Mastercard Inc., a global leader in payment solutions, is set to acquire a minority stake in MTN Group's fintech unit, MTN Mobile Money (MoMo), which has been valued at an impressive $5.2 billion. This significant investment highlights the growing importance of mobile financial services in Africa and the Middle East, where MoMo currently serves over 46 million customers across 21 markets.

MTN Chief Executive Officer, Ralph Mupita, confirmed that definitive investment agreements are expected to be signed very soon. The fintech unit, operating under the MoMo brand, offers a comprehensive suite of mobile financial and digital solutions. These include essential services such as sending and receiving money, bill payments, airtime purchases, and access to insurance, loans, and savings products. Additionally, MoMo facilitates online shopping via mobile phones and partners with banks, merchants, and other service providers to expand its digital service platforms.

The news of Mastercard's investment was met positively by the market, with MTN shares rising as much as 9.5% in Johannesburg, according to Bloomberg. Peter Takaendesa, head of equities at Mergence Investment Managers, commented on the robust valuation, noting its strength given the current difficulties many technology start-ups face in securing funding, especially since Mastercard will not be taking a controlling stake.

This strategic partnership is designed to significantly enhance MTN’s fintech capabilities and expand its market reach. Mastercard will contribute its extensive global network, advanced technology, and expertise to bolster MTN's digital transformation and innovation initiatives. This collaboration is expected to help MTN extend its fintech offerings into new segments and markets, including e-commerce, remittances, and cross-border payments.

A key benefit of this partnership will be for MTN’s customers, who will gain access to a range of Mastercard’s products and services. These include virtual cards, QR codes, contactless payment options, and digital wallets, thereby enabling their participation in the global digital economy and unlocking new opportunities.

Analysts have weighed in on the deal, with John Davies, BI senior telecoms analyst, highlighting that Mastercard’s planned minority investment at an enterprise value (EV) of $5.2 billion equates to 16x trailing EBITDA. This valuation is notably higher than Airtel Africa’s equivalent of 10x. Davies further suggested that beyond boosting MTN’s see-through valuation, the incoming cash could strengthen the company’s balance sheet. It could temporarily substitute for dividends from subsidiaries and partially offset the increased 2023 capital-spending guidance, both of which have been affected by foreign exchange fluctuations.

MTN’s rivals, such as Airtel Africa Plc, Safaricom Plc (Nairobi-based), and Vodacom Group Ltd. (South Africa), are also actively transitioning from basic voice and text mobile services to broader digitalization. Their long-term goal is to separate and monetize these digital businesses. MTN itself has previously announced plans to raise 25 billion rand ($1.3 billion) through asset sales. Recent disposals include the sale and leaseback of its South African mobile-phone towers and intentions to sell some West African assets. The company also holds a stake in the New York-listed tower owner IHS Holding Ltd., though a sale of this asset has been delayed due to low trading prices and a dispute with management.