Airtel Africa has announces the signing of an agreement under which Mastercard will invest $100 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 intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries.
The Transaction values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis.
Mastercard will hold a minority stake in AMC upon completion of the Transaction, with 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.
(TOP: Raghunath Mandava, CEO of Airtel Africa).
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 March 18, 2021 of $200 million investment in AMC by TPG’s The Rise Fund, and the sale of the Group’s telecommunication towers companies in Madagascar and Malawi on March 23, 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% of the issued share capital of AMC, and to explore the potential listing of the mobile money business within four years.
The proceeds from the Transaction will be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries.
Airtel Africa mobile money services generated revenues of $110 million with the year-on-year revenue growth for the quarter being 41.1% in constant currency, largely driven by 29% growth in the customer base to 21.5 million, and 9.7% ARPU growth. Growth in transaction value was 53.0% to $12.8 billion ($51 billion annualised).
Mastercard (through one of its wholly owned subsidiaries) will invest $100 million through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction will close in two stages, with $75 million being invested at first close, once the transfer of sufficient mobile money operations and contracts into AMC has been completed, while the other $25 million will be invested at second close upon further transfers.
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 within four years of 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 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 sale of its shares, and with no time value of money or minimum built in) and a maximum number of shares in AMC such that the consideration does not exceed $200 million.
The Transaction is expected to reach first close over next three to four months. From first close, Mastercard will be entitled to certain customary information and minority protection rights.
Raghunath Mandava, CEO of Airtel Africa, commented: “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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