Equity Bank, Kenya’s largest bank by customer base, has applied to the Communications Authority of Kenya (CAK) for a Mobile Virtual Network Operator (MVNO) license. CAK director general Francis Wangusi said the regulator was assessing the application, which must go through several stages before reaching approval. If it is approved, Equity would run the service on the network of mobile operator Yu. Madhur Taneja, Yu’s managing director, confirmed that the company is in talks with Equity Bank regarding use of its infrastructure.

Tarifica’s Take

Kenya is a world leader in m-payments. In 2007 Safaricom and Vodacom launched the mobile money system M-PESA, which handles some 25 percent of Kenya’s GNP and is used by more than two thirds of the adult population. As elsewhere in Africa, the m-payment economy has prospered in Kenya at least in part because a significant percentage of the population does not have bank accounts. So in a sense, banks are in competition with mobile operators. By starting its own MVNO, Equity could gain access to a rural customer base that is not used to doing business with banks but is quite used to making financial transactions of all kinds via their mobile phones. We think that offering an m-payment service similar to M-PESA through the MVNO could be a very strong competitive move. And if Equity were to get a significant proportion of its 8 million existing customers to sign up for its MVNO, it would be starting out with a good amount of momentum, which would help in adding more subscribers. (Safaricom, which is owned by Vodafone and is Kenya’s largest MNO, currently has 21 million subscribers.)

However, Equity’s choice of Yu as a partner is a complicating factor. A stake of approximately 30 percent of Yu—Kenya’s third-largest operator—is being offered for sale by owner Essar Group, an India-based conglomerate, and Safaricom and Airtel have reportedly made bids for it. The deal is expected to close in March.