MTN Set To Spin Off Fibre, FinTech Businesses, Invite Third Party Investors

MTN is planning to demerge its Fibre and FinTech business and to bring third party investors to unlock value trapped in the company.

Ralph Mupita, MTN CEO, said Wednesday MTN plans to separate the two businesses are already underway structurally.

“Further to our previous announcement regarding our intention to focus on our pan-Africa strategy, we completed a comprehensive strategy review in Q4 2020 and are excited to introduce ‘Ambition 2025’,” he said.

At its core, Ambition 2025 sets the context of how we will drive the business forward to take advantage of the digital acceleration trends, capture growth opportunities and reveal the inherent value in our business, said Mupita.

“This will be underpinned by a clear focus on driving network and operational efficiencies, including digitalising the core, with a target of realising efficiencies of at least R5 billion over the next three years off the 2020 base,” he explained.

“Importantly, under the revised strategy we will look to structurally separate some of our businesses such as Fintech and Fibre over the medium-term, as part of revealing and crystallizing value.”

“MTN is open to third-party capital and partnerships in those fintech and fibre businesses over the medium-term, with the potential of either, in due course, that some of these assets could be listed or remain unlisted,” Mupita explained.

FinTech Business

MTN Group’s FinTech business grew revenue by 23,9% to R13,5 billion in the year to end-December 2020.

The FinTech business in SA continued to scale, with 2,5 million registered users and 207 000 active users at year-end. FinTech includes Mobile Money (MoMo), insurance, airtime lending and e-commerce.

“This follows the launch of Mobile Money in South Africa in January 2020,” the company said.

“The platform continues to grow transactions driven by innovative and relevant solutions.
MTN SA’s main focus is around distribution, as well as extending cash-in and cash-out points through both formal and informal channels.”

The number of active Mobile Money (MoMo) users rose by 11,7 million to 46,4 million, generating a monthly ARPU of $1,2. The value of MoMo transactions was $152 billion (R2.3 trillion) and MTN processed 12 400 transactions per minute (up 35%
from 9 200 in 2019).

While COVID-19 accelerated the adoption of mobile financial services, growth in FinTech revenue was moderated by reductions in transaction fees to support customers, lockdown restrictions on agents and a slowdown in economic activity, the company said.

At the end of December 2020, MTN’s aYo insurance joint venture had 11 million registered policyholders and 6 million active policies.

In total, aYo generated $6,4 million (R106 million) in service revenue and $10,5 million (R172 million) premium income.

“We have concluded an agreement to increase our shareholding in aYo to 75% and will consolidate it in future once regulatory approvals are obtained.”

Fibre Business

MTN has 85 000 km of fibre network across the African continent and intends to seek partners to expand its footprint.

The company will need about $500 million investment over the medium term to invest in the expansion of its fibre business into an open-access network.

“We are looking to structurally separate this business,” said Mupita.