Equity Bank has acquired a licence to operate a mobile-phone service in conjunction with Airtel, Equitel. Equity Bank is another Kenyan success story, revolutionised local finance in the past decade by slashing fees and helping to bring the poor into the banking sector; the number of accounts rose from around 2.5m in 2005 to more than 20m in 2013 (in a population of 44m).
On July 15th their joint venture, Equitel, will launch a service that uses “thin SIMs”, plastic sheets embedded with microchips that slip over the top of a standard SIM card and let the user switch between operators easily. This makes it more likely they will try, and perhaps eventually migrate to, Safaricom’s new rival. Equitel is aiming for 5m users by the end of the year, compared with Safaricom’s 23m. Safaricom is only its first target: it plans to break into other markets by similar means, in the hope of having 100m customers across Africa a decade from now. Among the candidates it might consider are Nigeria and South Africa.
Equitel’s biggest selling-point is a promise to charge a fraction of Safaricom’s fees for money transfers. It is in a strong position, since Equity already banks 10m Kenyans and has branch networks in several countries. Telecom operators like Safaricom will struggle to fight back; getting a banking licence is not nearly as easy as it has been for Equity to move into mobile telephony, which is less heavily regulated.
Mr Collymore has put on a brave face, saying he is not worried and that his real competitors are messaging services such as those of Google and WhatsApp. He has fought back by lobbying in parliament and by trying to get the courts and the country’s telecoms regulator to block its rival’s use of thin SIM technology. He has warned the public (with some justification) that thin SIMs may present security risks to the money stored on their phones. But his battle to ward off new competition to Safaricom seems lost. Read more