HomeAccessIs MTN Group about to spin off fintech business?

    Is MTN Group about to spin off fintech business?


    Momo and M-Pesa have stimulated many African economies

    Africa’s largest phone company MTN Group has had such great results with its MTN Momo mobile banking apps that is looking to create a separate financial technology business. Bloomberg has reported that the mobile operator group is working with advisers at JP Morgan Chase for a strategy to split the business.

    At the end of March the carrier said to Bloomberg sources that it aims to complete a ‘carveout’ of the business by the end of the first half of 2022. It will then seek funds from outside investors later in the year. Last year, Nedbank Group estimated the fintech arm could be worth about $6 billion.

    MTN is considering a variety of options, including bringing in partners for some of its businesses. Alternatively, it might list certain units in the future, to unlock value and pay down debt. The carrier is also exploring ideas for its data centre business, according to Bloomberg’s secret sources.

    Meanwhile, in its core telco operations, the firm is working separately with FTI Consulting to find ways to boost revenues from its wholesale business and roaming agreements across the national markets it’s involved in. Shares of MTN have doubled in Johannesburg in the last 12 months, giving the company a valuation of $22.3 billion. Sources say that at present there is no certainty in the direction of MTN Group’s futures and options speculations, with deliberations said to be ‘ongoing’. There has been no comment so far from MTN, JPMorgan and FTI. 

    In 2020 MTN Group said it wanted to raise 25 billion rand (€1.6 billion) from asset disposals over the medium term. It agreed in November to sell a portfolio of wireless towers in its home market of South Africa for 6.4 billion rand (€400 million) and was reportedly biding to take over rival Telkom. MTN also has a stake in towerco IHS Holding. 

    Fintech has helped millions of Africans get their first bank accounts through their mobile phones. According to The World Bank, annual remittances in Africa amount to $40 billion dollars, but the cost of the money transfers is the highest in the world. 

    Lack of access to credit can severely hinder business growth and in Nigeria, only 7 per cent of businesses have taken out a formal loan. Fintech slashed the cost of credit risks assessments and in Uganda, where less than a third of the population has an account at a financial institution, lenders use First Access software to screen potential clients and match them with the right financial products. Digital microloans are also becoming extremely popular as an alternative to family loans. In Nigeria for example, several fintech companies offer small loans of as little as $150 in 24 hours.

    Vodafone’s M-PESA is the largest payments platform on the African continent with 50 million customers as of September 2021, according to Business Insider Africa. Vodafone’s African subsidiaries such as Vodacom and Safaricom, which bought the M-Pesa brand in 2020, process over a billion transactions every month and operate in Kenya, Tanzania, Lesotho, Democratic Republic of Congo, Ghana, Mozambique and Egypt.

    In March 2022 the M-Pesa service launched Super Apps to allow businesses to create their own fintech systems. About 25 per cent of all M-PESA customers have access to a smartphone – a figure that is growing by 10 per cent annually, according to the GSMA.