Mastercard Makes Strategic Move with Minority Stake in MTN’s Fintech Business, Paving the Way for a Mobile Money Revolution in Africa

MTN Group Ltd., the continent’s leading wireless carrier, has announced that Mastercard Inc. has agreed to acquire a minority stake in its financial technology (fintech) business.

This strategic move comes as MTN values its fintech venture at an impressive $5.2 billion, signifying a significant boost for the company’s ambitions in the digital finance space.

MTN’s Chief Executive Officer, Ralph Mupita, stated, “Signing the definitive investment agreements is expected to occur in the very near term”.

The timing couldn’t be more right as Africa’s young and tech-savvy population increasingly utilizes mobile phones to bridge gaps in services, including banking. This shift has created a lucrative and fast-growing sector within fintech for wireless carriers like MTN.

MTN shares surged by as much as 9.5% in Johannesburg following the announcement.

Peter Takaendesa, Head of Equities at Mergence Investment Managers in Cape Town, said, “The valuation is strong given the fund-raising difficulties many technology start-ups are facing and the fact that Mastercard won’t receive a controlling stake.”

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The investment by Mastercard in MTN’s mobile money venture carries a valuation that exceeds the industry norm. This move is set to amplify MTN’s see-through valuation while bolstering the company’s balance sheet, temporarily substituting for dividends from subsidiaries, and offsetting increased 2023 capital-spending guidance.

MTN’s rivals, including Airtel Africa Plc, Safaricom Plc, and Vodacom Group Ltd., are all making strides in the transition from basic voice and text mobile services to comprehensive digitalization. The ultimate goal for these telecom giants is to monetize their digital businesses, laying the foundation for a thriving fintech ecosystem across the continent.

This announcement draws parallels with Airtel’s successful partnership with Mastercard for its mobile-money unit as well as India’s Jio Platforms Ltd., which attracted significant capital from Facebook Inc. and Silver Lake Partners in 2020.

MTN’s ambitious plans also include raising 25 billion rand ($1.3 billion) from asset sales, demonstrating the company’s proactive approach to financial strengthening. With this latest strategic move and a focus on digital transformation, MTN is poised to lead the charge in revolutionizing mobile money in Africa.