Two Major Telecoms Operators Attract Fresh N822.66bn
Two major telecoms operators, MTN Nigeria and Airtel Africa Plc, have attracted a total of $2billion (approximately N822.66billion) funds into their operations.
This is even as foreign direct investments (FDIs) into the industry dipped sharply by 78 per cent in the first six months of this year, according to the first quarter (Q1) and Q2 of this year’s Capital Importation data released by the National Bureau of Statistics (NBS).
The data showed that the sector attracted a total of $56.62 million during the period under review, while in the same period of last year, FDI’s in the sector stood at $263.13 million.
MTN Nigeria said it plans to invest N617 billion (approximately $1.5 billion) over the next three years on the expansion of its broadband access across the country.
The Federal Government had launched the National Broadband Plan (NBP) 2020-2025 designed to deliver data download speeds across Nigeria of a minimum 25megabyte per second (Mbps) in urban areas, and 10Mbps in rural areas, with effective coverage available to at least 90 per cent of the population by 2025 at a price not more than N390 per 1GB of data (that is two per cent of median income or one per cent of minimum wage). In order to achieve these ambitious targets, the NBP is focused on recommendations in four critical pillars infrastructure; policy; demand drivers; and funding and incentives.
MTN said the funding is in support of NBP and MTN Group’s strategy known as “Ambition 2025: Leading Digital Solutions for Africa’s Progress”
MTN Group President/Chief Executive Officer Ralph Mupita, who described Nigeria as one of the company’s most important markets also said plan to sell 14 per cent stake to local investors was at an advanced stage.
“Nigeria is one of our most important markets. We have a proud history of partnering with Nigeria and Nigerians to drive faster and more inclusive growth through digital transformation,” Mupita said after a three-day visit to Abuja and Lagos.
Listed in the Nigeria stock Exchange (NSE), MTN Nigeria is the largest operator. Its mobile subscribers however declined steeply by 7.6 million to 68.9 million in the first half of this year due to the restrictions imposed by Communications and Digital Economy Minister, Dr Ibrahim Pantami on new subscriber identity module (SIM) sales and activations in the country.
MTN Nigeria, in which MTN Group has a 78.8 per cent stake, sought to have the largest retail shareholder base on the NSE. It has a market capitalisation of N3.4 trillion ($8.2 billion).
Airtel Africa has also secured $200million funding from The Rise Fund, $200million form Qatar Holding LLC, an affiliate of Qatar Investment Authority (QIA) and $100million funding from Mastercard respectively to boost its mobile money operations across its 14 countries of operations.
The Rise Fund will invest $200 million in Airtel Mobile Commerce BV (AMC BV), a wholly owned subsidiary of Airtel Africa Plc.
AMC BV is currently the holding company for several of Airtel Africa’s mobile money operations; and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s 14 operating countries.
Airtel Africa Plc is listed on the NSE and Nigeria is the major market for the leading provider of telecoms and mobile money services.
The Rise Fund is the global impact investing platform of leading alternative investment firm, TPG.
The transaction values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis. The Rise Fund will hold a minority stake in AMC BV upon completion of the transaction, with Airtel Africa continuing to hold the remaining majority stake.
The transaction is subject to customary closing conditions including necessary regulatory filings and approvals, as necessary, and the inclusion of specified mobile money business assets and contracts into AMC BV.
A newly incorporated investment vehicle of The Rise Fund will invest $200 million through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction will close in two stages-$150 million will be invested at first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, with $50 million to be invested at second close upon further transfers.
Airtel Africa aims to explore the potential listing of the mobile money business within four years. Under the terms of the transaction, and in very limited circumstances, in the event that there is no Initial Public Offering of shares in AMC BV within four years of first close, or in the event of changes of control without TPG’s prior approval, TPG would have the option, so as to provide liquidity to them, to sell its shares in AMC BV to Airtel Africa or its affiliates at fair market value , determined by a mutually agreed merchant bank using an agreed internationally accepted valuation methodology.
The option is subject to a minimum price equal to the consideration paid by The Rise Fund for its investment, less the value of all distributions and any proceeds of sale of its shares, and with no time value of money or minimum return built in and a maximum number of shares in AMC BV such that the consideration does not exceed $400 million.
The transaction is expected to reach first close over the next three to four months. From first close The Rise Fund will be entitled to appoint a director to the board of AMC BV and to certain customary information and minority protection rights.
Chief Executive Officer, Airtel Africa Plc, Raghunath Mandava said Airtel Africa offers a unique digital mobile financial services platform under the Airtel Money brand.
“In most of our markets there is limited access to traditional financial institutions, and little banking infrastructure, with less than half of the population having a bank account across sub-Saharan Africa. Our markets therefore 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.
“With today’s announcement we are pleased to welcome The Rise Fund as an investor in our mobile money business and as a partner to help us realise the full potential from the substantial opportunity to bank the unbanked across Africa,” Mandava said.
Partner, TPG, Yemi Lalude, who leads Africa investing for The Rise Fund said financial inclusion is a global issue that is most acute in Africa noting that through Airtel Money, Airtel Africa has built a unique platform that is closing the gap between traditional financial institutions and the millions of unbanked Africans across the 14 countries where Airtel Africa operates.
“We look forward to working with Airtel Africa to enhance their mobile money services, broaden its use cases, and grow into new markets. 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,” Lalude said.
Airtel Africa is in discussions with other potential investors in relation to possible further minority investments into Airtel Money, up to a total of 25 per cent of the issued share capital of AMC BV. There can be no certainty that a transaction will be concluded or as to the final terms of any transactions.
In a statement, Airtel Africa indicated that the net proceeds from the transaction will be used to reduce group debt and invest in network and sales infrastructure in the respective operating countries.
The $200million investment from Qatar Holding LLC came three months after Mastercard also invested $100million in the company’s mobile money business.
The carrier said proceeds of the investment will be used to reduce its debt and invest in network and sales infrastructure across its operating countries.
Qatar Holding LLC is an affiliate of the QIA, the sovereign wealth fund of the State of Qatar with over $300billion in assets. The Middle Eastern corporation is set to invest $200million into Airtel by buying secondary purchases of shares from Airtel Africa.
The Chief Executive Officer, QIA, Mansoor Al-Mahmoud, said: “The sovereign’s wealth fund investment in Airtel Africa would help promote financial inclusion in sub-Saharan Africa.
“Airtel Money plays a critical role in facilitating economic activity, including for customers without access to traditional financial services. We firmly believe in its mission to expand these efforts over the coming years.”
The CEO, Airtel Africa, Raghunath Mandava, said the company was pleased to welcome QIA as a prospective investor in its mobile money business, joining both Mastercard and TPG’s The Rise Fund as a further partner “to help realise the full potential from the substantial opportunity to bank the unbanked across Africa”.
Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a leading digital mobile financial services platform catering to a large addressable market in Africa, characterised by limited access to formal financial institutions with limited banking infrastructure and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.
Mobile money services are 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 own mobile banking licence. It is the intention that all mobile money operations will be owned and operated by AMC BV.
According to Airtel Africa, in the third quarter results, the mobile money service segment delivered a strong operational performance generating total revenue of $110 million and underlying earnings before interest, tax, depreciation and amortization (EBITDA) of $54 million at a margin of 48.7 per cent.
“Our mobile money business benefits from strong network presence with our core telecom business through the extensive distribution platform of kiosks and mini shops as well as dedicated Airtel Money branches supplementing our extensive agent network, to facilitate customers’ assured wallet and cash.
“We have a clear strategy to continue to drive sustainable long-term growth in Airtel Money with a focus on assured float availability, distribution expansion and increased usage cases for our customers,” Airtel Africa stated.
In this year alone, Airtel Africa has added partnerships with Mastercard, Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expand both the range and depth of the Airtel Money offerings and to further drive customer growth and penetration.
A breakdown of the FDIs attracted by the telecoms sector in the two quarters showed that $56.28 million was recorded in Q1, while the Q2’s figure stood at a paltry $0.34 million. Checks on the capital importation data for the sector since 2013 showed that the Q2’21 figure was the least quarterly investment the sector had recorded in the last eight years. For the Q2’21, the investments in telecoms represented 0.04 per cent of the total capital importation into the country for the period.
NBS data showed that the total value of capital importation into the economy in the second quarter stood at $875.62 million.
This represents a decrease of 54.06 per cent compared to Q1’21 and a 32.38 per cent decrease compared to the second quarter of 2020. While the general downtrend in FDI in the country’s economy is attributable to the COVID-19 pandemic, the telecoms sector had been recording a decline in investments over the years. The decline in the sector, stakeholders said, is not unconnected with several challenges bedevilling the telecoms. For the first time in five years, the sector had recorded an increase in FDIs in 2019, as it attracted $944 million against $114.43 million recorded in 2018.
Until 2019, the sector had witnessed a consistent decline in investments for four years. For instance, the $544.6 million attracted by the sector in 2017 was 42 per cent less than $931.2 million recorded in 2016. The sector also witnessed a marginal decline in 2016 as the figure went down by 0.7 per cent from $938.1 million recorded in the preceding year. In 2015, capital importation into the sector had decreased by 5.7 per cent from $994.3 million it got in 2014. This was despite the government’s sustained efforts at wooing foreign investors into telecoms, with broadband infrastructure at the heart of various international campaigns.