Mastercard Inc., a global leader in payment solutions, has agreed to acquire a minority stake in the fintech unit of MTN Group, Africa’s largest mobile operator, which the company values at $5.2 billion.
“Signing of the definitive investment agreements is expected to occur in the very near term,” MTN Chief Executive Officer, Ralph Mupita said in a statement on Monday.
MTN’s fintech unit operates under the brand name, MTN Mobile Money (MoMo) and provides mobile financial services and digital solutions to over 46 million customers across 21 markets in Africa and the Middle East.
MoMo enables customers to send and receive money, pay bills, buy airtime, access insurance, loans, and savings products, and shop online using their mobile phones. The fintech also partners with banks, merchants, and other service providers to offer various digital services and platforms.
According to Bloomberg, shares in MTN rose as much as 9.5% in Johannesburg. The valuation is strong given the fund-raising difficulties many technology start-ups are facing and the fact that Mastercard won’t receive a controlling stake, according to Peter Takaendesa, the head of equities at Mergence Investment Managers in Cape Town.
Read also: Airtel partners Mastercard to allow mobile customers transfer funds across Africa
Mastercard to enhance MTN’s fintech capabilities and reach
Mastercard’s investment in MTN’s fintech unit is part of a strategic partnership that aims to enhance MTN’s fintech capabilities and reach.
Mastercard will leverage its global network, technology, and expertise to support MTN’s digital transformation and innovation agenda. Mastercard will also help MTN expand its fintech offerings to new markets and segments, such as e-commerce, remittances, and cross-border payments.
The partnership will also benefit MTN’s customers who will gain access to Mastercard’s products and services, such as virtual cards, QR codes, contactless payments, and digital wallets. The partnership will also enable MTN’s customers to participate in the global digital economy and access new opportunities.
What analysts are saying about the deal
Mastercard’s planned minority investment in MTN mobile money, at an EV of $5.2 billion, equates to 16x trailing EBITDA—well above Airtel Africa’s equivalent of 10x. As well as boosting MTN’s see-through valuation, the cash could help the company’s balance sheet by temporarily substituting for dividends from subsidiaries and partly offsetting increased 2023 capital-spending guidance—both affected by forex – John Davies, BI senior telecoms analyst.
MTN rivals, including Airtel Africa Plc, Nairobi-based Safaricom Plc, and South Africa’s Vodacom Group Ltd., are all at various stages of transforming from basic voice and text mobile use to digitalization, with the broad aim of separating and monetizing the businesses in the longer term.
MTN has previously said it plans to raise 25 billion rand ($1.3 billion) from asset sales. Its most recent disposals include the sale and leaseback of its South African mobile-phone towers and a plan to sell some of its West African assets. It also has a stake in New York-listed tower owner IHS Holding Ltd. that it may sell, although the tower firm’s low trading prices and a dispute with its management have delayed any sale in the near term.
Technext Newsletter
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!
