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Picture: FREDDY MAVUNDA
Picture: FREDDY MAVUNDA

MTN has a hidden gem in its portfolio: its fintech platform. The service, which allows users to access payments, e-commerce, insurance, lending and remittance services using their mobile phones, has grown rapidly in the past few years, attracting customers, partners and investors. It’s time for MTN to spin it off and let it shine on its own.            

MTN is late to the party. More than a decade ago Kenya’s Safaricom, partly owned by Vodacom, launched M-Pesa, a mobile money service whose success convinced investors and executives across emerging markets that the industry’s next growth path was in financial services.

Yet MTN’s fintech bet is paying off, giving it all the characteristics of a business that is ripe for an initial public offering (IPO) to unlock its full potential and provide an immediate value uplift for investors.

For starters, it has a large and growing market opportunity. MTN boasts nearly 300-million subscribers, most of them in more than a dozen countries in Sub-Saharan Africa, a region where more than three-quarters of the population does not have a bank account.

Should MTN be able to convince just half of its customer base across its markets to use its service, it could sign up almost 150-million people. The platform has just more than 60-million users and processed 8.3-billion transactions worth $135.2bn (R2.5-trillion) in the six months to the end of June. MTN also facilitated $1.5bn in remittances and $1bn in loans through its fintech platform in the period.

It also has a strong and loyal customer base, a diversified and scalable revenue model, a profitable and efficient operation, and a clear and compelling vision.

MTN’s fintech business has a competitive advantage over its rivals, as it leverages its parent’s extensive operations across the continent. It brought in almost R4bn in core profit, or earnings before interest, tax, depreciation and amortisation (ebitda), on revenue of R10bn in the first half of 2023. 

This potential has attracted the financial backing of Mastercard, a global payment processing behemoth. In the same earnings report that showed the resilient performance of the group, MTN announced that Mastercard agreed to take an unspecified minority stake in the business, which values the division at $5.2bn (nearly R100bn). We do not know the size of the stake or how much Mastercard is paying for it, but that valuation propels MTN’s fintech business into the upper echelons of the SA financial services industry dominated by the likes of Standard Bank, FirstRand and Nedbank. 

Furthermore, in the age of ESG investing, MTN’s fintech business is unlikely to find a shortage of investors in the stock market. By providing convenient financial services to millions of unbanked and underbanked people on the continent, MTN is contributing to financial inclusion and economic development. An IPO would allow MTN’s fintech business to access public capital markets, which could provide more funding for its growth and innovation. Its listing would allow it to establish its own identity and reputation, which could enhance brand awareness and customer loyalty.

Going public would also benefit MTN as a whole. It would allow the group to unlock the value of its fintech business, the value of which is not fully reflected in the company, which is worth more than R250bn on the stock market. It would also free up capital and resources for MTN to focus on its core connectivity business and other strategic priorities.

MTN’s fintech platform is a shining example of how mobile technology can transform the lives of millions. It has a strong financial and operational performance, a large and growing market opportunity, a competitive advantage over its rivals, and a positive social and environmental effect. An IPO would unlock its full potential and benefit all its stakeholders. MTN should make the move soon and let the world see the value of its fintech business.

• Motsoeneng is deputy editor

motsoenengt@businesslive.co.za 

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