MTN’s Aggressive Fintech Arm Is Gearing Up For A Splashy Spin-Off

Weeks after some (somewhat disputed) news reports put word out that MTN’s fintech business is now top of the pile having usurped M-Pesa as the largest mobile payments business in Africa, the telco seems to be stepping up plans to spin off its fintech business as a separate unit.

Fresh reports have emerged that South Africa’s MTN Group is working with advisers at JPMorgan Chase & Co on the planned separation of its financial technology business, according to people with knowledge of the matter.

MTN, which is Africa’s largest telco, revealed last month that it is targeting the completion of the carve-out of the fintech business by the end of the first half of the year. This would be followed by seeking funds from outside investors by the end of the year, the company had revealed.

MTN’s fintech unit posted a revenue of USD 1.052 B in its most recent results and a total transaction value of USD 239.4 B. Comparing notes with M-Pesa, MTN’s fintech business is actually less valuable, albeit by a relatively small margin. M-Pesa’s USD 1.3 B revenue and USD 300 B transaction value in the equivalent period does put it ahead of MTN despite the fact that M-Pesa is available in 7 countries compared to MTN’s 21 countries. Plus, M-Pesa also has 58 million active customers compared to the 56.8 million active customers on MTN’s fintech platforms.

Nevertheless, MTN’s fintech unit is growing aggressively and its agent network is already nearly twice that of M-Pesa. Last year, Nedbank Group estimated the fintech arm could be worth about USD 6 B.

As Bloomberg reported, MTN is studying a variety of potential deals, including bringing in partners for some of its businesses as well as possibly listing certain units in the future, to unlock value and pay down debt. It is understood that the carrier is also exploring options for its data centre business, said the people who revealed the details to Bloomberg who asked not to be identified because the information is private.

It is noteworthy that shares of MTN have roughly doubled in Johannesburg over the past 12 months, giving the company a valuation of about ZAR 355 B. While the deliberations are believed to be ongoing, people with knowledge of the matter reckon there’s no certainty that the talks will lead to any transactions.

In addition, it was revealed that the telecoms operator is separately working with FTI Consulting to find ways to boost revenues from its wholesale business and roaming agreements across the markets where it operates, one of the people said. As of press time, spokespeople for MTN, JPMorgan and FTI opted to not comment.