MTN Uganda is set to separate its mobile money business MTN MoMo from the telecommunications operation, as part of a plan that will eventually lead to the listing of the former on the Uganda Securities Exchange (USE) in the next three to five years.
The company says the decoupling of the businesses will make it easier to grow the mobile money division and attract investors interested purely in financial technology, following a strategy that was implemented earlier by Airtel Africa.
Minority shareholders of MTN Uganda with a combined 23.985 percent stake will hold a similar interest in a new entity called MTN New FinCo, to which the mobile money operation will be transferred.
MTN Uganda and MTN New FinCo will prepare and report separate financial statements and their shareholders –South Africa’s MTN Group and minority investors— will jointly participate in the two firms’ governance and corporate decisions including dividend distributions.
Minority shareholders’ interest in MTN New FinCo will be held through a trust whose main role will be paying them dividends from the mobile money business.
“Currently, it is anticipated that subject to the necessary board and shareholder approvals, regulatory approvals and appropriateness of the market conditions, MTN New FinCo will be listed on the USE within a three to five-year period. The operational and technology maturity of the business will be assessed for readiness for such a listing,” the USE-listed firm said in a circular ahead of a shareholder vote on the proposed separation.
“In future, after the trust’s shareholding is unbundled and MTN New FinCo is listed, a minority shareholder will have two separate interests in two separately listed companies –MTN and MTN New FinCo.”
MTN’s shares are currently trading at 269 Ugandan shillings (Sh9.67), having gained from the 2021 initial public offering (IPO) price of 200 shillings (Sh7.19).
The shares of MTN New FinCo will be priced based on the value of the business at the point of listing by introduction –where no new shares will be sold to the public.
MTN noted that the dividend policy of MTN New FinCo will be similar to that of the current unified business, which has a goal of distributing at least 60 percent of net income to shareholders.
The spinoff of the mobile money business will not have a tax implication.
MTN Group has also committed to provide top-up funds to ensure that Ugandan investors continue to pay a withholding tax of 10 percent on the dividend they will earn from the mobile money unit.
Without the intervention, Ugandan shareholders would have seen their dividend tax rate rise from the current 10 percent to 15 percent, applicable on distributions made through trusts.
Foreign investors including Kenyans will continue to incur a withholding tax of 15 percent on dividends that will be paid by the telecoms and mobile money units.
The two businesses have comparable net profit margins of about 26 percent, with the telecommunications operation having larger revenues and earnings.
Mobile money is seen as presenting more growth opportunities from its extensible applications in diverse areas including payments, credit, savings, microinsurance and investments.
The telecommunications division reported a net profit equivalent to $193.4 million (Sh24.9 billion) in the year ended December 2024, when its revenue stood at $725.7 million (Sh93.7 billion at current exchange rates).
MTN MoMo meanwhile posted a net income of $69.6 million (Sh9 billion) on revenues of $273.4 million (Sh35.3 billion).
Unlike telecommunications operators in most countries, MTN has continued to register growth in the traditional voice business in which it has added millions of customers over the years.
Revenue growth from voice is however expected to slow down in the coming years, partly due to a reduction in fees MTN charges its main rival Airtel Uganda to facilitate cross-network calls.
