Mastercard Set to Acquire Minority Stake in $5.2 Billion Fintech Venture from MTN

MTN, the prominent telecommunications group with a pan African presence, has unveiled a pivotal agreement with Mastercard, a leading global fintech player. This strategic partnership involves the sale of a minority stake in MTN's fintech business for an impressive $5.2 billion. The announcement comes as part of MTN's comprehensive half-year financial performance update, which was officially disclosed on Monday. Taking a look into the shares of the company itself, the present stock price of MTN Group Limited (JSE: MTN) on the Johannesburg Stock Exchange stands at 13,408 ZAC.

The memorandum of understanding signifies a substantial move in MTN's fintech sector. The company is on the verge of finalizing the investment agreements as the due diligence process nears completion. MTN's fintech division achieved rapid expansion in the first half of the year, experiencing a remarkable 37% surge in transaction volume, totaling 8.3 billion. Impressively, these transactions were carried out by 61 million active MoMo customers.

Fueling the growth of the fintech business, MTN executed a commercial agreement with Mastercard. In the words of MTN, “Following the bespoke process to identify and potentially introduce strategic minority investors into MTN Group Fintech, we executed commercial agreements with Mastercard to support the acceleration and growth of our fintech business’s payments and remittance services." 

Furthermore, a memorandum of understanding was signed between MTN and Mastercard, paving the way for Mastercard's minority investment into Group Fintech. The valuation stands at approximately $5.2 billion, considering the business's enterprise value on a cash and debt-free basis. The definitive investment agreements are set to be finalized in the near future, subject to customary closing conditions.

First Half Performance in 2023

Reflecting on MTN's financial performance for the first half of 2023, CEO Ralph Mupita emphasized the company's resilient performance and strategic progress amid challenging macroeconomic conditions. Notably, MTN South Africa experienced enhanced network availability due to investments in power resilience, resulting in a stronger performance in Q2 23 compared to Q1 23. Mupita also acknowledged the company's strong operational outcome in Nigeria, successfully navigating cash shortages and increased inflation. The policy changes implemented in Nigeria were perceived as short-term setbacks with promising long-term benefits for the investment climate.

MTN Group's service revenue demonstrated robust growth, increasing by 15% to nearly R108 billion in constant-currency terms. This growth was primarily attributed to a 24% increase in revenue from data services and a 22% surge in fintech services revenue. Additionally, revenue from voice services witnessed a 6% rise during the period. The company's subscriber base also expanded, reaching 292 million by the end of June 2023, marking a 4% increase compared to the same period the previous year. This growth was attributed to lower data rates and improved access to broadband services.