London — In a market dominated by Orange, Senegal's regulator has chosen to try and add more competition by adding three 4G ISPs (see issue 920: ) and now three new MVNO operators. Russell Southwood looks at who's entering the race and whether MVNOs are the answer to the question.
At the end of January 2019, one of the MVNOs Sirius Telecom (owned by local businessman Mbackiou Faye who is also CEO) and the regulator ARTP laid on a "dog and pony" show to give a fair wind to its launch in June. Held in ARTP's swanky new offices in Dakar's Rond Point, Sirius Telecom's CEO said he would like the MVNO to lower both voice and data rates:"The Internet today, in a way, is a must for everyone. So, the more everyone uses it, I think that extending the base and reducing the charges can really reduce the real cost for both calls and data."
Its brand will be Promobile and it will also launch its mobile banking platform Procash that will allow people to carry out a variety of electronic transactions including money transfer, electronic payment of bills and E-Commerce. The company also plans to set up a call centre, a customer service and a fixed line offer.
ARTP's CEO Abdou Karim Sall reassured the new MVNOs that the MNOs hosting them would have to follow ARTP's guidelines so that the MVNOs can operate without being blocked by their host MNOs:"The ARTP will have to review the conventions that will bind the MVNO to the host operator (and) the deadlines for implementation, as well as the rights and obligations of each party are respected ".
Sirius Telecom's host MNO is Tigo Senegal and its General Manager was in attendance so it seems like that the process has been agreed between the two of them. The other two MVNOs are You Mobile (owned by singer and local media mogul Youssou N'dour) that will work with Orange-run Sonatel (in which the Government has a shareholding) and Origine SA with Sudatel-owned Expresso.
You Mobile paid FCFA400 million (US$692,118) for its licence and the other two each paid FCFA300 million (US$519,088), reflecting the respective market shares of the players that are hosting them (ARTP, Sept 2018):
After a very shaky start, Expresso is now in a two-horse race with Tigo. However, market shares have not really shifted greatly over the last 12 months, Nevertheless the market has grown from 15,556,649 subscribers in September 17 to 16,403,402 subscribers in September 2018. However, there is now a penetration rate of 107.52% that means that there are high levels of multiple handsets.
For the MVNOs there will continue to be significant incremental growth of this kind and they must hope that some of it comes to them. If they had split last year's growth, each MVNO would have a subscriber base of hundreds of thousands. An MVNO is essentially a marketing operation and although the licence costs have been kept low, they will need to find sufficient CAPEX to create a visible brand and a network of agents.
From the host operator point of view, the motivation will be different depending on what market share they have. Tigo Senegal was sold in April 2018 to an SPV called Saga Africa Holdings. The shareholders are French billionaire Xavier Niel (who owns Iliad, operator of the Free brand) and Malagasy millionaire Hassanein Hiridjee (who owns Axian which owns Telma in Madagascar) and local Senegalese businessman Yerim Sow (owner of the Teyliom Group).
Hosting an MVNO will offer Tigo a low-risk bet that will allow someone else to acquire subscribers that it will get a share of the revenues for. Both it and Expresso need to do something to shift the needle in terms of market share. For Sonatel/Orange, it will be important to create a strong defensive play that means the MVNOs eat into the subscribers of its competitor hosts.
In Africa where MNOs are in markets with only 1-3 effective players, MVNOs are increasingly being talked about as one tactic to provide a higher level of competition. However, there are three questions that have not yet got clear answers:
What will be the difference between the MVNOs? They will all really be selling the same thing. The only one that thus far has any brand character is You Mobile through its association with Youssou N'dour. His media holdings will also put him in a strong position when it comes to marketing his MVNO brand.
What user niche will they be aimed at? MVNOs usually focus on a smaller, niche market to give them distinctiveness. There are niches of language and socio-demographic opportunities like youth (particularly students) and women.
Will the host MNOs give them sufficient price, service and product flexibility to succeed? Cutting prices by 10% always looks attractive to new entrants but there is not much evidence that finessing prices by such a relatively small amount makes much difference.