The International MVNO operators start arriving in Africa – more competition on international calling

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This week international MVNO operator Lycamobile announced that it has got a licence in Cameroon where it has set up a subsidiary. Others are in the wings and this could bring a new wave of competition on international calling. Russell Southwood looks at what might develop.

In the bad old days, when the Government-owned telcos ruled the roost, they usually had monopolies on international calling and rates were very high. However, international companies offering cheap calling to diasporas were nearly always able to buy a “backdoor” connection internally. As a result, there was a vigorous grey market in international calling, either initially through call-back and then through VoIP.

As markets liberalised, there was much more competition between the former incumbent telcos and the new mobile operators. In many countries, this competition drove down prices from several dollars to tens of cents. But although the grey market shrank in size, its calling rates were still cheaper and it has persisted to this day.

In the last five years, there has been a parallel trend where Governments and regulators seek to control international calling through a single gateway so that they can add taxes to incoming calls. This has added a significant premium to those wishing to call home from the diaspora.

So why has the grey market in international calling persisted? Because the price of buying wholesale minutes – particularly to popular destinations – is now down to fractions of a cent per minute. But mainstream carriers are still charging tens of cents a minute to retail customers. In other words, things are back to where they started: there’s a significant arbitrage opportunity between the wholesale price and the retail prices being charged.

Any attention to international calling and the sale of minutes has been rather overtaken by the focus on new data markets. But the margins made by all operators from international calling are a significant contributor to overall revenues.

But this market segment has been bought back into sharp focus by the news this week that UK-based international MVNO Lycamobile has had prior notification of approval from the Cameroonian regulator ART for the provision of public electronic communications services. According to the order signed by the Director General of Art, Jean-Louis Beh Mengue, the receipt given to Lyca Mobile Cameroon Sarl entitles the services of "resale of telephone traffic, supply Internet service to the public, provision to the public value-added services. "

Created in 2006, Lycamobile operates in 17 countries internationally but thus far all of these countries have been in developed markets: Cameroon is the first market it has entered outside and its first African market presence.

If it operates as elsewhere, it will be able to offer cheaper international calling rates and this will compete with existing operators. There are issues of interconnection but it could also use VoIP and simply avoid them. It is hard to imagine that it will not roll-out in other African countries before too long. We have heard of a couple of other international MVNOs who are looking seriously at entering the African market.

The impact will be to bring the cost of wholesale and retail international minute prices closer together, squeezing out some of the generous margins that currently exist. All mainstream operators will resist these kinds of MVNO licences but if they get a foothold in one country then they will become inevitable.

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