Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa,today announces thesigning of an agreement under which Mastercard, a leading innovatorand global technology company in the payments industry,will invest $100m in Airtel Mobile Commerce BV (“AMC BV”), a wholly owned subsidiary of Airtel Africa plc(the “Transaction”). AMC BV is currently theholding company forseveral of Airtel Africa’s mobile money operationsand is intended toown and operate themobile money businessesacross allofAirtel Africa’sfourteen operating countries.The Transactionvalues Airtel Africa’smobile money business at$2.65bn on a cash and debt free basis.Mastercardwill hold a minority stake in AMC BV 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 businessassetsand contractsinto AMCBV. 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 18 March 2021 of $200m investment in AMC BV by TPG’s The Rise Fund, and the sale of the Group’s telecommunication towers companies in Madagascar and Malawi on 23 March 2021, the Transaction is a continuation ofthe Group’s pursuit of strategic asset monetisation and investment opportunities. As previously announced, Airtel Africaaimstocontinue to monetise its mobile money business with minority investments up to a total of 25% of the issued share capital of AMC BV, 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 moneyservicesOperating under the Airtel Money brand, Airtel Africa’smobile money services is a leadingdigital mobile financial services platform catering to a large addressable market in Africa (characterised by limited access to formal financial institutions with limited banking infrastructure)and includesmobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit cardand international money transfers.Mobile money services are available across the Group’s 14 countries of operation, howeverin Nigeria the Group offers Airtel Money services through a partnership with a local bank and has applied for its ownmobile banking licence. It is the intention that all mobile money operations will be owned and operated by AMC BV.In our most recentreportedresults for Q3, the mobile moneyservice segment (corresponding to all the businesses that are intended to be transferred to AMC BV) delivered a strong operational performance:
.Generatedrevenue of $110m ($440m annualised), and underlying EBITDA of $54m ($216m annualised) at a margin of 48.7%.
•Year on yearrevenue growth for the quarter was41.1%in constant currency, largelydriven by 29% growth in the customerbase to 21.5m, and9.7% ARPU growth.
•Growth in transaction valuewas 53.0%to $12.8bn ($51bn annualised).
Our mobile money business benefits from strong network effects with our core telecom business through the extensive distribution platform of kiosks and mini shops as well as dedicated Airtel Money branchessupplementing our extensive agent network,to facilitate customers’assured wallet and cash.We have a clear strategy tocontinue to drivesustainable long-term growth in AirtelMoney with a focus onassured float availability, distribution expansion and increasedusage cases for our customers.In this year alone, in addition to Mastercard,we have added partnerships with Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expandboththe range and depth of the Airtel Money offerings and to further drive customer growth and penetration.The profitsbefore tax in the full year ending 31 March 2020 and value of gross assets as of that date,attributable to the mobile money businesseswere $143.4m and $463.2m,respectively.
Key elements of the Transaction
•Agreement valuesAirtel Africa’s mobile moneybusiness at $2.65bn on a cash and debt free basis.
•AMC BV, a whollyowned subsidiary of Airtel Africa, 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 once the inclusion of the remaining mobile money operations under AMC BV is completed.
•Mastercard(through one of its whollyownedsubsidiaries)will invest $100m through a secondary purchase of shares inAMC BV from Airtel Africa.The transaction will close in two stages. $75m will be invested at first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, with $25m to 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 BV 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 BV 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 BV such that the consideration does not exceed $200m.
The Transaction is expected to reach first close over next three to fourmonths.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 potentialfrom the substantial opportunity to improvefinancial 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.”