African MVNOs should target premium customers, says Cell C

MVNOs in Africa should focus on the premium end of the market rather than offer low-cost ‘no frills’ services, according to Bjorn Florman, chief executive, wholesale business at Cell C. The South African mobile operator is one of the relatively small number of networks in the region that has wholeheartedly opened its network to MVNOs.

Speaking on the opening day at this year’s AfricaCom event in Cape Town this week, Florman said MVNOs require a well-known brand, a customer base and a distribution network to succeed. He said that in emerging markets it makes more sense for MVNOs to target the premium end of the market than it does for them to target low-end no frills segments, as has been the case in a number of mature market MVNO deployments.

Mats Carrgard, chief commercial officer of Virgin Mobile South Africa, one of Cell C’s key customers, said the main objective for any MVNO is to make the most of its assets, including its brand. “We are looking at using the brand to create an exceptional customer experience,” he said. “The MVNO model is about finding a niche where you can operate,” he said.

Carrgard said there needs to be a regulatory framework that creates a level playing field for MVNOs. However, he said he does not believe in mandatory access.

Echoing Florman’s comment about the attractions of the premium segement, Carrgard highlighted the example of Virgin Mobile Australia, which has succeeded in creating a premium niche segment, migrating most of its customer base to postpaid accounts and increasing its rates with high value unlimited data packages.  The brand had appealed to “aspirational people who want a high level of service”, he said.

Carrgard said that Virgin Mobile now had its eyes on northern African markets and could look to Tunisia to launch a further MVNO operation.

Carrgard said there are relatively few MVNOs in Africa, in part because low ARPU levels mean that operators need a large number of customers. However, he said that in eastern African markets characterised by price wars, MNOs could profitably adopt the MVNO model to deliver growth and avoid cutting their own margins.