Mastercard to buy stake in MTN's $5.2B fintech business

Mastercard plans to become a minority investor in MTN Group's fintech business, which the pan-African telco values at $5.2 billion.

The announcement was part of MTN Group's interim results for the six months ended June 30, 2023, published on Monday. The group's share price on the Johannesburg Stock Exchange jumped almost 7% on the back of the news.

MTN said it had signed a memorandum of understanding with Mastercard on the investment and it expected the signing of a definitive investment agreement to "occur in the very near term" after finalizing its due diligence.

"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' payments and remittance services," MTN said in its results statement.

MTN's fintech offering includes MTN Mobile Money (MoMo), insurance, airtime lending and e-commerce.

The fintech business saw the volume of transactions increase by 37% to 8.3 billion in the first half of the year and fintech service revenue grew by 21.7% on a constant-currency basis.

The MoMo user base held steady at 60.5 million, largely impacted by the effects of the cash shortages in the first quarter and a strategic shift to focus on wallet customers in Nigeria as well as a "clean-up of the user base" in Côte d'Ivoire, it said.

Resilient results

MTN Group's half-year service revenue grew 15% year-on-year (YoY) to almost R108 billion ($5.7 billion) in constant-currency terms and was driven by increases in revenue from data services of 24% and from fintech services of 22%. Revenue from voice services also increased 6% in the period.

The MTN total subscriber base grew 3.6% YoY to 291.7 million subscribers at the end of June 2023. It said it had 170 million smartphones on its network, representing 59% penetration of the customer base.

MTN Group President and CEO Ralph Mupita said the operator delivered a resilient performance in the half and made good strategic progress against a tough macro-economic backdrop.

"In South Africa, we were very encouraged by the improved network availability on the back of our power-resilience investment, resulting in a stronger [second quarter] performance than [the first quarter]," he said.

By the end of June, MTN South Africa's network availability was more than 90% despite severe electricity shortages across the country due to forced blackouts – known locally as load shedding – which have cost operators like MTN dearly.

Ralph Mupita, MTN Group President and CEO. (Source: MTN Group)

"In Nigeria, we delivered a very strong operational result, having navigated the cash shortages in [the first quarter] and increased inflation," Mupita said.

"The policy changes implemented in Nigeria in [the second quarter] have short-term negative impacts, but we see these as being very constructive for the investment climate in the medium to longer term," the CEO added.

The number of active data users grew 7% to nearly 140 million; overall data traffic increased 19%; and the group reduced the cost of mobile data for users – with the average effective rate per megabyte dropping 22%.

The group committed R17.2 billion ($907.5 million) in capital expenditure in the first six months of 2023 but decided not to declare an interim dividend for shareholders.

Middle East departure

Of its planned exit from Afghanistan, MTN said the sale of its entire shareholding to Investcom AF, an affiliate company of M1, remains on track.

In August 2022, MTN announced it would sell its Afghanistan business to Beirut-based M1 New Ventures for $35 million.

On Monday it said the transaction received conditional regulatory approval to proceed, pending the submission of relevant documentation to the Afghanistan Regulatory Authority.

MTN decided in August 2020 to exit the Middle East and rather focus on its African operations.

MTN had originally planned to sell the Syrian operation first, but was forced to abandon its telecom operation in Syria in August 2021, saying that the regulatory actions and demands in the country had made operating "untenable."

This after its Syrian business was placed under judicial guardianship in February 2021.

The Yemen business, meanwhile, was sold in November 2021 to the group's minority shareholders in the country.

After the Afghanistan deal is finalized, the only Middle Eastern operation left will be MTN's joint venture in Iran – MTN Irancell – of which it owns 49%.

MTN is also still evaluating an orderly exit of three of its smaller operations in West Africa – MTN Guinea-Bissau, MTN Guinea-Conakry and MTN Liberia – following an offer from Axian Telecom in May 2023.

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*Top image source: MTN Group.

— Paula Gilbert, Editor, Connecting Africa