People & Money

MTN Mulls Spinoff of Fintech Unit in New Growth Strategy

Pan-African telecommunications giant MTN Group has embarked on a plan to streamline its operations, which will involve the separation of its fintech and fibre infrastructure assets business, CEO Ralph Mupita said Wednesday. 

The plan is part of a broader strategy termed “Ambition 2025” meant to enhance growth. The company had previously revealed plans to exit markets outside the African continent.

Fibre and fintech are some of the units that will be structurally separated to attract third-party capital and partnerships over the medium term, Mupita said. “We already have 85,000km of fibre and we believe that there is significant investment required and we will look to attract third-party capital.”

Meanwhile, the Mobile Money service (MTN MoMo) has over 46.4 million subscribers and as such is a “scale business” according to the chief executive. The company expects that number to reach 100 million over the next five years, making it an attractive investment to players in the tech sector. 

Last year, the number of active MoMo users increased by 11.7 million, generating a monthly average revenue per user (ARPU) of $1.2. The value of transactions was $152 billion and MTN processed 12,400 transactions per minute, up 35% from 9,200 in 2019.

Also Read: MTN Nigeria Seeks SEC Approval To Tap Debt Market

“This is a scale business that can sit in its own structure, separated from the GSM business. Where it makes sense, we are seeking to structurally separate and create these businesses as separate vehicles for investors to participate in,” Mupita said.

In support of the 2025 ambition, MTN plans to invest up to around $1.9 billion in its network, fintech, and digital services platforms this year with a specific focus on pan-African markets. The Group last year said it was exiting the Middle East, where operational challenges have hindered growth. 

The plan to improve its digital services comes as digital acceleration takes place globally with more people coming online in the wake of the coronavirus pandemic. 

The South Africa-based Group has also been selling off some of its assets to reduce debt. The programme has seen it offload its 49% equity holdings in Ghana Tower and Uganda Tower Interco as well as the reduction of its stake in e-commerce company Jumia Technologies in exchange for $150 million.

Also Read: Mastercard, MTN in Partnership to Expand Digital Payments Across Africa

With these, it successfully lowered net debt from $3.6 billion in 2019 to $2.8 billion in the 2020 financial year – the lowest in five years according to Mupita, who became CEO last September after Rob Shuter’s departure. 

The Nigerian subsidiary continues to be a significant contributor to the Group. Full-year 2020 financial statements released Wednesday show that MTN Nigeria added 14.6% to the group’s service revenue, which rose 11.9% from R141.8 billion in 2019 to R170.1 billion. 

But getting cash out of Nigeria has been difficult due to the issue of scarce foreign currency in Africa’s biggest economy. MTN has managed to repatriate $18.6 million, Mupita said, with about $274 million yet to be repatriated as of December 31, 2020.

MTN Group is yet to declare a final dividend for 2020 due to the uncertainty surrounding repatriation of its cash from Nigeria and the turbulent market conditions caused by the Covid-19 pandemic. The Group however recorded improved topline performance in the year ended December, driven by a surge in active data and MoMo subscriptions.

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