By Hilary Heuler |From African Enterprise via ZDNet

Africa’s mobile operators, accustomed to fierce competition and a rapidly changing industry, are used to looking over their shoulders. But it isn’t often that their biggest threat comes not from another telecom company but from a bank.

Kenya’s dominant operator, Safaricom, found itself facing down Equity Bank earlier this year as the two battled it out in through the regulators over Equity’s new ‘thin SIM’, a chip embedded into a thin plastic sheet that sits on top of an ordinary SIM card, making two services available simultaneously. Safaricom claimed the new technology, produced by Taiwanese firm Taisys, was unsafe, and could lead to fraud for the 15 million Kenyans using M-Pesa, the company’s massively successful mobile money system.

But in September, after months of legal wrangles and a hearing before a Parliamentary Committee on Energy, Information and Communications, the Communications Authority of Kenya (CAK) gave Equity Bank the green light to roll out its thin SIM cards in a year-long pilot scheme. Assuming it goes without a hitch, thin SIMs could shake up not only Kenya’s telecom industry, analysts say, but the world of mobile money across Africa.

A challenger arrives

Equity Bank was licensed as a mobile virtual network operator (MVNO) in Kenya earlier this year under the name Equitel, making it the latest entrant into a market that has long been dominated by Safaricom. But with its focus on mobile money – and its declared intention to offer money transfer services at dramatically lower rates than its competitors – industry watchers see in the bank what could be M-Pesa’s first serious challenger.

“We are reducing the charges to a sixteenth of the current charges,” said Equity Bank CEO James Mwangi, speaking before the Kenyan parliamentary committee in September. In a press release, he added: “In this venture of enhancing our mobile banking offering, we are, as always, driven by our focus of making financial services convenient, accessible, affordable, and inclusive.”

In a market in which brand loyalty is practically nonexistent, price wars can be devastating, argues Danson Njue, telecoms analyst for the London-based research firm Ovum. “If Equity is going to come up with a low-priced model, then Safaricom has every reason to fear,” he says. “In such a market customers are very sensitive to prices. They are not tied to one network, so they can change.”

This has led to speculation that Safaricom may indeed see the thin SIM as risky, but the risk is mostly to its own business.

“The reason why we feel some people have concern is because this is a disruptive technology that we have brought,” Equity Bank’s Mwangi told the parliamentary committee. “Every time you bring disruption, it changes the status quo, and those who have been well-positioned before can really find themselves gazing to a threat of even survival.”

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