Singtel will invest US$250 million (S$345 million) in Airtel Africa in a move to tap the continent's rapidly expanding use of mobile money.

Africa is projected to be the world's second-fastest growing economic zone by 2020 with mobile subscriber numbers expected to reach 500 million, up from 420 million at the end of 2016, Singtel said yesterday.

The investment forms part of US$1.25 billion in funding the African telco has secured from international investors, which include Singapore investment firm Temasek, American private equity giant Warburg Pincus and SoftBank Group International.

Singtel paid cash for around 168.41 million shares in Airtel Africa, a unit of Singtel's regional associate Bharti Airtel, with operations in 14 countries, including Ghana, Kenya and Nigeria.

Singtel, which holds a 39.5 per cent stake in Bharti Airtel, said only a quarter of Africa's population has access to formal banking services.

Mobile money has filled the gap and become the engine for financial inclusion for both individuals and small businesses.

Airtel Africa will be valued at US$4.4 billion after the funding round.

The proceeds will be used to reduce its debt of around US$5 billion and grow its business ahead of an intended initial public offering, Singtel said.

Airtel Africa is the second-largest telecommunications operator on the continent with a customer base of 91 million, Singtel noted, adding that it ranks among the top two operators in most of its 14 markets, and has been delivering "healthy revenue growth" in voice and data services.

Its mobile wallet service Airtel Money has 11.8 million subscribers and has performed "strongly".

Mr Arthur Lang, chief executive of Singtel's International Group, said the investment reflects the telco's confidence in Africa's long-term growth potential with its young and growing population.

"As Airtel continues to execute its transformation strategy to become a leader in data and mobile money in Africa, we believe it is in a strong position to benefit from increasing smartphone penetration and mobile money adoption," he added.