The Rise Fund, the global impact investing platform of alternative investment firm TPG, is to invest USD200 million in Airtel Mobile Commerce BV (AMC BV), a wholly owned subsidiary of Airtel Africa.
AMC BV is currently the holding company for several of Airtel Africa’s mobile money operations; and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries.
The Transaction values Airtel Africa’s mobile money business at USD2.65 billion on a cash and debt free basis. 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. 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.
The Transaction is the latest step in the Group’s pursuit of strategic asset monetisation and investment opportunities, and it is the aim of Airtel Africa to explore the potential listing of the mobile money business within four years. The Group is 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. 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.
Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a leading digital mobile financial services platform catering to a large addressable market in Africa (characterised by limited access to formal financial institutions with limited banking infrastructure) and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.
Mobile money services are available across the Group’s 14 countries of operation, however in Nigeria the Group offers Airtel Money services through a partnership with a local bank and has applied for its own mobile banking licence. It is the intention that all mobile money operations will be owned and operated by AMC BV.
In the most recent reported results for Q3, the mobile money service segment (corresponding to all the businesses that are intended to be transferred to AMC BV) delivered a strong operational performance:
• Generated revenue of USD110 million (USD440 million annualised), and underlying EBITDA of USD54 million (USD216 million annualised) at a margin of 48.7 per cent.
• Year on year revenue growth for the quarter was 41.1 per cent in constant currency, largely driven by 29 per cent growth in the customer base to 21.5 million, and 9.7 per cent ARPU growth.
• Growth in transaction value was 53.0 per cent to USD12.8 billion (USD51 billion annualised).
The Transaction is expected to reach first close over the next three to four months. From first close The Rise Fund will be entitled to appoint a director to the board of AMC BV and to certain customary information and minority protection rights.
Raghunath Mandava, CEO of Airtel Africa, says: “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.”
Yemi Lalude, Partner at TPG who leads Africa investing for The Rise Fund, adds: “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.”
