tom_boy wrote:Wakanyugi wrote:tom_boy wrote:This thin sim biashara will not be a walk in the park for Equity. I doubt they will make any money for the first 2 yrs. Kenyans are peculiar people and we know that price alone is not a major motivator for people to jump ship especially when it comes to telecoms. In addition, Safcom is able to counter any price reductions likely to affect its market. In short Kenyans will benefit from lower prices but it remains to be seen whether this will translate to significant profit for Equity.
I don't share your pessimism. Here is why:
1. Equity already has over 9M members. That is a massive base from which to start.
2. JM has announced that they will be giving the thin SIM to any Kenyan, not just 'Meba' - his target is the 27M Kenyans with a phone.
3. Money transfer at 25 bob, max; plus all the benefits of electronic banking.
4. And don't forget that what Equity has is basically a license to do telkom, not just banking. (The Safaricom strategy has been turned against Safaricom)
5. The nationalism card - Equity is our bank versus, Safaricom is foreign owned/led....etc
What does Safaricom have to counter all this?
I am not being pessimistic, just realistic.
A market is divided into segments. Out of the 9 million Equity accounts, probably only about 5 million use Equity as their primary bank, another 2 million use it for long term savings (kwa sababu by the time one has lined up at the branches to access the money, you must really need it) and another 1 million may be dormant accounts (like mine).
The Equity customer probably deals in small many transactions per month. This is the customer that Safaricom has already targeted by reducing Mpesa charges to probably approximate those of Equity. I doubt non Equity bank customers will suddenly en-mass join Equity bank just because there is a new sim card with slightly lower "mpesa" charges. The product has to offer more than just price.
The price wars of yester years may have affected Safaricom profits but, Safaricom still made profits. Their competitors still made losses despite the price wars.
I still think thin sim will not be a walk in the Park for Equity. It may not lead to massive profits as widely expected.
You make good points but the way you want to interpret them, it seems to me, is upside down.
1. With MVNO Equity stands to eat into every product that Safaricom offers - money transfer, data and voice.
2. Safaricom does not threaten Equity's core product - banking - and therefore can not play the kind of offensive game they did on Airtel.
3. To beat M-Pesa Equity is offering a cost of 25 shillings maximum on money transfer, compare this with 300 plus that M-pesa charges you. And you don't even have to change your Phone/M-pesa number to use the thin SIM, only the prefix.
4. For the 9M account holders the cost of most MVNO banking services, money transfer included, is ZERO. I bet with this kind of deal even you will reconsider your dormant account.
5. All this before you have even factored in the operating efficiencies and market penetration that Equity will reap from moving most of their customers to a virtual banking platform. MVNO is a game changer and Equity should make money from it from the get go.
Which ever way you look at it, Safaricom/M-Pesa has met its Waterloo.
If you don't agree, show me how they are going to respond.
Safaricom should have applied for a banking license the day they pissed Mwangi off.
"The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)