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MasterCard eyes a stake in MTN’s $5.2bn fintech business

By , Africa editor
Africa , 14 Aug 2023
MTN Group president and CEO Ralph Mupita.
MTN Group president and CEO Ralph Mupita.

MasterCard will acquire a minority stake in MTN Group's fintech divisionbased on a cash and debt-free enterprise valuation of approximately US$5.2 billion.

Africa’s largest provider of telecom services announced today that MTN and MasterCard have signed a memorandum of understanding, and that a definitive investment agreement is expected to be reached in the near future.

According to MTN Group CEO, Ralph Mupita, the conclusion of the investment will be subject to customary due diligence conditions.

Today, MTN Group released its interim financial results for the six-month period that ended in June.

MTN says it reached an agreement with MasterCard during the period for a minority investment to support the acceleration of its payments and remittances verticals.

According to Mupita, the commercial agreements executed with Mastercard will support the growth and profitability of MTN's fintech services, such as payments, remittances, and the development of technology infrastructure

He says: “As a globally recognised brand and a leading international payment systems company, Mastercard will enable Mobile Money (MoMo) consumers to pay globally and MoMo businesses to digitise their payments and accept payments beyond MoMo users. This will enable Group Fintech customers to participate in the global economy.”

The transaction comes as MTN Group is expanding its fintech business, putting the telecom company on a solid footing, as it prepares to separate its financial services division.

In the last six months, Mupita says fintech revenue grew by 21.7% year-over-year (YoY), primarily due to growth in the wallet (+20.7%), payment and e-commerce (+54.9%), and remittance (+78.9%) industries.

“We are pleased with the sequential recovery and trajectory of our fintech revenue, which grew by 25.4% in Q2 versus 17.4% in Q1. We obtained a PSB licence for our Cameroon operations in the second quarter, allowing us to expand our advanced product offerings,” says Mupita.

According to Mupita, MTN’s active MoMo users were flat in the current reporting period at 60.5 million due to the effects of the cash shortages in the first quarter and a strategic shift in focus to wallet consumers in Nigeria; as well as a user base clean up in Côte d'Ivoire.

However, he states: “The growth of our overall fintech ecosystem remained robust with a 37.3% increase in transaction volumes to 8.3 billion transactions and a 61.6% increase in transaction value to US$135.2 billion.

“Work is well advanced on structurally separating the fintech business from the GSM business. Fintech generated a consolidated EBITDA margin of 37.6% in H1 23 as a result of its past achievements and business expansion.

“This metric accounts for current opex (including head office costs) and excludes intercompany transactions.

“As previously indicated, we anticipate Group Fintech will generate an EBITDA margin in the mid-30% range once all intercompany agreements have been implemented.

“Given the low capex intensity of the business, the operating free cash flow (OpFCF) economics of fintech are very attractive. The fintech division reported an H1 OpFCF margin of approximately 37.0% on a consolidated basis.”

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