MTN
MTN
MTN - MTN Group Limited - Final audited results for the year ended 31 December
2007
MTN Group Limited
Registration number: 1994/009584/06
ISIN code: ZAE000042164 Share code: MTN
Final audited results for the year ended 31 December 2007
HIGHLIGHTS
Group subscribers up 53% to 61,4 million from December 2006
Revenue increased 42% to R73,1 billion
EBITDA up 42% to R31,8 billion
Net debt to EBITDA of 0.5x
Adjusted headline EPS of 681,9 cents
Dividend per share of 136 cents
REVIEW OF RESULTS
MTN Group Limited (MTN Group) continued to deliver a solid performance in the
twelve months to 31 December 2007, driven mainly by mobile subscriber growth
across all operations.
The MTN Group reports operational performance by region, namely South and East
Africa ("SEA"), West and Central Africa ("WECA") and Middle East and North
Africa ("MENA").
The Group recorded revenue growth of 42% to R73,1 billion (31 December 2006:
R51,6 billion). The SEA and WECA regions contributed 43% and 42% respectively of
total Group revenue, and the MENA the remaining 15%. This compares with 52% by
SEA, 41% by WECA and 7% by MENA at 31 December 2006 and reflects growth from a
low base and start-ups in the MENA region. The Iran operation contributed 12% of
the total MENA region`s revenue (up from 2% last year). Without the positive
effect of foreign currencies having strengthened against the Rand, Group revenue
would have been approximately 2% lower.
The Group`s earnings before interest, tax, depreciation and amortisation
("EBITDA") increased by 42% to R31,8 billion compared with the twelve-month
period ended 31 December 2006. Without the positive effect of foreign currencies
having strengthened against the Rand, Group EBITDA would have been 3% lower. The
SEA region contributed 36% to Group EBITDA and WECA 52%. The MENA region
contributed 8% of total Group EBITDA, up 3% from December 2006.
Profit after tax ("PAT") decreased to R11,9 billion from R12,1 billion for the
twelve months to 31 December 2006, owing to increased finance charges and a
higher tax charge arising mostly from the end of the pioneer tax status of the
Nigerian operation. Basic headline earnings per share ("HEPS") rose to 584,8
cents for the period, 4% below the 606,5 cents for the twelve months ended 31
December 2006.
The Group recorded 61,4 million subscribers at 31 December 2007, a 53% increase
from 40,2 million at 31 December 2006, as penetration rates increased in most
markets. The former Investcom operations recorded subscriber growth of 66% from
31 December 2006, to 13,9 million or 23% of the Group`s total subscribers.
Subscribers in the SEA region increased by 23% to 19,3 million, in the WECA
region by 43% to 28 million, and the MENA region recorded a 186% increase to 14
million driven by the very strong growth of Irancell.
The average revenue per user ("ARPU") has marginally declined in most
operations, which is consistent with increased penetration into lower usage
segments.
The Group is supportive of meaningful local shareholder participation. During
the course of the year, it facilitated the increase in equity participation of
local shareholders in Uganda to 5%. MTN also decreased its shareholding in Cote
d`Ivoire to 60% during the year. The Group is also keen to ensure that, where
possible, it holds a controlling interest in its operations. Accordingly, during
the course of the year, the Group increased its shareholding in MTN Rwanda from
40% to 55% and Mascom Botswana from 51% to 53%. The increase in Botswana did not
result in a change in control.
M A Ramphele and P L Woicke resigned their positions as directors with effect
from 18 March 2008. The Board greatly appreciates their contribution to the
achievements of the Group.
In February 2008 Moody`s upgraded MTN`s national scale rating to A2.za from
A3.za and affirmed the global scale issuer rating at Baa3. The outlook on the
ratings was changed to positive.
Income statement analysis
Group consolidated revenue increased by 42% to R73,1 billion (31 December 2006:
R51,6 billion) largely owing to strong subscriber growth.
The increase in revenue was mainly driven by South Africa, which increased
revenue by 15% to R28,2 billion, and Nigeria, which increased revenue by 36% to
R20,3 billion. Ghana and Syria generated revenues of R4 billion and R4,6 billion
respectively.
Former Investcom operations increased revenue by 48% to R14,8 billion (31
December 2006: R10 billion 12 months unaudited). These operations contributed
R5,3 billion (17%) to WECA revenue and R9,4 billion (88%) to the MENA revenue
for the period under review.
Group EBITDA increased by 42% to R31,8 billion (31 December 2006: R22,4 billion)
as a result of strong revenue growth and initiatives to improve operational
efficiencies.
Former Investcom operations generated R6,3 billion of the Group`s total EBITDA
for the year under review. The Group`s EBITDA increased year on year by 29% to
R25,1 billion, excluding the former Investcom operations. The SEA region`s
EBITDA increased by 22%, accounting for 36% of the Group`s EBITDA. This was
driven mostly by EBITDA from South Africa. The WECA region contributed 52% to
Group EBITDA, up 1% from 31 December 2006. The MENA region contributed 8% to
Group EBITDA, up 3% from December 2006.
The Group`s EBITDA margin improved marginally to 43,5% compared with 43,4% for
the twelve months ended 31 December 2006.
The Group depreciation charge increased by R1,7 billion to R6,8 billion for the
period ended 31 December 2007. R0,8 billion of this amount is attributable to
the increased investment in the former Investcom operations and a full-year
application of the depreciation charge compared to six months in the previous
year. Additional investment, mainly in South Africa, Iran and Nigeria,
contributed to the remainder. The depreciation related to former Investcom
operations came to R1,3 billion, with Ghana, Syria and Sudan at R327 million,
R509 million and R200 million respectively.
Group amortisation of intangible assets increased by R0,9 billion to R2,2
billion compared with the twelve months to 31 December 2006. The amortisation
relating to the acquisition of Investcom operations increased by R500 million to
R1,1 billion for the twelve months to 31 December 2007, while Iran contributed a
further R79 million. Nigeria`s amortisation increased by R60 million, mainly as
a result of the acquisition of a 3 G licence and 7,5 MHz frequency spectrum band
licence.
Net finance costs of R3,2 billion were higher by R1,7 billion compared to 31
December 2006 and related mostly to the full-year impact of financing the
borrowings related to the Investcom acquisition.
The Group`s Board continues to report adjusted headline EPS in addition to basic
headline EPS. The adjustments are in respect of:
the impact on earnings due to the Nigerian deferred tax credit, which decreases
the adjusted headline EPS by 12,0 cents
the IFRS requirement that the Group account for a written put option held by a
minority shareholder of one of the Group subsidiaries _ which provides them with
the right to require the subsidiary to acquire their shareholding at fair value.
The net impact is an increase in adjusted headline EPS of 19,7 cents.
The unwinding of a previously reversed deferred tax asset in Nigeria, which
increased the adjusted headline EPS by 89,4 cents.
Adjusted headline EPS of 681,9 cents for the period under review compares
favourably with adjusted headline EPS of 584,7 cents for the twelve months ended
31 December 2006.
Group Taxation
The Group`s taxation charge increased by R5,2 billion compared with the twelve
months ended December 2006. This relates mostly to the ending of the pioneer
status tax holiday in Nigeria in March 2007, resulting in a tax charge of R3,8
billion in 2007 compared with a tax credit of R0,8 billion in 2006.
MTN Group`s effective tax rate increased from 17,6% at December 2006 to 39,5% at
December 2007, mainly because of the end of the tax holiday in Nigeria at the
end of March 2007.
Balance sheet and cash flow
The Group`s total assets increased by 19% to R116 billion compared with R97
billion at 31 December 2006.
Property, plant and equipment increased by R8,8 billion from 31 December 2006.
This included acquisitions of R14,8 billion across the Group - R4,8 billion in
Nigeria, R2,6 billion in South Africa and R1,5 billion in Iran (MTN`s share
only).
Goodwill and other tangible assets have decreased by 3% to R38,9 billion, as a
result of the exchange-rate movement of the local currencies against the rand on
the translation of Investcom LLC`s goodwill. Intangible assets before
amortisation increased by R2,1 billion, mainly as a result of the acquisition of
the 3G licence and the 7,5 MHz frequency spectrum band licence awarded to MTN
Nigeria.
Current assets grew by R12,9 billion to R33,5 billion, mainly because of the
increase in other current assets of R5,4 billion to R15,9 billion and in cash
balances of R7,5 billion to R17,6 billion. The movement in trade and other
receivables was driven mainly by Nigeria, which increased by R388 million to
R519 million (interconnect receivables and prepayments), and South Africa, which
increased by R1,1 billion to R7,1 billion. The increase in the Group`s cash
balances was after cash outflows of R14,5 billion for capital expenditure, R1,7
billion for dividends, R91 million additional equity purchased in subsidiaries
and joint ventures, and R4,2 billion in taxes paid.
Of the total interest-bearing liabilities of R34 billion (2006: R33 billion), a
significant portion was originally used to fund the Investcom transaction via
Mauritius. This debt includes R5 billion four-year bonds, R1,3 billion eight-
year bonds, as well as syndicated facilities consisting of two five-year term
loans of US$750 million and R7 billion each, and a three-year revolving credit
facility of US$1,25 billion. R5.2 billion of the unproductive debt was repaid
during 2007, reducing it to R14,9 billion.
Irancell`s debt increased by R1,6 billion to R3,4 billion, primarily as a result
of funding its network rollout and operational and other working capital
requirements. The company entered into deferred payment facility arrangements
with Nokia, Ericsson and Huawei for the sole purpose of funding the network
rollout.
MTN Nigeria`s debt increased by R1,4 billion to R5 billion, as a result of the
funding of its network rollout and dividend payments. In October 2007, Nigeria
signed an unsecured US$ 2 billion medium-term debt fund made up of 80% local
currency and a 20% US$ portion. Net debt to EBITDA at 31 December 2007 is 0.5 x
due to significant cash accumulation in Nigeria, Ghana and Syria. The Group`s
target is to reduce total debt to 0,4 times EBITDA by the end of 2008.
OPERATIONAL REVIEW
South Africa? ?
MTN South Africa performed well in a very competitive market increasing its
total subscriber base by 17% from 31 December 2006 to 14,8 million at 31
December 2007. The postpaid subscriber base grew by 9% to 2,5 million
subscribers, and the prepaid base increased by a healthy 19% to 12,3 million
over the twelve-month period. Low-denomination vouchers have been a key driver
in stimulating usage. Market share was maintained at 36% at 31 December 2007.
The postpaid segment made a strong recovery in the second six months of 2007,
through improvements in the channel strategy and customer value proposition.
Blended ARPU decreased by 9% to R149 at 31 December 2007, from R164 at 31
December 2006. Prepaid ARPU remained relatively stable, declining marginally to
R92 from R94 owing to more affordable lower denomination vouchers. Postpaid ARPU
decreased to R396 from R487, because of increased penetration into the lower
usage segments.
Network enhancement during the review period included the commissioning of 371
2G base transceiver stations ("BTSs") and 590 3G BTSs. At year-end, the total
number of 3G sites was 1379, and 904 000 3G handsets and data cards were in use.
Looking forward, MTN South Africa is laying its own fibre cable to improve the
capacity and quality of mobile transmission, and effectively manage margins.
The second quarter of 2007 saw the launch of the brand revitalisation campaign
"Go", which has been successful in increasing brand awareness. There have
been a number of innovative products targeted at different customer segments.
These include low-denomination vouchers, peak-time usage products,
BlackberryCopyright-connect on HTC and the FNB bulk sms.
The MTN data proposition is gaining momentum, with a 42% increase in
data revenue to R2,8 billion. This was due to competitive pricing,
increased 3G roll-out and improved stock management in the channels.
Nigeria
MTN Nigeria increased its subscriber base by 34% to 16,5 million at
31 December 2007. This was achieved despite network capacity- and quality
constraints and strong competition. Network capacity and quality are being
addressed through a ramp-up in the infrastructure roll-out in the second
half of 2007.
During the period, ARPU declined from US$18 at 31 December 2006 to US$17 at 31
December 2007, which is consistent with increased penetration into the lower
segment of the market.
MTN Nigeria maintained its leading market position, with market share at 43% as
a result of competitive pricing, strong brand preference and an effective value
proposition. During the period, a number of products and innovations were
launched, such as GPRS roaming, Edge, BlackberryCopyright services, Vitrain top-
up and Wimax.
By the end of December 2007, 785 additional sites had been added during the
year, bringing the total number of live sites to 3 422, and approximately 77
sites have now been integrated with 3G technology. The Lagos Metro (82 km) and
Niger - Delta (342 km) fibre-optic cabling were completed in the second half of
2007.
The integration and commissioning of IP/MPLS backbone to service corporate
customers has significantly increased capacity. MTN Nigeria was awarded a 15-
year 2 GHz spectrum licence on 1 May 2007, at a cost of US$150 million, for the
delivery of 3G services as well as a 7,5 MHz frequency spectrum band licence on
23 March 2007, at a cost of N288 000, renewable annually.
Iran
Irancell soft-launched commercial operations with postpaid services on 21
October 2006. Prepaid services were launched in January 2007. The period under
review is the first full twelve months of operation. During the period, Irancell
recorded an exceptional performance, increasing subscribers from 154 000 to 6
million. This equates to an average net acquisition rate of 488 000 subscribers
per month. Prepaid subscribers comprise 94% of the subscriber base.
ARPU increased from US$9 at 31 December 2006 to US$10 at 31 December 2007 as a
result of usage stimulating packages and improvements in the quality and
capacity of the network.
During the period, Irancell increased its brand awareness and launched a number
of new products, including flat competitive rates and standard per-second
billing. Irancell was first to market in providing GPRS, which has enabled email
solutions, MMS, Data SIMS and Vitrain content portal.
The operation has significantly increased its distribution channels in all 30
provinces of Iran, with over 4 945 dealers and service centres in 258 cities.
Following a slow roll-out in 2006, the network has been significantly enhanced
and had sufficient capacity to service 6,5 million subscribers at 31 December
2007. There are 2 023 live sites across the 30 provincial capitals in 291
cities. Geographic coverage is 50%, population coverage is 50% and there is 1
500 km of road coverage.
Ghana
MTN Ghana recorded an exceptional increase in subscriber numbers for the period
under review, from 2,6 million to 4,0 million. This was underpinned by
improvements in network coverage and quality and an enhanced competitive
proposition. The operation was rebranded MTN Ghana in August 2007.
ARPU decreased from US$17 at 31 December 2006 to US$14 at 31 December 2007, as a
result of increased penetration and reduced tariffs.
Network enhancement continued during the review period with the installation of
718 new BTSs, bringing the total number to 1 660. At 31 December 2007,
geographical coverage was 28% and population coverage was 72%.
MTN Ghana made further progress in increasing accessibility and driving sales
through the regions. Three major distributors have been added to the network and
the decentralisation of distribution points from head office is progressing
well. There has also been a significant increase in Electronic Voucher
Distribution ("EVD") vendors - to 31 451 vendors from 12 808 in December 2006.
The operation introduced new products and innovations, including GPRS roaming,
Me2U, International call-back and International Top-Up services, which increased
international call traffic.
Sudan
MTN Sudan increased its subscriber base by 96% to 2,1 million at 31 December
2007 and its market share from 25% to 28% at 31 December 2007, in a highly
competitive market.
Subscriber acquisitions in the first quarter of 2007 were slightly lower due to
technical challenges experienced during the migration to the new billing system.
In June 2007, the Sudan operation was successfully rebranded MTN Sudan.
A number of products were also launched in the second quarter of 2007, including
a prepaid per-second billing campaign. A number of value-adding initiatives were
launched, ranging from voicemail, postpaid bill inquiry, 3G data card, bulk SMS
for corporates and prepaid multiprofile.
ARPU decreased from US$16 at 31 December 2006 to US$12 at 31 December 2007,
because of high connections in the lower usage market and the prevalence of dual
SIMs. MTN Sudan has introduced a segmented pricing offering which will stimulate
usage and support ARPU.
During the period, the operation rolled out an additional 575 BTS sites.
Population coverage is 43% and geographical coverage is 3%.
Syria
MTN Syria delivered stable performance in a high-growth market, recording a 39%
increase in subscriber numbers to 3,1 million at 31 December 2007.
Blended ARPUs declined from US$22 at 31 December 2006 to US$20 at 31 December
2007. Prepaid ARPUs are US$15 and postpaid ARPUs are US$42. This was due to an
increase in mobile penetration from 26% to 35%.
MTN Syria continued to focus on improving coverage in the major cities and
providing coverage in rural and coastal areas. 337 BTSs were rolled out in the
twelve months to 31 December 2007. Population coverage and geographical coverage
stood at around 98% and 78% respectively.
Prospects
The Group`s prospects for 2008 remain positive in our key markets.
Strategic priorities include:
Actively seeking value-accretive expansion opportunities in emerging markets;
Ongoing infrastructure investment to ensure appropriate levels of capacity and
quality;
Ensuring that the Group is well positioned to benefit from a rapidly converging
technology market;
Driving operating margin efficiencies;
Engaging with regulatory authorities.
Dividend declaration
Due to the Group`s strong free cash flow generation and sound financial
position, a dividend of 136 cents per share (December 2006: 90 cents per share)
has been declared.
Notice is hereby given that a dividend (number 9) of 136 cents per ordinary
share has been declared and is payable to shareholders recorded in the register
of the MTN Group at the close of business on Friday, 11 April 2008.
In compliance with the requirements of Strate, the electronic settlement and
custody system used by the JSE , the MTN Group has determined the following
salient dates for the payment of the dividend:
Last day to trade cum dividend Friday, 4 April 2008
Shares commence trading ex dividend Monday, 7 April 2008
Record date Friday, 11 April 2008
Payment date of dividend Monday, 14 April 2008
Share certificates may not be dematerialised or rematerialised between Monday, 7
April 2008 and Friday, 11 April 2008, both days inclusive.
On Monday, 14 April 2008 the dividend will be electronically transferred to the
bank accounts of certificated shareholders who make use of this facility. In
respect of those who do not use this facility, cheques dated Monday, 14 April
2008 will be posted on or about that date. Shareholders who have dematerialised
their shares will have their accounts held by their Central Securities
Depository Participant or broker credited on Monday, 14 April 2008.
For and on behalf of the Board
M C Ramaphosa P F Nhleko
(Chairman) (Group President and Chief Executive Officer)
Fairland
18 March 2008
Certain statements in this announcement that are neither reported financial
results nor other historical information are forward-looking statements,
relating to matters such as future earnings, savings, synergies, events, trends,
plans or objectives.
Undue reliance should not be placed on such statements because they are
inherently subject to known and unknown risks and uncertainties and can be
affected by other factors that could cause actual results and company plans and
objectives to differ materially from those expressed or implied in the forward-
looking statements (or from past results).
Unfortunately, the company cannot undertake to publicly update or revise any of
these forward-looking statements, whether to reflect new information of future
events or circumstances or otherwise
Operational data 31 December 2007
Subscribers (`000) ARPU (ZAR/US$)
South and East Africa 19 329
South Africa 14 781 R149
Uganda 2 362 $10
Botswana 874 $15
Rwanda 652 $12
Swaziland 380 $18
Zambia 262 $10
West and Central Africa 27 999
Nigeria 16 511 $17
Ghana 4 016 $14
Cote d`Ivoire 2 679 $13
Cameroon 2 559 $14
Guinea Conakry 727 $15
Benin 652 $12
Congo Brazzaville 316 $20
Liberia 304 $19
Guinea Bissau 235 $17
Middle East and North Africa 14 025
Iran 6 006 $10
Syria 3 109 $20
Sudan 2 090 $12
Yemen 1 507 $9
Afghanistan 1 200 $11
Cyprus 113 $39
Total MTN 61 353
Condensed consolidated income statements
12 months 12 months
ended ended
31 December 31 December
2007 2006
Audited Audited Change
Rm Rm %
Revenue 73 145 51 595 42
Direct network operating costs (8 525) (4 628) 84
Cost of handsets and other accessories (5 524) (4 135) 34
Interconnect and roaming (9 997) (7 178) 39
Employee benefits and consulting expenses (3 379) (2 453) 38
Selling, distribution and marketing (9 071) (7 949) 14
expenses
Other expenses (4 804) (2 839) 69
Depreciation (6 774) (5 030) 35
Amortisation of intangible assets (2 199) (1 289) 71
Net finance costs (3 173) (1 427) 122
Share of results of associates 8 23 (65)
Profit before tax 19 707 14 690 34
Income tax expense (7 791) (2 591) 201
Profit for the period 11 916 12 099 (2)
Attributable to:
Equity holders of the Company 10 608 10 610 -
Minority interests 1 308 1 489 (12)
11 916 12 099 (2)
Earnings per share (cents) 569,9 605,4 (6)
Diluted earnings per share (cents) 559,2 589,1 (5)
Dividend per share (cents) 90,0 65,0
Condensed consolidated balance sheets
At At
31 December 31 December
2007 2006
Audited Audited Change
Rm Rm %
ASSETS
Non-current assets 82 085 76 282 8
Property, plant and equipment 39 463 30 647 29
Goodwill 25 744 27 017 (5)
Other intangible assets 13 053 13 088 -
Investments in associates 60 73 (18)
Loan and other non-current recievables 2 433 2 852 (15)
Deferred income tax assets 1 332 2 605 (49)
Current assets 33 501 20 635 62
Cash and cash equivalents 16 868 9 961 69
Restricted cash* 739 130 468
Other current assets 15 894 10 544 51
Total assets 115 586 96 917 19
EQUITY AND LIABILITIES
Shareholders` equity
Share capital and reserves 47 315 38 696 22
Minority interest 4 187 4 033 4
51 502 42 729 21
Non-current liabilities 29 114 34 203 (16)
Borrowings 23 007 28 587 (20)
Deferred income tax liabilities 2 676 2 778 (4)
Other non-current liabilities 3 431 2 838 21
Current liabilities 34 970 19 985 76
Non-interest bearing liabilities 24 320 15 593 56
Interest-bearing liabilities 10 650 4 392 142
Total equity and liabilities 115 586 96 917 19
*These monies consist primarily of amounts placed on deposit with banks in
Nigeria to secure letters of credit.
Condensed consolidated statements of changes in equity
12 months 12 months
ended ended
31 December 31 December
2007 2006
Audited Audited
Rm Rm
Opening balance 42 729 23 096
Net profit attributable to Equity holders of 10 608 10 610
the company
Dividends paid (3 387) (2 500)
Issue of share capital 60 9 532
Disposal/(Purchase)of non-controlling interests 294 (2 874)
Purchase of controlling interests 192 1 187
Minorities` share of profits and reserves 1 308 1 489
Shareholders` revaluation reserve 565 86
Share-based payments reserve 92 36
Cash flow hedging reserve 30 (54)
Coversion of shareholder loans to preference (192) -
shares
Currency translation differences (797) 2 121
51 502 42 729
Segmental analysis
12 months 12 months
ended ended
31 December 31 December
2007 2006
Audited Audited
Rm Rm
REVENUE
South and East Africa 31 453 26 586
West and Central Africa 30 843 21 208
Middle East and North Africa 10 779 3 756
Head office companies 70 45
73 145 51 595
EBITDA
South and East Africa 11 329 9 346
West and Central Africa 16 601 11 355
Middle East and North Africa 2 530 1 117
Head office companies 1 385 595
31 845 22 413
PAT
South and East Africa 6 155 5 119
West and Central Africa 6 529 7 489
Middle East and North Africa 730 182
Head office companies (1 498) (691)
11 916 12 099
Condensed consolidated cash flow statements
12 months 12 months
ended ended
31 December 31 December
2007 2006
Audited Audited
Rm Rm
Cash inflows from operating activities 25 850 17 622
Cash outflows from investing activities (17 152) (35 711)
Cash (out)/in flows from financing activities (2 135) 18 993
Net movement in cash and cash equivalents 6 563 904
Cash and cash equivalents at beginning of period 9 008 7 164
Effect of exchange rate changes (25) 940
Cash and cash equivalents at end of period 15 546 9 008
Notes to the condensed consolidated financial statements
1. Basis of preparation
The condensed financial information ("financial information") announcement is
based on the audited financial statements of the Group for the year ended 31
December 2007 which have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), International Accounting Standards 34,
the Listing Requirements of the JSE Limited and the South Africa Companies Act,
Act 61 of 1973, as amended, on a consistent basis with that of the prior period.
2. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per ordinary share are
based on basic headline earnings of R10 886 million (December 2006: R10 628
million) and adjusted headline earnings of R12 693 million (December 2006: R10
246 million) respectively, and a weighted average of 1 861 454 696 (December
2006: 1 752 304 867) ordinary shares in issue.
Reconciliation between net profit attributable to the equity holders of the
Company and headline earnings.
12 months 12 months
ended ended
31 December 31 December
2007 2006
Audited Audited
Rm Rm
Net profit attributable to Equity holders of the 10 608 10 610
Company
Adjusted for:
Loss on disposal of property, plant and equipment 61 40
Impairment/(reversal of impairment) of property, 173 (22)
plant and equipment
Other impairments 44 -
Basic headline earnings 10 886 10 628
Adjusted for:
Reversal of deferred tax asset (223) (650)
Reversal of the subsequent utilisation of 1 664 -
deferred tax asset
Reversal of put option in respect of subsidiary
- Fair value adjustment 262 120
- Finance costs 210 301
- Minority share of profits (106) (153)
Adjusted headline earnings 12 693 10 246
Reconciliation of headline earnings per ordinary
share (cents)
Attributable earnings per share (cents) 569,9 605,4
Adjusted for:
Loss on disposal of property, plant and equipment 3,3 2,3
Impairment/(reversal of impairment) of property, 9,3 (1,2)
plant and equipment
Other impairments 2,4 -
Basic headline earnings per share (cents) 584,8 606,5
Reversal of deferred tax asset (12,0) (37,1)
Reversal of the subsequent utilisation of 89,4 -
deferred tax asset
Reversal of put option in respect of subsidiary 19,7 15,3
Adjusted headline earnings per share (cents) 681,9 584,7
Contribution to adjusted headline earnings per
ordinary share (cents)
South and East Africa 329,2 289,5
West and Central Africa 410,6 325,8
Middle East and North Africa 22,2 2,7
Head office companies (80,1) (33,3)
681,9 584,7
Number of ordinary shares in issue:
- Weighted average (000) 1 861 455 1 752 305
- At period end (000) 1 864 798 1 860 268
Adjusted headline earnings adjustments
Deferred tax asset
The Group`s subsidiary in Nigeria had been granted a five-year tax holiday under
"pioneer status" legislation.
As previously disclosed, although the Group has complied with the requirements
of IAS 12 in this regard, no cognisance was taken in determining the value of
such deferred tax assets for uncertainties arising out of the effects of the
time value of money or future foreign exchange movements. The Board resolved to
report adjusted headline earnings (negating the effect of the deferred tax
asset) in addition to basic headline earnings, to more fully reflect the Group`s
results for that period.
A deferred tax credit of R223 million (December 2006: R650 million) excluding
minority interests relating to deductible temporary differences has been
recognised for the period ended 31 December 2007 in terms of IAS 12 - Income
Taxes.
On 31 March 2007 MTN Nigeria exited "pioneer status," and from 1 April 2007
became subject to income tax in Nigeria. A deferred tax asset of R2,5 billion
was created during "pioneer status" in respect of capital allowances on capital
assets that are only claimable after the Company comes out of "pioneer status".
The above has resulted in the commencement of the reversal of the deferred tax
asset shown as an adjustment of R1,9 billion (R1,7 billion excluding minorities)
to the adjusted headline earnings figure.
Put option in respect of subsidiary
"The implementation of IFRS requires the Group to account for a written put
option held by a minority shareholder of one of the Group subsidiaries, which
provides them with the right to require the subsidiary to acquire their
shareholdings at fair value. Prior to the implementation of IFRS the
shareholding was treated as a minority shareholder in the subsidiary as all
risks and rewards associated with these shares, including dividends, currently
accrues to the minority shareholders.
IAS 32 requires that in the circumstances described in the previous paragraph:
(a) the present value of the future redemption amount be reclassified from
equity to financial liabilities and that the financial liability so reclassified
subsequently be measured in accordance with IAS 39;
(b) in accordance with IAS 39, all subsequent changes in the fair value of the
liability together with the related interest charges arising from present
valuing the future liability be recognised in the income statement; and
(c) the minority shareholder holding the put option no longer be regarded as a
minority shareholder, but rather as a creditor from the date of receiving the
put option.
Although the Group has complied with the requirements of IAS 32 and IAS 39 as
outlined above, the Board of Directors has reservations about the
appropriateness of this treatment in view of the fact that:
(a) the recording of a liability for the present value of the future strike
price of the written put option results in the recording of a liability that is
inconsistent with the Framework, as there is no present obligation for the
future strike price;
(b) the shares considered to be subject to the contracts are issued and fully
paid up, have the same rights as any other issued and fully paid up shares and
should be treated as such; and
(c) the written put option meets the definition of a derivative and should
therefore be accounted for as a derivative in which case the liability and the
related fair value adjustments recorded through the income statement would not
be required.
3. Independent audit by the auditors
These condensed consolidated results have been audited by our joint auditors
PricewaterhouseCoopers Inc. and SizweNtsaluba VSP, who have performed their
audit in accordance with the International Standards on Auditing. A copy of
their unqualified audit report is available for inspection at the registered
office of the Company.
12 months 12 months
31 December 31 December
2007 2006
Audited Audited
Rm Rm
4. Capital expenditure incurred 15 536 9 778
5. Contingent liabilities and commitments
Contingent liabilities 957 911
Operating leases 955 837
Finance leases 581 592
Other 373 506
6. Commitments for property, plant and equipment
and intangible assets
- Contracted for 8 671 3 268
- Authorised but not contracted for 21 910 13 163
7. Cash and cash equivalents
Bank balances, deposits and cash 16 868 9 961
Call borrowings (1 322) (953)
15 546 9 008
8. Interest-bearing liabilities
Call borrowings 1 322 953
Short-term borrowings 9 328 3 439
Current liabilities 10 650 4 392
Long-term liabilities 23 007 28 587
33 657 32 979
9. Other non-current liabilities
The put options in respect of subsidiaries arise from arrangements whereby
minority shareholders of two of the Group`s subsidiaries have the rights to put
their remaining shareholdings in the subsidiaries to Group companies.
On initial recognition, these put options were fair-valued using effective
interest rates as deemed appropriate by management. To the extent that the put
options are not exercisable at a fixed strike price, the fair value will be
determined on an annual basis with movements in fair value being recorded in the
profit and loss.
10. Business combinations
The acquisition of additional shares in MTN Rwanda
In November 2007 the shareholding in MTN Rwanda, a telecommunications company
incorporated in Rwanda, was increased from 40% to 55%, for US$ 40,5 million,
converting the joint venture operation into a fully consolidated subsidiary of
the Group.
MTN Rwanda contributed revenues of R305 million and net profit of R101 million
to the Group. If the step-up had occurred on 1 January 2007, the contribution to
the Group revenue would have been R583 million and the contribution after tax
would have been R197 million.
These amounts have been calculated using the Group`s accounting policies.
Goodwill is attributable to the synergies expected to arise after the Group
gains control of MTN Rwanda.
Details of the net assets acquired and goodwill as at acquisition are as
follows:
November 2007
Rm
Total purchase consideration 272
Fair value of net assets acquired (58)
Goodwill 214
The assets and liabilities arising from the
acquisition are as follows:
Fair value at Acquiree`s
acquisition carrying
date amount on
acquisition
date
Rm Rm
Cash and cash equivalents 223 223
Property, plant and equipment 254 254
Intangibles 2 2
Investment in subsidiary 4 4
Inventories and receivables 84 84
Payables (139) (139)
Net deferred tax liability (39) (39)
Net assets acquired 389 389
Minorities (175)
Net assets already owned (156)
Fair value of assets acquired 58
Cash and cash equivalent in subsidiary acquired 134
Purchase consideration (272)
Cash outflow on acquisition (138)
11. Post-balance sheet events
Broadening of the Nigerian shareholder base of MTN Nigeria
Subsequent to year-end, Nigerian individuals and key institutions have acquired
a 9,45% interest in MTN Nigeria from MTN, acting through its wholly owned
subsidiary, MTN International (Mauritius) Limited, and other shareholders in MTN
Nigeria, pursuant to a private placement.
The main rationale for the transaction is to achieve MTN`s stated intention of
broadening the ownership of MTN Nigeria among Nigerian citizens and
institutions, and to reaffirm MTN`s commitment of enabling greater Nigerian
representation in MTN Nigeria.
MTN disposed of an overall equity interest of 5,96% in MTN Nigeria as part of
the private placement, for a consideration of US$594,50 million, thereby
reducing its interest in MTN Nigeria to 76,08%.
The allocation date for the private placement was 8 February 2008 and share
transfers have been effected on 18 February 2008.
Change in tax rate
On 20 February 2008, the South African Minister of Finance announced a change in
the corporate tax rate from 29% to 28%. This change is effective for financial
years ending on any date between 1 April 2008 and 31 March 2009.
Directorate
M C Ramaphosa (Chairman), P F Nhleko (Group President and CEO)*, R S Dabengwa*,
R D Nisbet*, D D B Band, K P Kalyan , A T Mikati, M J N Njeke, A H Sharbatly, J
H N Strydom, A F van Biljon, J van Rooyen
*Executive
Group Secretary
S B Mtshali, 216 14th Avenue, Fairland, 2195.
Private Bag 9955, Cresta, 2118, RSA
Registered office 216 14th Avenue, Fairland, 2195
American Depository Receipt (ADR) programme
Cusip No. 62474M108 ADR to ordinary share 1:1.
Depository: The Bank of New York, 101 Barclay Street, New York NY 10286, USA
Office of the South African registrars
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
PO Box 61051, Marshalltown, 2107
Joint auditors
PricewaterhouseCoopers Inc., 2 Eglin Road, Sunninghill, 2157
Private Bag X36, Sunninghill, 2157 and SizweNtsaluba VSP
20 Morris Street East, Woodmead, 2146
PO Box 2939, Saxonwold, 2132
E-mail investor_relations@mtn.co.za
Our financial results can be viewed on our website at: www.mtn.com
Date: 19/03/2008 08:00:05 Produced by the JSE SENS Department.
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