Apps are where commerce lies and the channel through which most businesses engage with customers. So claims Valde Ferradaz, CEO of Ignition Telecoms and head of its subsidiary, MVN-X, who says this not only reflects the high penetration of smartphones, but also affirms that digital is the best approach to ensuring high quality customer experience.

Ferradaz says in the current economy, value for money and a good experience for the customer are essential to business survival. While the tech-savvy consumer demands engagement, COVID-19 lockdown conditions have also forced the hand of retailers and they need to be ready.

“With current economic trends, trying to minimise costs and increase value is uppermost in our minds. Customers are looking for that value. Businesses can do this better by digitising their customers. It is important, within the prescriptions of the law, to know as much as you can about your customers so you can service them best. I don’t think a business can survive without doing that, especially in an era when you can’t rely on destination to attract people. People want to stay home to save fuel and be safe. Smartphones allow that, especially as they become cheaper and more universal. As a business you must constantly be engaging with customers to keep them interested and to give them value.”

“As a consumer, if I can’t engage with my provider of choice I will shop around. People want to be able to engage, to be able to talk to someone, especially during Covid. Service has to be responsive and interactive. The world is simply forcing us that way.”

Ignition Telecoms says companies have seen the surge in data, especially since COVID-19 with demand for tools like Zoom and Teams.

It adds that smartphones are playing a pivotal role in accelerating business growth. In South Africa, smartphone penetration increased by almost 10% in 2019 alone, from 81.7% in 2018 to 91.2%.

In early December 2020 ITWeb Africa reported on statistics from the International Data Corporation (IDC) which stated that Africa's overall mobile phone market shipments declined 6.0% year-on-year (YoY) in Q3 2020.

According to the research company’s Quarterly Global Mobile Phone Tracker, the decline stemmed mainly from feature phones, with shipments of these devices declining 11.2% YoY in Q3 2020 to total 29.4 million units.

By contrast, smartphone shipments were up a healthy 14.1% YoY, with 22.9 million smartphones shipped to the region during the quarter.

The IDC said the growth of the smartphone market was caused by the release of pent-up demand after countries eased their COVID-19 lockdown restrictions and by a shift in vendor strategies to offer more entry-level flagship models.

Ferradaz believes businesses see the prospects – especially with the exponential growth in data, but often feel out of their depth in this space - which is why many have partnered with mobile enablers to enter telecommunications.

This is where MVN-X comes in.

MVNO operators

The company was established to help big retail clients to become their own Mobile Virtual Network Operators (MVNOs).

Ignition Telecoms says the MVNO industry is flourishing. The company references the Global Markets Insight, which projects a compound annual growth rate of over 12% between 2018 and 2024. But, the business is fraught because few companies have the experience or infrastructure to navigate this terrain.

According to Ferradaz about 50% of MVNOs fail because they don’t know how to build products that are different to the networks, and they don’t know how to engage with customers in a way that’s relevant.

There are several boxes that need to be ticked before a business establishes itself as credible competitive MVNO and tap into data growth.

The first box is reach to establish a recurring customer base.

“It is easier to succeed as an MVNO if you have some critical mass. This reach allows you to penetrate the market where others can’t.”

Another important factor is the reason a retailer wants to become a MVNO. This carries some weight says Ferradaz.

“Many MVNOs want to simply resell airtime. That’s not a good reason to become an MVNO. If the strategy is to retain a share of the wallet and build loyalty, then you would consider it. If I don’t give my customers what they want, there is a higher risk that I will lose them. So, how do I engage and reward them? With data, for example, because it is a valuable commodity and people appreciate it. By the same token you are branding it as your own. Now, not only can I communicate with you and engage with you frequently, but I can track your spending and that becomes more and more powerful and of value to us both. A consumer buys airtime and is rewarded with more airtime. It offers ever increasing value. As a consumer you don’t have to go to a mobile network operator for airtime. You walk into a store that you trust, where you are already shopping for your groceries. And you know that the more you spend on household items, the more you are rewarded. The benefits are clear.”

Ferradaz says the big mobile network operators aim for the mass market and try to be all things to all people. On the other end of the spectrum, consumer brands looking to do a better job serving their customers through MVNOs, get caught up in a business that isn’t their core.

The rise in MVNOs talks to the ability of some to get to market fast, “with the same capability and at times even better agility than a standard mobile network operator”.

Distribution is also critical for retailers that want to grab ‘a piece of the telecommunications pie’ says Ferradaz.

“The reach and distribution of the retailer means it can negotiate wholesale margins on airtime and data, better than the consumer would have received from the networks. This was impossible before because of the lack of technology, but now companies like ours can enable MVNOs and this digital penetration allows them to leverage their customer base.”

Adjusting SA’s focus

Ignition Telecoms’ chief executive believes South Africa is still too focussed on the top LSM (Living Standards Measure).

“It is not just about cheaper data - it is about getting relative value. The lens in South Africa is still too focussed on the top LSM. MVNOs are good for the country because they can improve data affordability, access in rural communities and dilute monopolies.”

“…. about 50% of MVNOs fail because they don’t know how to build products that are different to the networks, and they don’t know how to engage with customers, in a way that’s relevant.”

Valde Ferradaz, CEO of Ignition Telecoms.

Ultimately competition in South Africa’s mobile telecommunications space is increasing and Ferradaz says this has to be viable to ensure service delivery.

“I think the regulator has to govern spectrum and competition. We don’t want window dressing and a waste of spectrum from those who can’t deliver. Spectrum is not an endless commodity, but you can utilise it well. That’s why new technology, like 5G, is important.”