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Qatar Investment Authority (QIA) Plans to Invest $200 Million in Airtel Africa’s Mobile Money Business

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Airtel Africa Plc - Investors King

Airtel Africa has signed an agreement with under which Qatar Holding LLC, an affiliate of the Qatar Investment Authority (QIA), plans to invest $200 million in Airtel Mobile Commerce BV (“AMC BV”), a subsidiary of Airtel Africa plc (the “Transaction”).

The Transaction values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis. QIA will hold a minority stake in AMC BV upon completion of the Transaction (alongside other minority investors), with Airtel Africa continuing to hold the majority stake. The Transaction is subject to customary closing conditions.

Following the announcement on 18 March 2021 of a $200m investment in AMC BV by TPG’s The Rise Fund, on 1 April 2021 of a $100m investment in AMC BV by MasterCard and the sale of the Group’s telecommunication towers companies in Madagascar and Malawi on 23 March 2021, the Transaction is a continuation of the Group’s pursuit of strategic asset monetization and investment opportunities, and it is the aim of Airtel Africa to explore the potential listing of the mobile money business within four years.

The proceeds from the Transaction will be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries.

Airtel Africa mobile money services

Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a leading digital mobile financial services platform catering to a large addressable market in Africa (characterised by limited access to formal financial institutions with limited banking infrastructure) and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual card and international money transfers.

Mobile money services are available across the Group’s 14 countries of operation, however in Nigeria the Group offers Airtel Money services through a partnership with a local bank and has applied for its own mobile banking licence. It is the intention that all mobile money operations will be owned and operated by AMC BV.

In our most recent reported results for Q1’22, the mobile money services (corresponding to all the businesses that are intended to be transferred to AMC BV) delivered a strong operational
performance:

 Generated revenue of $124m ($496m annualised), and underlying EBITDA of $60m ($240m annualised) at a margin of 48.8%.
 Year on year revenue growth for the quarter was 53.7% in constant currency, largely driven by 24.6% growth in the customer base to 23.1 million, and 25.4% ARPU growth.
 Growth in transaction value was 64.4% (constant currency) to $14.7bn ($59bn annualised).

Our mobile money business benefits from strong network presence with our core telecom business through the extensive distribution platform of kiosks and mini shops as well as dedicated Airtel Money
branches supplementing our extensive agent network, to facilitate customers’ access to assured wallet and cash.

We have a clear strategy to continue to drive sustainable long-term growth in Airtel Money with a focus on assured float availability, distribution expansion and increased usage cases for our customers.

Last year we added partnerships with Mastercard, Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expand both the range and depth of the Airtel Money offerings and to further drive customer growth and penetration.

The profits before tax in the full year ending 31 March 2021 and the value of gross assets as of that date, attributable to the mobile money businesses were $185m and $668m, respectively.

Key elements of the Transaction

 Agreement values Airtel Africa’s mobile money business at $2.65bn on a cash and debt free basis.

 AMC BV, a subsidiary of Airtel Africa, is the holding company for several of Airtel Africa’s mobile money operations; and it is intended that ultimately it shall own and operate the mobile
money businesses across all of Airtel Africa’s fourteen operating countries once the inclusion of the remaining mobile money operations under AMC BV perimeter is completed.

 QIA will invest $200m through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction will close in two stages: $150m will be invested at first close, subject to customary closing conditions, including necessary regulatory filings, with $50m to be invested at second close once further transfers of certain mobile money operations and contracts into the AMC BV perimeter have been completed.

The Transaction first close is expected in August. From first close, QIA will be entitled to appoint a director to the board of AMC BV and to certain customary information and minority protection rights.

Comment on the deal, Raghunath Mandava, CEO of Airtel Africa, said “With today’s announcement we are pleased to welcome QIA as a prospective investor in our mobile money business, joining both Mastercard and TPG’s The Rise Fund as a further partner to help us realise the full potential from the substantial opportunity to bank the unbanked across Africa.”

Mansoor bin Ebrahim Al-Mahmoud, CEO of QIA, added that “We are delighted to build on our support of Airtel Africa in promoting financial inclusion to the large and growing population of Sub-Saharan Africa. Airtel Money plays a critical role in facilitating economic activity, including for customers without access to traditional financial services. We firmly believe in its mission to expand these efforts over the coming years.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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MTN Nigeria Joins FG Delegation at the 2021 Edition of UNIIS to Woo investors!

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Karl O Toriola - Investorsking.com

MTN Nigeria is participating at this year’s edition of the US-Nigerian Investment Summit scheduled to hold on the 17th and 18th of September, 2021 in New York City. The participation is in furtherance of the company’s  commitment to partner with the Federal Government,  through the  Ministry of Industry, Trade and Investment, to attract investors and investment to Nigeria.

Themed “Nigeria: The Future of Global Business”, the event builds on the success of the 2018 maiden edition. The Chief Executive Officer, MTN Nigeria, Olutokun Toriola as well as Chief Financial officer, MTN Nigeria, Modupe Kadiri will be in attendance at the summit. Toriola will be speaking at the summit, highlighting opportunities in Nigeria with MTN Nigeria’s success story as a reference.

“We are passionate about the development of our economy. This can be seen in our unrelenting efforts in working with   Government and institutions in different sectors to advance economic growth in our nation. We believe in the many opportunities Nigeria avails investors, and our 20 year journey is a testament to the promise the country holds,” said Toriola.

The US-Nigeria Investment Summit plays a vital role in attracting and facilitating business investment and job creation by raising awareness about a range of opportunities, and enabling vital direct connections between investors and the Nigeria economy. The investment summit features senior government officials, C-Suite business executives, and other thought leaders.

MTN Nigeria continues to advance its Good Together philosophy through strategic interventions, working  with the people and government of Nigeria. Recently, the company announced a series of activities as part of its milestone anniversary celebration including participating in the Road Infrastructure Tax Credit Programme (RITC) for an opportunity to reconstruct the Enugu – Onitsha expressway in South-Eastern Nigeria, building a world-class campus in Nigeria and selling down up to 14% of its equity to Nigerians.

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SEC In plans To Embrace Crypto Investment, Set Up Fintech Unit For Regulations

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The Securities and Exchange Commission (SEC) has set up a fintech division to study crypto investments and products in order to come up with regulations, the Director-General of the commission, Lamido Yuguda said on Thursday.

“We are looking at this market closely to see how we can bring out regulations that will help investors protect their investment in blockchain,” Yuguda was reported to have said by Reuters in a virtual interview in Abuja.

He did not provide a time frame for issuing regulations but said the SEC will step in with regulations once crypto is allowed within the Nigerian banking system.

The SEC has sought to regulate crypto on the grounds that they qualify as securities transactions.

Nigeria is one of the biggest markets for crypto trading, but in February the Central Bank of Nigeria (CBN) banned banks from transacting or facilitating deals in cryptocurrencies.

The use of bitcoin, the original and biggest cryptocurrency, has boomed in Nigeria in recent years, driven by payments from small businesses and a weakening naira currency, which makes it difficult to get the U.S. dollars needed to import goods or services.

Yuguda said the commission has been in talks with the CBN, part of which led to the plan by the regulatory bank to launch the country’s digital currency, e-naira.

The commission is seeking to work with fintech firms to boost the marketing of domestic securities to prevent capital flight.

The central bank this month blocked the accounts of six firms for allegedly sourcing funds from illegal foreign exchange operators to buy foreign securities and cryptocurrencies.

He said the SEC is looking to boost savings through investment schemes, which currently have over N4 trillion under management split between public and private fund managers.

Yuguda said the regulator has asked private managers to put in place custody arrangements to protect investors.

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In 4 Years 92 Percent Of Investment Opportunities Lost in Nigeria

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Within the period of 2017 and 2020, Africa’s largest economy, Nigeria has lost over 92 percent of investment available to the country. The loss in investment sums up about $188.29 billion.

According to the report of the Nigerian Investment Promotion Commission (NIPC) on “Investment announcements versus FDI (Foreign Direct Investments) Inflow in Nigeria, 2017 – 2020” the discrepancies between the FDI announcement and actual FDI inflow were revealed. The commission stated that the actual inflow of FDI into Nigeria was 7.65 percent of the total FDI announcements.

This is an affirmation that the FDI announced by the commission did not materialize or translate to actual investment inflow.

In the period 2017 to 2020, the NIPC FDI announcement stood at $203,89 billion, however, the actual FDI within the same period was $15.6 billion and unmaterialized FDI announced was $188.29 billion.

In 2017, statistics obtained from NIPC revealed a total of $66.35 billion FDI announcement but only $3.5 FDI inflow was recorded. For 2018, 2019 and 2020, $90.89 billion, $29.91 billion and $16.74 billion FDI were announced in each year respectively. However 2018 FDI inflow was $6.4 billion, 2019 inflow was $3.3 billion and 2020 FDI inflow was $2.4 billion.

With this report, the commission asserted that its report was based solely on Investment announcements which may not contain exhaustive information on all investment announcements in the country within the said period.

According to NIPC, the gaps between announcements and actual investments demonstrate investments potentials that were not fully actualised.

The Commission stated: “A more proactive all-of-government approach to investor support, across federal and state governments, is required to convert more announcements to actual investments.”

Reacting to the situation, Director General, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ambassador Ayoola Olukanni, noted that the gap may not be unconnected to the economic recession and COVID-19 pandemic events within the period, aggravated by policy instability.

Olukanni stated: “Numerous studies have established that Foreign Direct Investment is dependent on the market size of the host country, deregulation, level of political stability, investment incentives, openness to international trade, economic policy coherence, exchange rate depreciation, availability of skilled labour, the endowment of natural resources and inflation.

“You will agree with me that the four years spanning 2017 and 2020 are characterized by the struggle to exit from economic recession, a period of slight recovery, the COVID-19 pandemic, and another period of recession. These circumstances may or may not be responsible for the political and economic reaction that can be witnessed in the uncertainty in the foreign exchange market, increased inflation, increased unemployment, increased political unrest and insecurity and so on.

“What can be established is that Foreign Direct Investment is averse to risk and uncertainty, especially the kind of uncertainty brought about by policy instability and economic policy. An obvious example is the closure of the land borders in 2019, while justifiable through the lens of national security is certain to have a negative impact on Foreign Direct Investment which has a long-term planning horizon.

“In summary, to seek to increase actual FDI is to promote the factors that have been shown, empirically, to positively impact FDI. While the Nigerian economy checks the boxes of most of these factors, economic policy coherence, foreign exchange market stability and insecurity are issues that are currently the bane of FDI inflows.”

Also commenting, an economist and private sector advocate, Dr. Muda Yusuf, who is also the immediate past Director-General of Lagos Chamber of Commerce of Industry (LCCI), said the development reflects the low level of investors’ confidence occasioned by structural problems of infrastructure and worsening security situation.

His words: “It is investors’ confidence that drives investment, whether domestic or foreign. Investors are generally very cautious and painstaking in taking decisions with respect to Foreign Direct Investment (FDI). This is because FDIs are often long-term and invariably riskier, especially in volatile economic and business environments. Uncertainties aggravate investment risk.

“Investors in the real sector space are grappling with structural problems, especially around infrastructure. There are also worries around liquidity in the forex market; there are concerns about the accelerated weakening of the currency. There are issues of heightened regulatory and policy risks in many sectors.

“Investors’ confidence has also been adversely affected by the worsening security situation in the country. Meanwhile, the economy is still struggling to recover from the shocks of the COVID-19 pandemic. These are the likely factors impacting investment decisions.

“Our ability to attract FDI will depend on how well we position ourselves. The critical question will be around expected returns on investment. Overall, it is the investment climate quality that will make the difference. We need to ensure an acceleration of necessary reforms to make Nigeria a much better investment destination. We need policy reforms, regulatory reforms and institutional reforms, among others.

“We should accelerate the ongoing foreign exchange reforms; we need to undertake trade policy reforms to liberalise trade in sectors of weak comparative advantage; we need regulatory reforms to make regulations more investment-friendly. We need to create new opportunities in the public-private partnership (PPP) space, especially in infrastructure. We need to see more privatization of public enterprises.

“It is important as well to quickly fix the ravaging insecurity in the country. All of these are crucial to boost investors’ confidence.”

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