June 24, 2015

TODAY a week ago FNB launched their much anticipated new cellular offering, called FNB Connect. This is the second Mobile Virtual Network Operator (MVNO) to enter the local scene in 2015 after the launch of me&you mobile a month ago. But what are they and why would they take on the big guys?

The MVNO – although not new – is still a poorly understood concept in SA. MVNOs are niche providers that run on top of existing networks, but offer their own products, retail prices, customer service, billing systems, marketing and sales. Judging by the global boom of the business model over the past decade, which has put mobile giants under pressure in many countries, SA could follow a similar path.

In SA, Virgin Mobile was the lone wolf MVNO for nine years. This changed in 2014 when Mr Price’s MRP Mobile launched with a few limited deals. MRP Mobile primarily targets existing Mr P Money customers by allowing them to buy, pay off their devices and upgrade a lot quicker the more they spend on their mobile bills or in-store items.

me&you mobile took a completely different approach. me&you mobile are all about the lack of phone. That’s right – you get a contract without a phone. That might sound absurd to many of us who are used to waiting for contract expiration to upgrade to that brand new iPhone 12, but there’s a growing international trend of people keeping their phones or buying one separately to free themselves from contract lock-in. me&you mobile is tapping into this by offering flexible month-to-month contracts at various price points.

FNB Connect may be the latest guest at the MVNO party, but their entrance is long awaited. They’ve been selling and financing handsets and other hardware, and various top-up bundles for a long time. In fact, they are the largest vendor of iPhones and iPads in SA and registered as a network provider with the Independent Communication Authority of South Africa (Icasa) years ago. It was really just a matter of time before they offered SIM cards too. So, from now on, FNB customers can get the full monty – including flexible contracts – via FNB Connect.

So you may be asking yourself – why has it taken so long for players like these to come to market and why are they launching now? It comes down to two main factors:

Firstly, they now have a partner to help them. While Vodacom, MTN and Telkom have shied away from supporting MVNOs, Cell C, which is desperate for more market share, is now offering itself as the sole MVNO partner network in SA. Virgin Mobile, MRP Mobile, FNB Connect and me&you mobile all get talktime and data wholesale from Cell C. Then they differentiate themselves through how they package their services.

Cell C must have realised that its network coverage faced a reputation problem, because it is now investing in network upgrades, such as the network strengthening deal with Vodacom it announced just this month.

The second factor creating a window of opportunity for MVNOs is that people are increasingly “gatvol” of their service providers. Poor customer service, call quality and signal issues, high prices and inflexible contracts have consumers yearning for alternatives. Just two weeks ago the SA Consumer Satisfaction Index for the mobile industry revealed that satisfaction with all the big networks, apart from Cell C, dipped over the past year.

The Great Prepaid Price Wars of 2014 may have benefited some, but contract users still faced price hikes and a lack of innovation. Measurement company Tariffic has been analysing corporate cell phone spend for years and found that customers are overpaying by up to 60%. Networks just weren’t incentivised to give customers the most cost effective post-paid contracts to suit their needs.

In this, FNB Connect and me&you mobile have recognised a big opportunity to start offering consumers what they really want. “Call centres are frustrating”, mobile users said. “We’ll let you manage your entire contract online”, the MVNOs answered. “We want month-to-month contracts with no lock-in”, they said. “You got it!” the MVNOs replied. And then, both companies developed innovative solutions to the commonplace RICA hassles, and FNB Connect even threw in some eBucks rewards.

So what does that mean for Joe Bloggs? There’s competition. A paradigm shift is taking place that is likely to lead to greater innovation, competitive pricing and customer-centricity.

While the new MVNOs haven’t been able to make data affordable for the masses yet, they are quite competitive on voice rates and they’re making the customer king again. So if you’re looking for a new contract these days, it might be worth looking further than just red, yellow, black or blue.

This piece was originally published on Fin24

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