Airtel enters agreement to will out minority stake of its mobile money service to Mastercard for $100m

• Says transaction will be used to reduce Group debt and invest in network infrastructure

Charles Abuede

Following the recent acquisitions of a majority stake in Airtel Africa’s mobile money service by AMC BV for $200 million, Airtel Africa has announced the penned agreement which will see Mastercard, a leading innovator and global technology company in the payments industry, invest $100 million in Airtel Mobile Commerce BV to hold a minority stake in the business. The proceeds from the transaction will be used to reduce group debt and invest in network and sales infrastructure in the respective operating countries.

Airtel in a disclosure filed to the NSE on Thursday, revealed that the transaction will see Airtel Africa’s mobile money service valued at $2.65 billion on a cash and debt-free basis. The disclosure also stated that Airtel Africa will continue holding the majority stake in Airtel Mobile Commerce BV, which is a wholly-owned subsidiary of the telecoms giant.

Raghunath Mandava, the CEO of Airtel Africa, in his comments on the transaction, said: “With today’s announcement we are pleased to welcome Mastercard as an investor in our mobile money business, joining The Rise Fund which we announced two weeks ago. 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. 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.”

Further revelation from the disclosure signed by Simon O’Hara, the company secretary puts it that the $100 million investment from Mastercard will be through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction will close in two stages: $75 million will be invested at a first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, with $25 million to be invested at second close upon further transfers.

Elsewhere, Mastercard in an agreement with Airtel Africa, have reached a commercial agreement and signed commercial framework which will see both entities deepen their partnerships across several geographies and areas including card issuance, payment gateway, payment processing, merchant acceptance and remittance solutions. This extended agreement is alongside the investment into the service.

As part of the signed agreement and with the aim of the telecoms giant to list the mobile money business within four years, Mastercard would have the option to sell its shares in AMC BV to Airtel Africa or its affiliates at fair market value if there is no initial public listing of the shares within four years of first close. The option is subject to a minimum price equal to the consideration paid by Mastercard for its investment (less the value of all distributions and any proceeds of the sale of its shares, and with no time value of money or minimum built-in) and a maximum number of shares in AMC BV such that the consideration does not exceed $200m.

Meanwhile, Airtel Africa in its current operating year has, in addition to Mastercard, added partnerships with Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expand both the range and depth of the Airtel Money offerings and to further drive customer growth and penetration.

The transaction is expected to reach its first close over the next three to four months. From the first close, Mastercard will be entitled to certain customary information and minority protection rights.