The idea of every South African having access to the internet and digital services anywhere, anytime remains a lofty goal; for now the cost of data means only a relative few can afford the ease and convenience of transacting online.
While not without risks, companies, led by banks and retailers, are now increasingly realising the inherent potential of a captive online consumer base. And to tap into that revenue stream they are catching a ride into the world of telecom from mobile network operators (think Vodacom, MTN and Cell C).
Capitec Bank, SA’s biggest by customer numbers last month became the latest mobile virtual network operator, piggybacking on the network of Cell C.
“We want to help create opportunity for everyone to be able to connect with access to affordable data and digital banking anywhere, anytime,” said CEO Gerrie Fourie.
By definition MVNOs don’t own physical network infrastructure. Typically, they lease bandwidth from mobile network operators (MNOs) and instead focus on offering customers highly targeted services and pricing packages.
I’m doubtful that MVNOs alone will save us from MNOs charging exorbitant prices for data to join the digital world. If that were the case, early adopters such as retail banking group FNB, which launched FNB Connect in June 2015, would have drawn millions of customers by now.
Still, FNB Connect, which also rides on Cell C’s network, is making decent money. JSE-listed FirstRand, FNB’s parent, disclosed in its latest integrated report that retail’s commissionable turnover amounted to R17.9bn (including prepaid service providers), with active sim cards in the MVNO reaching 878,000 in 2022, up by 45,000 from 2021. That means FNB is attracting a mere 3,750 customers a month, way below the numbers reported by traditional mobile network operators.
Nevertheless, FNB could be earning close to R600m a year from its MVNO. How so? In July, Vodacom, SA’s biggest mobile MNO, announced that the average revenue per user (ARPU) from active prepaid accounts was R55. Multiply that number by FNB Connect’s 878,000 active sim cards gives you R48.3m, which translates into R579m a year.
Rival Standard Bank isn’t as transparent about its MVNO, known as SB Mobile, and doesn’t disclose figures for active sim cards. Why the secret about an operation established four years ago? Is it not performing to expectations, or could it be that Standard Bank wants to release the numbers when SB Mobile has surpassed FNB Connect? If that’s the case they could be playing a numbers game that doesn’t make much sense.
Rivals Absa and Nedbank appear to be reluctant about MVNOs, but in the local retail space Mr Price was the first to take the plunge, launching its network in 2014. Though the retailer has been shy about subscriber numbers for Mr Price Mobile, revenue at its telecom segment Mr Price Cellular — which sells cellular products and services — exceeded R1.2bn in the year to end-April 2022.
Mr Price Cellular has reported stellar growth since its inception in 2017, and is now available in 370 stores with promising growth opportunities, most notably the rollout of stand-alone stores. But Mr Price Cellular is still secretive about its subscriber figures.
Similarly, Pick n Pay is also mum about the performance of PNP Mobile — the first MVNO to launch on the MTN network, in November 2020.
Shoprite, on the other hand continues to promote transparency and disclosed in 2021 that its MVNO, known as K’nect, attracted 33,944 customers in its first year of operation. The retailer has added 139,556 users so far in 2022, taking the total of new voice and data customers to 173,500. Based on the Vodacom ARPU discussed earlier, Shoprite is making close to R115m a year.
These figures show that FNB Connect as a banking group and Shoprite as a retailer are creating a new market in a space previously preserved for MNOs. But while MVNOs are bringing competition to the mobile and data space, are they matching customer-specific demands and going deeper into the value chain? Also, are they avoiding MNOs’ one-size-fits-all strategy for the subscriber?
It is early days, but things are looking promising. Perhaps we could one day even see the likes of FNB Connect, Mr Price Mobile and Shoprite K’nect being unbundled and listed on the JSE and/or A2X to raise cash to compete with MNOs.
Regardless of that, my view is that if you’re looking for a competitive mobile and data space, you’d do well to embrace MVNOs and free yourself from the bondage of MNOs.
Insurers may also join the fray.
One hopes communications watchdog Icasa will award spectrum to MVNOs that can afford it to enable them to grow and offer ever more competitive prices.
• Lourie is the founder and editor of TechFinancials.
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