Mastercard has announced its intention to acquire a minority stake in the fintech division of MTN Group, Africa’s largest mobile phone provider, valuing the division at $5.2 billion. Formal investment agreements are expected to be signed soon as both parties near the end of the regular due diligence process. The investment’s closure will be subject to standard closing conditions, according to a statement by MTN regarding its half-year financial performance.
Ralph Mupita, President, and CEO of MTN Group, revealed that the deal would be established as a commercial partnership focused on payments and remittances. It will leverage Mastercard’s technical infrastructure to drive expansion throughout Africa, alongside an investment in a minority share. The exact share size will be disclosed upon the completion of the transaction.
Mupita highlighted the company’s resilient performance and strategic progress during the first half of 2023. Despite challenges in certain regions, MTN’s operational results remained strong. In Nigeria, MTN effectively managed cash shortages and increased inflation while implementing policy changes that are expected to have positive long-term effects on the investment climate.
This development follows MTN Group’s decision to seek minority investors for its African fintech subsidiary last year. The move aimed to unlock the division’s potential by separating it from the main telecom business. MTN’s expansion plans received a boost when it obtained a mobile banking license in Nigeria, allowing the company to offer financial services to a broader audience.
MTN’s mobile money transactions surged by 37% to $8.3 billion in the first half of 2023, with over 60 million active users participating. As of June 2023, MTN Group boasted more than 290 million subscribers.
In 2021, Mastercard struck a deal with Airtel Africa, a competitor to MTN, acquiring a $100 million stake in Airtel Mobile Commerce BV, the company’s mobile money business, at a $2.65 billion valuation. Mastercard’s planned minority investment in MTN mobile money is valued at $5.2 billion, equivalent to 16x trailing EBITDA, exceeding Airtel Africa’s 10x valuation. This investment could bolster MTN’s balance sheet, offset dividends from subsidiaries, and mitigate increased capital spending projections for 2023, both of which are influenced by foreign exchange rates.
Other telecom giants in Africa, including Safaricom and Vodacom, are also embracing fintech ambitions by separating their fintech arms from traditional telecom operations. With the continent’s gradual shift towards digital services, telecom operators are venturing into financial services, competing with established fintech players like Interswitch, Flutterwave, Chipper Cash, and MFS Africa. This strategic pivot reflects Africa’s evolving mobile landscape, transitioning from voice and text services to a digital-first approach.
