Mastercard agrees to buy minority stake in MTN's fintech business

MTN Group announced on Monday that it has entered into an initial deal with global payments giant Mastercard to sell a minority stake in its fintech subsidiary as part of its aspirations to generate new money.

The South African telecoms giant announced a memorandum of understanding (MoU) with Mastercard for a minority investment in its fin-tech unit valued at nearly $5.2 billion, or around 40% of MTN's entire market value.

According to its CEO, Mr Ralph Mupita, "Signing of the definitive investment agreements is expected to occur in the very near term."

The deal will be structured in two pieces, according to the telco CEO in a video chat with Bloomberg, including a commercial partnership on payments and remittances that will use Mastercard's technical infrastructure to develop throughout Africa and an investment in a minority interest. He also indicated that the size of the share will be announced once the transaction is completed.

In 2021, Mastercard will invest $100 million in Airtel Mobile Commerce BV, the holding company for Airtel Africa's mobile money operations.

This sale is the result of a cooperation that began in 2021, when both companies agreed to form a strategic alliance to enable millions of consumers in 16 African countries to make global e-commerce payments safely and securely. Through a Mastercard virtual payment solution linked to MTN MoMo (Mobile Money) wallets, consumers and merchants were able to engage with brands and businesses abroad through digital commerce, extending their reach to an international marketplace and unlocking a host of opportunities.

MTN’s fintech unit includes the mobile money business whose volume of transactions increased by 37% to 8.3 billion in the first half of 2023. These were executed by 61 million active MoMo customers, which was largely impacted by the effects of the cash shortages in Q1 and the company’s strategic shift to focus on wallet customers in Nigeria; as well as a clean-up of the user base in Côte d’Ivoire

Despite this, half-year fintech service revenue increased by 21.7%*, with an expected acceleration in Q2 2023 (up 25.4%*), indicating the good momentum in our whole ecosystem.

Group revenue increased to R113.2 billion during the intermediate period ending June 2023 (2022: R97.5 billion), while profit after tax attributable to equity investors increased to R9.2 billion (2023: R8 billion). Furthermore, headline earnings per share increased to 542 cents (2022: 506 cents).