Africa’s largest mobile operator, MTN has announced that global payment company, MasterCard is investing up to $200 million in its Group fintech business. According to a statement shared today, the telecoms company announced it had signed definitive agreements detailing the transaction with Mastercard yesterday.
According to Mybroadband in South Africa, the transaction valued MTN Group Fintech at $5.2 billion, on a cash and debt-free basis. Consequently, Mastercard is taking up a minority stake in the business of about 3.8% at the said amount of $200 million.
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.
– John Davies, BI senior telecoms analyst
Apart from 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.
MTN has previously said it plans to raise $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.
The telecoms company also claim that the partnership with Mastercard will complement its larger commercial relationship to support the continued development of technology infrastructure to drive financial inclusion across Africa.
“This commercial relationship is a key enabler for the acceleration of our fintech business’ payments and remittance services,” the statement by MTN said. The company also said that it would continue to explore opportunities for other value-enhancing partnerships and investments with strategic partners and long-term investors.
Similar: Mastercard to buy stake in MTN’s $5.2 billion fintech unit, MoMo
Mastercard investment in MTN: transaction completed 6 months after the first announcement
Recall that the investment offer was previously announced on 14 August 2023. According to the initial announcement, Mastercard’s investment in MTN’s fintech unit is part of a strategic partnership that aims to enhance MTN’s fintech capabilities and reach.
Then, MTN Chief Executive Officer, Ralph Mupita said that the “signing of the definitive investment agreements is expected to occur in the very near term”. The transaction is now being consummated 6 months later.
Analysts believe that 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. Peter Takaendesa, the head of equities at Mergence Investment Managers in Cape Town told Bloomberg that the fact that MTN share prices rose by over 9.5% on the Johannesburg exchange justifies the new confidence by investors.
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.
In September 2023, it launched a couple of new features to provide low-cost alternatives for non-banked customers to share in the benefits of formal financial services. These include a business wallet, streamlined payments, and international remittances.
Similar: MTN wants 3 more investors to join MoMo as it looks to sell 30% of the fintech vertical
Why does an MTN X Mastercard partnership matter
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.
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