Mastercard Inc. is making waves in African fintech by acquiring a minority stake in MTN Group Ltd.'s financial-technology subsidiary, valued at a whopping $5.2 billion.
This move has sparked a remarkable 10% increase in MTN shares, underscoring the significance of the collaboration.
MTN Group, the continent's telecom giant, unveiled this game-changing partnership in two strategic phases.
The first phase involves a collaborative pact on payments and remittance. This leverages Mastercard's advanced technology to drive expansion across Africa's diverse landscape.
The second phase sees Mastercard injecting capital as a minority stakeholder within the fintech venture. The exact size of the stake remains a tantalizing secret until the deal is finalized.
This strategic move comes as Africa's tech-savvy population increasingly embraces mobile tech to bridge service gaps, especially in finance. This has turned the fintech arena into a flourishing playground for wireless carriers.
The announcement propelled MTN shares to soar by a remarkable 9.4%, reaching 141.42 rand. This surge reflects the company's historical performance and highlights the challenges startups face in securing funding.
It's important to note that Mastercard's acquisition won't grant them control, a point emphasised by Peter Takaendesa, head of equities at Mergence Investment Managers.
John Davies, Bloomberg Intelligence Analyst, notes that Mastercard's investment of $5.2 billion translates to an impressive 16x trailing EBITDA, overshadowing Airtel Africa's equivalent 10x.
Beyond enhancing MTN's valuation, this infusion could bolster the company's fiscal stability by offsetting reduced dividends and mitigating increased capital spending in 2023.
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