Mastercard has reached an agreement to acquire a minority share in the fintech division of MTN Group, the largest mobile phone provider in Africa, valuing the division at $5.2 billion.

MTN Group’s President and CEO, Ralph Mupita, revealed that the arrangement would take the form of a commercial partnership centered on payments and remittances. This collaboration will leverage Mastercard’s advanced technical infrastructure to facilitate expansion across Africa, while also entailing an investment in a minority stake.

The strategic move has been spurred by MTN Group’s recent achievement of a mobile banking license in Nigeria, its largest market. This licensing breakthrough enables MTN to provide financial services to a substantial number of new clients.

With a remarkable 37 percent increase in mobile money transactions, amounting to $8.3 billion, during the first half of this year, MTN’s mobile money business is flourishing. Over 60 million active users participated in these transactions. As of June 2023, the MTN Group boasted more than 290 million subscribers.

In light of this development, MTN underscored the signing of a commercial agreement with Mastercard, a move aimed at propelling the fintech business’s growth trajectory.

“Following the bespoke process to identify and potentially introduce strategic minority investors into MTN Group Fintech, we executed commercial agreements with Mastercard to support the acceleration and growth of our fintech business’s payments and remittance services.

“MTN and Mastercard also signed a memorandum of understanding which provides for a minority investment by Mastercard into Group Fintech based on a total enterprise valuation of about US$5.2 billion for the business on a cash and debt-free basis.

“The signing of the definitive investment agreements is expected to occur in the very near term as we approach the finalization of customary due diligence. The closing of the investment will be subject to customary closing conditions.”

In 2021, Mastercard inked a deal with Airtel Africa, one of MTN’s competitors that saw the India-founded telecom receive $100 million for its mobile money business, Airtel Mobile Commerce BV, at a $2.65 billion valuation.

According to Bloomberg, Mastercard’s planned minority investment in MTN mobile money, at a valuation of $5.2 billion, translates to 16x trailing EBITDA – far more than Airtel Africa’s corresponding 10x.

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The cash might aid MTN’s balance sheet by temporarily substituting for dividends from subsidiaries and somewhat offsetting increased 2023 capital-spending projections — both of which are influenced by forex.

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