Airtel Africa is set to sell equity worth US$ 200 Million in its mobile cash business to Global private equity firm TPG, through its The Rise Fund. The deal will allow the equity firm to own part of the Airtel Mobile Money business, owned by Airtel Africa.
The telecom operator will use proceeds from this transaction to reduce Group debt and invest in network and sales infrastructure in 14 countries where it has a presence.
Airtel Mobile is currently a wholly-owned arm of Airtel Africa, part of Indian billionaire Sunil Mittal’s Bharti Airtel group.
Airtel Africa’s ambitious plan
Airtel Africa said this transaction is the latest in the group’s pursuit of asset monetization and investment opportunities. Airtel Africa plans to list its mobile money business within four years.
The transaction will close in two stages.
The Rise Fund will initially invest US$150 Million once the transfer of sufficient mobile money operations and contracts into Airtel Mobile is complete.
It will put in US$50 Million at second close upon further transfers. The transaction is likely to hit the first close over the next three to four months.
Under the terms of the transaction, if the company fails to float an initial public offering within four years, TPG would have an option to sell its shares in Airtel Mobile to Airtel Africa or its affiliates.
Transaction details
The TPG will get a minimum of US$200 million, minus any dividends or proceeds from a share sale, and a maximum of US$400 million if it exercises this option.
Yemi Laude, a partner at TPG who leads Africa investing for The Rise Fund, said the deal would expand its global fintech portfolio and deepen its focus on improving financial inclusion in Africa and worldwide.
San Francisco-based, The Rise Fund has more than $5 billion in assets under management. It focuses on opportunities in education, energy, food and agriculture, financial technology, healthcare and technology sectors.
Airtel Africa provides telecommunications and mobile money services primarily in East Africa, Central and West Africa.
Airtel Africa is also in talks with other potential investors to dilute a 25% stake in Airtel Mobile. Airtel Africa offers mobile money services under the Airtel Money brand.
It offers mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.
Airtel Money is 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 mobile banking license.
The company has tied up with Mastercard, Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expand its offerings.
For the quarter ended December 31, 2020, the mobile money service segment generated revenue of US$110 Million. EBITDA was US$ 54 Million. This means annualized revenue of US$440 million and annualized EBITDA of US$216 million.
Quarterly revenue climbed 41.1% from a year earlier in constant currency terms, driven by a 29% increase in the customer base to 21.5 Million and a 9.7% rise in average revenue per user.
Quarterly transaction value jumped 53% to $12.8 billion.
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