Airtel secures $200m investment from The Rise Fund, to invest in mobile money service expansion

• Mobile money business now with a $2.65bn valuation
• Plans for a potential listing of the mobile money business within 4 years

Charles Abuede

Leading provider of telecommunications and mobile money services in Nigeria and Africa, Airtel Africa has announced signing an agreement with The Rise Fund, the global impact investing platform of leading alternative investment firm TPG, which will see the Rise Fund invest $200 million in Airtel Mobile Commerce BV, a wholly-owned subsidiary of Airtel Africa plc.

Airtel Africa Plc, in a statement on Thursday, signed by Simon O’Hara, Group Company Secretary revealed that the transaction values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt-free basis. Meanwhile, The Rise Fund will hold a minority stake in AMC BV upon completion of the Transaction, with Airtel Africa continuing to hold the remaining majority stake. However, the Transaction is subject to customary closing conditions including necessary regulatory filings and approvals, as necessary, and the inclusion of specified mobile money business assets and contracts into AMC BV.

Commenting on the landmark transaction between the two entities, Raghunath Mandava, CEO of Airtel Africa said: “In line with our vision of enhancing financial inclusion, Airtel Africa offers a unique digital mobile financial services platform under the Airtel Money brand. In most of our markets, there is limited access to traditional financial institutions, and little banking infrastructure, with less than half of the population having a bank account across sub-Saharan Africa. Our markets, therefore, afford substantial market potential for mobile money services to meet the needs of the tens of millions of customers in Africa who have little or no access to banking and financial services, and this demand is driving growth.

With today’s announcement we are pleased to welcome The Rise Fund as an investor in our mobile money business and as a partner to help us realise the full potential from the substantial opportunity to bank the unbanked across Africa.”

Also, Yemi Lalude, Partner at TPG who leads Africa investing for The Rise Fund, added: “Financial inclusion is a global issue that is most acute in Africa. Through Airtel Money, Airtel Africa has built a unique platform that is closing the gap between traditional financial institutions and the millions of unbanked Africans across the 14 countries where Airtel Africa operates. We look forward to working with Airtel Africa to enhance its mobile money services, broaden its use cases, and grow into new markets. With this investment in Airtel Africa’s mobile money operations, we are excited to expand The Rise Fund’s global fintech portfolio and continue to deepen our focus on improving financial inclusion in Africa and around the world.”

According to the statement filed to the NSE by Airtel Africa, the transaction will close in two stages. The first stage which is expected to close by July 2021, will see $150 million invested once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, while $50 million will be invested at second close upon further transfers.

Meanwhile, the leading provider of mobile money service with presence in 14 countries of operation has stated that it aims to explore the potential listing of the mobile money business within four years where in very limited circumstances that AMC BV has no initial public offering of its shares within 4 years of first close or at the instance of change of control without the approval of TPG, Airtel will have TPG shares in AMC BV sold to it or its affiliates at fair market value. The sale is to be determined by a mutually agreed merchant bank using an agreed internationally accepted valuation methodology. However, the of sales of shares are subject to a minimum price equal to the consideration paid by The Rise Fund for its investment and a maximum number of shares in AMC BV such that the consideration does not exceed $400 million.

Elsewhere, in the recently released earnings report by Airtel Africa for Q3 2020, the mobile money service segment delivered a strong operational performance where it generated $440 million annualised revenue and underlying annualised EBITDA of $216 million at a margin of 48.7 per cent. Also, revenue growth for the quarter was 41.1 per cent year on year in constant currency, largely driven by 29 per cent growth in the customer base to 21.5 million, and 9.7 per cent growth in its average revenue per user (ARPU).  Growth in transaction value was 53.0 per cent to an annualised $51 billion.

The company further disclosed that proceeds from the Transaction will be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries. Though, the group is already in discussions with other potential investors in relation to possible further minority investments into Airtel Money, up to a total of 25 per cent of the issued share capital of AMC BV.