The past few months have offered something of a vindication for the MVNO concept in the Middle East and Africa region.
While the concept has been widely adopted in more developed markets such as Europe, it has taken far more time for MVNOs to gain acceptance in the Middle East. Oman was the first country in the Middle East to offer MVNO licences, and the first to actually host an MVNO, with the launch of Friendi Mobile back in 2009. The country’s regulator licenced about five MVNOs, although only two, Friendi and Renna Mobile, appear to have gained any traction in the market.
Since then, Jordan also dipped its foot in the water and issued an MVNO licence, which was also taken up by Friendi Group in 2010. But since then, there had been, until recently, a lull in terms of MVNO developments. Saudi Arabia allowed its operators to launch sub-brands but held back from licencing fully-fledged MVNOs. In 2010, Virgin Mobile also launched an ill-fated branded reseller agreement with Qtel in Qatar. However the operation, which was called Virgin Mobile Qatar, was eventually axed after Qtel’s competitor, Vodafone Qatar launched legal action against ictQatar for allowing what it perceived to be a third operator into the market. The incident probably did some damage to the MVNO concept in the region by revealing a certain amount of confusion over the exact definition of MVNO.
But the Qatar incident also appears to have made Virgin Mobile take a second look at its strategy in the Middle East and Africa. Its operation in South Africa had long been racking up losses, and the company’s decision to launch in Qatar in the way it did - and without an MVNO licence - was risky. This also demonstrates that running a successful MVNO is no simple matter. An MVNO does, after all, carry out all the same functions as a regular operator, apart from the core network operations. It also has to know its target audience in order to build a big enough customer base to survive. This is perhaps partly what led Virgin Mobile to place its trust in a local specialist, in the form of Friendi Group, rather than continue to go it alone in the region.
Indeed, in June, Virgin Group and Friendi Group signed a strategic partnership agreement for MEA to combine their regional telecom operations to create a combined entity called Virgin Mobile Middle East and Africa. The group will manage current operations of Virgin Mobile in South Africa, and Friendi Group in Oman, Jordan, and KSA. The new group also has plans to expand by launching more operations across the Middle East and Africa and will target nearly 5 million subscribers by 2015 across both brands.
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The deal was viewed in a positive light by analysts. For example, Joseph Que, a partner at Dubai-based telecoms consulting and investment firm, Delta Partners, said that Friendi Group and Virgin Mobile are essentially putting together their assets in the MEA region. “This something that makes sense, as scale of operations is very relevant for the telecom business. According to available information, the new company will manage around 1 million customers, which seems to be an interesting starting base for further expansion within the region, as assumed by the partners,” he said. “With their operations in Oman, KSA and Jordan, Friendi has the know-how and expertise of running MVNOs in the region and the Virgin Mobile brand is a strong asset for any mobile venture in the world added to its experience in Qatar.”
While the Virgin Mobile Qatar dabacle showed the extent to which MVNOs can instill fear in operators as a legitimate means of competition, it is important to remember the many benefits that MVNOs can bring to markets.
By tapping niche parts that the mainstream operators may have missed, MVNOs can help their host operator to at least make use of spare capacity of their network. They also offer regulators another important means of increasing competition on the service layer.