This new NCC licence could make data cheaper in Nigeria

logomark aapbuw

Nigeria”s telecommunications sector has been dominated by the big four since Airtel (then Econet) and MTN entered the country in August 2001, with Glo and 9mobile (then Etisalat) following in August 2003 and October 2008, respectively. But there’s

The Nigerian Communications Commission (NCC) has given these new players mobile virtual network operator (MVNO) licences, and according to Ernest Akinlola, MVNO’s are will be the most talked about subject in Nigeria in a few months.

Akinlola, who is currently in the renewable energy space as the Managing Director of Bboxx, speaks so confidently because of his experience, having been in the MVNO business since it began in the UK in 1999.

After serving as a manager at Virgin Mobile MVNO, the first MVNO in the world, he became the Head of MVNOs at American telecom giant, T-Mobile.

Akinlola believes that MVNOs have been quite successful since their creation. From Lyca Mobile to Lebara in the UK, they have played a very significant role in the UK’s telecom space.

However, MVNOs could play out very differently in Nigeria. But what are MVNOs and what do they mean for Nigeria’s telecoms space?

What is an MVNO?

Mobile virtual network operators (MVNOs) provide wireless services just like your mobile network operators (MNOs) — MTN, Glo, and Airtel.

Akinlola defines the MVNO model as “piggybacking off an MNO” because unlike MNOs, MVNOs do not own infrastructure. They do not spend huge sums of money investing in infrastructure to provide their services; instead, they rent from MNOs that earn secondary revenue from this arrangement.

MVNOs can also reach certain demographics that MNOs haven’t.

Be the smartest in the room

Join 30,000 subscribers who receive Techpoint Digest, a fun week-daily 5-minute roundup of happenings in African and global tech, directly in your inbox, hours before everyone else.

In Nigeria, for example, MVNOs can create niche telecom products that serve the needs of people living in rural areas.

Because they only rent infrastructure, they can operate a lean business process that makes them agile, helps offer cheaper services, and allows for experimenting with different product categories.

In the UK, MVNOs such as Lyca Mobile and Lebara offer significantly cheaper international calls, unlike MNOs.

Describing how the above-mentioned operators created a market where they can dominate with niche products and lower prices, he says, “They carved out a proposition for international calls and made it their mantra.”

The influx of 43 MVNOs certainly means cheaper mobile services in Nigeria, which would be great for the economy at large.

But while MVNOs could be a net positive to Nigeria, the reality could be the opposite if regulators, MNOs, and the MVNOs do not go beyond what Akinlola describes as “default thinking” — looking beyond the obvious and figuring out where problems could arise.

Why are MVNOs just coming to Nigeria? 

Although MVNOs have been around for over 20 years, a global trend of creating MVNOs just started in the past five years. The Connector, attributes this growing trend to an increase in the number of people who need communication services and MNOs and an increase in the number of MNOs interested in MVNOs.

This growing trend is probably one reason Nigeria is just catching the MVNO fever. Another is that Nigeria’s MNOs weren’t ready for MVNOs in the 2000s.

“I brought Lyca Mobile to Nigeria in 2014 and we met with the then vice president [Namadi Sambo] and the view was that our operators were still building out networks.”

An head shot of MVNO expert, Ernest Akinola
Ernest Akinola, Managing Director, Bboxx and MVNO expert

Back then, MNOs couldn’t house MVNOs on their limited infrastructure. However, they might still not be able to take on these MVNOs.

How will MVNOs affect Nigeria’s telecom sector?

“By definition, the whole idea of an MVNO is to identify areas that the mobile network operator is not really focusing on.”

Akinlola explains this with an example of an MVNO that decides to offer farmers in Nasarawa cheaper calls with the added benefit of getting periodic weather predictions on their feature phones.

Essentially, MVNOs will make the telecom sector more vibrant because of competition.

However, Akinlola raises several issues that could impede the smooth running of MVNOs in Nigeria and the first is the number of MVNOs that have been granted licences.

Nigeria has four MNOs that have to somehow offer 43 MVNOs piggyback rides.

Hosting all the MVNOs would mean the MNOs are doing a lot of investing, and quite unlike API connections in software companies, this is not a simple plug-and-play scenario.

“How are the MNOs going to host all of them?” Akinlola wonders.

He also pointed out that in the UK where MVNOs began and have become commonplace, it took 20 years for 20 MVNOs to emerge, but Nigeria wants to start with more than double that from the get-go.

However, there’s a solution in the form of tier 5 MVNOs.

MVNO licences are in five tiers.

Tier 1 holders are what Akinlola describes are super dealers, companies that sell MNOs’ products for profit, but don’t own their SIM card.

Tier 2 MVNO license holders, on the other hand, will own cards and sell their services with their branding.

Tier 3 holders get all the benefits of tier 1 and 2 plus a switching network and core network.

Holders of tier 4 MVNO licences are aggregators and can host tier 1, 2, and 3 licence holders.

Tier 5 holders are almost indistinguishable from tier 4 licence holders but Akinlola says the one notable difference is that they can have low level infrastructure — that will still be plugged into an MNO’s — making them mini MNOs.

These tier 4 and tier 5 licence holders are the ones Akinlola predicts will be the solution to MNOs hosting so many MVNOs.

“None of the MNOs are going to launch 10 MVNOs each, they’ve not done it before. If I were the CEO of an MNO, I would bring on the strongest tier 4s or 5s, and tell them, ‘Since you can aggregate tiers 1 to 3, aggregate them through your platform.'”

While this solves the problem of MNOs taking in too many MVNOs, there’s yet another problem.

There’s a steep learning curve for MVNO licence holders and the NCC

As a prominent figure in the space, Akinlola has been engaged by some of the MVNO licence holders and he says while some know how to run an MVNO, there’s going to be a steep learning curve for most of them.

“The successful ones are those that have engaged the right professionals and advisors to tell them how to orientate their MVNOs.”

Interestingly, the NCC’s learning curve would also be pretty steep.

For about two decades, the NCC has only regulated four telcos. Akinlola thinks that going from four to 47 could stretch the regulator.

He predicts a 16% success rate for the MVNO licence holders because each would take on 42 competitors from the get-go.

While MNOs will be profiting from MVNOs, competition could also arise between them.

“MNO’s retail teams are going to have to learn how to co-exist with an MVNO as their partner. Staff whose bonuses are based on their retail sales are not going to necessarily be very happy about the MVNOs.”


Telecom services will be available in rural areas

Unlike the UK where MVNOs sprung up solely for commercial gains, the NCC is encouraging MVNO licence holders, through legislation, to focus on rural areas.

The influx of MVNOs in Nigeria will also lead to “better data quality because an MVNO would want to want to prove its worth.”

Akinlola also says that there is some advantage to granting licences to many MVNOs because fewer MVNOs could collude and fix prices “but with 43, it is impossible.”

Another plus is economic development and employment, which Akinlola is excited about. But for this to happen, all parties involved need to look beyond the obvious, to make sure that MVNOs are a net positive for the country.