Interswitch, the Visa-backed Nigerian payments giant that reported $42 million in revenue for its financial year ended March 31, will enter into Nigeria’s telecommunications sector after acquiring a Tier 5 MVNO (Mobile Virtual Network Operators) license for ₦500 million ($1.08 million) from the Nigeria Communications Commission (NCC) in May 2023.

“The company is investigating the launch of a low level of capital expenditure virtual telecoms model using the license, combining payments and telecoms services to B2B customers and consumers,” read the company’s financial report. 

Nigeria, Africa’s largest phone market, awards MVNOs on a tiered basis, specifying the services they can provide. Interswitch, which has the highest tier licence—the Tier 5 (unified virtual operator) license— can negotiate with one of Nigeria’s four telcos and provide asset-light telecom services in underserved areas. 

The five tiers under which MVNOs can operate

Interswitch will ride on the infrastructure of these telcos to bring value-added services to consumer segments that have been ignored or underserved by the telcos. 

With this license, Interswitch can provide cheaper 4G or 5G services to Nigerians or provide telecommunication services to rural areas. 

Last year, the country’s telco sector witnessed a decline in growth—its first in 5 years— after foreign investment declined, which led to reduced capital expenditure from Nigeria’s existing telcos. 

The NCC issued 25 MNVO licenses in 2023 as it looked to increase competition in Nigeria’s telco sector. Nigeria is home to 200 million people, but only 60% of the population can access mobile connectivity, while less than 5% have access to 4G, and 0.8% have access to 5G. 

The payment startup would rely on its access to a large base of customers—Interswitch, through Verve, has issued more than 50 million debit cards—to offer an alternative to the entrenched options that Nigeria has in telecommunications. 

Interswitch would have to offer improved telecommunications services to its customers and carefully select a telco to partner with it to capture market share in Nigeria’s mobile sector, which is estimated to have more than 200 million subscribers. 

The payments startup would also have to introduce innovative ways of communicating and value-added services if it hopes to compete in Nigeria’s telco sector.