MTN
MTN
MTN - MTN Group Limited - Reviewed interim results for the six months ended 30
June 2008
MTN Group Limited
Registration number: 1994/009584/06
ISIN code: ZAE000042164
Share code: MTN
Reviewed Interim Results for the six months ended 30 June 2008
Highlights
Group subscribers up 53% to 74,1 million from June 2007
Revenue up 35% to R46,1 billion from June 2007
EBITDA up 29% to R19,6 billion from June 2007
Adjusted headline EPS up 26% to 408,5 cents from June 2007
Review of results
Against the background of increased investment in infrastructure and
distribution to cater for ever increasing demand, the MTN Group Limited (MTN
Group) delivered a sound performance in the six months to 30 June 2008, driven
mainly by subscriber growth in increasingly competitive markets.
The 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 strong revenue growth of 35% to R46,1 billion (30 June 2007:
R34,2 billion). The WECA and SEA regions contributed 46% and 38% respectively of
total Group revenue, and MENA the remaining 16%. This compares with 44% by WECA,
43% by SEA and 13% by MENA for the six months to June 2007. Included in these
numbers is the positive effect of foreign currencies which, having strengthened
against the Rand, contributed to the increase in Group revenue.
The Group`s earnings before interest, tax, depreciation and amortisation
("EBITDA") increased by 29% to R19,6 billion (30 June 2007: R15,2 billion). The
WECA and SEA regions contributed 57% and 30% respectively of total Group EBITDA,
and MENA the remaining 11%. This compares with 54% by WECA, 34% by SEA and 8% by
MENA for the six months to June 2007. Included in these numbers is the positive
effect of foreign currencies which, having strengthened against the rand,
contributed to the increase in Group EBITDA.
The Group EBITDA margin reduced by 1,8 percentage points to 42,6% for the period
ended 30 June 2008 (30 June 2007: 44,4%). MTN maintained EBITDA margins in
Nigeria but margins in South Africa were lower by 2 percentage points when
compared to the same period last year. The Group EBITDA margin dilution was due
to a number of factors including increased investment in distribution and
marketing, the benefits of which are expected to come through in future
reporting periods; increased maintenance activities to improve network quality;
rising fuel; site rental renewal costs and increased marketing spend. Excluding
the high revenue share arrangements in Iran and Syria, the Group EBITDA margin
would have been 46,0% (June 2007: 47,8%).
Notwithstanding the increase in the tax charge in Nigeria mentioned in the
income statement analysis below, profit after tax ("PAT") increased by 11% to
R7,0 billion compared to R6,3 billion for the six months to 30 June 2007.
Basic headline earnings per share ("HEPS") rose to 339,3 cents for the period,
12% above the 304,2 cents for the six months ended 30 June 2007.
Adjusted headline earnings per share increased to 408,5 cents for the period,
26% above the 324,7 cents for the six months ended 30 June 2007.
The Group recorded 74,1 million subscribers as at 30 June 2008, a 53% increase
from the same period last year (48,2 million subscribers) and a 21% increase
from 61,4 million at 31 December 2007. In the six months from December 2007,
subscribers in the WECA region increased by 16% to 32,5 million, in the SEA
region by 9% to 21,0 million and the MENA region recorded a 47% increase to 20,6
million. The growth in the MENA region over the last six months was mainly
driven by a 93% increase in subscribers in Irancell to 11,6 million. MTN
consolidates only 49% of Irancell financials thereby diluting the impact on
revenue and EBITDA growth.
The average revenue per user ("ARPU") has marginally declined in most
operations, which is consistent with increased penetration into lower usage
segments.
Income statement analysis
Group consolidated revenue increased by 35% to R46,1 billion
(30 June 2007: R34,2 billion) driven largely by the 54% growth in subscribers
since 30 June 2007. The increase in revenue was mainly driven by Nigeria, which
increased revenue by 39% to R13,4 billion, and South Africa, which increased
revenue by 18% to R15,4 billion when compared to the six-month period ending 30
June 2007. Syria, Ghana and Iran (MTN`s share of 49% only) generated revenues of
R2,9 billion, R2,8 billion and R1,9 billion respectively.
Group EBITDA increased by 29% to R19,6 billion (30 June 2007: R15,2 billion) as
a result of strong revenue growth.
The WECA region`s EBITDA increased by 37% accounting for 57% of the Group`s
EBITDA. This was mainly driven by EBITDA from Nigeria. The SEA region
contributed 30% to Group EBITDA, down 4% from 30 June 2007. The MENA region
contributed 11% to Group EBITDA, up 3% from 30 June 2007.
The Group`s EBITDA margin declined by 1,8 percentage points to 42,6% as compared
to June 2007.
The Group depreciation and amortisation charge increased by R1,4 billion to R5,7
billion for the period ended 30 June 2008. R0,5 billion of this amount is
attributable to additional capital expenditure for the network expansion in
Nigeria where depreciation increased by 34% to R2,0 billion compared to the six-
month period to 30 June 2007. Increased investment in South Africa, Iran and
Sudan accounted for R0,3 billion of the increase.
Net finance costs remained almost flat at R1,5 billion for the period ended 30
June 2008 in relation to the comparable period in the prior year. Net finance
costs include interest expense of R2,8 billion (30 June 2007: R2,0 billion) and
foreign exchange gains of R1,0 billion (30 June 2007: 2,0 billion). The higher
finance costs mainly relate to the increased funding requirement for the ongoing
expansion of network capacity in Nigeria. Included in the finance costs this
period is R1,2 billion (MTN share R924 million) relating to the Nigeria put
option(30 June 2007; R288 million and MTN Share R243 million).
The Group`s Board continues to report adjusted headline EPS in addition to basic
headline EPS. The adjustments are in respect of:
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 46,4 cents; and
The unwinding of previously reversed deferred tax asset in Nigeria, which
increased the adjusted headline EPS by 22,8 cents.
Adjusted headline EPS of 408,5 cents for the period under review compares
favourably with adjusted headline EPS of 324,7 for the six months ended 30 June
2007.
The Group taxation charge increased by R2,4 billion compared to the six months
ended June 2007. This relates mainly to the ending of pioneer status tax holiday
in Nigeria in March 2007 resulting in a tax charge of R2,9 billion for the
period under review as compared to R1,0 billion for the period ended June 2007.
As provided by the commencement rule for the taxation of new business post
pioneer status, taxable profit in Nigeria for the 12 months between April 2007
and March 2008 was effectively taxed twice. The implication of this is that
taxable profits in Nigeria for the January to March 2008 period was taxed at 60%
for company income tax and 4% for education tax.
MTN Group`s effective tax rate increased from 33% in June 2007 to 44% in June
2008, mainly due to the tax effects in Nigeria noted above. This is expected to
decrease to the high thirties for the year ending December 2008.
Balance sheet and cash flow
The Group`s total assets increased by 26% to R146 billion compared with R116
billion at 31 December 2007. Property, plant and equipment increased by R10,7
billion from 31 December 2007. Included in this increase is R5,2 billion
relating to foreign currency translation movements. The increase in assets is
mainly driven by infrastructure investment to increase network capacity and
improve quality of service across all operations. For the six months ended 30
June 2008, Nigeria invested R3,9 billion, South Africa R1,8 billion, Ghana R0,8
billion and Sudan and Iran each invested R0,6 billion. Total capital expenditure
for the Group was R10,3 billion as at 30 June 2008 (30 June 2007: R6,3 billion).
Goodwill and intangible assets increased by 12% to R43,5 billion as compared to
December 2007, mainly as a result of exchange rate movement of local currencies
against the rand on the translation of Investcom LLC`s goodwill.
Current assets increased by R13,1 billion to R46,6 billion as compared to
December 2007. The increase is mainly attributable to the improvement in cash
and cash equivalents of R10,0 billion to R27,6 billion and other current assets
which increased by R3,1 billion to R19 billion. The increase in other current
assets is mainly due to the movement in trade and other receivables. Trade and
other receivables in South Africa increased by R0,1 billion to R6,4 billion, in
Nigeria by R0,6 billion to R0,8 billion and in Iran by R1,4 billion to R1,7
billion.
Total interest-bearing debt increased by 21% to R40,6 billion as at 30 June 2008
(31 December 2007: R33,7 billion).
The increase is mainly attributable to Nigeria drawing down US$865 million of
the US$2 billion unsecured facility during the six months ended 30 June 2008. A
significant portion of the interest-bearing debt was originally used to fund the
Investcom acquisition via MTN International (Mauritius). This debt includes R5
billion four-year bonds, R1,3 billion eight-year bonds, as well as syndicate
facilities consisting of two five-year amortising loans of which US$656 million
and R6,1 billion remain respectively, and an undrawn revolving credit facility
of US$1,25 billion. R4 billion of the unproductive debt was repaid during the
six months ended 30 June 2008, reducing it to R10,9 billion.
MTN Nigeria`s debt increased by R7,4 billion to R12,4 billion due to the draw
downs mentioned earlier. This facility comprises two tranches, namely the Naira
equivalent of US$1,6 billion and US$400 million denominated in US$. The company
continues to draw down on this facility as it rolls out its network.
Irancell`s debt increased by R1,1 billion to R4,5 billion, primarily as a result
of funding its network rollout and other operational and working capital
requirements. The company continues to benefit from deferred payment facility
arrangements with its equipment vendors for the sole purpose of funding the
network rollout.
The Group`s net debt as at 30 June 2008 was R13,0 billion
(31 December 2007: R16,1 billion), reflecting the continued strong cash flow
generation of the Group, notwithstanding the increased investment in
infrastructure. Net debt to EBITDA annualised was 0,3 times for the period ended
30 June 2008. The Group`s target is to reduce net debt to EBITDA to 0,4 times
EBITDA by the end of 2008 financial year.
OPERATIONAL REVIEW
South Africa?MTN South Africa performed well in a very competitive environment
and despite the slowdown in consumer spending in many sectors due to rising
interest rates, inflation and the rising fuel prices. Subscribers increased by
5% to 15,6 million in June 2008 from 14,8 million in December 2007. This was
mainly due to strong growth in prepaid subscribers which grew 6% to 13 million
and to a lesser extent the 4% growth in postpaid subscribers to 2,6 million.
The introduction of MTN Zone (a prepaid dynamic tariffing price plan) in
February 2008 together with the continued impact of low denomination vouchers
played a major role in the acquisition of prepaid subscribers. MTN Zone had 4,5
million users at the end of June 2008, of which 400 000 were estimated to be new
connections.
Average revenue per user (ARPU) of the prepaid segment remained stable at R92
while postpaid ARPU increased R9 to R405. The prepaid ARPU performance was
positively influenced by the continued success of the low denomination vouchers
and higher average usage by the subscribers that signed up for MTN Zone when
compared with other prepaid subscribers. Blended ARPU, as a consequence of the
movement in postpaid ARPU and increased contribution of prepaid subscribers,
shows a decline by R4 to R145 from December 2007.
During the period additional nodes were introduced to increase capacity on the
voice and data core networks of 25% and 30% respectively. SMS capacity was also
increased by over 40%.
To improve the efficiency of the distribution channel, MTN South Africa acquired
the remaining 51% shareholding of Cell Place (Proprietary) Limited and also
exercised the right to acquire the remaining 51% of I-Talk (Proprietary)
Limited, also a service provider. Both these transactions together with Verizon
South Africa (Proprietary) Limited, an internet service provider, are subject to
the Competition Commission approval.
Nigeria?The Nigeria subscriber base increased 12% to 18,6 million subscribers
from December 2007. ARPU declined slightly to US$16 from US$17 reported at the
end of last year. The trend is in line with the increasing competitive
environment and the deeper mobile penetration into the market, which is now at
31%. Market share marginally declined to 43% to 44% December 2007.
Aggressive network rollout continued during the first half of the year and 758
new BTS sites were integrated into the network and 494 3G sites are now live.
Over 1 200 km of new microwave backbone routes are already in progress and shall
be completed by the end of 2008.
Iran?The Iran subscriber base grew 93% from December 2007 to 11,6 million
subscribers. The aggressive subscriber acquisition rate can mainly be attributed
to the Buy One Get One Free (BOGOF) campaigns, competitive sim pricing which
lowered upfront cost of ownership, and attractive basic and promotional tariff
plans. Market share increased from 23% in December 2007 to 32% at the end of
June 2008, while mobile penetration moved up from 37% to 50% over the same
period.
Iran`s ARPU declined marginally from US$10 in December 2007 to US$9 for this
half-year period as the operation continued to attract low income subscribers.
During the half year period, 696 new BTS sites were rolled out bringing the
total live sites to 2 649. At the end of June 2008, 454 cities have been covered
by the network, of which 220 were switched on this year, and a total of 4 027 km
of road coverage has been put on the ground (2 918 km at December 2007).
Population coverage has increased from 50% in December 2007 to 57% in June 2008.
The operation now has seven established dealers of its products with 6 000
registered dealer outlets and 40 000 points of sale countrywide.
Ghana?MTN Ghana recorded a 24% increase in subscribers to 4,9 million from
December 2007. A combination of usage-based promotions, direct consumer
engagements and network coverage expansion led to this performance. MTN Zone was
successfully launched on 1 June. Market share remained at 52% as in December
2007, and the market environment is expected to become more competitive later in
the year as new entrants join the industry.
ARPU has declined by US$1 to US$14 from December 2007. The tariffs were adjusted
in June 2008 to partly absorb the 6% CST revenue tax that was introduced
effective 1 June 2008.
The company rolled out 483 new BTS sites and now has a total of 1 271 sites. One
new switch and four new Base Station Controllers (BSC`s) were also installed
during the period.
Sudan The MTN Sudan subscriber base grew by almost 20 000 from December last
year to 2,1 million subscribers. Stiff competition combined with the regulatory
requirement to disconnect all prepaid subscribers with no personal information
recorded resulted in lower connections and a high level of disconnections. A
total of 1,1 million subscribers were disconnected during the beginning of the
second quarter this year. Market share consequently declined from 28% end of
last year to 25%.The results from MTN Sudan were not as expected but the
situation is being appropriately addressed.
ARPU reduced by US$5 to US$7 from December 2007 as a consequence of both lower
minute usage by subscribers and lower effective tariffs as all the players in
the industry offered cheap on-net calls to ringfence their market shares.
A total of 191 BTS sites were rolled out during the six-month period and the
core network capacity has been increased from 3 million to 4,1 million
subscribers. Preparations for rollout of the network into the southern part of
the country commenced in April 2008.
Syria?MTN Syria now has 3,4 million subscribers, up 9% from December 2007. The
growth was mainly driven by the reduction in connection fees and effective churn
management. Market share increased from December 2007 by 1 percentage point to
46%.
ARPU for the period was US$ 19, a reduction of US$1 from the year ended December
2007. Penetration into the lower usage segments of the market and a 20% tariff
reduction in the last quarter of 2007 were responsible for this drop.
During the period 239 new BTS sites were rolled out. The operation has been
running a 3G trial project over the past 12 months and has received governmental
approvals for commercial launch of the services.
Prospects
Given the current developments in the global telephony market, the Group`s
prospects for the second half of 2008 remain positive in increasingly
competitive markets. The major strategic priorities are:
actively seeking value-accretive expansion opportunities in emerging markets;
ongoing infrastructure investment to ensure appropriate levels of capacity and
quality of service;
ensuring the Group is well positioned to benefit from a rapidly converging
technology market; and
optimise efficiencies in maintaining and improving competitive position.
For and on behalf of the Board
M C Ramaphosa P F Nhleko Fairland
(Chairman) (Group President and CEO) 28 August 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 30 June 2008
Subscribers (`000) ARPU
South and East Africa 20 995
South Africa 15 590 R145
Uganda 2 776 $9
Botswana 885 $13
Rwanda 834 $11
Swaziland 457 $15
Zambia 453 $12
West and Central Africa 32 506
Nigeria 18 565 $16
Ghana 4 997 $14
Cote d`Ivoire 3 030 $11
Cameroon 3 106 $12
Guinea Conakry 797 $10
Benin 779 $16
Congo Brazzaville 522 $23
Liberia 407 $16
Guinea Bissau 303 $12
Middle East and North Africa 20 557
Iran 11 593 $9
Syria 3 375 $19
Sudan 2 109 $7
Yemen 1 725 $8
Afghanistan 1 627 $6
Cyprus 128 $45
Total MTN 74 058
Condensed consolidated balance sheets
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Change Audited
Rm Rm % Rm
ASSETS
Non-current assets 98 963 79 330 24,7 82 085
Property, plant and 50 125 33 954 47,6 39 463
equipment
Goodwill and other 43 450 40 524 7,2 38 797
intangible assets
Investments in 52 78 (33,3) 60
associates
Deferred income tax 945 2 335 (59,5) 1 332
assets
Loans and other non- 4 391 2 439 80,0 2 433
current receivables
Current assets 46 585 26 574 75,3 33 501
Cash and cash 27 058 12 744 112,3 16 868
equivalents
Restricted cash 524 622 (15,8) 739
Other current assets 19 003 13 208 43,9 15 894
Total assets 145 548 105 904 37,4 115 586
Equity and liabilities
Shareholders` equity 67 228 47 033 42,9 51 502
Share capital and 63 112 43 207 46,1 47 315
reserves
Minority interests 4 116 3 826 7,6 4 187
Non-current liabilities 34 075 28 661 18,9 29 114
Borrowings 29 313 24 531 19,5 23 007
Deferred income tax 3 812 2 753 38,5 2 676
liabilities
Other non-current 950 1 377 (31,0) 3 431
liabilities
Current liabilities 44 245 30 210 46,5 34 970
Put option 3 258 - - -
Non-interest-bearing 29 737 20 287 46,6 24 320
liabilities
Interest-bearing 11 250 9 923 13,4 10 650
liabilities
Total equity and 145 548 105 904 37,4 115 586
liabilities
Segmental analysis
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
South and East Africa 17 609 14 556 31 453
West and Central Africa 21 132 15 053 30 843
Middle East and North 7 324 4 575 10 779
Africa
Head office companies 63 22 70
46 128 34 206 73 145
EBITDA
South and East Africa 5 905 5 163 11 328
West and Central Africa 11 174 8 162 16 601
Middle East and North 2 161 1 163 2 529
Africa
Head office companies 407 713 1 387
19 647 15 201 31 845
PAT
South and East Africa 3 162 2 684 6 155
West and Central Africa 3 985 4 264 6 529
Middle East and North Africa 636 189 730
Head office companies (819) (832) (1 498)
6 964 6 305 11 916
Condensed consolidated income statements
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Change Audited
Rm Rm % Rm
Revenue 46 128 34 206 34,9 73 145
Direct network (5 891) (3 932) 49,8 (8 525)
operating costs
Cost of handsets (2 447) (1 992) 22,8 (5 524)
and other
accessories
Interconnect and (6 225) (4 747) 31,1 (9 997)
roaming
Employee benefits (2 167) (1 560) 38,9 (3 379)
Selling, (6 368) (4 655) 36,8 (9 071)
distribution and
marketing expenses
Other expenses (3 383) (2 118) 59,7 (4 804)
Depreciation and (5 714) (4 309) 32,6 (8 973)
amortisation
Net finance costs (1 499) (1 491) 0,5 (3 173)
Share of results of 2 5 (60,0) 8
associates after
tax
Profit before 12 436 9 406 32,2 19 707
income tax
Income tax expense (5 472) (3 101) 76,5 (7 791)
Profit after tax 6 964 6 305 10,5 11 916
Attributable to: 6 964 6 305 10,5 11 916
Equity holders of 6 240 5 555 12,3 10 608
the company
Minority interests 724 750 (3,5) 1 308
Earnings per ordinary share (cents) attributable to equity holders
of the company
- basic 334,6 298,6 12,1 569,9
- diluted 326,6 286,2 14,1 559,2
Dividends per share 136,0 90,0 51,1 90,0
(cents)
Condensed consolidated statements of changes in equity
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Audited
Rm Rm Rm
Opening balance 51 502 42 729 42 729
Net profit attributable to 6 240 5 555 10 608
equity holders of the
company
Dividends paid (5 165) (2 702) (3 387)
Issue of share capital 8 14 60
Transactions with minorities 4 076 200 -
Disposal of non-controlling 907 - 294
interest
Purchase of controlling - - 192
interest
Minorities` share of profits 724 750 1 308
and reserves
Shareholders` revaluation 153 259 565
reserve
Share-based payment reserve 6 11 92
Cancellation of MTN Cote 54 - -
d`Ivoire put option
Cash flow hedging reserve (8) - 30
Conversion of shareholders` - - (192)
loans to preference shares
Currency translation 8 731 217 (797)
differences
67 228 47 033 51 502
Condensed consolidated cash flow statements
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Audited
Rm Rm Rm
Cash inflows from operating 12 988 9 408 25 850
activities
Cash outflows from investing (7 444) (7 170) (17 152)
activities
Cash in/(out)flows from 3 209 41 (2 135)
financing activities
Net movement in cash and 8 753 2 279 6 563
cash equivalents
Cash and cash equivalents at 15 546 9 008 9 008
beginning of period
Effect of exchange rate 1 705 9 (25)
changes
Cash and cash equivalents at 26 004 11 296 15 546
end of period
Notes to the condensed consolidated financial statements
1. Independent review by the auditors
These condensed consolidated results have been reviewed by our joint auditors
PricewaterhouseCoopers Inc. and SizweNtsaluba vsp, who have performed their
review in accordance with the International Standard on Review Engagements 2410.
A copy of their unqualified review report is available for inspection at the
registered office of the company.
2. General information
MTN Group Limited (the "Group") carries on the business of investing in the
telecommunications industry through its subsidiary companies, joint ventures and
associate companies.
3. Basis of preparation
The condensed consolidated interim financial information ("interim financial
information") announcement was prepared in accordance with International
Financial Reporting Standards ("IFRS") IAS 34 - Interim Financial Reporting and
in compliance with the Listing Requirements of the JSE Limited and the South
African Companies Act (1973), on a consistent basis with that of the prior
period.
4. Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 December 2007, as described in the
annual financial statements for the year ended 31 December 2007.
5. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per ordinary share are
based on basic headline earnings of R6 328 million (June 2007: 5 660 million)
and adjusted headline earnings of R7 618 million (June 2007: R6 040 million)
respectively, and a weighted average number of ordinary shares in issue of 1 864
911 (June 2007: 1 860 430).
Reconciliation between net profit attributable to the equity holders of the
company and headline earnings
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Audited
Rm Rm Rm
Net** Net** Net**
Net profit attributable 6 240 5 555 10 608
to equity holders of the
company
Adjusted for:
(Profit)/loss on (1) 32 61
disposal of property,
plant and equipment
Impairment of property, 89 73 173
plant and equipment
Other impairments - - 44
Basic headline earnings 6 328 5 660 10 886
Adjustment:
Reversal of deferred tax - (223) (223)
asset
Reversal of the 425 436 1 664
subsequent utilisation
of deferred tax asset
Reversal of put option
in respect of subsidiary
- Fair value adjustment 520 132 262
- Finance costs 404 111 210
- Minority share of (59) (76) (106)
profits
Adjusted headline 7 618 6 040 12 693
earnings
Reconciliation of
headline earnings per
ordinary share (cents)
Attributable earnings 334,6 298,6 569,9
per share (cents)
Adjusted for:
(Profit)/loss on (0,1) 1,7 3,3
disposal of property,
plant and equipment
Impairment of property, 4,8 3,9 9,3
plant and equipment
Other impairments - - 2,4
Basic headline earnings 339,3 304,2 584,8
per share (cents)
Reversal of deferred tax - (12,0) (12,0)
asset
Reversal of the 22,8 23,5 89,4
subsequent utilisation
of deferred tax asset
Reversal of put option 46,4 9,0 19,7
in respect of subsidiary
Adjusted headline 408,5 324,7 681,9
earnings per share
(cents)
Contribution to adjusted
headline earnings per
ordinary share (cents)
South and East Africa 165,9 144,0 329,2
West and Central Africa 261,0 217,3 410,6
Middle East and North 25,5 1,7 22,2
Africa
Head office companies (43,9) (38,3) (80,1)
408,5 324,7 681,9
Number of ordinary
shares in issue:
- Weighted average (000) 1 864 911 1 860 430 1 861 455
- At period end (000) 1 865 354 1 861 208 1 864 798
** Amounts are stated after taking into account minority interests.
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. 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 resulted in the
commencement of the reversal of the deferred tax asset shown as an adjustment of
R542 million (June 2007: R515 million) (R425 million excluding minorities (June
2007: R436 million) to the adjusted headline earnings figure.
As previously disclosed, although the Group has complied with the requirements
of IAS 12 in this regard, the Board of Directors has reservations about the
appropriateness of this treatment in view of the fact that no cognisance may be
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 therefore 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 the period.
Put option in respect of subsidiary
"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 accrue 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 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."
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Audited
Rm Rm Rm
6. Capital expenditure 10 311 6 256 15 348
incurred
7. Contingent
liabilities and
commitments
Contingent liabilities 1 013 610 957
Operating leases 917 1 490 955
Finance leases 1 393 608 581
Other 84 - 373
8. Commitments for
property, plant and
equipment and intangible
assets
- Contracted for 12 686 7 022 8 671
- Authorised but not 11 816 8 446 21 910
contracted for
9. Cash and cash
equivalents
Bank balances, deposits 27 058 12 744 16 868
and cash
Call borrowings (1 054) (1 448) (1 322)
26 004 11 296 15 546
10. Interest-bearing
liabilities
Call borrowings 1 054 1 448 1 322
Short-term borrowings 10 196 8 475 9 328
Current liabilities 11 250 9 923 10 650
Long-term liabilities 29 313 24 531 23 007
40 563 34 454 33 657
11. Other non-current liability
The put option in respect of the subsidiary arises from an arrangement whereby
the minority shareholders of the Group`s subsidiary have the right to put their
remaining shareholding in the subsidiary to Group companies.
On initial recognition, the put option was fair valued using effective interest
rates as deemed appropriate by management. To the extent that the put option is
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 income
statement.
In January 2008, the MTN Cote d`Ivoire put option, amounting to R474 million,
was cancelled. Upon cancellation the outstanding balance was transferred to
equity. There was no effect on profit and loss.
12. The disposal of 5,96% of MTN Nigeria Communications Limited
In February 2008, the legal shareholding in MTN Nigeria Communications Limited,
a telecommunications company incorporated in Nigeria, was reduced from 82,04% to
76,08%, for ZAR 4660 million. The transaction did not result in loss of control.
Carrying value on
disposal date
Rm
The assets and liabilities sold are:
Cash and cash equivalents 282
Property, plant and equipment 1 065
Intangibles 187
Investment in subsidiary 2
Net deferred tax assets 7
Non-current prepayments 3
Inventories and receivables 129
Payables (439)
Other non-current liabilities (3)
Borrowings (326)
Net assets disposed of 907
Consideration received 4 660
Net assets disposed of 907
Profit on disposal included in equity on 3 753
consolidation
13. Comparative amounts
During the period under review certain operating expenses and cost allocations
from head office companies in respect of the prior year were reclassified to
ensure consistency with the current year classification. These reclassifications
were done to achieve better comparability.
Registration number: 1994/009584/06 ISIN code: ZAE 0000 42164 Share code:
MTN
Directorate: MC Ramaphosa (Chairman), PF Nhleko* (Group President and CEO), DDB
Band, RS Dabengwa*, KP Kalyan, AT Mikati, RD Nisbet*, MJN Njeke, JHN Strydom, AF
van Biljon, J van Rooyen *Executive
Company secretary: SB Mtshali, 216 - 14th Avenue, Fairland, 2195. Private Bag
9955, Cresta, 2118
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). 70 Marshall
Street, Johannesburg, 2001. 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.com
www.mtn.com
Sponsor
Merrill Lynch South Africa (Proprietary) Limited
28 August 2008
Date: 28/08/2008 08:00:15 Produced by the JSE SENS Department.
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