Interswitch ventures into Nigeria’s telecommunications sector following the acquisition of a tier 5 MVNO license

Interswitch, a Nigerian payments giant that is backed by Visa and reported revenues of $42 million for its financial year that ended on March 31, plans to venture into Nigeria’s telecommunications sector. This strategic move comes after the acquisition of a Tier 5 MVNO (Mobile Virtual Network Operators) license, which cost ₦500 million ($1.08 million), from the Nigeria Communications Commission (NCC) in May 2023.

The financial report from the company indicates that it is exploring the launch of a virtual telecoms model that requires a low level of capital expenditure using this new license. This novel approach aims to integrate payment and telecoms services catering to B2B customers as well as consumers.

The Nigerian market, distinguished as Africa’s largest phone market, issues MVNO licenses on a tiered basis, each specifying the services that can be provided. Interswitch, now in possession of the highest tier license, the Tier 5 (unified virtual operator) license, can engage in negotiations with any one of Nigeria’s four telcos. This enables Interswitch to provide asset-light telecom services in areas that are currently underserved, giving the company a unique advantage and opportunity for growth in the thriving Nigerian market.

Interswitch, the hefty Nigerian payments organization, will capitalize on its telco partner’s infrastructure to introduce value-added services to customer segments previously overlooked or inadequately served by telecommunication companies.

Armed with the newly acquired license, Interswitch is now poised to offer either more affordable 4G or 5G services to Nigerians or extend telecommunication services to the rural areas.

In the previous year, the country’s telecoms sector experienced its first decline in growth in five years, primarily due to a drop in foreign investment leading to a decrease in capital expenditure from existing Nigerian telecoms.

In a bid to encourage competition, the NCC granted 25 MVNO licenses in 2023. Despite being home to 200 million people, only 60% of Nigeria’s population can avail mobile connectivity, with less than 5% having access to 4G and merely 0.8% having access to 5G.

Interswitch plans to leverage its large customer base—Verve, under its umbrella, has issued over 50 million debit cards— to propose an alternative to the entrenched telecom options in Nigeria.

To secure a firm market share in Nigeria’s mobile sector estimated to have more than 200 million subscribers, Interswitch must ensure high-quality telecom services to its customers. It also needs careful selection of a telco partner for accomplishing this feat.

Moreover, to maintain competition in Nigeria’s telecoms sector, the payment startup is expected to introduce novel means of communication and value-added services. The company’s ingenuity and innovation will be key factors in navigating this challenging yet promising sector.