Venture Capital: TPG’s Impact Investing Arm Pays $200M For Stake In Airtel Africa’s Mobile Money Biz

March 19, 2021 | FinTech, News, Venture Capital

The Rise Fund, an arm of alternative investment firm TPG, is the world’s largest global impact platform with over $5 billion of assets.

Airtel Africa plc (LON: AAF) announced Thursday that The Rise Fund would invest $200 million for a minority stake in Airtel Mobile Commerce BV, a wholly-owned subsidiary that is the holding company for several of Airtel Africa’s mobile money operations. It also announced that other Airtel Africa mobile money businesses would soon be merged into this company. Ultimately, Airtel Mobile Commerce BV would be the umbrella owner of the mobile money units in all 14 African countries where they operate. (Mint)

Airtel Africa – The Rise Fund: Key transaction details

  • Valuation of Airtel Africa’s mobile money business – $2.65 billion on a cash and debt-free basis
  • Airtel Africa to explore the potential listing of the mobile money business within four years
  • In the event there is no IPO, TPG would have the option to sell its shares in AMC BV to Airtel Africa or its affiliates at a fair market value; however, the option is subject to a minimum price equal to the consideration paid by The Rise Fund for its investment and a maximum consideration of $400 million.
  • 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.
  • 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.
  • Use of funds – to reduce debt and invest in network and sales infrastructure in the respective operating countries
  • Operational highlights of Airtel Africa’s mobile money biz:
    • [Q3] – Generated revenue of $110 million ($440 million annualized), and underlying EBITDA of $54 million ($216 million annualized) 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 annualized).
    • [Full year ending 31 March 2020] – The profits before tax 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.

Scope of mobile money in Africa

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.”

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