Africa’s largest mobile operator MTN has received final approval from Nigerian regulators for its mobile money platform, which will allow it to scale up its fintech services in the continent’s biggest market.
This entry into mobile payments in Nigeria pits MTN against the third-largest mobile operator in the world, Airtel. The Indian telecommunications company is in 14 African countries, including Nigeria.
MTN already makes 25% of its revenue in Uganda from its mobile money offering MoMo, and 23% in Ghana.
The Central Bank of Nigeria (CBN) had given approval in principle for MoMo Payment Service Bank in November, with MTN saying on Monday it received a letter approving the commencement of operations on April 8. The commencement date is to be communicated to authorities.
Nigeria is the continent’s biggest market, and MTN’s most profitable, generating more than a third of its core profit in 2021.
The final licence will enable it to offer payment services and receive deposits — an opportunity it has been waiting years for — as it looks to provide services for many Africans who lack traditional bank accounts.
SA’s two leading telecoms operators, Vodacom and MTN, continue to diversify into digital payments, insurance and shopping apps in a bid to tap the unbanked potential on the African continent. The diversification comes as the popularity of voice calls declines and as data prices — and therefore profits — drop.
“We are grateful to the CBN for granting the final approval to commence the operations of MoMo Payment Service Bank, which is an important milestone for our Ambition 2025 strategy,” MTN group president and CEO Ralph Mupita said in a statement.
“We are excited about the opportunity for MTN Nigeria to support the CBN and the Federal Republic of Nigeria in fulfilling the agenda of driving financial inclusion in Nigeria,” he said.
MTN had reported that its active MoMo users rose more than a fifth to 56.8-million in its year to end-December, while the value of transactions had risen by more than half to $239.4bn (R3.5-trillion).
Mobile money was popularised by M-Pesa, a payment system launched in Kenya in 2002 by Safari.com allowing people to make payments, send and receive cash through a text message. It was developed after Kenyans were buying and selling airtime to store cash, as banks were far away from where they live.
Mobile money revolutionised payments in Kenya and more than 96% of that country’s households now use M-Pesa — with 51- million users in seven countries using M-pesa in part owned by Vodacom. Mobile money has been an effective way to bring millions of people who do not have bank accounts into formal financial services markets.
The GSMA state of mobile money 2021 report states that in sub-Saharan Africa there are 590-million mobile money accounts with transactions in the region in 2020 amounting to $490bn.
It is in this context MTN has tried for years to gain a licence to enter the Nigerian mobile money market.
Bloomberg previously reported a third of MTN’s income in many markets could come from mobile money.
In afternoon trade on Monday, MTN’s shares were up 1.75% to R181.79 but have fallen about 10% over the past month, coming under some pressure recently from new SIM card registration rules in Nigeria.
Nigerian authorities have required operators to restrict outgoing calls for those whose SIMs are not linked to their national identity numbers, with MTN saying last week a third of its subscribers had not yet submitted their details.
Senior market analyst from IG Shaun Murison said MTN had been downplaying the negative effect that suspending 19-million mobile numbers in Nigeria would have on group revenue.
“The company’s share price has since recovered a good portion of the losses attributed to the Nigerian regulatory announcement, suggesting that the market does in part believe the MTN group’s guidance on the matter.”
Murison said the mobile money licence in its largest jurisdiction as measured by revenue “will help boost some short-term sentiment and boost the share price”.
MTN’s digital and fintech initiatives are certainly fast growing and future areas for diversification and growth for the group".
However, Murison added that "data and voice do however still make up by far the largest proportion of revenue for MTN as it does for its competitors".
SA’s third largest cellphone operator, Telkom is not diversifying into fintech, leaving it reliant on data and voice revenue, even as call volumes, data prices and profits drop. As MTN and Vodacom have success in mobile payment and loan systems, some investors worry Telkom is being left behind.
However, tech analyst Arthur Goldstuck said Telkom could not be behind if it chose not to enter the market.
Telkom had other advantages such as its internet fibre business and its TelkomCloud storage division, he said.
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