In February, London-listed telecom Airtel Africa said it was looking to sell a minority stake in its mobile money business in a bid to raise cash and sell off some assets.
The investment will see the mobile money business -- Airtel Mobile Commerce BV (AMC BV) -- valued at $2.65 billion. AMC BV is an Airtel Africa subsidiary and the holding company for several of Airtel Africa's mobile money operations across 14 African countries, including Kenya, Uganda and Nigeria.
AMC BV says the holding company will use the investment to reduce its debt and invest in network and sales infrastructure in the respective operating countries. The deal will close in two tranches -- $150 million invested at first close, with $50 million to be invested at second close.
Following the deal's completion, Airtel Africa will still hold a majority stake in the business and is also exploring the opportunity to take the business public within the next four years.
“Our markets afford the 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," Airtel Africa CEO Raghunath Mandava said. "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.”
Airtel mobile money business, one of the many players driving financial inclusion across the continent, offers a range of services. They include mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit cards and international money transfers.
Typically, these services are present across countries of operation but slightly differs in the way it operates in Nigeria. In the West African country, Airtel has gone through the route of partnering with a local bank but has now applied for its own mobile banking license.
In its most recent reported results for Q3 2020, Airtel Africa witnessed a year on year revenue growth of 41.1% to $110 million, largely driven by 29% growth in the customer base to 21.5 million and 9.7% ARPU growth. Transaction value went up 53% to $12.8 billion ($52 billion annualised), and underlying EBITDA stood at $54 million ($216 million annualised) at a margin of 48.7%.
AMC BV benefits from a strong offline presence of kiosks, mini shops and agents, which tie with its core telecom business. And in a bid to drive growth this year, the business has struck partnerships with Mastercard, Samsung, Standard Chartered Bank and WorldRemit, among others, to expand both the range and depth of its mobile money offerings.
Yemi Lalude, a partner at TPG who leads Africa investing for The Rise Fund, said that with financial inclusion being a global issue that is most acute in Africa, the telecom is closing the gap between traditional financial institutions and the millions of unbanked Africans.
"We look forward to working with Airtel Africa to enhance their 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,” he said.
Last year, TPG, which has more than $91 billion in assets under management, invested $600 million in Reliance Jio. The telecoms operator is a competitor to Airtel Africa's parent company, Bharti Airtel. That's one interesting detail, although both investments target different markets and are from separate funds within TPG.