Has Safaricom finally met its match?

In a previous blog, we discussed and debated why Safaricom was the king of the voice, internet and mobile money market in Kenya. 

We saw why Safaricom, as the dominant player in this market, can afford to ignore both the customer and the regulator when it comes to quality of service issues.

Its closest competitors (Orange Telkom and Airtel) share the remaining 25 per cent of the mobile market and can barely stay afloat, let alone make an attempt to claw into the Safaricom market share.  The secret to Safaricom's success is actually not a secret; it’s MPESA, the globally acclaimed mobile money platform used by over 75 per cent of the 25million mobile money subscribers in Kenya.

Now Equity Bank wants a piece of this action.  Recent business reports indicate that Equity Bank has submitted an application to the regulator to have a mobile virtual network operator license.  This means Equity will have its own SIM-cards for its customers while leasing telecommunication infrastructure from the existing mobile operators to distribute their own brand of mobile money.

It is clear that Equity wants a direct and stronger control of its mobile money market – beyond what it currently has through partnering with operators.   But why would Equity's entry make a difference? After all, Orange and Airtel already enjoy this direct and strong control of their money market business without necessarily threatening or denting Safaricom's dominant position.

Two clear advantages stand out for Equity; a large customer base and a significant nationwide branch network.  With 8million existing banking customers, Equity would automatically become the second-largest mobile money player once they converted these customers into Equity mobile money subscribers.  Put differently, Safaricom - being the biggest player - could potentially lose 8million of its existing mobile money subscribers to Equity.

OMNIPRESENT MPESA

The other advantage for Equity is its large, countrywide branch and agent network.  One problem Airtel and Orange mobile money customers face is the lack of agents at grassroots levels. Equity seems to be the only one that can match Safaricom in terms of capillarity level of reach and distribution across the country.

If Equity succeeds and eventually presents itself as a credible and viable alternative to the MPESA brand, then Safaricom's secret to success will have been commoditized, and subsequently its overall stronghold on the mobile market will have been critically weakened. 

MPESA is simultaneously the strongest and weakest link in Safaricom’s portfolio.  Most subscribers stick with Safaricom because of the omnipresent nature of MPESA. Once a formidable competitor is found in that space, the invincible nature of Safaricom is bound to start crumbling.

Indeed, Safaricom and other operators know this and they have duly responded by offering to buy out YouMobile – an operator that was allegedly planning to partner with Equity Bank in delivering the mobile money services.  Equity Bank will therefore be forced to lease infrastructure from Safaricom, Airtel or Orange in their new scheme of things.

Ten years ago, Safaricom introduced a disruptive innovation in the banking sector through MPESA. Today, Equity Bank seems to be saying – it is payback time.  They want to return to favour by taking the war right back into the telecommunication sector.  If they succeed, the mobile telecommunication sector will never be same again.

The stage is definitely set for the next big wave of mobile market disruption and re-alignment.  This time round, Safaricom (and its pretenders) face an unlikely competitor - Equity Bank.  This is a company that equally matches Safaricom in terms of being Kenyan, is techno-savvy, makes billions by targeting the mass-market and is also “politically” correct.

Has Safaricom finally met its match? Time will tell.

Mr Walubengo is a lecturer at the Multimedia University of Kenya, Faculty of Computing and IT. Twitter : @jwalu