Following the announcement that Mastercard has agreed to purchase a minority stake in the financial-technology division of MTN Group Ltd., the largest wireless carrier in Africa, the stock of the telecom company has increased by the highest it has in the past three months.
When the purchase concludes, Mastercard’s ownership level won’t be made public, but MTN stated that the deal values the entire fintech division at $5.2 billion.
CEO Ralph Mupita stated that the share “will go up to a maximum of 30%, but obviously only if that makes sense.”
At an estimated value of $5.2 billion, Mastercard’s proposed minority investment in MTN mobile money works out to 16x trailing Ebitda, which is significantly higher than the 10x equivalent for Airtel Africa.
The fund might benefit MTN’s balance sheet, temporarily replacing subsidiary dividends and partially offsetting increased 2023 capital-spending projections both impacted by FX in addition to raising the company’s transparent value, according to John Davies, BI Senior Telecoms Analyst.
Rival companies to MTN, such as Airtel Africa Plc, Safaricom Plc of Nairobi, and Vodacom Group Ltd. of South Africa, are all in various phases of transitioning from traditional voice and text mobile use to digitalization, with the overall goal of separating and monetizing the businesses in the long run.
Mastercard has already invested in Airtel’s mobile money division. By securing funding from Facebook Inc. and Silver Lake Partners in 2020, India’s Jio Platforms Ltd., the digital division of billionaire Mukesh Ambani’s Reliance Industries Ltd., established a precedent.
MTN earlier stated that it intended to raise 25 billion Rand through asset sales.
The company recently sold and leased back some of its South African cell towers, and it also has plans to sell some of its West African holdings.
Additionally, it has a stake in the New York-listed tower owner IHS Holding Ltd. that it may sell down, although any sale in the near future has been put off due to the tower company’s low trading prices and a conflict with its management.
According to MTN’s statement on its first-half earnings, the fintech unit is valued at $5.2 billion under the agreement of understanding with Mastercard.
According to the corporation, revenue increased 16% to 113.2 billion rand ($6 billion) during that time.
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