MTN is selling half of its stake in loss-making Jumia in order to pay off its debt

3 May 2019

Mergers, Acquisitions and Financial Results

Africa’s biggest wireless carrier MTN group is looking to reduce its debt and enter into new markets by selling at least half of its stakes worth $655 million in Jumia Technologies AG. This was made known to Bloomberg by people with knowledge about the deal. This comes a few weeks after loss-making Jumia launched its initial public offering (IPO) on the New York Stock Exchange (NYSE).

According to the sources, the sale will happen before the end of the year although the company needs to wait out a half-year investor lock-in period that followed Jumia’s successful share sale in New York.

“We have a six-month lockup period where we can’t sell our shareholding. Post that period we will apply our minds on what to do with the investment,” an MTN spokesman said.

If this is successful MTN will be able to pay up its debt which increased to R63.5 billion ($4.39 billion) from R57 billion ($3.94 billion) in 2018. The rising liabilities and a dispute over non-payment of back taxes in Nigeria have affected the company negatively. In order to further reduce its debt, MTN could also sell its other investments which include flight-booking site and telecommunication masts-operator IHS Towers Ltd.

Apart from MTN, other investors such as Rocket Internet with 28 percent stake in Jumia could also take advantage of the listing to exit the loss-making business. If Rocket Internet exits, it would be in line with its strategy of selling or listing established internet firms. In 2017, Rocket Internet floated online food groups Delivery Hero and HelloFresh. It also floated its online furniture retailer Home24 last year.

Jumia has expanded to 14 African countries since its launch in 2012 having been backed with over $700 million from investors which include Africa’s largest mobile operator MTN and French insurance company AXA. The company recorded €120.1 million ($135.83 million) loss in 2017, €91.9 million ($103.92 million) loss in 2016 and €161.3 million ($182.30 million) loss in 2015.

Source: The Nerve