MTN Initiates Stake Sales in $5.2 Billion Fintech Business

The African telecommunications group revealed the agreement in tandem with its first-half results, which showcased a robust fintech business performance despite certain challenges. However, at this stage, the details are rather sparse.

“In the pursuit of identifying and potentially introducing 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 announced.

A memorandum of understanding has been signed between the two entities, with the intention for Mastercard to make a minority investment in Group Fintech based on a cash and debt-free valuation. The deal is structured around an enterprise value of approximately US$5.2 billion. While the due diligence process nears completion, both parties anticipate signing definitive investment agreements “in the very near term.” The deal’s finalization will be contingent on standard conditions.

These are the details available currently, with more information expected to surface in due course.

It’s reasonable to assume that Mastercard’s commitment to MTN Group Fintech will be substantial.

In a somewhat analogous scenario, Mastercard invested $100 million into Airtel Africa’s mobile payments business slightly over two years ago. During that time, the relevant business, Airtel Mobile Commerce, was valued at $2.65 billion.

The involvement of a prominent player like Mastercard underscores the maturation of this sector, as non-traditional banking and financial services gain credibility.

MTN expressed that the agreements with Mastercard will expedite the growth and profitability of its fintech arm, particularly emphasizing payments, remittance, and technology infrastructure development.

“As a globally recognized brand and a prominent international payment systems company, Mastercard will empower MoMo [mobile money] users to engage in global payments, and MoMo businesses to digitize their transactions and accept payments from beyond MoMo users,” MTN noted in its first-half results report. “This will enable Group Fintech customers to participate in the global economy.”

MTN’s fintech user base remained stable at 60.5 million during the initial half of the year, impacted by cash shortages in Nigeria during the first quarter and a customer base cleanup in Côte d’Ivoire, among other factors.

Nevertheless, the growth of the overall fintech ecosystem remained robust, as indicated by a 37.3% rise in transaction volumes to 8.3 billion transactions, with transaction value soaring by 61.6% to US$135.2 billion, according to MTN. Moreover, fintech revenue increased by 21.7% year-on-year in the first six months of the year, driven by wallet growth, payment and e-commerce activities, and remittance services.

“We are pleased with the sequential recovery and trajectory of our fintech revenue,” stated the telecommunications company, highlighting Q2 growth at 25.4%, up from 17.9% in Q1.

Evidently, the financial services market in Africa remains vibrant, making it unsurprising that entities like Mastercard are eager to secure their share of the opportunities in this space.