Equity to know Thin SIM fate this week

Kenya: The fate of Equity Bank’s entry into the telecoms industry will be known this week when the industry regulator responds to concerns raised by Safaricom over the bank’s Thin SIM technology.

“We are finalising investigations on the concerns raised by Safaricom,” Communications Authority of Kenya (CA) Director General Francis Wangusi, said. Wangusi said the authority has been awaiting reports from other jurisdictions to benchmark on how they handled SIMilar cases. “We are studying to see whether Safaricom’s claims have merit,” he said. “We will meet all the parties concerned early next week to discuss our decision.”

The bone of contention between the two companies is a technology known as Thin SIM that Equity Bank wants to unveil into the market 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. Safaricom late last month wrote to the regulators in telecoms and the banking industries raising integrity and suitability concerns over the Thin SIM.

“We kindly request that the Bank undertake a full risk review of the Thin SIM to address exposures and to ensure that Kenya’s financial sector is not negatively impacted,” wrote Safaricom’s Chief Executive Officer, Bob Collymore in a letter dated June 25, 2014 and addressed to Prof Njuguna Ndung’u, governor of the Central Bank of Kenya. Safaricom also wrote to CA on June 26, raising SIMilar concerns like those in a letter he sent to Prof Ndung’u.

The telco petitioned the telecoms industry regulator and the Central Bank to prohibit Equity from launching the technology in the Kenyan market. Collymore, in the letters detailed why the Thin SIM should not be launched in Kenya.

“The Thin SIM operates largely through its super imposition against an existing SIM card. It then intercepts the communication channel between the primary SIM card and the operating system of the mobile handset via the hard-wired circuit of the primary SIM card.” Safaricom claimed the Thin SIM has the ability to intercept and distort communication between the mobile handset and the standard SIM card. The telco also raises concerns that since the standard of communication between the Thin SIM and the primary SIM card have not been defined, there is a risk that the Thin SIM will infringe on the primary card’s property rights.

Hit back

“Any use of a Thin SIM product should be with the express concurrence of the operator of the primary SIM card to avoid such potential infringement of Intellectual Property Rights. The concurrence of the operator will also ensure that security protocols are in place to safeguard the information on the SIM card,” Collymore said. But Equity Bank hit back: “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 Mr Wangusi. Finserve’s executive director, Mr John Waweru, termed Safaricom’s claims baseless and ill informed.

“All the concerns expressed by Safaricom in its letter are technically baseless and should be disregarded,” said Waweru. “A licensee like Safaricom should never be allowed to determine or dictate the technology that its potential competitors should or should not use. We submit that Safaricom has clearly overstepped its bounds in this matter by urging the regulator to prohibit the use of a competitor’s technology without sufficient knowledge of the product,” reads the letter signed by Waweru.

“The suggestions that we would want to maliciously and/or intentionally intercept or interfere with the primary SIM or the M-Pesa system is preposterous. If at all, M-Pesa’s security and its vulnerability is a task that firmly lies with Safaricom.” At the heart of the two firms’ renewed rivalry is a technology known as Thin SIM, which 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. 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 Thin SIM, that advantage could be eroded. With Equity Bank announcing it will charge a maximum of Sh25 for any amount transacted, it could be a major assault on Safaricom’s money transfer business. .