Mastercard has agreed to purchase a minority stake in the fintech division of MTN Group, Africa’s largest cell phone provider, which it values at $5.2 billion on a cash and debt-free basis. While the specifics of Mastercard‘s investment will remain confidential until the deal’s completion, which will likely occur soon as both parties near the end of the due diligence process. This news has led to a significant surge in MTN‘s stock, marking its highest increase in three months.
MTN‘s CEO, Ralph Mupita, mentioned in a recent investor discussion that Mastercard‘s stake could potentially reach up to 30%, contingent upon the deal’s completion. He said the deal would be structured as a commercial partnership on payments employing Mastercard’s technical infrastructure to develop throughout Africa and an investment in a minority share.
This collaboration will enable MTN to leverage Mastercard‘s advanced tech infrastructure, enhancing its payment and remittance offerings across Africa. The rise of mobile payment technology in Africa, especially among its youthful and tech-oriented populace, has revolutionized services like banking. This shift has paved the way for telecom operators to tap into the burgeoning fintech market. Companies like Flutterwave and Interswitch have already made significant strides in this domain.
Following the announcement, MTN‘s shares witnessed a 4.9% boost, settling at 135.86 rand in Johannesburg. Bloomberg Intelligence highlights that Mastercard‘s prospective investment in MTN‘s mobile money segment, valued at $5.2 billion, surpasses Airtel Africa‘s valuation. This investment could bolster MTN‘s valuation and provide a financial cushion.
MTN‘s half-yearly report revealed a 16% revenue growth, amounting to 113.2 billion rand ($6 billion). Other telecom giants like Airtel Africa, Safaricom, and Vodacom Group are also transitioning towards digitalization, aiming for long-term monetization. Notably, Airtel has already partnered with Mastercard for its mobile-money division. Similarly, Jio Platforms, associated with Reliance Industries, secured investments from Facebook and Silver Lake Partners in 2020.
MTN’s plans include raising 25 billion rand through asset sales, including selling its South African mobile towers and certain West African assets.
