1 July 2014

Kenya: Equity's Bid to Roll Out Telecom Services Now Challenged By Safaricom

Photo: Lilian Mutegi/CIO
Equity Bank CEO Dr James Mwangi (2nd right) is joined by, from left Adil El Youssefi, CEO Airtel Africa; Eng. John Waweru, Chairman Finserve Africa Ltd and John Staley, Chief Officer, Finance, Innovation and Technology during the unveiling ceremony at Equity Centre.

Equity Bank's plans to launch telecom services in Kenya faces yet another hurdle following an objection by one of the telecommunication players over the technology the bank intends to use to rollout.

In a letter to the Communications Authority, Safaricom chief executive Bob Collymore says Equity Bank should be prohibited from issuing thin SIM cards as it could expose subscribers to financial fraud and intercepted communication.

According to the letter, Safaricom wants the Communications Authority to invite the GSM Association which represents the interests of mobile operators worldwide -- to review the risk posed by the technology to other mobile operators and subscribers.

"In the meantime, we call on the Communications Authority to prohibit its use in Kenya," Mr Collymore says in the letter copied to the Central Bank of Kenya and Equity Bank through its subsidiary, Finserve.

The SIM in contention is paper-thin and is embedded with a chip. Users overlay it on their primary SIM card, regardless of the network, and can subsequently receive services from two mobile service providers simultaneously. Its use means Equity Bank does not have to issue its own SIM cards but could ride on the existing ones.

According to Daily Nation Safaricom's major concern is the security of its money transfer service, M-Pesa, which it says would be vulnerable to attacks.

"It would compromise the security of the M-Pesa system and consequently expose our 19 million M-Pesa subscribers to irreparable harm," says Mr Collymore.

Contacted, Equity Bank chief executive James Mwangi dismissed Safaricom's concerns as baseless.

In a phone interview, Mr Mwangi said SIM overlay technology does nothing more than provide dual SIM capability without the need to change handsets. The product, he said, is needed if Kenyan subscribers are to have true choice in telecom services.

"The opposition by Safaricom is speculative and would require technical proof. To the extent that the thin SIM has not been rolled out, they cannot allege without proof," he said.

Mr. Mwangi said the company is on track to launch telecom services to the mass market this month despite the concerns raised by Safaricom and a court case by the Consumer Federation of Kenya (Cofek).

On 10 July, Mr Mwangi said the firm's banking agents and the families of its staff would be issued with SIM cards.

Safaricom's is the latest round of opposition to Equity's ambitions to make an entry into the telecommunication sector. Cofek has filed a case in the High Court, questioning the manner in which Equity Bank and two other firms were granted licences by the Communications Authority to become mobile virtual network operators (MVNOs). Cofek's concerns echo those raised by Telecommunication Service Providers of Kenya in May.

Finserve Africa Ltd was in April granted an MVNO licence alongside Mobile Pay Ltd and Zioncell. Equity Bank plans to use the Finserve licence to roll out mobile banking services independent of any operator. Customers will also be given data and voice services on the network.

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