MTN shareholders are expected to vote on a proposal to separate mobile money from the listed company on July 2. Photo / File
MTN Mobile Money is preparing to step out of the shadow. It wants to claim its own spotlight, but the path to independence will be long.
After years as a cash cow quietly bundled as MTN’s subsidiary, the mobile money segment is being structurally separated.
The plan? Fold MTN Mobile Money into the new FinCo - a Fintech holding company, MTN Group is building by clustering its mobile money and digital finance units across markets. The ambition here is scale and synergy that could perhaps build a unicorn.
Since its 2009 debut, mobile money has quietly grown into one of MTN’s biggest revenue streams. Yet for years, it remained buried in the mix - its financials bundled with voice and data - just a line in MTN’s books.
That began to shift with the 2021 National Payment Systems Act, which forced telecoms to unbundle their financial services.
MTN responded by setting up MTN Mobile Money. But even then, the separation was more structural than financial - mobile money results still flowed through consolidated accounts, and dividends were a cocktail of telecom and Fintech earnings.
That is now changing
MTN is carving mobile money out for good, transferring it into MTN New FinCo, which will sit directly under MTN Group Fintech, the financial technology arm.
In other words, the mobile money unit is moving out of the telecom home to build its own future.
Why? Telecoms run on infrastructure - towers, spectrum, average revenue per user metrics - and are regulated as utilities, while Fintechs, on the other hand, scale fast, serve digitally, and face tighter scrutiny on data privacy, cybersecurity, and fraud.
Staying under the telecom limits the mobile money unit’s flexibility to form alliances or attract specialised investors.
Thus, separating it clears the path for deals with big names such as Mastercard or PayPal, and allows it to acquire or partner with startups because Fintech’s success hinges on speed, innovation, and ecosystem reach.
MTN signaled the direction as early as 2021, in its initial public offering prospectus and annual reports.
Back then, it separated mobile money under the National Payment Systems Act, creating MTN Mobile Money, under the regulation of Bank of Uganda.
Now, under the new direction, it will be fully, if shareholders approve, amalgamate into MTN New FinCo. From the outside, mobile money services continue uninterrupted. Inside, however, the wiring will change, readying the business for bigger moves.
A shareholders’ loss?
MTN promises that shareholders won’t lose out. The plan is that instead of one mixed bag, they will now hold exposure to two focused businesses: MTN (telecom) and MTN New FinCo (Fintech).
Minority shareholders won’t directly own shares in MTN New FinCo, but instead, a special trust will be set up to hold a 23.985 percent stake in the new company on their behalf, equal to the percentage they already own in MTN.
How it will work
If you hold shares in MTN, you will hold indirect ownership in MTN New FinCo through a trust.
When MTN New FinCo declares dividends, the Trust will collect them and pass them on to shareholders. The trust will also vote in company meetings based on instructions from shareholders.
For now, MTN New FinCo will stay private. But in about three to five years, MTN hopes to let the public in, which will effectively end the functions of the special trust.
The dividend tax dilemma
The corporate restructuring is slick, but not without friction. The moment the Fintech arm breaks away, a tax wrinkle emerges. A simple dividend becomes a math problem.
Local shareholders currently pay 10 percent withholding tax on dividends because MTN is a listed company with tax benefits.
When dividends come from MTN New FinCo - a private company - the rate rises to 15 percent.
The higher flat rate applies to all shareholders regardless of residency, which means less payouts to the 21,452 Ugandan investors.
It may seem small on paper, but in reality, it could shake investors.
MTN isn’t taking that risk lightly. It’s planning a Dividend Adjustment Trust - a special legal setup designed not to hold shares or earn income but to act as a financial equalizer.
In this case, when MTN New FinCo pays dividends, it withholds a 15 percent tax and passes the net to the trust holding shares for minority investors.
At the same time, MTN Group Fintech funds the Dividend Adjustment Trust with the missing 5 percent, which then reimburses individual shareholders directly.
This approach avoids double taxation since special trusts don’t keep or trade income.
MTN has already asked URA for a ruling to confirm the trust won’t be taxed - that 15 percent withholding is final - and the 5 percent top-up won’t trigger more tax.
This protects retail investors, who are sensitive to dividend cuts.
Institutional and offshore investors already pay 15 percent, so they don’t get the top-up.
Eventually, in three to five years, the trust will unwind when MTN New FinCo lists, according to MTN’s plan, “giving shareholders direct ownership without dilution.”
The risks?
Like any corporate restructuring, MTN’s proposed separation carries risks - starting with the need for shareholder approval, because the entire transaction depends on the green light at the upcoming extraordinary general meeting on July 2, without which, the process could stall.
Even if shareholders approve, regulatory approval from Bank of Uganda remains. Other regulators, such as Capital Markets Authority and Uganda Securities Exchange, have given conditional approvals.
MTN also must secure consent from third parties - lenders, suppliers, and major customers, which the telecom says its board is proactively pursuing.
More risks
Tax treatment is another cautious area. MTN has obtained independent tax advice and applied for formal rulings from URA, hoping for a tax-neutral outcome on capital gains and value-added tax.
This is envisioned to prevent unexpected tax burdens for MTN or its shareholders.
Meanwhile, existing intra-group agreements - covering shared infrastructure and support services - will continue on an arm’s-length basis consistent with transfer pricing rules.
These are longstanding arrangements designed to ensure smooth operations before and after the trust distributes shares.
But the transaction may trigger short-term share price volatility as markets react independently of the restructurer’s fundamentals.
A blurry future
The decision of the mobile money spinoff from the listed holding introduces more questions than answers, and investors are peering through the fog.
The logic is understandable: creating separate, focused entities could allow each business to attract specialised investors, sharpen strategy, and potentially unlock long-term value.
Mobile money is MTN’s growth engine, contributing Shs958b to the 2024 topline.
Separating it makes the listed company leaner. This mirrors Airtel’s strategy when it spun off its Fintech arm in 2021 and listed it separately in London through Airtel Mobile Commerce.
Crested Capital suggests post-spin-off revenue growth could slow.
Market reaction
Investor skepticism surfaced immediately. The MTN share price dropped 3.33 percent following the announcement. Though partly due to ex-dividend trading, it also reflected market unease.
For now, minority shareholders will rely on the special trust to hold their economic interest.
But trusts are not governed by the same disclosure requirements as public companies.
And who governs the special trust has not yet come out clearly, while also timelines remain vague.
While there is talk of a Fintech listing in three or five years, there is no binding commitment, which has also unsettled the capital markets despite the unconditional approvals.
And on the flip side, the spin-off could undercut recent gains in the capital markets.
Uganda has made visible progress with local listings like Airtel and Quality Chemical Limited, and MTN’s own performance has attracted investor interest.
Crested Capital cautions that a spin-off structure that bypasses public oversight could weaken these gains and signal to future issuers that opacity is permissible.
The risk isn’t just about what is being separated but about how it’s being done, and whether that process inspires trust or hesitancy.
For now, shareholders are navigating uncertainty, with more faith than foresight.
