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Mastercard (MA) to Invest $100 Million in Airtel Africa

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Zacks Equity Research
·4 min read
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Mastercard Inc. MA will be acquiring a minority stake in Airtel Mobile Commerce BV (AMC BV), the subsidiary of Airtel Africa.

With this, Mastercard will be investing $100 million for a 3.75% stake in AMC BV through the secondary purchase of shares in the same from Airtel Africa. This fund infusion will be done in two tranches with the first being a $75-million investment, which will be upon the transfer of specified mobile money business assets and contracts to AMC BV. The remaining $25 million will be invested on further transfers.

According to Airtel, alongside the aforementioned investment, the Airtel Africa and Mastercard extended their commercial agreements and signed a new commercial framework, which will deepen their partnerships across geographies. Business involvement will further grow in the areas including card issuance, payment gateway, payment processing, merchant acceptance and remittance solutions.

This tie-up will complement Mastercard’s business since AMC BV operates under the brand Airtel Money, overseeing one of the largest financial services in the continent. Airtel Money caters to Africa and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers. With this investment, Mastercard will be able to participate and provide these services in South Africa.

Mastercard already has business relations with Airtel. Back in 2019, both struck a deal, giving Airtel Africa’s 100 million subscribers in 14 nations an access to Mastercard’s global network.

This deal will help Mastercard reap opportunities from the growing market in Africa. Mobile internet connections are expected to grow rapidly in Africa owing to low-cost smartphones and high-speed GSM networks, which are being rolled out by Mobile Network Operators like Airtel. This growth in internet connections is spurring demand for digital content, social media, m-commerce, even online education and a need to make online payments easily and securely by both banked and unbanked consumers.

MasterCard network extends the company’s presence to 48 of the 55 markets that cover the continent. Economic development, population growth and an improving political situation create the need for innovative and secure payment solutions. Given the utmost strategic importance that this continent holds for MasterCard, the company is committed to invest in infrastructure, people and the know-how in this part of the world. This has been the fastest growing area for MasterCard over the past few years and is expected to continue making a laudable progress.

MasterCard is collaborating with governments, central banks, financial institutions, mobile network operators, large retailers and other stakeholders across Africa to understand the economic outlooks of its countries, their unique demographics, infrastructure challenges and hidden opportunities.

Year to date, the stock has inched up 1.8% compared with the industry’s growth of 0.7%.

Other stocks in the same space, namely American Express Co. AXP and Discover Financial Services DFS have also rallied 19.6% and 7.4%, respectively, but Visa Inc. V has lost 0.8% over the same time period.

Mastercard currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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