MTN South Africa is revising its approach to wholesale access pricing for Mobile Virtual Network Operators (MVNOs). The company will now offer bandwidth at a lower price with a deliberately reduced quality level, giving MVNOs a choice between cost and performance that was previously unavailable.
CEO Ferdie Moolman told TechCentral that the previous wholesale model considered almost exclusively sales volume. MVNOs would enter into an agreement on price and volume, pay a surcharge if they exceeded this volume, and receive the same network quality as regular retail MTN customers. Quality was never a variable in the calculations.
In the new model, quality has become a variable. An MVNO operator aiming to compete through aggressive retail pricing can acquire access more cheaply but with a guaranteed lower bandwidth. The decision of where to position oneself on this curve remains with the MVNO itself. Moolman provided a simplified example: bandwidth guaranteed at 20 Mbps will cost less than that guaranteed at 100 Mbps because, in his words, a constant need for 100 Mbps is not always necessary.
There is potential for further development of this model to account for geographical specifics—for instance, setting prices to help MVNOs gain customers in areas where their own brand is strong, but MTN's penetration is weak.
Previously, Moolman had stated MTN's transition to a more disciplined wholesale structure, warning that some MVNOs use telecommunications as a customer acquisition tool (loss leader) in a way that threatens market value. However, the mechanism for implementing this transition had not been presented before.
Moolman noted that wholesale sales make obvious sense where an operator has unused capacity, as this capacity represents already incurred costs. An operator with 30% or 40% free capacity will agree to lower returns to fill it.
Responding to questions about profitability, he refuted the claim that wholesale operations are necessarily detrimental to profit. Although the return is lower, service costs also decrease: MTN works with one client instead of a retail base, does not spend money on marketing for these subscribers, and does not require call centers or service centers for their support.
By linking wholesale pricing to capital expenditure, Moolman raised a politically sensitive issue. He reported that coverage in rural South Africa turned out to be worse than he expected after returning to the country, and 5G penetration is below expectations. He suggested that if wholesale revenues fall too sharply, the entire investment model could collapse.
Moolman left South Africa around 2000 and worked abroad until 2021, spending the last five years as CEO of MTN Nigeria. He returned to the company as Group Chief Risk Officer of MTN and took over the business in South Africa last November.
According to Moolman's figures, approximately 30 MVNOs operate on the MTN network, most of which are invisible to the general market. MTN launched its platform for MVNOs in 2020, and participants now include Pick n Pay Mobile, Afrihost Air Mobile, and Melon Mobile.
Capitec Connect, claiming to be the largest MVNO in the country, uses the Cell C network, not MTN, but Cell C in turn depends on MTN. MTN builds and operates the radio access network, which runs on Cell C's own spectrum and transmits prepaid and MVNO traffic. In return, MTN gains access to part of this spectrum, which it combines with its own.