# The Rise Fund to invest $200 million in Airtel Africa’s mobile money business

- Link: https://www.directorstalkinterviews.com/the-rise-fund-to-invest-200-million-in-airtel-africas-mobile-money-business/412969286
- Published: 2021-03-18T07:17:44+00:00
- Author: Giles

**[Airtel Africa plc](https://www.directorstalkinterviews.com/ftse-company/airtel-africa/aaf.l)**(
LON:AAF), a leading provider of telecommunications and mobile money services, with
a presence in 14 countries across Africa, today announced the signing of an agreement
under which The Rise Fund, the global impact investing platform of leading alternative
investment firm TPG, will invest $200 million in Airtel Mobile Commerce 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 fourteen operating
countries.

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.

The Transaction is the latest step in the Group’s pursuit of strategic asset monetization
and investment opportunities, and it is the aim of Airtel Africa to explore the 
potential listing of the mobile money business within four years. The Group is in
discussions with other potential investors in relation to possible further minority
investments into Airtel Money, up to a total of 25% 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.

The proceeds from the Transaction will be used to reduce Group debt and invest in
network and sales infrastructure in the respective operating countries.

**Airtel Africa mobile money services**

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.

In our most recent reported results for Q3, the mobile money service segment (corresponding
to all the businesses that are intended to be transferred to AMC BV) delivered a
strong operational performance:

·      Generated revenue of $110 million ($440 million annualised), and underlying
EBITDA of
$54 million ($216 million annualised) at a margin of 48.7%.

·      Year on year revenue growth for the quarter was 41.1% in constant currency,
largely driven by 29% growth in the customer base to 21.5 million, and 9.7% ARPU
growth.

·      Growth in transaction value was 53.0% to $12.8 billion ($51 billion annualised).

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.

In this year alone we have 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.

The profits before tax in the full year ending 31 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.

**Key elements of the Transaction**

·      Agreement values Airtel Africa’s mobile money business at $2.65 billion on
a cash and debt free basis.

·      AMC BV, a wholly owned subsidiary of Airtel Africa, 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 fourteen
operating countries once the inclusion of the remaining mobile money operations 
under AMC BV is completed.

·      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.

> **Raghunath Mandava, CEO of Airtel Africa, commented:**
> “In line with our vision of enhancing financial inclusion, 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.”

> **Yemi Lalude, Partner at TPG who leads Africa investing for The Rise Fund, added:**
> “Financial inclusion is a global issue that is most acute in Africa. 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.”

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