The Brilliant Interswitch’s MVNO Business Model in Nigeria

In June 2023, I wrote: “Tekedia Capital is looking for innovators who are building around MVNO (mobile virtual network operator) in the Nigerian market…We have great ideas on how MVNO could unlock massive opportunities through subscriber-based business models; one case study: Incentivize customers to go subscription in logistics, ecommerce, etc sectors, where paying subscriptions could unlock many benefits, including affordable data plans. Think of Jumia Prime subscription shoppers who also get cheap phone services from Jumia!

The playbook here is to execute a double play strategy (read how I explained it in Harvard here) where the MVNO may not deliver the direct financial rewards, but would accelerate value capture via other ways. Tekedia Capital believes that startups within our portfolio can create GREAT PRODUCTS by using the telecom-based services for subscription-based customers, delivering superior customer retention and value capture over time.” 

But you know what? Interswitch is going on that business model. Yes, the payment giant has acquired an MVNO operator license: “Interswitch intends to leverage this newly acquired license to pioneer a novel approach in the telecommunications market, merging payment and telecoms services tailored for both business-to-business (B2B) customers and consumers. By exploring a low-capital-expenditure virtual telecoms model, Interswitch aims to bridge the gap in underserved areas while simultaneously tapping into Nigeria’s vast phone market.” That is a brilliant business model.

While I am not a fan of generic MVNO business model where already overburdened core network operators are asked to add more users via MVNOs, this in-customer focused model is a brilliant playbook on how MVNO can help a company deepen services competitive advantages. Yet, the challenge remains since Interswitch customers will still be tethered to the same overburdened networks unless it can find ways to wall them off, to ensure network services are better for them.

But in Nigeria, I do posit that some of our core telcos are already operating at above customer-capacity. For example, they are built for say 20 million users, but they have 30 million users, causing service failures, call drops, inability to browse efficiently, and broad network congestion.

If you now allow them to add an NMVO, and that company brings 2 million users, you are not helping any person. This is why I do not have a positive view of the MVNO market in Nigeria considering the Naira FX paralysis.

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