“When they say virtual network operator, what they mean is that they are not actually the operator and they’re piggybacking on a real or physical operator,” said Arthur Goldstuck, managing director of technology market research company, World Wide Worx, and editor in chief of technology magazine, Gadget.
“In this case, Cell C is the operator. Mr Price uses their infrastructure but almost indirectly as it’s really still a cell c service but its branded Mr Price so that’s why it’s a virtual network and not a real network.”
Goldstuck further explained that a virtual network works well for brands with a large customer base as they can leverage off it to offer additional services and benefits to its consumers.
For example, he added, [DATA MPC:Mr Price Group Limited]could offer clothing discounts on the back of someone using its mobile service.
(READ MORE: Mr Price earnings up due to successful retail formula)
He believes that the MVNO service may work well for Mr Price as prepaid consumers are always on the hunt for the best deal.
“Consumers are always looking for a better deal and they are actually very intelligent when it comes to balancing out prepaid deals, for example, and having a look at what the next best prepaid package is compared to the one they have right now,” he explained.
On the other hand, Cell C too will benefit from the deal.
“Cell C makes itself available to MVNOS so it has a history and experience of providing an MVNO infrastructure and platform. Part of the reason for that is because being the smallest player, they have to find every way they can to try and increase their market share,” said Goldstuck.
(WATCH VIDEO: Cell C dissects future financial plan)
He added that consumers’ loyalty to mobile networks is low meaning that churn figures from operators like Vodacom, MTN and Cell C remain high.
In addition, he believes that there is major potential for other retail brands such as banks to tap into the MVNO market in order to offer their customers a wider range of services.
On the other hand, Goldstuck said that there is no longer much margin in reselling mobile network operator services.
“There used to be much more margin in South Africa but now with the interconnect fee having come down dramatically and about to vanish in the next few years, the remaining margin has almost vanished so it’s going to be a tight balancing act for Mr Price and for Cell C,” he said.
(WATCH VIDEO: Cell C slashes call rates to 66c)
Virgin Mobile, he added, was the first company to launch an MVNO in South Africa, also on the back of Cell C, however it did not gain much traction as they tried to leverage off a brand that didn’t exist in South Africa.
Goldstuck added that MVNOS although not a new concept, are still not very popular in major global markets.