ISPA calls for 'light-touch' regulation for South African MVNOs

South Africa's Internet Service Providers' Association (ISPA) is backing recent calls for an "appropriate, light-touch regulatory regime" to support the growing number of mobile virtual network operators (MVNOs) in South Africa, as it believes this will introduce competition into the local mobile data market.

ISPA is South Africa's official Internet industry representative body, and the association believes MVNOs are in fact a type of Internet service provider (ISP) and should be approached as such.

"A number of local MVNOs are already ISPA members – MVNOs are in reality a form of ISP – and looking to us to provide regulatory support in a local market where there is a commercial understanding of MVNOs, but no agreed regulatory definition," Sasha Booth-Beharilal, ISPA chair, said in a statement.

ISPA acknowledged that the MVNO sector has grown significantly over the years with many familiar South African brands launching their own mobile offerings.

"There are now around 18 active MVNOs in South Africa, competing aggressively in the mobile data space and reducing the cost of mobile data for subscribers who have more choice than ever before," ISPA said.

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

Some of the most successful South African MVNOs have come from banks (like Capitec, FNB and Standard Bank) and retailers (like Pick n Pay, Mr Price and Shoprite) who target their already large customer bases and strong distribution channels to offer mobile services.

The 2023 SA MVNO Report from ICT market research firm Africa Analysis showed that by December 2023, the number of MVNO SIMs in the SA market had surged to over 4.3 million, marking an annual growth rate of 51%.

The report forecast that the SA market is poised for continued expansion. By December 2028, analysts project the market to reach 10 million SIMs while the potential entry of large retail brands could further propel growth, potentially elevating the market to 13.5 million SIMs.

"The majority of these are on the Cell C platform – launched in 2006 – but MTN has entered the MVNO market aggressively over the past two years. Vodacom and Telkom – obliged by their latest spectrum licenses to also offer access to their networks for MVNOs – should enter the market soon," ISPA added.

The Association also commended The Independent Communications Authority of South Africa (ICASA) for including the obligation to provide access to MVNOs in the licenses issued after the successful March 2022 spectrum auction.

"In ISPA's view this will prove to be one of the most important regulatory interventions for reducing the cost to communicate," it added.

Changes in South Africa's MVNO market

At the moment, South Africa's MVNO ecosystem is primarily supported by two host mobile network operators, Cell C and MTN, and Africa Analysis estimates that Cell C is carrying over 95% of MVNO SIMs.

Cell C CEO Jorge Mendes spoke to Connecting Africa last week about the MVNO market and what the operator is doing to maintain its dominance.

"I think we never want to be complacent. I know there's a lot more activity, but I'm enjoying that there's a lot more activity because that's what we want to do, we want to be deliberate," Mendes explained.

"We've already repriced in that structure so, you're seeing 20% wholesale revenue growth, but 76% traffic growth in that [MVNO] space. That's very indicative of repricing structures, and that makes us more competitive, so we are creating a lot more value for our MVNO partners, so that they can go and compete in the market, and that repricing is a continuous process," he added.

Mendes pointed out that there are other considerations for SA's more dominant operators if they want to make a mark in the MVNO space, because they risk squeezing their own margins.

"I think there is a conundrum for the big mobile network operators. I'll give you a statistic – of Capitec Connect customers, 12% come from Cell C, all the other customers come from the other networks. So, I'm a net gainer of 88% from other networks, and I cannibalize my own revenue to the tune of 12%, but I still get some revenue because it's on my network as an MVNO," he explained.

"The bigger players are going to struggle with this, because they've got the bigger market share. If they go very aggressively and deliberately into MVNOs, they compromise their own revenue, so they arbitrage themselves and that's the conundrum."

Cell C CEO Jorge Mendes. (Source: Cell C)

The market has seen MTN adding more MVNOs to its portfolio recently. The latest of these was Standard Bank Connect (formerly Standard Bank Mobile), which began roaming on MTN's network in June 2024.

In July 2024, Vodacom told Connecting Africa it had made significant investments in its mobile virtual network enablement platform and was in talks with potential partners with an expectation to start supporting MVNO partners soon.

In August 2024, Mr Price Mobile announced via its social media platforms that it was now roaming on the Vodacom network.

In January 2023, Telkom SA announced plans to enable MVNO partnerships on its network, and in July 2024 it told Connecting Africa it was "at the final stages of concluding the roll-out plans" and was engaging with potential partners.

SA's smallest network, Rain, also told Connecting Africa that it was open to any MVNOs interested in using its network.

"Currently, two MVNOs have been onboarded, and their details will be shared once they launch their commercial services," a Rain spokesperson said.

High failure rates for MVNOs

ISPA referenced Africa Analysis data to highlight the comparatively high failure rate for local MVNOs – approximately 16 of 34 launched have not survived – attributing this in part to a lack of regulatory support.

ISPA believes there needs to be "more than a bare obligation in a license" to ensure that the spark of competition is nourished.

On this front, SA's Competition Commission and the Department of Communications and Digital Technologies (DCDT) are proposing to include a new set of provisions to support MVNOs in upcoming amendments to the Electronic Communications Act (ECA).

"The finalisation of a legislative framework for MVNOs will be contentious. ISPA has already made submissions to the DCDT calling for more detailed provisions in the Electronic Communications Amendment Bill 2023 to support different forms of MVNOs and their ability to offer the widest range of services to South Africans," ISPA concluded.

— Paula Gilbert, Editor, Connecting Africa