• Telcos, licensees yet to agree on commercial terms
• Suspicion, greed slowing commercial agreements
• MVNOs to replicate fintech revolution in banking 
• ALTON says all agreements must be completed before activation 
• NCC does not intervene in operators’ commercial agreements, says DPA
 
 
Over a year after 43 operators secured mobile virtual network operation (MVNO) licences with a commitment to bridging the rural telephony gap, the commercial agreement seems to have stalled the take-off of the scheme.   

 
Consequently, Nigeria risks missing the 2025 broadband target of 70 per cent just as 31 states remain grossly underserved. MVNO was touted as a game changer by industry experts who believed the operators could replicate the fintech revolution in the banking industry.
  
The Guardian learnt at the weekend that the MVNO licensees are struggling to secure commercial agreements with mobile network operators (MNOs) otherwise known as the telcos.
 
MVNOs are designed to leverage the existing infrastructures of telcos to service the areas considered commercially unviable to the big players.  But sources said telcos are reluctant to grant the licensees the leeway to test market acceptance. Some industry sources suggested the existing operators may be threatened and the MVNOs could pull the rug off them as seen in the banking sector in recent years.
  
If the virtual operators do not find the footing to take off as expected, they would have to forfeit the N8.6 billion initial investment paid for their licences in March last year.
       
While commercial agreements vary relatively from MNOs to MVNOs based on agreements reached, the roll-out obligations, according to the licensing framework, expect a licensee to roll out its services within 12 months after obtaining its licence.
     
The journey to MVNO licensing started in 2017 when the Nigerian Communications Commission (NCC) published a Request for Proposal (RFP) for the “Development of a Licensing Framework for Mobile Virtual Network Operators (MVNOs) in Nigeria.” It was developed pursuant of the RFP and the Nigerian Communications Act, 2003.  The NCC began issuing the licenses in early 2023.
     
An MVNO is a telecommunications company that provides mobile phone services but does not own the wireless network infrastructure over which it operates. Instead, MVNOs lease network services from MNOs at wholesale rates and then resell the services to customers under their brand.
    
They are to provide value-added services to customer segments not fully served by the incumbent operators, especially in remote rural areas.As it is, the market segment, which the MVNOs should attend to, the rural areas may not witness the revolution on time.
   
In Nigeria’s $76 billion telecoms sector, the quartet of MTN, Airtel, Globacom and 9mobile have successfully connected 318 million telephone lines of which some 220 million have been active. However, despite this telephony footprint, many communities in about 31 states are still underserved.
    
Of course, there are an estimated 220 million people in Nigeria, less than the number of telephone lines connected by the operators, however, about 98 million of the lines are either inactive or dormant completely. Nigeria is a multi-simming country, where a particular subscriber is virtually a customer to all four major network carriers in the country. As such, the unique number of subscribers in the country may not be more than 130 million.
     
Hence, experts said gaps still exist to be filled and MVNOs, like what is obtainable in other climes, are expected to take up the task. Analysts are also of the opinion that MVNO players may have to struggle to acquire customers as the incumbent MNOs are already dominating the market.
     
Under the MVNO framework released by the NCC, there are five categories of operators in this segment covering Tier 1 to Tier 5.  According to the licensing framework, the highest in the categories, the Tier 5 licence costs N500 million, while Tier 4 goes for N200 million. Both the Tier 3 and Tier 2 licences cost N130 million and N60 million respectively, while the Tier 1 licence is to be issued at N35 million.  
Analysisby Nairametrics  showed that 10 companies have so far acquired the Tier 5 licence, thereby paying a cumulative of N5 billion to the regulator.  
    
For Tier 4, six companies have acquired the licence, paying a total of N1.2 billion, at N200 million per licence. The tier 3 category has the largest number of players as 15 companies have acquired the licence. At N60 million per licence, the total money paid amounts to N1.950 billion.
   
 The NCC database showed that 11 companies have acquired the Tier 2 licence, paying a total of N660 million, while only one company acquired the Tier 1 licence. 
     
There are, however, operational differences between the 5 tiers. For instance, Tier 1 operators are the Services Virtual Operators. This tier is expected to leverage its ability to offer services to its customers without owning any switching or intelligent network infrastructure. They do not control any numbering resources. Responsibilities lie with the host licensee to provide wholesale capacity to the VO for the delivery of its products and services.
     
Tier 2 is the Simple Facilities Virtual Operator, which assumes more control of the value chain, which allows it to significantly differentiate itself from its host. The VO does not have Core Switching and Interconnect capabilities but can set up its intelligent network (IN) to provide its own IN services to the customer.
     
Tier 3 is Core Facilities Virtual Operator, which relies on its technical and commercial prowess to launch and operate a full core network with switching and interconnect capabilities.  
     
Tier 4 is a Virtual Aggregator/Enabler licensee, responsible for aggregating and/or enabling VO services within the market. It relies on a model in which it stands as a middleman between the MNO and multiple VOs.
    
Tier 5 are Unified Virtual Operators. A VO within this tier can decide the level of service it desires to offer ranging from tier1 to tier4. This gives the VO freedom of choice to deploy its services the way it deems fit as long as it still has a valid license.
    
Speaking with The Guardian on why MVNOs have not started operations in the country, one of the licensees, the Chief Executive Officer of Hazon Technologies, promoters of Flex Mobile MVNO, Victor Afolabi, said Flex Mobile and several other licenses have completed all the technology buildups, signed an agreement in dollars with foreign partners and have imported servers, data rooms.
    
 He said most licensees were even ready to go commercial in Q4 2023 because of they had reached contractual agreements with some MNOs.

However, he said: “But, again, I think along the line, we assumed we have settled with the MNOs, which turned out to be false. We later discovered that there is not much interest from MNOs because we see a lot of resistance in terms of collaborations. After all, ultimately, an MVNO can only function with integration from MNOs. We don’t have the radio bandwidth.
     
“So, even though everything is concluded, to the fact that we have employed staff, paying subscription to some technology platforms, we should have gone live about six months ago, but we couldn’t go live because it is MNO stuff!”
     
Afolabi said largely the major challenge is around the revenue model between the MNOs and stakeholders in the MVNOs ecosystem.
     
“What I can boldly say on the part of the MNOs is that no enthusiasm. In all the meetings we have had, we see lots of resistance and suspicion and I think is coming from the learning from what the banks have seen from the Fintech revolution.
     
“So, ultimately, the MVNOs are going to be like the Fintechs of the MNOs in the telecoms space. Just like the Fintechs and banks. What I envisaged is that for the MVNOs to survive, it is not going to be about prices, we cannot win head-to-head.
    
“Imagine the fintechs coming and saying they want to do the same model a GTB did or is doing including opening branches all over the country and boasting about 1000 branches. No fintech will survive because they cannot match them. However, the MVNOs are coming with some kind of disruption in the market, which may unsettle the telecoms operators, especially the dominant players. The coming of MVNOs will liberalise that space and democratise choices, people would have options.”

     
Admitting that the NCC has done its best to propel the take-off, the Flex Mobile boss said before the licenses were issued, there were conversations for about three years, saying what is playing out now is not a surprise to anybody.
   
According to him, the MNOs, MVNOs, NCC and other stakeholders have had nothing less than four to five meetings on the issue in Lagos. He emphasised: “There are different schools of thought around how cost can be shared or billings can happen between the MNOs andMVNOs. What NCC proposed is a revenue-sharing agreement. What we suspect most of the MNOs wanted is a wholesale agreement, where they will sell the service to you, then MNOs become the retailer.
    
“NCC is saying that is not the plan of an MVNO. An MVNO should not come and you sell something to them at N10 and you now tell them to add N1 to it to sell at N11. With such a plan, there won’t be creativity and innovation. Is like saying that all the Fintechs should go and take the same lending rate or charge the same rate with banks. This is not possible! There is a need for liberalisation. I suspect this is one of the major pushbacks on the part of the MNOs.
     
“All the issues revolve purely around commercials. I don’t think there is any issue around capacity, zero opportunity, zero technical/skill set…. It is more around the stalemate in commercial agreement. And I think except the regulator puts its foot down and as the regulator, bring everybody into shape… if not, this MVNO thing would just be a rigmarole kind of.”
      
On his part, the Group Managing Director, Routelink MVNO, Mr. Femi Adeoti, said the amount paid for licenses reflects the significant interest in the MVNO market. He however, said launching services require more than just acquiring a license, stressing that the specific launch date for full-fledged MVNO services in Nigeria will depend on the progress of individual MVNOs in finalising infrastructure, agreements, and regulatory requirements.
     
According to him, the viability of the MVNO model depends on cooperation between MVNOs and MNOs. Adeoti said the NCC plays a critical role in supporting MVNOs starting operations, saying they have implemented various measures, including license issuing across different tiers to cater to diverse business models; establishing regulations to ensure fair access to network infrastructure for MVNOs and potentially offering additional support programmes or initiatives to facilitate MVNO operations.
    
“In summary, the launch of MVNO services in Nigeria is a positive development for the telecommunications industry. While there might be initial delays, continued collaboration between MNOs, MVNOs, and the regulator will hopefully lead to a successful rollout, offering Nigerians more choices, driving innovation, and benefiting phone users,” the Rouelink CEO stated.
    
Reacting to the development, an official of one the telcos, who preferred anonymity, said: “The industry working standards and MVNO pricing is yet to be finalised between NCC, MNOs and MVNOs.
     
“Even if the MNOs are reluctant, NCC reserves the right to go ahead as they’ve already awarded operating licenses to the MVNOs, but the pricing and margins have to be agreed and established, which is being coordinated by NCC yet to be finanlised.”
    
Speaking also on the matter, the Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, that MNOs are slow in activating the MVNOs may not be true because telecoms operators are always ready to support the progress of the industry.
   
 “So many things are involved in these operations. First, have they concluded their working agreement, terms of trading with the MNOs. They cannot sign on without concluding on those fronts.
    
“Discussions are ongoing about the terms of trade and commercial agreement/arrangement. Until these are finalized, there won’t be connectivity. It is a tripartite agreement that must happen among MNOs, MVNOs and NCC would be the approving authorities. Even when those agreements are signed between the two players, it has to be domiciled with the NCC for concurrence. Those processes are yet to be completed. So, I don’t think there is any reluctance on the part of the MNOs. I think the MVNOs need to do more. No commercial agreement has been finalised, which without, there cannot be interconnectivity and sharing of market and traffic. They need to complete all the lines of the process.”   
    
 According to the Director of Public Affairs, NCC, Reuben Muoka, the regulator only issues licenses, but commercial agreements are basically between the operators and MVNOs, which the NCC would not interfere with.
    
Muoka said NCC’s role deals with access, saying “there is a provision that once you are licensed in the network, nobody would deny you access. That is the extent to which we would go. If they say they are being denied access, that could be something that we would begin to talk about fresh, but if it is due to some disagreements based on commercial terms, which is usually between them, it is not what we should be talking about. If any of them is having issues with that, they know what to do, they should write to the NCC formally so that we can look into it. Regulatory processes are with them to explore.”     
    
But for the MVNO players to succeed in a competitive environment like Nigeria, where MTN currently controls 36.8 per cent of the market and services 80.8 million subscribers; Airtel, 63 million and 28.6 per cent; Globacom, 62 million, 28.2 per cent and 9mobile, 13.6 million and 6.21 per cent penetration, MVNOs would have to offer an array of VAS that is not being offered currently by the MNOs.
    
Speaking at an MVNO forum in Lagos, experts noted that many Nigerians are already subscribed to voice and data services from the MNOs and may not want to change to MVNOs for the same services.
     
The Chief Executive Officer of Wireless Technology Labs, Satya Mekala, said the licensed MVNOs will need to focus on special areas like education, agriculture, and rural development, among others.
     
“Mobile operators are very rich, and they’re already making lots of money. It’s an unnecessary waste of time for MVNOs to compete with them. But some innovations are not happening with mobile operators, which offers opportunities for the MVNOs,” he said. 
     
Mekala also stressed that collaborative efforts among MVNOs enabled them to pool expertise, tackle challenges collectively, build profitable ventures, and deliver essential value-added services crucial for the populace and the nation.
    
Similarly, the Vice President of TecnoTree, a telecoms software vendor, Himmat Gill, identified fierce competition in an oversaturated market, limited control over network quality and service prioritisation, and navigating through diverse regulatory landscapes across regions as some of the challenges that may impede MVNO’s success in Nigeria. 
     
He, however, suggested market differentiation as a potential strategy for MVNOs to overcome these challenges.
    
 “Market differentiation can serve as a potent strategy for MVNOs to overcome the challenges of low revenue and competition from the MNOs. By distinguishing themselves from competitors, MVNOs can attract and retain customers,” he said.
    
According to Fortune Business Insights, the global MVNO market size is projected to rise from $67.54 billion in 2020 to $123.40 billion in 2028, at a CAGR of 7.9 per cent during the forecast period, 2021-2028.