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Mastercard to acquire minority stake in MTN’s fintech business

Samuel Mungadze
By Samuel Mungadze
Johannesburg, 14 Aug 2023
MTN reached an agreement with Mastercard for a minority investment in its fintech unit.
MTN reached an agreement with Mastercard for a minority investment in its fintech unit.

MasterCard will acquire a minority stake in MTN Group's fintech division, based on a cash and debt-free enterprise valuation of approximately $5.2 billion (R99 billion).

Africa’s largest provider of telecoms 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.

The transaction comes as MTN Group is expanding its fintech business, putting the telecoms 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, 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 [payment service bank] licence for our Cameroon operations in the second quarter, allowing us to expand our advanced product offerings.”

According to Mupita, MTN’s active Mobile Money 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 $135.2 billion.

“Work is well-advanced on structurally separating the fintech business from the GSM business. Fintech generated a consolidated earnings before interest, taxes, depreciation and amortisation (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% on a consolidated basis.”