The largest African mobile operator, MTN, plans to generate R270 billion in revenue over the next three years through a plan to offer life insurance products in partnership with Sanlam, the largest JSE insurer by market capitalization.
Two listed companies announced on Tuesday that they will work together on people who have no insurance because MTN is trying to increase the revenue of its financial services, and Sanlam wants to expand to Africa.
MTN's Financial Manager Ralph Mupit said that MTN has recognized R90bn revenue each year for the next three years in their markets.
He said companies merged to take advantage of Sanlam's financial services and capital base, while simultaneously leveraging a significant MTN distribution network with 29 million subscribers to SA.
Specific details should only be given on the products that MTN and Sanlam will offer, as well as how they will work, their costs, time frame, and how the revenue will be distributed.
Over the last few years, MTN has strongly boosted business diversification, seeking new sources of revenue in mobile data, enterprise ICT services, wholesale network services, refectory and digital services.
Over the past few years, the fintech on the continent has grown, and Safaricom's best known is Mpesa. SA banks have come up against the offer of eBucks FNB, a standard bank with Snapscan, and new digital players such as Discovery and Tyme.
Mobile data and mobile money in Africa are great opportunity given the relatively low penetration of fixed line and formal banking in most markets, said Peter Takaendesa, a portfolio manager at Mergence Investment Managers.
Mupita said that 6% of revenue from MTN's services comes from fintech, but the company's goal is to reach 15% of the entire group.
MTN has financial services products on 14 out of 21 markets and seeks to add another four. .
Mupita added that the fintech is much less capital intensive than their business with voice and data.
Sanlam Ian Kirk, Executive Director, said that Sanlam has invested heavily in "securing technology" and sees this partnership as a good way to broaden its footprint, starting with SA and embarking on the rest of Africa.
Kirk said that MTN's dominance on the continent was what made the partnership attractive.
It comes as a competitor, Liberty Group, reduces its business in Africa to focus on SA to regain lost local market share.
Along with the ever-changing business-technology disruption, Kirk said that Sanlam had to develop the way he worked to keep up with the changes and attract new customers.
Felix Kamenga, Chief Financial Officer of MTN, said the first life product partnership would be delivered in the fourth quarter of 2019 with "digital crafts".
Companies plan to launch the product in SA before moving to other markets. The funeral cover will also be offered.
Mupita, a twenty-year veteran of insurance and a former executive director of the developing market unit at Old Mutual, said he was personally involved in product development.
Kamenga said that MTN plans to focus mainly on "mobile smart" youth and youth.
The telecommunications sector is in transition, says Takaendesa, but it is still too early to talk about whether financial services will enable operators to generate revenue growth due to the decline in voice business.