In a significant move, Mastercard has entered into an agreement to acquire a minority share in the fintech division of MTN Group, Africa's largest telecommunications provider. This transaction, which values MTN's fintech business at $5.2 billion, is nearing completion pending the finalization of formal investment agreements and the successful conclusion of standard closing conditions. The announcement came as part of MTN's half-year financial performance report released on Monday.

The partnership between Mastercard and MTN is structured to foster a commercial collaboration focused on payments and remittances. Leveraging Mastercard's robust technical infrastructure, the collaboration aims to drive innovative financial solutions across the African continent. The exact size of the minority share will be disclosed after the conclusion of the transaction.

Ralph Mupita, President, and CEO of MTN Group, emphasized the strategic nature of this deal. He highlighted that despite a challenging macroeconomic environment, MTN achieved resilient performance and strategic progress in the first half of 2023. Mupita underscored the company's successes in South Africa, particularly improved network availability, and lauded the strong operational outcomes in Nigeria, even amidst cash shortages and increased inflation. He also expressed optimism about the policy changes implemented in Nigeria, foreseeing positive impacts on the investment climate in the medium to longer term.

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This development follows MTN Group's pursuit of minority investors for its African fintech subsidiary, an initiative initiated a year ago. The separation of the fintech division from the core telecom business was aimed at accelerating growth within this burgeoning sector. MTN's mobile money business, with transactions recording a remarkable 37% increase to $8.3 billion in the first half of 2023, witnessed active participation from over 60 million users.

Mastercard's investment comes on the heels of its 2021 deal with Airtel Africa, another major player in the African telecommunications market. The agreement saw Mastercard invest $100 million in Airtel's mobile money business, Airtel Mobile Commerce BV, valuing it at $2.65 billion. In contrast, Mastercard's planned minority investment in MTN's mobile money division, valued at $5.2 billion, represents a multiple of 16x trailing EBITDA, surpassing Airtel Africa's corresponding valuation of 10x.

The strategic alliance between Mastercard and MTN reflects the dynamic shift within Africa's telecommunications sector towards fintech and digital services as mobile networks transition from traditional voice and text services to digital offerings, telecom operators like MTN, Airtel, and Safaricom are increasingly venturing into fintech. These endeavours position them to compete with established fintech companies in Africa, such as Interswitch, Flutterwave, Chipper Cash, and MFS Africa, as the continent embraces the digital transformation of financial services.