Six months after Mastercard announced plans to acquire a minority stake in MTN MoMo, the payments giant has revealed that it will invest $200 million in the telco’s fintech arm, acquiring a 3.8% minority stake.
The South African telecommunications company announced in a statement on Tuesday, 6 February, that it had reached definitive agreements with Mastercard on Monday, 5 February.
By the end of the transaction, MTN Group Fintech will be worth $5.2 billion on a cash and debt-free basis, excluding any cash reserves or outstanding debt.
On August 14, 2023, MTN Group’s President and CEO, Ralph Mupita, revealed the company’s intention to sell a 30% stake in the fintech firm.
The telecom operator stated that the deal with Mastercard is non-categorised according to the Johannesburg Stock Exchange (JSE) listing requirements and is subject to customary closing conditions.
The mobile operator explained that its new definitive agreement with Mastercard is consistent with both companies’ ultimate business goal of promoting financial inclusion across the continent through ongoing technological and infrastructure development and growth.
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The Mastercard deal comes when MTN Group wants to expand its fintech business. The telco intends to separate its financial services division while expanding the scope of its telecoms business.
MTN added that the partnership with Mastercard is necessary to accelerate payments and remittance services in its fintech business.
The telco intends to pursue additional relevant collaborations and investments with strategic partners and long-term investors.
MTN’s fintech structure includes a mobile money platform —MTN MoMo— insurance services, airtime lending, eCommerce, and network offerings, all with ambitious plans to compete with South Africa’s traditional banks.
In its provisional financial results for the six months ending in June 2023, the telco reported that its fintech business has been gaining traction in the market. Revenue increased by 21.7% year on year, owing primarily to the expansion of its wallet, payment and e-commerce, and remittance services.
In September 2023, the mobile money platform in South Africa unveiled an assortment of new features, including a business wallet, streamlined payments, and international remittances, all to provide an affordable option for non-banked customers to access the benefits of formal financial services.
In January 2024, MTN and Ericsson, a Sweden-based networking and telecommunications company, announced plans to extend their partnership for another ten years to improve mobile financial services in Africa.