Why invest in Mdundo

Triggers:

• Continued high growth in the number of monthly active users (MAU): The target is 50 Mio. MAU in 2025 – from 5 mio. MAU at the IPO in August 2020. At the end of 2023, the company had 30.8 million MAU. MAU
• Evidence that agreements with telcos generate paying subscribers and revenue: Mdundo estimated at the IPO that a smaller telco could generate around 50,000 subscribers and an annual revenue of around DKK 1 million, while a larger telco in a high-income country could generate up to 100,000 subscribers and an annual revenue of up to DKK 8 million.
• Further commercialization of music catalog: In general, investments in music rights on the African continent have grown rapidly in recent years. Currently Currently, Mdundo does not redistribute the music catalog to e.g. other services despite having the rights to do so, which is why this may constitute a new business area.
• Acquisition offers from other players in the sector: As Mdundo’s geographical reach (sub-Saharan Africa), the growth in the number of users (paying as well as free users) and the size of local music catalogs, the possibility of Mdundo being acquired by, for example, African-based companies or international music streaming services in connection with a consolidation of the music streaming market in sub-Saharan Africa increases.

Risks:

• Lower than expected revenue: Too few agreements with telecom companies for Mdundo subscriptions for telecom customers
• Lower than expected advertising sales: Challenge for the business concept. Agreements with telecom companies do not provide the expected number of subscribers/revenue, and continued high illegal music downloading in sub-Saharan Africa.
• Poorer music catalog: International record labels terminate their agreement with Mdundo to stream their catalog. The most streamed African artists cannot be associated with Mdundo or move to other services.

Business model

Mdundo’s business model consists of revenue from advertising and secondarily from subscription payments charged by telecom companies. The model is thus similar to e.g. Spotify and Asian streaming services’ business model, where the user is either ad-funded through audio commercials or pays an ongoing subscription. Significant factors for Mdundo’s investment case are therefore the number of users, advertising sales and paying subscribers (primarily via agreements with telecom companies). Revenue in 2020/21 was DKK 2.3 million, increasing to DKK 7.2 million in 2021/22 and to 12.6 MDKK in 2022/2023, including from annual advertising agreements. For 2023/2024, the company expects revenue of 14-17 MDKK and EBITDA of -6.5 to -7.5 MDKK.

From the end of 2022 to the end of 2023, the number of monthly active users (MAU) on Mdundo’s platform increased from 23.4 million to 30.8 million, corresponding to a growth of 32%. The company has a target of more than 50 million users by 2025.

A basic part of the investment case is how many telecom subscribers become paying users of Mdundo and the number of agreements with telecom companies. Mdundo has signed agreements with the telecom companies: Vodacom Tanzania, Airtel Nigeria and MTN in Nigeria, Ghana and South Africa, which together have over 185 million subscribers. The partnerships enable the telecom provider’s customers to subscribe to Mdundo music packages. Mdundo expects subscription-based revenue from these agreements to account for 40% of total revenue within a few years.

Mdundo has signed deals directly with more than 140,000 African artists, which is a competitive advantage as 80% of the music listened to in Africa is African music. In addition, it reduces costs as royalty payments are made directly to the musicians instead of paying royalties to, for example, international record labels.