London-listed Airtel Africa Plc has ceded a 25.77 percent stake in its local mobile money business as part of a continent-wide deal that has seen it raise $550 million (Sh64.2 billion) from four institutional investors.
The multinational’s interest in Airtel Money Kenya Limited dropped to 74.23 percent in the year ended March from 100 percent a year earlier.
It also disclosed a similar reduction in ownership in Airtel Mobile Commerce (Kenya) Limited in the review period.
Similar changes in ownership of the mobile money businesses were also witnessed in markets such as Rwanda, Tanzania, and Zambia.
Airtel Africa has disclosed the share sale of the subsidiaries in its latest annual report as a prospect of a cashless Africa triggers a scramble for control of its payments platforms.
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The record-breaking deal values Airtel Money at Sh250 billion, indicates that the rival M-Pesa platform, available in Kenya and five other African markets such as Tanzania and Mozambique, could be valued even higher.
Airtel had earlier announced it was selling a minority stake in its mobile money business in Africa to raise cash, with the part of the funds used to reduce the group’s debt.
"We received a minority investment of $550 million (Sh64.2 billion) from four investors in Airtel Mobile Commerce B.V.," the multinational says in the report.
"The Rise Fund invested $200 million, Mastercard $100 million, Qatar Holding LLC (QIA) $200 million and $50 million from Chimera Investment LLC."
In the agreements, the mobile money businesses were to be folded into the holding company Airtel Mobile Commerce B.V. which is registered in the Netherlands.
The multinational’s interest in Airtel Money Kenya Limited could drop further after the government passed a policy requiring the telco to sell at least a 30 percent stake in the business to local investors.
"Airtel Money Kenya Limited, which holds a Content Service Provider Licence from the Communications Authority of Kenya, with effect from November 2020, has three years from the date of the licence to comply with the requirement to have 30 percent local shareholding," the multinational said.
"Under the amended ICT policy, a licensee may apply to the Ministry for ICT for an extension to comply with the requirement, or obtain an exemption."
A similar rule also applies to Airtel Networks Kenya Limited, which provides cellular services and is currently fully owned by the multinational. The minority stakes sold in Airtel Money across the African markets signal the huge value of mobile financial service platforms.
M-Pesa’s reach recently spread to more than 200 countries after a deal with global payments firm Visa. M-Pesa is offered by Kenya’s Safaricom and by subsidiaries of South Africa’s Vodacom Group.
Airtel Money generated $553 million (Sh64.6 billion) revenues in the African markets in the year ended March users of the platform stood at 26.2 million.
Over the same period, M-Pesa had 47.1 million customers and revenues of Sh145.6 billion in Kenya, the Democratic Republic of the Congo, Lesotho, Mozambique, and Tanzania.
Both Airtel, Safaricom, and South Africa’s Vodacom see mobile money as presenting growth and diversification opportunities and have invested billions of shillings to develop new offshoots of their platforms’ core offerings of cash transfers and payments.
Airtel Money has struggled in the Kenyan market where it had less than 800,000 active customers in December against M-Pesa’s 26.2 million.
The service is, however, more successful in other African markets.
"Total transaction value increased to $64.4 billion (Sh7.5 trillion), up by 37 percent in the year ended March in constant currency. Transaction value per customer per month was $223 (Sh26,079), an increase of 13.9 percent in constant currency," Airtel Africa said.
"This was driven by both customer base growth and increased adoption of Airtel Money services, mainly in person-to-person, cash-in and cash-out transactions. Annualised transaction value now stands at $64.3 billion (Sh7.5 trillion) in the fourth quarter of 2022 in constant currency."
The prospect for growth has created a flurry of activity. African banks are scrambling to launch basic mobile accounts while investors are scouring for deal making.
M-Pesa meanwhile processes more than 52 million transactions daily with a cumulative value of $324.6 billion (Sh37.9 trillion) in the year ended March. The platform serves 550,000 merchants through 510,000 agents in the DRC, Kenya, Lesotho, Mozambique and Tanzania.
"Alongside M-Pesa, which is expected to further establish itself as Africa’s largest fintech provider through the implementation of an enhanced product road map, VodaPay will be instrumental in our quest in connecting the next 100 million African customers so that no one is left behind," Vodacom said.
Airtel Africa says the low uptake of traditional banking services continues to be the main driver of demand for mobile money services.
The platform currently offers mobile wallet deposits and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit cards, and international money transfers.
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The multinational has sought to expand the subscriber base and use of its mobile money platform through partnerships with multiple financial service firms.
It has, for instance, signed agreements with cash remittance companies MoneyGram, Mukuru and WorldRemit.
The telecom operator also plans to introduce new banking and remittance services in partnership with London-based lender Standard Chartered Plc, which has subsidiaries operating in 16 African markets.