TPG fund to invest $200 mn in Airtel’s Africa mobile money biz

Global private equity firm TPG’s impact investment platform, The Rise Fund, will invest in Airtel Mobile Commerce BV, valuing the company at $2.65 billion.

The Rise Fund will invest $200 million through a secondary purchase of shares in Airtel Mobile from telecom operator Airtel Africa.

Airtel Mobile is currently a wholly owned arm of Airtel Africa, part of Indian billionaire Sunil Mittal’s Bharti Airtel group. It is the holding company for several of Airtel Africa’s mobile money operations. It intends to own the telecom company’s mobile money business across all of its 14 operating countries.

Airtel Africa said the transaction is the latest step in the group’s pursuit of asset monetization and investment opportunities and that it aims to explore a potential listing of the mobile money business within four years.

The transaction will close in two stages. The fund will invest $150 million at first close, once the transfer of sufficient mobile money operations and contracts into Airtel Mobile has been completed. It will put in $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. The TPG fund would get a minimum of $200 million, minus any dividends or proceeds from a share sale, and a maximum of $400 million if it exercises this option.

Yemi Lalude, partner at TPG who leads Africa investing for The Rise Fund, said the deal will expand its global fintech portfolio and deepen its focus on improving financial inclusion in Africa and around the world.

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 as well as Central and West Africa. It is also in discussions with other potential investors to dilute as much as 25% stake in Airtel Mobile.

The telecom operator will use the proceeds from the transaction to reduce group debt and invest in network and sales infrastructure in the respective operating countries.

Airtel Money

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 own mobile banking licence.

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 delivered a strong operational performance. It generated revenue of $110 million and earnings before interest, tax, depreciation and amortization of $54 million. This means annualized revenue of $440 million and annualized EBITDA of $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.

The profits before tax for the full year ended March 2020 and the value of gross assets as of that date, attributable to the mobile money businesses were $143.4 million and $463.2 million, respectively.