Africa’s largest mobile network operator, MTN, has announced that payments processing giant Mastercard is investing the sum of $200 million in its fintech business.
The transaction which is non-categorized in terms of the JSE Listings requirements, was originally announced on 14 August 2023 and is subject to customary closing conditions.
According to reports, MTN announced that it had signed definitive agreements detailing the transaction with Mastercard yesterday.
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The deal is coming after Mastercard last year agreed to purchase a minority stake in the fintech division of MTN Group. The investment values the fintech business at $5.2 billion, implying about a 3.8% stake.
According to MTN Group president and CEO Ralph Mupita, he disclosed that the deal will be structured as a commercial partnership on payments and remittances employing Mastercard’s technical infrastructure to develop throughout Africa and an investment in a minority share.
MTN announced on Tuesday that the agreements complement the larger commercial relationship between the company and Mastercard to support the continued development and growth of technology and infrastructure. It added that the commercial relationship is a key enabler for the acceleration of the fintech business payments and remittance services.
Apart from boosting MTN’s see-through valuation, the investment could help the company’s balance sheet by temporarily substituting for dividends from subsidiaries and partly offsetting increased 2023 capital-spending guidance both affected by Forex.
Recall that Mastercard’s investment of $200 million in MTN fintech business is coming a year after MTN said it was searching for minority investors to invest in its African fintech subsidiary after separating it from the carrier’s main telecom business to maximize development in the thriving division.
The Mastercard transaction comes as MTN Group is expanding its fintech business, putting the telecoms company on a solid footing, as it prepares to separate its financial services division. MTN’s fintech structure includes the mobile money platform MoMo, insurance offerings, airtime lending, and e-commerce, as well as its network services.
In its interim financial results for the six-month period that ended in June, last year, Mn revealed that its fintech business has been flourishing, with revenue growing by 21.7% year-over-year, primarily due to growth in the wallet (+20.7%), payment and e-commerce (+54.9%) and remittance (+78.9%) industries.
It is worth noting that the Johannesburg-based company’s aspirations were boosted after obtaining a mobile banking license in Nigeria, its largest market, which allowed MTN to offer financial services to millions of new clients.
MTN has however stated that it will continue to explore opportunities for other value-enhancing partnerships and investments, subject to market conditions, with strategic partners and long-term investors.