Mastercard to Invest in MTN Group's Fintech Arm for Minority Stake, Accelerating African Digital Payment Growth

Mastercard Inc MA has agreed to acquire a minority stake in MTN Group Ltd's financial-technology business at a valuation of $5.2 billion. The financial details of the transaction or stake percentage remain undisclosed.

The deal involves a commercial agreement on payments and remittances using Mastercard's technology infrastructure to expand in Africa, Bloomberg reports.

Also Read: Mastercard's Conservative Outlook and Relative P/E Discount Make It a Favorable Bet: Analysts Raise Price Targets

Africa's young and tech-savvy population increasingly uses mobile phones to access services, leading to a booming fintech sector for wireless carriers.

Mastercard's investment won't result in a controlling stake in MTN's mobile money business, according to Peter Takaendesa of Mergence Investment Managers in Cape Town.

The investment would enhance MTN's valuation and balance sheet, helping offset increased capital spending and dividend issues, per John Davies, BI senior telecoms analyst.

MTN's first-half revenue saw a 16% rise to 113.2 billion rand ($6 billion).

Rivals like Airtel Africa Plc, Safaricom Plc, and Vodacom Group Ltd are also shifting towards digitalization from primary mobile usage.

Airtel already has Mastercard as an investor in its mobile-money unit, while other companies like Jio Platforms attracted investments from Meta Platforms Inc META Facebook, and Silver Lake Partners.

MTN aims to raise 25 billion rands from asset sales, including selling mobile-phone towers and some West African assets.

The company may also sell its stake in IHS Holding Ltd IHS, but challenges have delayed this process.

As of June 30, 2023, Mastercard's cash flow from operating activities stood at $4.6 billion, and cash and equivalents stood at $8.52 billion.

Price Action: MA shares traded higher by 0.55% at $397.14 premarket on the last check Monday.

Photo via Wikimedia Commons

Editor's Note: The story has been updated to correct the stake valuation.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.