Airtel Africa, a provider of telecoms and mobile money services, with a presence in 14 countries across Africa, has announced the signing of an agreement under which The Rise Fund, the global impact investing platform of alternative investment firm TPG, will invest $200 million in Airtel Mobile Commerce (AMC), a wholly owned subsidiary of Airtel Africa.
AMC is currently the holding company for several of Airtel Africa’s mobile money operations; and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries.
As part of the Transaction, Airtel Africa’s mobile money business is valued at $2.65 billion on a cash and debt free basis. The Rise Fund will hold a minority stake in AMC upon completion of the Transaction, with Airtel Africa continuing to hold the remaining majority stake. The Transaction is subject to customary closing conditions including necessary regulatory filings and approvals, as necessary, and the inclusion of specified mobile money business assets and contracts into AMC BV.
The Transaction is the latest step in the Group’s pursuit of strategic asset monetization and investment opportunities, and it is the aim of Airtel Africa to explore the potential listing of the mobile money business within four years. The Group is in discussions with other potential investors in relation to possible further minority investments into Airtel Money, up to a total of 25% of the issued share capital of AMC.
The proceeds from the Transaction will be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries.
Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a major digital mobile financial services platform catering to a large addressable market in Africa (characterized 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. However in Nigeria, the Group offers Airtel Money services through a partnership with a local bank and has applied for its own mobile banking license. It is the intention that all mobile money operations will be owned and operated by AMC.
In its third quarter financial results, Airtel Group’s mobile money service segment (corresponding to all the businesses that are intended to be transferred to AMC) delivered a strong operational performance, generating revenue of $110 million ($440 million annualized), and underlying EBITDA of $54 million ($216 million annualized) at a margin of 48.7%. Year-on-year revenue growth for the quarter was 41.1% in constant currency, largely driven by 29% growth in the customer base to 21.5 million, and 9.7% ARPU growth, while growth in transaction value was 53.0% to $12.8 billion ($51 billion annualized).
The profits before tax in the full year ending March 31, 2020 and the value of gross assets as of that date, attributable to the mobile money businesses were $143.4 million and $463.2 million, respectively.
Airtel’s mobile money business benefits from strong network presence with its core telecom business through the extensive distribution platform of kiosks and mini shops as well as dedicated Airtel Money branches supplementing the firm’s extensive agent network, to facilitate customers’ assured wallet and cash.
The Group 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, the Group hase added partnerships with Mastercard, 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 IPO of shares in AMC within four years of first close, or in the event of changes of control without TPG’s prior approval, TPG would have the option, so as to provide liquidity to them, to sell its shares in AMC to Airtel Africa or its affiliates at fair market value that does not exceed $400 million.
The Transaction is expected to reach first close over the next three to four months. From first close, The Rise Fund will be entitled to appoint a director to the board of AMC and to certain customary information and minority protection rights.
Raghunath Mandava, CEO of Airtel Africa, commented: “In line with our vision of enhancing financial inclusion, Airtel Africa offers a unique digital mobile financial services platform under the Airtel Money brand. In most of our markets, there is limited access to traditional financial institutions, and little banking infrastructure, with less than half of the population having a bank account across sub-Saharan Africa. Our markets therefore afford substantial market potential for mobile money services to meet the needs of the tens of millions of customers in Africa who have little or no access to banking and financial services, and this demand is driving growth.
With today’s announcement, we are pleased to welcome The Rise Fund as an investor in our mobile money business and as a partner to help us realize the full potential from the substantial opportunity to bank the unbanked across Africa.”
Yemi Lalude, Partner at TPG who leads Africa investing for The Rise Fund, added: “Financial inclusion is a global issue that is most acute in Africa. Through Airtel Money, Airtel Africa has built a unique platform that is closing the gap between traditional financial institutions and the millions of unbanked Africans across the 14 countries where Airtel Africa operates. We look forward to working with Airtel Africa to enhance their mobile money services, broaden its use cases, and grow into new markets. With this investment in Airtel Africa’s mobile money operations, we are excited to expand The Rise Fund’s global fintech portfolio and continue to deepen our focus on improving financial inclusion in Africa and around the world.”
Airtel Africa is a provider of telecoms and mobile money services, with a presence in 14 countries in Africa, primarily in East Africa and Central and West Africa. Airtel Africa offers an integrated suite of telecommunications solutions to its subscribers, including mobile voice and data services as well as mobile money services, both nationally and internationally.
The Rise Fund is the world’s largest global impact platform committed to achieving measurable, positive social and environmental outcomes alongside competitive financial returns.
With more than $5 billion in assets under management across its platform, The Rise Fund works with growth-stage, high potential, mission-driven companies. Headquartered in San Francisco, The Rise Fund was founded in 2016 to deliver deep expertise in business solutions to help achieve the United Nations’ SDGs.
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