The South African based telco group wants to expand its African fintech business before other telcos do
MTN and payment processor Mastercard have signed an MoU which will see Mastercard make a minority investment into the telco’s fintech arm, which it values at around $5.2bn. The deal is expected to close in the “very near term” and continues the telco’s rapid expansion into mobile payments, in the wider absence of banking infrastructure across the continent.
The group’s fintech business increased its transaction volume by 37% to 8.3bn in the first half of the year, predominately through its 61m active MoMo mobile money product users.
MTN group president and CEO Ralph Mupita told investors during the telco’s results conference call that the value and size of the stake being sold would be disclosed after final agreements are signed. The telco also signed separate commercial agreements with Mastercard to grow its payments and remittance services and for “building a broader remittance capability”, according to Reuters.
MTN’s fintech arm has 16 different mobile money businesses and includes services such as its mobile money platform MoMo, insurance, airtime lending and e-commerce, reports Reuters. The chief executive said it would continue to scout for opportunities to sell up to 30% of the business, which contributes almost a fifth of its total revenues.
Telco fintech competition hotting up across continent
Mastercard has previously connected its virtual payment service to MTN wallets, letting the telco’s customers make international payments online without a bank account. Its investment follows a similar $100m investment two years ago in Airtel Mobile Commerce BV, the holding company for Airtel Africa’s mobile money operations.
Safaricom, which has dominated mobile payments in Kenya with M-Pesa, is preparing to launch the service in Ethiopia and has just raised the M-Pesa account limits to around €3214 in a bid to attract SMEs in its home country.
South Africa’s Vodacom recently signed digital payments firm Network International to provide managed payment services to the telco’s financial services business, Vodacom financial and digital lifestyle services. The deal will see NI provide omni-channel digital payment offerings, including card issuing and acquirer processing services, transaction switching capabilities, as well as other value-added services.
Resilient H1 performance for MTN
The Mastercard deal was announced at MTN’s H1 results which Mupita described as “resilient” in the face of: “difficult operating environment marked by elevated inflation, weaker local currencies and regulatory developments across our 19 markets.”
“In South Africa, we were very encouraged by the improved network availability on the back of our power-resilience investment, resulting in a stronger Q2 23 performance than Q1 23,” he said. By end-June, MTN South Africa’s network availability was more than 90% despite severe electricity shortages across the country.
“In Nigeria, we delivered a very strong operational result, having navigated the cash shortages in Q1 23 and increased inflation,” he said. “The policy changes implemented in Nigeria in Q2 23 have short-term negative impacts, but we see these as being very constructive for the investment climate in the medium to longer term.”
MTN Group’s service revenue grew 15% to almost ZAR108bn in constant-currency terms. This was driven by increases in revenue from data services of 24% and from fintech services of 22%. Revenue from voice services increased 6% in the period.
Group-wide, the telco had 292m subscribers – 4% higher than the same period last year. “We increased the number of active data users by more than 7% to nearly 140 million; reported a 19% increase in overall data traffic; and improved data affordability by reducing the average effective rate per megabyte by more than 22%,” he added.