Airtel Africa Secures $200 Million Investment for Mobile Money Arm

London-based telecommunications provider Airtel Africa announced in February its intention to divest a minority ownership stake in its mobile money division to generate capital and streamline its asset portfolio.

An investor has now been identified, with The Rise Fund – the impact investing arm of TPG – committing $200 million to Airtel Mobile Commerce BV (AMC BV), the company’s mobile money subsidiary.

Valuation and Scope of AMC BV

This investment establishes a valuation of $2.65 billion for the mobile money business. AMC BV functions as a holding company for Airtel Africa’s mobile money operations spanning 14 African nations, including key markets like Kenya, Uganda, and Nigeria.

The received funds will be allocated towards debt reduction and enhancements to network and sales infrastructure within the operating countries. The investment will be disbursed in two phases: an initial $150 million, followed by a subsequent $50 million.

Future Plans and Airtel Africa’s Stake

Upon completion of the transaction, Airtel Africa will retain a majority ownership position in the business. Furthermore, the company is evaluating the possibility of an initial public offering (IPO) for the mobile money division within the next four years.

Raghunath Mandava, CEO of Airtel Africa, emphasized the significant market potential for mobile money services across Africa, stating, “Our markets 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.” He further expressed enthusiasm about partnering with The Rise Fund to fully capitalize on the opportunity to provide financial services to the unbanked population.

Services Offered by Airtel Mobile Money

Airtel’s mobile money platform is a key driver of financial inclusion throughout the continent, providing a diverse array of services.

• Mobile wallet deposits and withdrawals
• Merchant and commercial payments
• Benefit transfers
• Loans and savings options
• Virtual credit cards
• International money transfers

While these services are generally available across its operational areas, the implementation in Nigeria differs slightly. Airtel initially collaborated with a local bank in Nigeria but has since applied for its own mobile banking license.

Recent Financial Performance

Airtel Africa reported a 41.1% year-over-year revenue increase in Q3 2020, reaching $110 million. This growth was primarily fueled by a 29% expansion of its customer base to 21.5 million and a 9.7% increase in Average Revenue Per User (ARPU).

Transaction values surged by 53% to $12.8 billion (annualized to $52 billion), with underlying EBITDA reaching $54 million (annualized to $216 million) and a margin of 48.7%.

Strategic Partnerships and Infrastructure

AMC BV leverages a robust offline network comprising kiosks, mini-shops, and agents, complementing its core telecommunications business. To further accelerate growth, the company has forged partnerships with Mastercard, Samsung, Standard Chartered Bank, and WorldRemit, among others, to broaden the scope and depth of its mobile money offerings.

Yemi Lalude, a partner at TPG leading Africa investments for The Rise Fund, highlighted the critical role Airtel Africa plays in bridging the gap between traditional financial institutions and the vast unbanked population in Africa, addressing a significant global financial inclusion challenge.

“We look forward to working with Airtel Africa to enhance their mobile money services, broaden its use cases and grow into new markets,” Lalude stated. “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.”

Notably, TPG, with over $91 billion in assets under management, previously invested $600 million in Reliance Jio last year. Reliance Jio is a competitor to Airtel Africa’s parent company, Bharti Airtel. While both investments are managed by separate funds within TPG, they target distinct markets.