Exclusive: Vodacom launches first MVNO, in-house MVNE service

Telecoms operator Vodacom has officially activated its first mobile virtual network operator (MVNO) in South Africa – Mr Price Mobile – and has created its own mobile virtual network enabler (MVNE) platform.

Shenge Buthelezi, managing executive of wholesale at Vodacom South Africa, sat down with Connecting Africa for an exclusive interview, confirming that Vodacom is now officially open for business when it comes to MVNOs.

"In the month of August, Mr Price Mobile started putting this new product, that is hosted and connected on the Vodacom network, into all its retail stores. Without speaking on their behalf, I can confirm that we are now fully launched, and we are very excited to start on this journey as Vodacom," Buthelezi said.

MVNOs are telecoms service providers that piggyback off the infrastructure of mobile network operators (MNOs), usually offering their services to niche segments.

"We are in multiple talks with various existing and new [MVNO] entrants, and we see ourselves adding maybe three to five more MVNOs in the next three years," he said.

"For us, it's a value creation exercise, and we will work very closely with the specific MVNO, based on its ambitions. What helps us is we've built the platform and integrated it once, and we can now onboard multiple times, which also helps us shorten the time to market of future MVNOs that we onboard," Buthelezi added.

Mr Price Mobile partnership and growth beyond

Mr Price, an apparel, homeware and sportswear retailer, launched its MVNO in 2014 to enhance its offering to existing customers. Mr Price Mobile previously used the Cell C network but is now also partnering with Vodacom.

"Partnering with Vodacom is the next step in unlocking more opportunities through the mobile network operator's innovative services and extensive coverage," Mr Price said in a statement about the launch.

Buthelezi was careful not to say that Mr Price has left Cell C, but rather that it is now able to do new activations on Vodacom, and Mr Price will decide if and when it moves which portions of its telecoms customer base to Vodacom.

"This is their base that they've built over time, so they are very careful about the customer experience and making sure that the switch is seamless to the end user. As you can imagine, the end user is a Mr Price Mobile customer, and the change of suppliers in the backend needs to be handled between Mr Price and the mobile networks," he said.

It's unclear how many active SIMs Mr Price Mobile has in 2024, as it does not publish these numbers. However, Mr Price's telecoms division has been growing in recent years.

For the year ended March 30, 2024, the retailer's telecoms segment's profit grew 55% year-on-year, to R133 million (US$7.5 million), and retail sales in the segment increased by 10.2%, to R1.17 billion ($65.6 million).

The telecoms segment includes device sales, data and airtime across various networks, as well as sales for the Mr Price Mobile network itself.

"[Mr Price Mobile] is quite significant in the market and it's not just about the number of SIMs that they've activated, it's also about the value they're able to create out of those SIMs, which is super important," Buthelezi added.

For now, Vodacom's MVNO service is only available in South Africa but Buthelezi said that the option to roll out MVNO services in other Vodacom markets across Africa is in the pipeline.

"Some of the major brands that we've spoken to definitely like the idea of overlaying our African footprint on the map with theirs and if this works well in South Africa, they will look to doing something in other markets. We encourage that. But obviously, as a South African headquartered entity, we are launching here in South Africa, but we will definitely look in the future to start enabling the service [in other African countries]," he explained.

SA's MVNO market

Up to this point, South Africa's MVNO ecosystem has been primarily supported by two host mobile network operators, Cell C and MTN, and Cell C still dominates the market, carrying over 95% of SIMs according to data from ICT market research firm Africa Analysis.

Cell C became the first operator in SA to allow MNVOs onto its network back in 2006 and remained alone in this space until 2020 when Pick n Pay Mobile and Boxercom joined the MTN network.

Cell C currently partners with MVNOs including the two biggest – Capitec Connect and FNB Connect – as well as C-Connect, Mr Price Mobile, Me&You Mobile, Shoprite K'nect Mobile and U-Connect.

MTN's MVNO list includes Pick n Pay Mobile, TFG Connect, Melon Mobile, Afrihost's AirMobile, and Standard Bank Connect.

The worst kept secret in the industry has been that Vodacom, Telkom SA and Rain were all planning to launch their own MVNO services.

This is partly due to regulatory requirements after the Independent Communications Authority of South Africa (ICASA) included an obligation to provide access to MVNOs as part of licenses issued after SA's successful March 2022 spectrum auction.

Buthelezi explained why it has taken Vodacom so long to join the party.

"Outside of the regulatory requirements, we've been planning this for a while. Our point was to enter at the right time, enter for the right reason, and enter from a value creation point of view," he explained.

"We do not have a market acquisition strategy to MVNOs, we rather have a value creation strategy. So, it was important that we enter when we are ready and when we can provide full value and enter in a more sustainable way, rather than just chasing the number of SIMs sold," he went on.

Vodacom's in-house MVNE

Traditionally in South Africa MVNOs have either connected directly to a network's infrastructure or gone via an independent enablement platform – a mobile virtual network enabler (MVNE) – that specializes in integration.

One unique feature of Vodacom's venture is it decided to build its own MVNE in-house rather than contracting the enablement out to a third party.

"It's part of the reason we took our time to enter into the market. We wanted to do it correctly, but we also wanted to be fully involved in the value creation process of the MVNO," Buthelezi said.

"What that means is we've actually built a Vodacom owned and operated MVNE. We've got an IT team, we've got solution architects, we've got business analysts that make sure that our platform has been fully integrated to all the touch points of the network," he explained.

This allows MVNOs to use the MVNE platform to create subscriber profiles, activate packages for subscribers, activate bundles and set their own bundle depletion sequence.

"The reason we did that is, we wanted an MVNO to have a single point of contact. When they are unhappy, they have one person to resolve it, when they want something done tomorrow morning, there isn't finger pointing or a gap between the MVNE platform provider and the mobile network," he went on.

Shenge Buthelezi, managing executive of wholesale at Vodacom South Africa. (Source: LinkedIn)

"Our aim is to do this in a platform-enabled API-first, digital-first set up so that MVNOs have full autonomy for product pricing, rating, reporting, rewarding and launch cycles. We found that from the key strategic MVNOs we have spoken to, that the success is not just about the megs and the minutes and the price. It's also how you manage your customer journeys and really entrench yourself as an MVNO in the digital journeys of your customer," he went on.

Vodacom's enablement of MVNOs is also not a completely foreign idea to the company.

Buthelezi pointed out that Vodacom had been offering a similar service to "branded resellers" including branded telecoms products for Kaizer Chiefs Mobile – part of the popular football team's offerings for supporters – and the Zion Christian Church's Zetnet mobile offering.

"As much as we were not in a full independent MVNO space, we've sort of been playing in that space already, and now [we are moving] to a full MVNO offering that creates its own products, rates and everything," he said.

Buthelezi said the branded reseller model works on a commission basis.

"For your participation in the distribution and acquisition we give you commission for it. Even though it's branded, you are still reselling to an extent a Vodacom product and service, and we give you commission. That channel is still there, and it will continue," he added.

For revenue on the MVNO side it will work on a wholesale model, where the MVNO pays for data and voice bundles in bulk from Vodacom and sells those on to its customer base, with the MVNO taking the profit generated.

"That is very important, because that base becomes [the MVNO's] own base. It is never owned and reported as part of the Vodacom base. That is why we've been very strict about creating the proper channels and platform for the wholesale ecosystem to really run an MVNO like it's an independent telco," he added.

Growth opportunities for MVNOs

The 2023 SA MVNO Report, from Africa Analysis, showed that by December 2023, there were over 4.3 million MVNO SIMs in the SA market, marking an annual growth rate of 51%.

The report forecast that by December 2028, this could reach 10 million SIMs while the potential entry of large retail brands could elevate the market to 13.5 million SIMs.

"I honestly believe that the MVNO market has a lot to contribute to this industry. It's been around for a while and it's far from saturated," Buthelezi said.

"You're only now seeing for the first time, big providers participating in this MVNO space. What I do see, without predicting the future, is the value that MVNOs contribute in terms of products, services, unique offerings, but also the revenue generated from the MVNO market will still continue to grow, quite significantly. There are still very good opportunities," he added.

Buthelezi believes MVNOs can tap into niche segments where they can co-create products with the telco.

"Our view is to allow the MVNOs to use our network to service their customer telco needs. However, they can collaborate to offer unique offerings that then compete at a service level, not just on a network level. So that's where we see ourselves playing, it's through synergic collaborations with brands that want to add telco into their service profile," he said.

"However, I do see that MVNOs that had targeted the number of SIMs rather than the value created, the unique offering, and the differentiation, will over time not be sustainable, which talks again to our approach. We want to be a telco and a techco partner and advisor," he added.

When questioned about fears that launching MVNO services could eat into Vodacom's own revenue margins and customer base he said he is no stranger to selling services to competing service providers and sees the MVNO offering similarly.

"As it is widely known, Vodacom provides national roaming services to a number of other mobile networks in the country. We also provide, for instance, undersea cable infrastructure as a service in wholesale, national long distance, access to our towers. So, the MVNO is no different," Buthelezi explained.

"If you think about it, you are enabling an independent telco and if they are going to do good business on a wholesale basis, they must be successful on the downstream, on their retail and consumer side of things," he added.

Buthelezi said that when you consider the pressures facing the South African economy, Vodacom wants to drive optimal utilization of its network assets, which in turn gives it better return on investment, and also drives inclusion and growth of the digital economy.

"Ultimately for Vodacom, we are less worried about grabbing a piece of the pie, but we are rather thinking of making the pie bigger so that there's more meaningful participation and value in the system," he added.

On the competition front, he said pulling customers away from other networks was not a key priority at this time.

"With more competition on the supply side of this MVNO ecosystem, with the entry of Vodacom, we will see MVNOs having better choices, having better options, but also being able to pursue different strategies than before and being able to participate more meaningfully going forward. As to how the numbers balance out, that is less of a priority for us," he shared.

"While I cannot comment on behalf of my competitors, we look at every MVNO on its merit, whether currently hosted on another network, or a new one. We don't necessarily have a targeted approach, but every MVNO opportunity we will deal with on its merit," he concluded.

— Paula Gilbert, Editor, Connecting Africa