MTN Uganda is moving to formally separate its mobile money business from its core telecom operations—a strategic shift that could reshape the country’s fintech landscape but is already making investors uneasy.
The transaction, which hinges on shareholder approval at an Extraordinary General Meeting (EGM) scheduled for July 2, would transfer the mobile money business to a new private entity, MTN New FinCo, which will sit under the MTN Group’s Fintech division. If approved, this would mark the final leg of a plan first hinted at in MTN’s 2021 IPO and annual reports.
Why the Split?
Telecom companies and fintechs operate under vastly different rules. Telecoms focus on infrastructure and regulated utilities, while fintechs thrive on speed, digital innovation, and flexible partnerships. Keeping the mobile money unit under the telecom umbrella limits its growth potential and ability to attract fintech investors or form strategic partnerships with global players like Mastercard or PayPal.
Carving out the mobile money unit into a focused fintech business could unlock faster growth and sharper execution. MTN’s move echoes a broader trend seen in the industry—Airtel, for instance, spun off its fintech arm in 2021.
What It Means for Shareholders
MTN insists shareholders won’t lose value. Instead, they’ll hold economic interest in two focused businesses—telecom and fintech. However, there’s a twist: minority shareholders won’t directly own shares in MTN New FinCo. Instead, their stake will be held in a special trust on their behalf, mirroring the 23.985% stake they currently own in MTN Uganda.
This trust will:
- Receive and distribute dividends to shareholders,
- Vote in MTN New FinCo meetings based on shareholder instructions, and
- Hold indirect ownership until MTN New FinCo lists publicly in 3–5 years.
The Dividend Tax Problem
One major friction point is taxation. Currently, MTN dividends are taxed at a 10% withholding rate because the company is publicly listed. However, dividends from the private MTN New FinCo would attract a 15% withholding tax, cutting into shareholder returns.
To cushion this impact, MTN is proposing a Dividend Adjustment Trust—a mechanism that tops up the 5% difference using funds from MTN Group Fintech. MTN has requested a formal ruling from the Uganda Revenue Authority (URA) to confirm that this arrangement won’t trigger double taxation.
Risks and Regulatory Hurdles
The restructuring is far from risk-free:
- Shareholder approval is not guaranteed. If the July 2 vote fails, the spin-off stalls.
- Regulatory approvals are still pending from the Bank of Uganda, although the Capital Markets Authority and Uganda Securities Exchange have granted conditional go-ahead.
- Third-party consents (e.g., from lenders and major customers) are still being pursued.
- Tax uncertainties linger despite external advice and pending URA rulings.
- Transparency issues are also raising eyebrows, with no clear information on who will govern the trust and vague listing timelines.
Crested Capital, a brokerage firm, has warned that the spin-off may slow MTN’s post-listing growth trajectory and undermine public confidence in Uganda’s capital markets.
Market Reaction
Following the announcement, MTN’s share price dipped 3.33%, a signal of market jitters. While part of that drop coincided with ex-dividend trading, analysts say the investor reaction also reflects deeper concerns over execution and oversight.
MTN Mobile Money is a powerhouse, contributing UGX 958 billion to the company’s 2024 revenue. But by spinning it off, MTN is making its listed entity leaner and, arguably, less attractive in the short term. Investors worry that the restructuring could create opacity at a time when Uganda’s capital markets were finally gaining momentum, thanks to recent local listings like Airtel and Quality Chemical Industries.
Looking Ahead
While MTN promises that the special trust is a temporary vehicle until a public listing of MTN New FinCo, there’s no binding timeline, and trust structures don’t follow the same disclosure rules as listed firms.
The strategy could unlock long-term value, but for now, shareholders are being asked to take a leap of faith—into a future filled with innovation, yes, but also uncertainty.