MTN Group CEO Ralph Mupita has warned that discounted pricing by mobile virtual network operators could have adverse consequences for the entire mobile telecommunications industry if MVNOs continue to offer data to their customers at prices lower than infrastructure owners like MTN.

MVNOs have no physical network infrastructure of their own, instead relying on mobile network operators (MNOs) for the network resources to support their mobile offerings. Well-known examples include FNB Connect, Capitec Connect, Spar Mobile and Melon Mobile.

Speaking at MTN’s investor presentation following the release of the mobile operator’s interim results for the six months to 30 June 2025 on Monday, Mupita warned that discounted pricing by MVNOs – the number of which has mushroomed in recent years – could collapse the local market, like happened in Europe.

“You want to avoid a situation where you have all these MVNOs on your network and they are providing the data cheaper than you as the generator of that data – but the costs sit with you,” said Mupita. “Look at the Netherlands 10-15 years ago. The MVNOs wrecked the market. If you are not careful, you’ll have a Netherlands effect [in South Africa].”

The relationship between MNOs and MVNOs can be fraught. One one hand, MVNOs offer MNOs the opportunity to reach niche customer segments that the broader-stroke marketing and segmenting initiatives of the big operators would otherwise not satisfy. On the other hand, MVNOs compete directly for customers at the retail level, threatening the operators’ market share, and their margins.

Increased competition at the retail level gives consumers more choice and improves affordability, increasing the likelihood that more people will be connected. However, downward pressure on pricing thins margins for the MNOs and threatens to slow investment into the infrastructure required to support all the players in the market.

‘Discount supermarket’

MNOs could respond to the threat by not allowing MVNOs onto their networks at all, but this presents another problem: any operator without an MVNO leaves itself vulnerable to those that embrace MVNOs as part of their broader strategy. In a way, they’re damned if they do and damned if they don’t.

Although Mupita cited events from 15 years ago in the Dutch market, more recent evidence suggests that discount pricing by MVNOs continues to be an issue for European operators. Specialist telecoms consulting firm Strand Consult in 2023 released a report (paywall) showing MVNOs “turned the [Danish] market upside down” though discount pricing, even affecting the customer churn rates of MNOs.

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“Today the number one selling point is simply the price, and most operators have passively chosen to copy and thereby follow the discount service providers’ concept – instead of taking up the fight,” said the report.

“The idea was to create a discount supermarket that competes against your own supermarket, a good enough idea until all your customers find out that they can save over 60% by simply switching to the discount supermarket.”

The European market pioneered the MVNO concept with the launch of Virgin Mobile UK in 1999. South Africa’s first MVNO – also Virgin Mobile, now defunct – was launched seven years later, in 2006. Although developments in the European market are often reflected locally at a later stage, there is no guarantee that what happens up north will be repeated in South Africa as there are key differences in market dynamics, especially in regulation.

“South Africa is structurally different and safeguarded by regulation. Dutch prices fell, but the primary drivers were MNO-led moves such as unlimited data launches by T-Mobile and aggressive Tele2 pricing, not the MVNOs,” said Cell C CEO Jorge Mendes in response to questions from TechCentral.

“The market has remained stable, and independent MVNOs’ share has stayed modest, with regulator-approved integration (for example, T-Mobile–Simpel and KPN-Youfone) viewed as orderly evolution.”

Cell C was the first operator to host an MVNO on its network when Virgin Mobile was launched in 2006. Despite a 2023 decision to forego its network infrastructure and adopt a roaming model that uses the masts and towers of competitors MTN and Vodacom, Cell C still uses its own spectrum to host 60% of the MVNOs in the market.

According to Mendes, communications regulator Icasa’s oversight in South Africa ensures balance, with MVNOs absorbing the unused capacity of the larger MNOs at “healthy margins”.

“Wholesale pricing frameworks mean no MNO subsidises MVNO data. These are commercially viable, profitable agreements,” said Mendes.

Beyond pricing

According to Vodacom South Africa CEO Sitho Mdlalose, there are other factors to consider beyond the regulatory one. MNOs offer services other than connectivity, including financial services and mobile money wallets. MNOs also invest in physical stores, which are widely distributed.

Read: Pick n Pay relaunches its MVNO

“MNOs continue to fund high-quality networks, extend coverage to rural areas and deploy advanced technologies such as 5G. We believe long-term success in this market goes beyond just competitive pricing,” said Mdlalose. – © 2025 NewsCentral Media

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