MTN Group to Spin Off Fintech Units for Mastercard Investment

MTN Group intends to spin off its fintech operations in Nigeria, Ghana, and Uganda by mid-2025, allowing Mastercard to acquire a minority stake. The spin-off process is relatively advanced in Uganda and Ghana, while Nigeria faces additional regulatory hurdles. The partnership values MTN’s fintech unit at $5.2 billion, with an investment of up to $200 million from Mastercard. Despite recent losses, MTN plans to increase dividend payouts, reflecting confidence in future growth.

MTN Group has disclosed its intentions to spin off its fintech divisions in Nigeria, Ghana, and Uganda by the first half of 2025. This strategic move aims to facilitate Mastercard Inc.’s acquisition of a minority stake in these rapidly expanding units, as articulated by MTN’s CEO Ralph Mupita during a Bloomberg interview. The separation complies with the agreement established with Mastercard in 2023.

The spin-off is progressing at a different pace in Uganda and Ghana compared to Nigeria, which faces additional regulatory challenges. Mupita has indicated that Nigeria’s situation entails “a bit more complexity with some more regulatory processes to work through.” Nevertheless, MTN is dedicated to finalizing the reorganization across all three nations.

Beyond its fintech aspirations, MTN is also considering network-sharing agreements, a strategy currently common in European markets. This approach is expected to optimize infrastructure costs while enhancing service delivery capabilities for the company.

The agreement with Mastercard places MTN’s fintech unit at a valuation of $5.2 billion, with the payments firm expected to invest up to $200 million. MTN announced this acquisition arrangement in 2023 simultaneously with a commercial agreement with Mastercard, which aligns with the intent to bolster its fintech services and facilitate payments and remittances. The enterprise value is based on a cash and debt-free basis, with the final investment agreements anticipated to materialize shortly, subject to standard closing conditions.

MTN, recognized as Africa’s largest telecommunications provider by sales, recently reported a financial loss of 9.59 billion rand for the year ending December 31, 2024, exceeding the forecasted loss of 3.87 billion rand. The company continues to express confidence in its financial outlook by announcing a dividend of 3.45 rand per share for 2024 and plans to increase this to at least 3.70 rand per share in the forthcoming financial year.

MTN Group’s strategic decision to spin off its fintech operations in Nigeria, Ghana, and Uganda is a significant step towards facilitating Mastercard’s minority investment in these businesses. While navigating regulatory complexities, MTN remains committed to this reorganization and explores additional strategies, such as network-sharing to enhance service efficiency. The financial outlook appears cautiously optimistic amidst recent losses, with plans to bolster dividend payouts moving forward.

Original Source: nairametrics.com