MTN Values Mobile Money Business at $6bn
By Adedapo Adesanya
MTN has valued its mobile money business fondly called MoMo at about $6 billion as it prepares to sell or list a minority stake to draw global investors, according to a report by the Financial Times.
This was disclosed by the company’s Chief Executive Officer, Mr Ralph Mupita, that the business should be worth at least $5 billion or $6 billion and should be listed within the next year.
The South African telecommunications company has 280 million global subscribers and the mobile money arm accounts for more than 15 per cent (46 million).
The plan, which was initially unveiled in March, is part of a strategy shift to refocus its business and cut $3 billion of net debt.
He was quoted as saying, “We think the best way to run these businesses is to structurally separate them.”
Mr Mupita further said that the move would unlock the value hidden in MTN’s $11 billion market capitalisation.
The group wants to tap into growing investor interest in the mobile money businesses built by African telecoms in the past decade that allow phone subscribers to send or receive money outside banks and increasingly sell ancillary services such as microinsurance.
Mr Mupita also revealed that the group’s financial services interests also include an insurance joint venture with over 10 million customers.
Reason for mobile money business separation
Explaining the rationale, the CEO said separating these businesses has become more pressing as their scale has become “quite material.”
He said despite regulatory scrutiny on the ventures being undertaken by mobile phone companies in Africa, regulators have welcomed the plan.
“In the discussions we’ve had with regulators, they welcome this,” Mr Mupita said.
It is not stopping there, MTN is also set to raise cash with a sale and leaseback of most of the group’s mobile phone towers in South Africa by the end of the year, and it is exiting its troubled Middle East operations.
The company commended its strides in its largest market, Nigeria which accounts for 40 per cent of group earnings and 41 per cent of its new subscribers last year, noting that it is positioned to grow higher.
“There is a lot we can control in Nigeria. We think Nigeria is a huge data story,” he said. “There are still low levels of internet penetration which we believe we are well-positioned to drive higher.”
Airtel did something similar
Rival, Airtel Africa, recently sold minority stakes in its mobile money business, valuing it at more than $2.6 billion, excluding cash and debt.
The Rise Fund, the impact investing arm of buyout firm TPG, and Mastercard bought stakes for $200 million and $100 million respectively.
“We think that the fintech business will be worth more than $5 billion, reading across from the Airtel Africa transaction,” Mr Mupita told FT.
At 46 million subscribers, MTN’s mobile money business has more than double the number of Airtel Africa, which is about 21 million.