MTN sells stake in $5.2 billion fintech biz

MTN has agreed to sell a minority stake in its financial services business to global payments giant Mastercard in a deal that could be worth a substantial sum.

The African telecoms group disclosed the deal alongside its first half results – which showed a strong fintech business performance despite some challenges, incidentally – but did not provide much information at this stage.

“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’s payments and remittance services,” MTN said.

The two companies have signed a memorandum of understanding geared towards Mastercard making a minority investment into Group Fintech on a cash and debt-free basis. The deal is based on the business carrying an enterprise value of around US$5.2 billion. MTN said due diligence is almost complete and the pair expect to sign definitive investment agreements “in the very near term.” Closure of the deal will be subject to the usual conditions.

And that’s all we know at present, although clearly there will be more information to come before too long.

It’s probably safe to say that Mastercard’s commitment to MTN Group Fintech will amount to more than small change.

In a similar deal Mastercard ploughed $100 million into Airtel Africa’s mobile payments business just over two years ago. At the time, the business in question, Airtel Mobile Commerce, was valued at $2.65 billion.

The fact that a big name like Mastercard is keen to get involved in this space shows that the sector is maturing and non-traditional banking and finance services are growing in credibility.

For its part, MTN said the agreements with Mastercard will accelerate the growth and profitability of its fintech business, highlighting payments, remittance and technology infrastructure development in particular.

“As a globally recognised brand and a leading international payment systems company, Mastercard will enable MoMo [mobile money] consumers to pay globally and MoMo businesses to digitise their payments and accept payments beyond MoMo users,” MTN said in its first-half results report. “This will enable Group Fintech customers to participate in the global economy.”

MTN’s fintech user base remained flat at 60.5 million in the first half of the year, affected by cash shortages in Nigeria the first quarter and a clean-up of the customer base in Côte d’Ivoire, amongst other things.

“However, the development of our overall fintech ecosystem remained robust with a 37.3% increase in transaction volumes to 8.3 billion transactions, with transaction value up by 61.6% to US$135.2 billion,” MTN said. Further, overall fintech revenue grew by 21.7% year-on-year in the first six months of the year, driven by growth in wallet, payment and e-commerce, and remittance services.

“We are pleased with the sequential recovery and trajectory of our fintech revenue,” the telco said, noting that Q2 growth came in at 25.4%, up from 17.9% in Q1.

Clearly the financial services market in Africa remains buoyant. There’s little wonder that the likes of Mastercard are keen to grab a piece of the action.

Get the latest news straight to your inbox. Register for the Telecoms.com newsletter here.