Nigerian fintech leader Interswitch has made a strategic shift, acquiring a Tier 5 Mobile Virtual Network Operator (MVNO) license for ₦500 million ($1.08 million) in May 2023. This move marks the company’s foray into the telecommunications sector, venturing beyond its established dominance in payment solutions.
Interswitch’s financial report reveals plans to leverage the license for a unique market entry. The company aims to create a hybrid model, combining payment and telecom services for both businesses and consumers. By adopting a low-investment virtual telecoms approach, Interswitch seeks to bridge the gap in underserved areas while capitalizing on Nigeria’s thriving mobile phone market, Africa’s largest.
Nigeria operates a tiered system for MVNO licenses, specifying the services each tier can offer. Interswitch’s Tier 5 license, the highest available, allows them to negotiate with any of Nigeria’s four major telecom operators. This paves the way for Interswitch to provide asset-light telecom services, focusing on regions with inadequate coverage.
Through strategic partnerships, Interswitch plans to utilize existing infrastructure to deliver value-added services to customer segments neglected by traditional telecom companies. This could potentially deliver more affordable 4G or 5G services to a wider Nigerian audience, while addressing the critical need for improved connectivity in rural areas.
The move comes at a pivotal moment for Nigeria’s telecom sector. The industry experienced its first decline in growth in five years due to reduced foreign investment and subsequent infrastructure spending cuts by existing operators. In response, the Nigerian Communications Commission (NCC) issued 25 MVNO licenses in 2023, aiming to foster competition and drive innovation.
Despite boasting a population of over 200 million, mobile connectivity remains a challenge in Nigeria. Only 60% have access to basic services, with 4G and 5G penetration hovering around 5% and 0.8% respectively. Interswitch, with its established customer base exceeding 50 million Verve debit cards issued, has the potential to disrupt the status quo and offer compelling alternatives in the telecom landscape.
However, carving out a significant market share requires Interswitch to deliver superior telecom services while carefully selecting a strategic telco partner. With an estimated 200 million mobile subscribers in Nigeria, competition is fierce. To capture consumer interest, Interswitch will need to develop innovative communication strategies and offer unique value-added services.
