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It seems Africa Internet Group, AIG, Jumia’s holding company has a ‘good’ financial adviser in Goldman Sachs. With their known pedigree for pulling off big deals, AIG has just raked in about $80 million (NGN15.9 billion). This is less than a month after the company announced that it had raised about 300 million from AXA, Millicom, MTN and Goldman Sachs.
This deal makes the total number of investors five-MTN, Orange, Millicom, Goldman Sachs and AXA. Apart from the shareholding stake that Orange has access to, this deal is strategic as it allows Jumia access to Orange’s mobile customers. Jumia’s francophone operations will now sell smart phones on its sites, bundled with Orange’s subscriber identification module , SIM cards. This would in a long way allow Jumia and its related subsidiaries within AIG to get an upper hand and a edge against competition planning to do the same.
A major positive for Jumia is its position to have the two leading mobile carriers: MTN and Orange as its strategic shareholders. An advantage that allows Jumia sell exclusive and mass products for the two carriers.
However, there might be a challenge and conflict of interest that would occur because of this two competitors. Orange and MTN are currently fighting to get a hold of the African mobile telecom market, their involvement with Jumia might end up activating their age long rivalry. For instance, what will be the look on the face of MTN’s CEO and board members seeing Jumia running promotions during the next Orange AFCON Cup in 2017 with Orange’s branding and products? However, the deal must have fine tuned the arrangement and make demarcations between MTN, Orange and how Jumia fits in.
To put things in perspective Jumia/AIG has been the only eCommerce group signing partnership and shareholding deals with telcos in Africa. Konga has a partnership with Glo mobile of Nigeria and it has nothing to do with shareholding. Yudala, a new entrant now works with Airtel, the situation remains the same. While Jumia/AIG’s move might be a proactive approach to outsell and out market competition, it is still very doubtful that the strategy is making a huge difference given the saturation level of mobile subscriber base, number portability and stricter regulations that now pressures telcos to deliver value and quality service or suffer huge churn, get fined or both.
To calm nerves of analysts, Herman Singh, MTN’s Group Chief Digital Officer, said “the investment also validates the proven business model and underscores MTN’s focus on e-commerce as a strategic pillar of our digital business.” However, industry watchers are eagerly waiting to see how this will play out.