Directors of telecommunications and mobile money services giant- Airtel Africa, on Thursday announced the signing of an agreement for a US$200m investment by The Rise Fund in its mobile money business currently valued at US$2.65bn on a cash and debt-free basis.
In a statement to the Nigerian Stock Exchange (NSE) through its company secretary, Simon O’Hara, Group Company Secretary, Airtel said The Rise Fund, a global impact investing platform of leading alternative investment firm TPG, will invest the amount in Airtel Mobile Commerce BV (AMC BV), a wholly owned subsidiary of Airtel Africa Plc.
AMC BV, the statement added, is currently the holding company for several of Airtel Africa’s mobile money operations now intended to own and operate the mobile money businesses across all of 14 countries of operation across Africa.
The Rise Fund will hold a minority stake in AMC BV upon completion of the transaction, while Airtel Africa continues to hold the remaining majority stake, even as the transaction is yet subject to customary closing conditions which include necessary regulatory filings and approvals, and the inclusion of specified mobile money business assets and contracts into AMC BV.
The transaction, the statement continued, is the latest step in the group’s pursuit of strategic asset monetization and investment opportunities, expressing a desire by “Airtel Africa to explore the potential listing of the mobile money business within four years.”
According to a breakdown, the transaction will close in two stages, beginning with US$150m investment in the first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, while the balance US$50m will follow upon further transfers.
The first close is expected over the next three to four months, and will entitle The Rise Fund to appoint a director to the board of AMC BV and to certain customary information and minority protection rights
Regarding the potential listing of the mobile money business, in the event that there is no Initial Public Offering of shares in AMC BV within four years of first close, or in the event of changes of control without TPG’s prior approval, TPG would have the option, so as to provide liquidity to them, to sell its shares in AMC BV to Airtel Africa or its affiliates at fair market value. This will be determined by a mutually agreed merchant bank, using an agreed internationally accepted valuation methodology, subject to a minimum price equal to the consideration paid by The Rise Fund for its investment (less the value of all distributions and any proceeds of sale of its shares, and with no time value of money or minimum return built in) and a maximum number of shares in AMC BV such that the consideration does not exceed $400m.
Ahead of this, the group said discussions are ongoing “with other potential investors in relation to possible further minority investments into Airtel Money, up to a total of 25% of the issued share capital of AMC BV.
The statement however warned that “there can be no certainty that a transaction will be concluded or as to the final terms of any transactions.
“The proceeds from the transaction will be used to reduce group debt and invest in network and sales infrastructure in the respective operating countries, O’Hara added.
At the close of the group’s nine-month operations on December 31, 2020, the mobile money service segment now being transferred to AMC BV, the statement continued, generated a total of US$110m in revenue (US$440m annualised), and an underlying EBITDA of US$54 million (US$216m annualised) at a margin of 48.7%.
Year on year revenue growth for the quarter was 41.1% in constant currency, largely driven by a 29% growth in customer base to 21.5m, while growth in transaction value was 53.0% to $12.8bn ($51bn annualised).
“We have a clear strategy to continue to drive sustainable long-term growth in Airtel Money with a focus on assured float availability, distribution expansion and increased usage cases for our customers.
“In this year alone we have added partnerships with Mastercard, 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 group stressed further.
Commenting on the deal, Raghunath Mandava, Chief Executive of Airtel Africa, said the offer of a unique digital mobile nfinancial services platform under the Airtel Money brand, is in line with the group’s vision of enhancing financial inclusion.
According to him, “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.”
Welcoming The Rise Fund as an investor in its mobile money business and partner to help realise the full potential from the substantial opportunity to bank the unbanked across Africa, he stressed: “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.
Yemi Lalude, Partner at TPG who leads Africa investing for The Rise Fund, agreed that “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 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.”
