Weeks After TPG, Mastercard Invests $100m In Airtel Mobile Money Business
Airtel Mobile Money Business seems to be the investors’ destination following Mastercard’s $100 million investment in the business, coming two weeks after TPG’s The Rise Fund invested $200m in the Airtel Africa’s AMC BV.
Both Mastercard and Airtel Africa have signed the pact to seal the deal which transaction is expected to reach its first close over the next three to four months. From the first close, Mastercard will be entitled to certain customary information and minority protection rights.
Details of the investment which will help to reduce the Group’s $3.5 billion debt, show that Mastercard (through one of its wholly-owned subsidiaries) will invest $100m through a secondary purchase of shares in AMC BV from Airtel Africa.
The transaction will close in two stages in which the first tranche of $75m will be invested at first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, the balance $25m to be invested at second close upon further transfers.
Part of the proceeds will also be invested in network and sales infrastructure in the respective operating countries.
Prior to the Mastercard and TPG deals, Airtel Africa had planned to sell about 4,500 telecommunication towers in five countries including Tanzania and Madagascar to help reduce $3.5 billion of debt and prepare for bond repayments according to reports from Bloomberg.
The operator also planned to dispose of mobile masts in Gabon, Malawi and Chad, according to CEO Raghunath Mandava who stated that the operator plans to lease back the towers from the buyers in an interview with Bloomberg.
Mandava said Airtel is constantly seeking to bring down debt and prefers to do so even faster with the tower deals.
Many of Airtel Africa’s fourteen markets border each other, making it easier to roll out fibre even during the Covid-19 pandemic, the CEO said. The company has added 9,000 kilometres (5,592 miles) of cable this year, bringing the total to 47,000 kilometres.
AMC BV is currently the holding company for several of Airtel Africa’s mobile money operations and is intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries.
Simon O’Hara, Group Company Secretary said the new transaction has improved the value of Airtel Africa’s mobile money business to $2.65bn on a cash and debt-free basis.
“Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, today announces the signing of an agreement under which Mastercard, a leading innovator and global technology company in the payments industry, will invest $100m in Airtel Mobile Commerce BV (“AMC BV”), a wholly-owned subsidiary of Airtel Africa plc (the “Transaction”).
AMC BV is currently the holding company for several of Airtel Africa’s mobile money operations and is intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries.
The investment will give Mastercard a minority stake in AMC BV upon closure of the deal in which Airtel Africa continuing to hold the majority stake.
The Transaction is subject to customary closing conditions including necessary regulatory filings and approvals, and the transfer of specified mobile money business assets and contracts into AMC BV.
Alongside the investment, the Group and Mastercard have extended commercial agreements and signed a new commercial framework which will deepen their partnerships across numerous geographies and areas including card issuance, payment gateway, payment processing, merchant acceptance and remittance solutions, amongst others
“Following the announcement on 18 March 2021 of $200m investment in AMC BV by TPG’s The Rise Fund, and the sale of the Group’s telecommunication towers companies in Madagascar and Malawi on 23 March 2021, the transaction is a continuation of the Group’s pursuit of strategic asset monetisation and investment opportunities.
As previously announced, Airtel Africa aims to continue to monetise its mobile money business with minority investments up to a total of 25 percent of the issued share capital of AMC BV, and to explore the potential listing of the mobile money business within four years.
Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a leading digital mobile financial services platform catering to a large addressable market in Africa (characterised by limited access to formal financial institutions with limited banking infrastructure) and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.
Mobile money services are available across the Group’s 14 countries of operation, except in Nigeria where the Group offers Airtel Money services through a partnership with a local bank and has applied for its own mobile banking licence. It is the intention that all mobile money operations will be owned and operated by AMC BV.
In our most recent reported results for Q3, the mobile money service segment (corresponding to all the businesses that are intended to be transferred to AMC BV) delivered a strong operational performance in which it generated revenue of $110m ($440m annualised), and underlying EBITDA of $54m ($216m annualised) at a margin of 48.7 per cent.
The mobile money business benefits from strong network effects with its core telecom business through the extensive distribution platform of kiosks and mini-shops as well as dedicated Airtel Money branches supplementing our extensive agent network, to facilitate customers’ assured wallet and cash.”
According to Airtel, it has a clear strategy to continue to drive sustainable long-term growth in Airtel Money with a focus on assured float availability, distribution expansion and increased usage cases for our customers.
In this year alone, in addition to Mastercard, we have added partnerships with Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expand both the range and depth of the Airtel Money offerings and to further drive customer growth and penetration.
Airtel Africa aims to explore the potential listing of the mobile money business within four years. Under the terms of the Transaction, and in very limited circumstances (in the event that there is no Initial Public Offering of shares in AMC BV within four years of the first close or in the event of changes of control without Mastercard’s prior approval), Mastercard would have the option, so as to provide liquidity to them, to sell its shares in AMC BV to Airtel Africa or its affiliates at fair market value (determined by a mutually agreed merchant bank using an agreed internationally accepted valuation methodology).
The option is subject to a minimum price equal to the consideration paid by Mastercard for its investment (less the value of all distributions and any proceeds of the sale of its shares, and with no time value of money or minimum built-in) and a maximum number of shares in AMC BV such that the consideration does not exceed $200m.
Speaking, Raghunath Mandava, CEO of Airtel Africa, said: “With today’s announcement we are pleased to welcome Mastercard as an investor in our mobile money business, joining The Rise Fund which we announced two weeks ago.
This is a continuation of our strategy to increase the minority shareholding in our mobile money business with the further intention to list this business within four years. We are significantly strengthening our existing strategic relationship with Mastercard to help us both realise the full potential from the substantial opportunity to improve financial inclusion across our countries of operation.
The combination of our extensive customer base and distribution platforms and Mastercard’s products and services, innovation and know-how, mean we can together accelerate demand and drive growth in financial services for the benefit of all our customers and markets.”
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