Cofek threatens legal action against regulator over thin-sim tussle

The Consumer Federation of Kenya (Cofek) has threatened legal action against the Communications Authority (CA) over what it terms as unprofessional handling of the overlay SIM technology issue between Safaricom and Equity Bank.

Cofek secretary general Stephen Mutoro Saturday said the manner in which the regulator has handled the matter “does not present a fair balance between commercial and consumer interest”.

“The CA is clearly the cause of the current confusion around the thin-SIM rollout,” charged Mr Mutoro.

Safaricom, the provider of the M-Pesa mobile phone payments service, challenged Equity’s intention to use the thin SIM cards for its money transfer service through its subsidiary Finserve, saying they would expose subscribers to financial fraud and intercepted communication.

CA ruled in Equity Bank’s favour, albeit on a one-year trial period.

(READ: Equity gets nod to launch services on thin sim)

But Cofek accused CA of failing to conduct an independent study on the viability of the technology.

“There was nothing more compelling for the unprecedented rush for the regulator to make a decision on a basis it neither owns nor can competently defend,” said Mr Mutoro.

He further said the authority’s decision to allow the thin-SIM was suspect and was likely to create a monopoly for the said operator and manufacturer.

REVIEW LEGAL COMMITMENTS

Safaricom later warned it would review its legal commitments to M-Pesa customers who opt to use Equity Bank’s overlay SIM card.

“In the interim, Safaricom will review some of its legal commitments to its customers and banking partners with the view of addressing the legal exposures that could be created by the use of the SIM overlay technology, particularly in relation to mobile banking activities,” Nzioka Waita, Safaricom’s director for corporate Affairs told Business Daily.

The warning forced CA to seek a written undertaking from Equity Bank that it would compensate users of the technology in the event that any money is lost.

(READ: Safaricom washes its hands over new SIM card use)

“For the regulator to call for indemnity guarantee from Equity Bank for its decision only confirms the obvious – CA was clearly not ready to make the decision but was caving into either commercial, political and or other pressure which hasn’t been laid bare,” said Mr Mutoro.

The commitment must also shield the regulator from any litigation arising from such losses.

But Mr Mutoro says the amount, process and time of compensating consumers who will be victims of the anticipated thin-SIM technology risks should be gazetted.

“If not, the CA must be ready for an avalanche of claims from consumers should anything go wrong with the thin-sim rollout,” he said.

SUPPORTED PARLIAMENT

The SIM card is paper-thin that is embedded with a chip which users overlay on the primary SIM card to receive services from two different mobile service providers simultaneously.

Mr Mutoro, however, maintained that there are huge benefits of a new competitor for Safaricom’s M-Pesa.

In a surprise move, the Cofek boss backed Parliament’s decision to overrule CA and halt the rollout of the technology.

(READ: MPs switch off Equity SIM card to await probe)

“Parliament was in order to intervene,” he said. “The indecisiveness and the belated peculiar order from CA for indemnity from risks, to Equity Bank, on its own decision speaks volumes on whether or not it indeed believed in its’ decision in the first place.”

Mr Mutoro said the Constitution gives the National Assembly an overarching oversight role on any public interest matter under primary purview of any institution, person or group of persons.

He added that a Committee of Parliament represents and is a true reflection, has authority, privileges and powers of the entire Parliament.

The Jamleck Kamau-led parliamentary committee on Energy, Information and Communication Technology had been accused of overstepping its mandate when it halted the rollout of the thin-SIM, an argument Mr Mutoro disagrees with.

“This is because Parliament has constitutional and other residual powers to oversight any state office and institution including Chapter 15 independent commissions, and which CA is not,” he said.

“The Constitution cannot envisage a situation in which a body that Parliament creates will have imaginary independence against its’ own creator, Parliament.”