Bharti Airtel raises $100 mn from Mastercard via Africa mobile money stake sale

Telecom operator Bharti Airtel said US-based payments processor Mastercard will invest $100 mln (Rs 730 cr) into its Africa mobile payments business. The announcement comes two weeks after TPG Group invested $200 mn in Airtel Money Africa.

The latest agreement values Airtel Africa’s mobile money business at $2.65bn on a cash and debt free basis, the company said.

The telecom operator said the move is part of its attempts to monetize some of its non-core assets in the Africa unit, and it will divest up to 25% of equity in Airtel Money Africa.

The investment has been made via a secondary sale of shares in AMC BV, an EU-based company that has been set up with the intention of serving as a holding company for all of Airtel Africa’s mobile money business.

The first leg of the transaction, which is expected to close in around four months, will see Mastercard buy shares of AMC BV worth Rs $75 mn from Airtel Africa. Given that all of Airtel Africa’s mobile money businesses have not been transferred yet to AMC BV, the second phase will take place after that process is completed, Bharti Airtel said.

The money will be used to reduce the debt on Airtel Africa’s books and to invest in network and sales network, the company said.

“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 of the Group’s pursuit of strategic asset monetisation and investment opportunities,” the telecom operator said.

“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 BV, and to explore the potential listing of the mobile money business within four years.”

Airtel Money offers services such as mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.

The services are available in 14 African countries, though the company operates through a tie-up with a bank in Nigeria. However, it said it plans to acquire its own license in Nigeria too.

In the three months ended December, the mobile money service segment generated revenue of $110m and underlying EBITDA of $54m at a margin of 48.7%.

Year on year revenue growth for the quarter was 41.1% in constant currency, largely driven by 29% growth in the customer base to 21.5m, and 9.7% ARPU growth. Growth in transaction value was 53.0%.

Under the terms of the Transaction, and in very limited circumstances — such as not having any IPO for AMC BV within four years — Mastercard would have the option to sell its shares in AMC BV back to Airtel Africa at fair market value, subject to a minimum price equal to the consideration paid by Mastercard for its investment.

“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,” said Raghunath Mandava, CEO of Airtel Africa.

“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,” he added.