MTN targets 100m fintech users in new Africa strategy
Ralph Mupita, MTN Group CEO, today laid out the telco’s ambitious plan to create a fintech operating company by the end of the first quarter of next year and onboard 100 million subscribers in five years.
Africa’s largest mobile operator hosted a virtual Capital Markets Day today, outlining MTN’s Ambition 2025 strategy, which focuses on driving growth, faster de-leveraging of the holding company balance sheet, and unlocking the value of the group’s assets and platforms.
Outlining the strategy, Mupita said the structural separation of the fintech and fibre units is key to the plan, and progress has since been made to spin-off the two entities.
“We are already a big business and what we are observing is that these businesses have their own unique financial and operational risk profiles to a traditional telco.
“So we are saying we need these businesses strategically to be much more focused. We will be leveraging the assets and capabilities of the traditional telco business and providing an ability to accelerate and grow.”
Mupita said the telco has in recent months recorded increased uptake of its fintech business, signalling future growth, an opportunity MTN will be pursuing in the near future.
“With the fintech side, we start off with the strategy that says today we are at 47 million Mobile Money subscribers; we are ambitious to get to 100 million in the next five years. We are getting a big and quite significant portion of MTN’s services revenue from fintech − 8% − and we say it would reach 20% by 2025.”
This growth and anticipated regulatory changes were motivation behind a standalone fintech business, he noted.
“We are also saying we don’t have the skills to run fintech businesses; what we should be doing is thinking of partnerships. Partners can bring us both skills and probably a bit of capital. We will still want to maintain majority control of these businesses. We will complete the structural separation by end-Q1 2022.”
The separation, he said, will also place the company on the correct regulatory path, as it anticipates that legislation in some countries will in future require spinning off fintech units.
He explained: “We need to apply focus and resources to fintech. In some aspects, regulators are already asking for the structural separation in some markets. So you can imagine in the years to come in the fintech space, they will ask for some kind of structural separation for regulatory reasons, so we are anticipating that, in part.”
Unsealing the vault
Additionally, Mupita said, by separating the fintech unit, MTN will unlock stored value in the business, which was under-appreciated.
Turning to fibre, Mupita pointed out the separation will take up to two years because MTN needs to pursue the right model.
“Fibre has got different motivators. I think the real issue we see around fibre is the model and we think the right model is the open access model. Not just for our own self-provision but as we build our data centre and fibre footprint, we think there is need for a shared infrastructure, open access model.”
MTN has since established its first FibreCo in Zambia as part of its Ambition 2025 strategy. The group has a 85 000km fibre network across the African continent and intends to seek partners to expand.
At the virtual Capital Markets Day event today, MTN promised to continue investing in the business in pursuit of growth opportunities.
Addressing matters on capital expenditure in the Ambition 2025 strategy, CFO Tsholofelo Molefe said: “From a capex point of view, we are really maintaining the capex envelope within the region of R28 billion to R30 billion, which is really the guidance that we have given to the market and we think we will be able to sustain that certainly through some capital productivity initiatives that we have been looking at.
“So, as we continue with growth into the future to support Ambition 2025, we are comfortable that some of the initiatives we have put in place will help us maintain that capex envelope.”