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Mastercard has agreed to take a minority stake in the financial technology unit of South Africa’s MTN, Africa’s biggest mobile company by subscribers, valuing the arm that covers payments and remittances at more than $5bn.
The global payments provider is expected to finalise its investment “in the very near term”, Ralph Mupita, MTN’s chief executive, said on Monday. “This is a really key milestone towards driving the acceleration of our [fintech] services,” he added.
MTN has been seeking to unlock value in one of Africa’s largest mobile money networks while global investors are being enticed by fintech assets that are growing quickly on the continent outside traditional banking.
The announcement sent MTN shares 7 per cent higher by lunchtime on the Johannesburg stock market on Monday.
The size of the MTN fintech stake and the amount paid by Mastercard were not disclosed. The $5.2bn valuation excludes cash and debt and “there will be fuller disclosures on Mastercard’s investment amount”, Mupita said.
Mastercard previously invested $100mn in the mobile money business of Airtel Africa, MTN’s rival, valuing that unit at the time in 2021 at more than $2.6bn.
MTN said that on a standalone basis the fintech unit could achieve earnings before interest, taxes, depreciation and amortisation of more than 30 per cent of revenue.
Based on this margin and figures for the unit’s performance in 2022, that would imply Mastercard is investing at a valuation of about 16 times trailing ebitda.
The overall value of transactions on MTN’s MoMo mobile-money platform increased by more than 61 per cent to $135bn in the six months to the end of June, the company said in interim results that were released on Monday. Transaction volumes were 8.3bn, up more than 37 per cent.
Numbers of MoMo users, however, stayed flat at 60.5mn, partly because of currency volatility in Nigeria, where users fell about 39 per cent to 7mn.
Overall MTN subscribers rose by 3.6 per cent to just under 292mn in the six-month period while headline earnings per share, a benchmark profit measure in South Africa, rose by 7 per cent to 542 rand cents a share.
The company flagged currency weakness against the US dollar in Nigeria, MTN’s biggest market, and South Africa as a risk to earnings in the second half of this year, such as raising the cost of capital investment.
The Nigerian naira dropped sharply in June as the country exited a currency peg. The country also struggled with cash shortages ahead of elections that were held in February.
MTN said in 2021 that it was seeking a minority investment or listing for the fintech unit at a valuation of more than $5bn.
It has been looking to sell other assets, such as stakes in mobile towers, to raise cash and strengthen its balance sheet.
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