MTN to separate fintech arm, values it at $5 billion

MTN Group Limited is valuing its mobile money arm at about $5 billion and plans to run it independent of its telecom connectivity operations, the company has said.

The telco hopes the separation will help free up value hidden in its core business, and potentially gain greater traction in a region having more mobile-money accounts than any other globally.

It is likely to happen by way of minority shares sale to court investors from around the world with interest in rapidly developing fintech assets, a transaction Bloomberg said Monday could come through an initial public offering.

“With similar valuations to that of Airtel, our valuation would sit at 75 billion rand, or about $5 billion,” Ralph Mupita, the telco’s group chief executive, said.

“No decision has been made as yet, but listing will be an option considered if that will be the best approach to unlock value.”

Airtel Africa, which together with MTN and Orange control more than half of Africa’s mobile subscribers, has garnered $300 million from a similar move in barely three weeks: $200 million and $100 million from part-stake sales to TPG Holdings LP and Mastercard respectively.

Apart from dwarfing Airtel’s mobile money valuation which stands at $2.65 billion (not including debt and cash), MTN’s mobile money, with 46 million users as of 2020, is more than twice bigger than its rival in sub-Saharan Africa where the absence of banking infrastructure is still commonplace but where a sizeable population of digitally-enabled young persons holds hope for informal banking.

548 million mobile money accounts were reported in the region last year, meaning 54 per cent of all global customers, said global mobile-operator industry group GSMA.

MTN is looking to widen revenue from services like microinsurance in addition to the spin-off plan, which will help reduce net debt by $3 billion.

“We think Nigeria is a huge data story. There are still low levels of internet penetration which we believe we are well positioned to drive higher,” Mupita told Financial Times of Nigeria, which is well behind many others in the region in terms of mobile money penetration.