In 2024, Interswitch Group subsidiary, Systegra Technologies, acquired a Tier 5 Mobile Virtual Network Operator (MVNO) licence for ₦500 million ($331,000). And like most of the 46 other companies that have gotten a licence — albeit in different tiers — very little has been heard about them since.
To be fair, Systegra Technologies’ Tier 5 licence makes it a Mobile Virtual Network Enabler (MVNE), which means it supports MVNOs in the background and does not face consumers directly. Nonetheless, there seems to be something wrong in the MVNO space.
According to BusinessDay, only two — Vitel Wireless and EmoSIM — out of the 46 are active. Kenneth Nwabueze, Chairman of Vitel Wireless, says the lack of telecom talent is one of the reasons most MVNOs continue to struggle.
“Telecom in Nigeria has not really produced a lot of talent in terms of people who understand the business end to end,” he said.
On a call with Techpoint Africa, Nwabueze explained why very little has been heard from MVNOs licensed by the Nigerian Communications Commission (NCC) in 2023 and what Vitel Wireless is doing differently to stay alive in Nigeria’s telecom space.
What are MVNOs and why are they important?
An MVNO, or Mobile Virtual Network Operator, is a telecom company that offers mobile services to customers without building its own infrastructure. Instead, it buys network capacity from existing operators like MTN and Airtel and then sells it under its own brand.
This makes it easier for new players to enter the market, create more competition, and design services for specific groups of people. In other countries, MVNOs have helped lower prices, improve service quality, and reach customers that traditional operators often overlook. Nigeria could benefit from the same if its MVNOs take off and the space grows.
However, the space is still in its early days. In fact, it was predicted that more than half of the MVNOs licensed by the NCC would collapse within the first five years. While Nwabueze cited a lack of talent as one of the problems, he also pointed to other issues holding MVNOs back.
MNOs don’t rate MVNOs
MVNOs depend on Mobile Network Operators (MNOs) like MTN, Airtel, and Glo to provide their services. However, Nwabueze noted that it has been difficult to get MNOs to respond to their requests when they are made.
“Most times, we have to go back to the regulator to hasten responses from MNOs. It is important because connectivity issues that could be resolved in two days can sometimes take up to two weeks.”
Interestingly, Technology Times reported in August that MVNOs were planning to create a group to address the integration issues they face with MNOs. The group is reportedly meant to help MVNOs negotiate better terms and address anti-competitive behaviour by MNOs.
Although MVNOs piggyback on infrastructure created by MNOs, they also need infrastructure of their own — another major challenge, according to Nwabueze.
He explained that while cell towers are the main infrastructure they require from MNOs, MVNOs still have to purchase everything else, an expensive and dollar-denominated ordeal.
“There are many components to telecoms. The major one is RF technology (radio frequency), which involves cell towers. Our MNOs handle that. However, there is a whole host of servers called the core networks. They house the circuit switching, data switching gate, and the SMSC (Short Message Service Centre) gateway. We have to provide these ourselves.”
Difficult business model for MVNOs
While MVNOs are expected to drive down the cost of telecom services as they have in other mature markets, the same may not apply in Nigeria. According to Nwabueze, any MVNO hoping to compete on price is dead on arrival because the equipment required to keep them running is expensive.
Despite this, he explained that Vitel Wireless still manages to keep its product prices slightly lower than those of some MNOs. However, the company’s main selling point is not data or airtime. Nwabueze admitted that competing with MNOs on those fronts would be futile, which is why Vitel Wireless is focusing on layering technology offerings on top of its telecom services.
“The reason why we are here is to give you a reason to have a handset in the first place, and that reason is security.”
Security is one of Vitel Wireless’ key selling points. Its SIM card and network come with what Nwabueze calls location awareness technology, which records a user’s movements across Nigeria.
“Whether it is your vehicle, an asset, or any other valuable device, you will be able to locate it as long as there is a SIM card in it. We know people have been with MTN, Airtel, and Glo for many years, so what we’re fighting for is to be a secondary telecoms provider that provides security.”
Nwabueze added that in the event a person goes missing, the company, with the necessary court documents, can provide the precise location history of the person’s mobile device.
In addition to its security feature, Vitel Wireless also offers Internet of Things (IoT) services. For example, it has cameras that can detect unknown faces in homes and notify residents via SMS. It also provides the Vitel Wireless Xphone, which Nwabueze said would make roaming easier for people travelling outside Nigeria.
The company has even partnered with Slot to distribute its SIM cards. As MVNOs like Vitel Wireless scramble to develop features and products that win the hearts of customers, Nwabueze remains optimistic.
According to him, MVNOs will not compete directly with MNOs. Instead, they will play the same role fintechs play in relation to traditional banks.
“MVNOs are going to bring value by way of innovation,” he said.
It may be too early to judge the success of MVNOs in Nigeria, but in other parts of Africa, MVNOs are rolling out 5G, while some are eyeing $4 billion in revenue.
