A Guide to Working with an Aggregator and Creating a “Brand-VNO”
Concluding the first day of the inaugural MVNO Nation Africa event, Jignesh Dave, Founder and Managing Director of Next Communications, introduced an intriguing new concept to the audience: the "brand-VNO" or "Branded Mobile Network."
A "brand-VNO" or Branded Mobile Network is a business model aimed at enhancing consumer connections to boost both revenue and loyalty. At Next Communications, we facilitate this by leveraging Mobile Airtime as a Currency, utilizing TelcoTech to develop Branded Mobile Networks along with various other solutions such as OneConnect, OneSIM, and OneEngage. By capitalizing on mutual strengths, Jignesh proposed that this approach could effectively circumvent the early-stage challenges that often lead to the failure of many MVNOs.
Approaching an untapped opportunity in Africa
As touched on earlier in this report, Jignesh reiterated that Africa represents a great, but largely untapped, opportunity for MVNOs.
“There are 1.4 billion people in the continent, and more than 90% of them still don't have access to MVNOs,” said Jignesh. “It is a huge opportunity.”
However, Jignesh advised that, unlike in more established markets, succeeding in Africa will require an intimate understanding of local consumer needs, since many countries on the continent are still facing challenges like low smartphone proliferation and slow infrastructure development. In fact, Jignesh also pointed out that around 40% of people on the continent still don’t own a smartphone.
He said, “If you look at South Africa, we mostly have an equivalent number of end consumers as the UK but, in the UK, around 20% of their mobile subscribers come through MVNOs. Whereas, in Africa, MVNOs only contribute around 2% of subscribers.”
“But every great opportunity comes with a challenge, and I strongly believe that Africa is a continent where, if you have the capacity to roll up your sleeves and work hard, you will be rewarded.”
New MVNOs must focus on their strengths
Still, it appears that succeeding as an MVNO can be more challenging than many businesses realise. Jignesh pointed out that the vast majority of MVNOs actually struggle to get past the stage of signing an agreement with an MNO.
“Less than 3% of MVNOs make it to the contract signing stage,” said Jignesh. “The reality is that 97% of MVNOs are unable to progress past those early stages. Of the 3% that do, 70% of them reportedly fail after three years.”
Clearly, there are substantial barriers to entry, as discussed earlier in the report.
However, these statistics shouldn’t discourage businesses from pursuing the opportunity with the African MVNO market. The key is to learn from the mistakes of others and look for new, innovative approaches to overcoming the key pitfalls, according to Jignesh.
And what did Jignesh identify as one of the most damaging pitfalls for new MVNOs to avoid?
He said, “The key problem that a new MVNO faces is that either by default or by design, they’re not allowed to focus on what they should be focusing on initially. MVNOs should be focusing on creating a strong value proposition, creating distribution channels, and creating niche communities.”
“But most of the time, what happens is they get distracted by technical things like their OSS or BSS, but that's not their domain.”
The temptation to take on the technical nuances of the telco industry without the support of trusted partners can be costly, especially for businesses without internal expertise. Therefore, it’s important to work with specialists, so the business can confidently dedicate its resources to the right areas, like developing a strong brand, a unique value proposition, and effective distribution channels.
Understanding the aggregator model
For organisations looking to avoid the challenges highlighted here by Jignesh, the aggregator model can enable more focus on those top MVNO priorities.
Aggregators are partners who essentially act as intermediaries, taking care of the technical and operational aspects that cause so many new MVNOs to struggle.
Jignesh explained that, for MVNOs, the quality of the network and technology is outside the realm of control, because it’s provided by the partners.
But what is within the control of new MVNOs is their costs and profitability, which are key factors for determining survival and success. So, variables like costs of goods sold (COGS) and wholesale rates are often make-or-break for MVNOs, and these can be made significantly stronger with the help of an aggregator.
Moreover, with the right aggregator, there’s no capital investment required up-front, as these partners can offer a subscription-based service that is flexible over time.
Jignesh said, “Focus on what you can control, which in the commercial sense is your profit margins. That negotiation with an aggregator is one of the most important parts for any start-up MVNO.”
“If you get that right, then you can choose what milestones you want to aim for in the first 18 or 36 months, and then you can look at long-term goals, like whether you want to invest in more technology, or more distribution channels. So, that's very crucial in my humble opinion as a starting point.”
Using an aggregator to become a “brand-VNO”
This aggregator model offers several key benefits for MVNOs, particularly for businesses that are new to the space.
These include:
Long-term commercial viability and strength
Rapid time-to-market with new offerings
Assistance with customer service
Flexibility and agility
Reduced risk.
The purpose of this model is to make life as easy as possible for MVNOs, freeing them up to focus on their strengths, thereby becoming a “brand-VNO” without the hassle of the technical challenges.
Key take-away
The best chance of long-term success for an MVNO is focusing on providing the best possible customer experience and service, and leveraging the existing brand to grow the business.
Too often, businesses from other industries are distracted by the complexity and technical nuances of the telco space, causing them to lose sight of what will really drive growth.
Working with a local partner, who is specifically there to enable brands to focus on their strengths, could help take full advantage of the MVNO opportunity in Africa.