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FNB signs deal with MTN for network services supplies (MVNO)

Felicia Akindurodoye by Felicia Akindurodoye
July 6, 2023
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FNB and MTN SA MVNO deal
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First National Bank, the bank with the second-largest client base in South Africa, has inked a partnership with MTN South Africa for the supply of network services for FNB Connect, the mobile virtual network operator (MVNO) owned and operated by the bank.

FNB and MTN announced their partnership in a statement, stating that the purpose of the partnership is to expedite “access to reliable telecommunications and internet services for customers who use FNB Connect.” 

“Telecoms and ICT services are central to the integrated value propositions we offer our customers across financial and lifestyle services,” said Jacques Celliers, the CEO of FNB, in the announcement. “In the months ahead, we will expand our range of services by introducing more cost-effective and tailored solutions for both individual and business customers. This includes internet-of-things solutions that empower businesses to improve efficiency and productivity.”

An MVNO collaboration has already been established between FNB Connect and Cell C, which holds the distinction of being the first mobile network operator in South Africa to offer MVNO services. According to FNB, the relationship with Cell C would continue to run concurrently with the new partnership with MTN in order to “[allow] customers to enjoy the best of both worlds in network quality.”

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The aim of the MVNO partnership 

Cell C’s chief officer for wholesale business, Stephen Morony, was interviewed by a local publication and said that the company is excited about the new competition in the MVNO area brought about by the partnership between FNB and MTN.

“We look forward to our continued relationship with the FNB Connect team while welcoming competition in the MVNO space. Cell C is confident that our technology platform, our extensive MVNO partner experience, range of service offerings and value propositions are competitive and will serve our varied customer segments well, enabling ever more choice for the South African consumer,” he said.

The mobile virtual network operator (MVNO) business in South Africa has had its value expand over the past several years, which has caused a boom in mobile network operators’ interest in providing the services. According to FNB, its MVNO generated over R400 million in revenue during the first half of the year from the sale of smartphones and other digital devices. MTN made the announcement that it would enter the market in September 2022 and stated that it would provide services comparable to those provided by Mr. Price Mobile.

Charles Molapisi, the CEO of MTN South Africa stated: 

“We are growing that part of the business quite significantly. We are building an MVNO platform as a service[…]we have a huge pipeline of MVNOs who want to come on board. We are open for business when it comes to MVNO. We will add far more than three.”

In the same month, September 2022, Cell C entered into a partnership with Capitec, the largest retail bank in the country, to develop an MVNO for Capitec. The MVNO is being marketed by Capitec as a virtual mobile network that provides consumers with data at a reduced cost and on an ongoing basis. In March of 2021, Shoprite also introduced its very own mobile virtual network operator (MVNO) known as K’nectmobile. This service was powered by Cell C’s infrastructure through a roaming relationship with MTN.

Telkom also entered the fray in January of this year, making an announcement that it will “leverage its extensive network footprint across South Africa to offer MVNOs the opportunity to provide quality services over its network – thereby enhancing the much-needed competition in the telecoms space”.

The requirements for spectrum licences that the industry regulator ICASA has imposed on mobile network operators to ensure that historically disadvantaged populations are helped by their services are met by the MVNO agreements.

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What is MVNO?

A reseller of mobile virtual network operator services is referred to as an MVNO. It does this by leasing wireless capacity from a third-party mobile network operator (MNO) at wholesale costs and then reselling it to end users under its business brand at retail prices that are lower than the original.

Mobile network operators get a competitive advantage by leasing this capacity because, in the absence of this arrangement, it would go unused. As a result, they are able to turn a profit by leasing it in bulk at wholesale rates. Because MVNOs do not need to pay for radio frequency spectrum licences and do not have any infrastructure that has to be built or maintained, they are in a position to benefit from the ability to mark down their retail costs to a certain extent. As a result of the cheap overhead, they are able to spend a significant amount of money on marketing in order to enhance the likelihood of selling capacity to end users.

According to the findings of a study conducted by Mordor Intelligence and titled “South African MNO – MVNO Market – Growth, Trends, COVID-19 Impact, and Forecasts (2023 – 2028)”, it is anticipated that the market will record a compound annual growth rate (CAGR) of approximately 7.8% throughout the duration of the forecast. The expansion will be primarily propelled by an increase in demand in a wide variety of applications, including as retail, cellular M2M, and media and entertainment, amongst others.

However, according to the report, the majority of MVNO players in South Africa operate as wholesalers, meaning that they purchase bandwidth in chunks from large carrier networks and then sell it to customers at a reduced price. As a consequence of this, the profit margin in this industry is low because the vendors in this industry offer cheaper prices to customers by renting spectrum from large carriers, which is an expensive endeavour.

Despite having a great deal of untapped potential, the MVNO market has been plagued in recent years by sluggish expansion due to large network operators’ discriminatory pricing practises for network access. A remedy that is likely to accelerate the expansion of the segment is the order given by the regulator Independent Communications Authority of South Africa (ICASA) to mobile network operators to decrease roaming fees. This will likely be corrected by the order given by ICASA to mobile network operators to lower roaming fees, including those of MVNOs.

Tags: FNBMTNMVNO
Felicia Akindurodoye

Felicia Akindurodoye

Felicia Akindurodoye is an experienced writer and researcher, whose watchword is originality.

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