Equity and Safaricom in a clash that might affect MPESA service

The black swan theory provides an interesting way of looking at the business world. But for many entrepreneurs and corporate leaders, this theory — which describes an event that comes as a surprise and has a major effect — is yet to be ingrained in their way of life. And this is despite the fact that innovations that turn the world of business upside down often, if not always, come from “unexpected” quarters. A black swan has landed into the Kenyan telecommunications market in the form of Equity Bank’s planned roll out of Thin SIM technology through its wholly owned subsidiary Finserve Africa. What Equity Bank is planning to disrupt and dismantle is the dominance Safaricom has built in the mobile money transfer sector with M-Pesa, and the stranglehold it has in the telecommunications market. Many thought Safaricom’s lead in mobile money transfer services would be unassailable. Even the telco’s direct competitors in the industry — Airtel, yuMobile and Orange — have been unable to dent the firm’s dominance. And going by a series of letters in Business Beat’s possession that were exchanged between the telco, Finserve and industry regulators, Safaricom CEO Bob Collymore is determined to defend his turf against an invasion by Equity. Renewed rivalry At the heart of the two firms’ renewed rivalry is a technology known as Thin SIM, which Equity plans to use to enter the telecoms industry. The Thin SIM is essentially a thin layer of plastic with a circuit printed on it. A user can literally stick it on to an existing SIM card to continue accessing the original network, but with the added functionality of the secondary provider.  With the innovation, subscribers will not need to buy another cellphone or use a handset with dual slots. They also do not need to migrate to Finserve Africa’s network to use its financial services. The Thin SIM can work alongside all four mobile operators in Kenya — Safaricom, Airtel, yuMobile and Orange. Equity Bank is playing a tactical game, arguing that its eight million or so clients cannot afford having two phones, so a SIM card that just sticks on to the existing card on the same phone makes economical sense. “Finserve’s services are targeted at poor people who cannot afford the luxury of a duo-SIM mobile phone but need to have access to at least two lines for their various needs and within their budgetary constraints. This need is currently not being met by any of the existing service providers, and that is the critical gap that Finserve seeks to fill through the roll out of the Thin SIM technology,” reads the letter from Finserve to the Director General of the Communications Authority of Kenya (CAK), Mr Francis Wangusi. One product Safaricom jealously guards is its mobile money transfer platform M-Pesa. Apart from bringing in billions of shillings for the operator, the service acts as a powerful loyalty tool. The other mobile operators have long tried to lobby for Safaricom to open up M-Pesa to competitors. Now, with the Thin SIM, that advantage could be eroded. With Equity Bank announcing that it will charge a maximum of Sh25 for any amount transacted, it could be a major assault on Safaricom’s money transfer business.