MTN
MTN
MTN - MTN Group Limited - Final audited results for the year ended 31
December 2008 and dividend declaration
MTN Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1994/009584/06
ISIN code: ZAE000042164
Share code: MTN
("MTN Group" or "the Company" or "the Group")
Final audited results for the year ended 31 December 2008 and dividend
declaration
Highlights
- Group subscribers up 48% to 90,7 million from December 2007
- Revenue up 40% to R102,5 billion from December 2007
- EBITDA up 36% to R43,2 billion from December 2007
- Adjusted headline EPS up 33% to 904,4 cents from December 2007
- Net debt/EBITDA 0,3x
- Dividend per share of 181 cents
Subscribers at 31 December 2008
Subscribers (`000)
Southern and East Africa 24 032
South Africa
Uganda
Botswana
Rwanda
Swaziland
Zambia
Middle East and North Africa 26 346
Syria
Iran
Sudan
Yemen
Afghanistan
Cyprus
West and Central Africa 40 274
Nigeria
Ghana
Ivory Coast
Cameroon
Benin
Guinea Republic
Congo Brazzaville
Liberia
Guinea Bissau
Total MTN Group 90 652
Operational overview
Robust mobile subscriber growth, together with a high investment in
infrastructure investment and improved distribution, enabled the MTN
Group to deliver a solid performance for the financial year ended 31
December 2008.
Demand for mobile services continued to impress on the upside in key
markets amidst the global economic slowdown which negatively impacted
many other sectors in 2008. The Group recorded 90,7 million subscribers
at 31 December 2008, compared with 61,4 million at the end of December
2007. The 48% increase was driven largely by MTN Irancell and MTN
Nigeria, which added 10 million and 6,6 million subscribers
respectively. A strong focus on operational performance as well as
continued improvements in the rollout of infrastructure has enabled the
Company to sustain or improve its market position in increasingly
competitive environments. MTN Group incurred expenditure of R28,3
billion on capex in 2008, an 84% increase over 2007 and in line with
US$ denominated guidance.
MTN continued to focus on evolving its networks and actively seeking
infrastructure, transmission and site sharing opportunities across its
operations. MTN also invested approximately R250 million in 2008 to
gain access to significant submarine cable capacity through the SAT-3,
WACS, EASSy and EIG initiatives.
An important aspect of the Company`s strategy is to be an integrated
service provider. In line with this, MTN has acquired ISPs in various
markets.
Basic headline earnings per share ("HEPS") increased by 43% to 836,5
cents for the period ended 31 December 2008, while adjusted headline
earnings per share increased by 33% to 904,4 cents.
In addition to sound operational performance, the depreciation of the
Rand against the US$ resulted in the effective appreciation of many
African and Middle Eastern currencies against the Rand for a major
portion of the year, positively affecting the net trading results of
MTN Group by approximately 15%.
The Group reports its performance by region, namely South and East
Africa ("SEA"), West and Central Africa ("WECA") and the Middle East
and North Africa ("MENA"). MTN consolidates only 49% of MTN Irancell`s
financials, thereby diluting the positive impact of revenue and EBITDA
growth of MTN Irancell on the Group`s financials.
Income statement analysis
MTN Group recorded a 40% increase in revenue to R102,5 billion (31
December 2007: R73,1 billion) driven by the strong growth in
subscribers. It was also enhanced by the relative appreciation of
operating currencies to the Rand.
The WECA region continues to be the largest contributor to Group
revenue making up 47% of total revenue, compared with 42% in the prior
financial year, while SEA and MENA contributed 37% and 17%
respectively. Average revenue per user per month ("ARPU") declined
marginally in most operations in 2008, which is consistent with
increased penetration into lower usage segments. As a result of strong
revenue growth, the Group`s earnings before interest, tax, depreciation
and amortization ("EBITDA") increased by 36% to R43,2 billion.
The WECA region is the largest contributor to Group EBITDA and
increased its contribution by 7 percentage points to 59% at 31 December
2008.
The SEA region contributed 30% to Group EBITDA and MENA contributed 11%
of Group EBITDA, increasing its contribution by 3 percentage points
from December 2007. MTN Group`s EBITDA margin declined by 1,4
percentage points to 42,1%. The decline in EBITDA margin was due to a
number of factors. Increased network maintenance costs, higher fuel
costs and regulatory levies were the main drivers. The increased
contribution from the MENA region with lower EBITDA margins also
lowered the Group`s EBITDA margin. However, its pleasing that MTN
Irancell`s EBITDA margin turned positive to 30,2% from negative 13,4%
as the business picked up critical mass. The South Africa EBITDA margin
dropped 2 percentage points to 32,8%, as a result of management`s
strategic decision to invest in distribution. The higher year on year
costs in opex related to increased capital expenditure and the increase
in handset costs related to foreign exchange also contributed to the
margin decline. The EBITDA margins in Sudan, Ghana and Syria were lower
compared to 2007.
MTN Group depreciation increased by R3,2 billion to R9,9 billion for
the period ended 31 December 2008. This was as a result of an increase
in the Group`s depreciable assets, mainly infrastructure, to support
growth opportunities.
Net finance costs for the Group decreased by 40% to R1,9 billion in
2008. This was mainly due to the substantial unrealised foreign
exchange gain at a holding company level on loans to operating
companies and the R1billion increase in finance income on cash invested
across the Group. These gains were offset to an extent by foreign
exchange losses on foreign loans in both holding and operating
companies. Finance cost increases were not substantial despite
increases in interest-bearing liabilities at the operating company
level, to improve capacity, due to the high capital expenditure
rollout.
The difference between the statutory tax rate of 28% and the Group
effective tax rate is mainly attributable to the following: the effect
of the Nigerian commencement provisions (4,26%), which resulted in
double taxation on the first three months` profits of MTN Nigeria for
the year; STC and other withholding taxes on dividends and management
fees (3,35%) the provision for the Nigerian put option (1,24%); and
other items (1,84%).
The Group 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`s subsidiaries,
which provides it with the right to require the subsidiary to acquire
its shareholding at fair value. The net impact is an increase in
adjusted headline EPS of 44,3 cents.
The unwinding of a previously reversed deferred tax asset in Nigeria
increased the adjusted headline EPS by 23,6 cents.
Adjusted headline EPS of 904,4 cents for the period compares favourably
with adjusted headline EPS of 681,9 cents for the year ended 31
December 2007.
Balance sheet and cash flow analysis
MTN Group`s assets, excluding cash, increased by 44% to R141,4 billion
in 2008. This is mainly as a result of increases in property, plant and
equipment of R24,7 billion including the impact of R6,7 billion as a
result of the weakening of the Rand.
Goodwill and other intangible assets of R45,8 billion at December 2008
showed an increase of R7 billion from 31 December 2007.
The increase was due mainly to the weakening of Rand of R7.6 billion
which was partially offset by amortisation of R2,8 billion.
Current assets for the Group, excluding cash, increased by R10,1
billion to R26,0 billion at 31 December 2008. The increase in trade
receivables of R3,4 billion was in line with organic growth of the
various operations. Inventory increased by R1,2 billion of which R700
million was in South Africa in respect of handsets to improve service
into both the pre and postpaid market. Sundry debtors and advances
increased by R2,6 billion and prepayments on site BTS`s and other
property leases increased by R1 billion.
Net debt of the Group decreased by R3,2 billion to R12,9 billion,
comprising of gross interest bearing liabilities of R41,6 billion and
cash balances of R28,7 billion. This reflects a significant improvement
in the net debt to EBITDA from 0,5 times to 0,3 times and places the
Group in a strong financial position.
Cashflow
Cash generated from operations increased to R44,8 billion from R34,3
billion as a result of the strong operational performance as well as
the impact of a weaker Rand. The Group paid a dividend of R2,5 billion
in April 2008. The successful capital expenditure rollout programme
utilised R26,9 billion of cash during the year. Nevertheless, net cash
flow for the year was R7,4 billion before foreign exchange translation
gains of R2,7 billion and movements in restricted cash balances.
Other
MTN`s people are the Company`s key competitive resource and advantage.
Recognising this, we continue to invest in skills development to
attract and retain talent. In the last quarter, we launched the MTN
Academy to develop skill and capacity, pertinent to our business across
all operating units.
We recognise that diversity, within a common culture and value
framework is a key strength of the Group.
During the year, we achieved an appropriate degree of mobility of staff
between our various operations. Apart from the benefits of increased
learnings across the business, this also provides our staff with
attractive and meaningful opportunities for growth within emerging
markets and should, over time, further bolster MTN`s ability to attract
and retain the best skill and capability across its footprint.
MTN, which has a long history of strong empowerment credentials, had
planned to implement a new BEE transaction during the first half of
2009 following the anticipated unwinding of the Alpine Trust ("Alpine")
and Newshelf 664 (Pty) Ltd ("Newshelf") empowerment scheme, which was
announced on 15 December 2008. However, after careful assessment of the
prevailing financial market conditions the board has determined that it
is not in the best interests of the Company, its shareholders and the
potential BEE investors to implement the proposed BEE transaction at
this time. The Board of Directors ("the Board") remains fully committed
to implementing a BEE transaction as soon as conditions become
conducive. It is anticipated that a further announcement regarding the
acquisition of Newshelf by MTN will be made shortly.
Changes in shareholding for the year ended 31 December 2008 included:
The Group`s disposal of a 5,96% interest in MTN Nigeria through a
private placement to Nigerian individuals and institutions for a
consideration of $594,5 million. The purpose of the transaction, which
reduces the Group`s interest in MTN Nigeria to 76,08%, was to broaden
the ownership of MTN Nigeria and enable wider participation.
Prominent Cypriot trading company Amaracos acquired 49% of MTN Cyprus.
At the same time MTN Cyprus acquired Infotel, a retail chain, and
OTEnet Ltd. Through these transactions, MTN has improved local
representation in its Cyprus business and is better positioned to
provide a more holistic and competitive service.
MTN also increased its shareholding in MTN Cote d` lvoire to 65% from
60% as part of a prior arrangement with its local partners.
Operational review
South Africa MTN South Africa performed well in challenging
conditions. Overall subscribers increased by 16% to 17,2 million, while
MTN`s market share remained relatively consistent at 36% in 2008.
Postpaid subscribers grew by 10% to 2,8 million despite a slowdown in
economic growth, stronger inflation, interest rate hikes and high fuel
prices.
Growth within the postpaid segment was mainly driven by the launch of
the MTN Anytime value proposition in September 2008, which attracted
more than 259,000 subscribers.
Prepaid subscribers increased by 17% to 14,4 million thanks to the
success of MTN Zone, which became the most successful MTN pay-as-you-go
price plan ever launched, attracting 6,6 million subscribers in the 11
months after launch in February 2008.
ARPU in the prepaid market segment increased by 5% to R97 a month,
positively influenced by the success of MTN Zone and continued demand
for as lower-denomination vouchers which stimulated usage. Postpaid
ARPU increased by 2%. The blended ARPU was negatively impacted by the
mix between postpaid and prepaid subscribers.
Capital expenditure on infrastructure and distribution was a major
focus of the year, with nearly R4,9 billion invested in the period, up
from R2,8 billion the previous year. The key objectives as regards the
network were to improve capacity, quality and coverage; modernise the
network and make it more efficient;
stimulate and support the development and launch of new products.
There were 483 new 2G base transceiver station (BTS`s) and 419 new 3G
BTS`s rolled out, bringing the total to more than 7,700. Considerable
progress was also made in providing additional capacity to both the
circuit switch (voice) and packet switch (data) core network.
The roll out of the fibre optic metropolitan network in the high-
traffic zone of Gauteng commenced during the year. Infrastructure
sharing remains a focus, and during the year, an agreement was
concluded to build, along with two other operators, a 5,000 km national
fibre optic network to enhance network coverage and quality.
Construction starts in the first half of 2009.
MTN South Africa also increased its branded distribution presence,
purchasing the remaining 49% of retailer Cell Place (which was
finalised on 1 August 2008) and concluding the purchase on 12 January
2009 of the remaining 51% stake in I-Talk (Pty) Ltd.
MTN has reached agreement with New Clicks to buy up to 17 Musica retail
outlets and release space in six other Musica stores. The transaction
is subject to certain conditions precedent and forms part of MTN`s
strategy to grow its branded retail footprint in key locations in a
timely and cost effective manner.
MTN acquired Verizon Business effective 28 February 2009. Verizon
Business South Africa currently has a market share of 18% of the data
market which together with MTN South Africa`s existing ISP, brings the
new combined companies market share to approximately 23% and jump
starts MTN South Africa`s business in this segment of the market.
Nigeria MTN Nigeria`s subscriber base grew by 40% from 16,5 million
at 31 December 2007 to 23,1 million at 31 December 2008 in an
increasingly competitive market. Market share rose from 43% to 44% at
the end of December 2008. The growth was driven by continued demand
supported by the Happy Hour value proposition, and the restructuring of
the distribution channel.
ARPU remained strong and dropped by only $1 to $16 as lower usage
customers continued to join the network.
Aggressive network rollout continued throughout 2008, gaining strong
momentum during the second half of the year and significantly improving
network quality and enabling increased net connections in the last
quarter. Capital expenditure for the year was substantially higher at
R9,6 billion compared with R4,8 billion in 2007. MTN Nigeria rolled out
1 560 BTS`s bringing the total to 4 776. To further improve the network
1 170km of new metro and national fibre was implemented on key routes.
Following quality improvements the promotional activities ban was
lifted in the third quarter. Sustained high network quality remains a
priority for both our current and future subscribers.
Ghana MTN Ghana`s subscribers increased by 60% to 6,4 million,
lifting market share from 52% to 55%. This was attributable to MTN
Zone, launched in June 2008. The operation also benefited from network
coverage expansion and an increased distribution presence.
ARPU for the reporting period was $12, down from $14 at the end of
2007, and included the impact of newly introduced airtime taxes.
MTN Ghana spent R1,9 billion on capital expenditure, 50% up from last
year. 704 BTS`s were rolled out during the year, significantly
improving the network quality. An additional mobile switching centre
and a base station controller were commissioned to cater for traffic
demands in Accra and Kumasi.
Iran MTN Irancell lifted subscriber numbers to 16,0 million from 6,0
million at the end of 2007. This sharp increase is largely attributable
to the strong brand image and successful seasonal promotional
campaigns. New products and segmented tariff plans were well received
by the market. MTN Irancell`s market share increased to 37% from 23% at
31 December 2007.
ARPU dropped $1 to $9 notwithstanding the significant growth in net
additions during the year. The operation added 1 529 BTS`s to its
network, bringing the total to date to 3 532. MTN Irancell now covers
699 cities with an additional 465 added during the reporting period. A
WiMax licence and spectrum were awarded to the company and service
provision will commence during 2009. Network coverage of the population
increased from 48% at the beginning of the year to 62% at December
2008.
Sudan MTN Sudan subscribers increased by 27% to 2,6 million in 2008.
This was accomplished despite increased competition and the regulatory
requirement to disconnect subscribers who had not complied with
registration requirements.
The operation connected 68% of its 557,000 net additions for the year
during the last quarter through promotional activities as it recovered
from the impact of the disconnections. At year-end, MTN Sudan`s market
share was back at 28%, the same as at December 2007.
Network coverage of the population increased to 43% at the end of 2008
from 43% a year earlier. Some 424 new BTS`s were added to the network,
bringing the total to 1 621. During the year the network rollout
commenced in South Sudan, introducing services in major cities.
Syria MTN Syria`s subscriber base grew by 14% in the year to 3,5
million. The company maintained a market share of 46%. Subscriber ARPU
declined marginally to $19.
The operation introduced new tariff plans and enriched data offerings
during the year. The network rollout gained momentum during the second
half of 2008 and 125 3G and 471 2G BTS`s were added.
Prospects
The Group remains cautiously optimistic about its prospects for 2009 in
challenging trading conditions. Strategic priorities include:
- Actively seeking value-accretive expansion opportunities in
emerging markets, with a potential to act as a consolidator in the
current market environment;
- Tightly monitored capital expenditure to ensure appropriate levels
of capacity and quality of service for an enlarged market;
- Optimise cash and operational efficiencies ensuring that the Group
is able to benefit from a rapidly evolving technology market while
maximizing infrastructure sharing; and
- Engaging positively with regulatory authorities.
Year to date performance of the key operations in terms of subscriber
net additions are as follows: South Africa 80,000, Nigeria 2.2 million,
Iran, 1.5 million, Ghana 300,000, Cameroon, 200,000, Cote d`Ivoire
200,000 and Uganda 300,000.
Dividend declaration
Shareholders are advised that a cash dividend of 181 cents per ordinary
share in respect of the period 31 December 2008, has been declared and
is payable to ordinary shareholders recorded in the register of the MTN
Group at the close of business on Friday 3 April. 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, 27 March 2009
Shares commence trading ex dividend Monday, 30 March 2009
Record date Friday, 3 April 2009
Payment of dividend Monday, 6 April 2009
Share certificates may not be dematerialised or rematerialised between
Monday, 30 March 2009 and Friday, 3 April 2009, both days inclusive.
On Monday, 6 April 2009, 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, 6 April 2009 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, 6 April 2009.
For and on behalf of the Board
M C Ramaphosa
(Chairman)
P F Nhleko
(Group President and CEO)
Fairland
11 March 2009
Condensed consolidated balance sheet
At At
31 December 31 December
2008 2007
Audited Audited Change
Rm Rm %
ASSETS
Non-current assets 115 319 82 085 40,5
Property, plant and equipment 64 193 39 463 62,7
Goodwill and other intangible 45 786 38 797 18,0
assets
Investments in associates 60 60 -
Loans and other non-current 4 623 2 433 90,0
assets
Deferred tax assets 657 1 332 (50,7)
Current assets 54 787 33 501 63,5
Cash and cash equivalents 26 961 16 868 59,8
Restricted cash 1 778 739 140,6
Other current assets 26 048 15 894 63,9
Total assets 170 106 115 586 47,2
EQUITY AND LIABILITIES
Shareholders` equity 80 542 51 502 56,4
Share capital and reserves 76 386 47 315 61,4
Minority interests 4 156 4 187 (0,7)
Non-current liabilities 34 973 29 114 20,1
Borrowings 29 100 23 007 26,5
Deferred tax liabilities 4 989 2 676 86,4
Put option - 2 556 -
Other non-current liabilities 884 875 1,0
Current liabilities 54 591 34 970 56,1
Put option 3 341 -
Non interest-bearing 38 760 24 320 59,4
liabilities
Interest-bearing liabilities 12 490 10 650 17,3
Total equity and liabilities 170 106 115 586 47,2
Condensed consolidated income statement
Financial Financial
year ended year ended
31 December 31 December
2008 2007
Audited Audited Change
Rm Rm %
Revenue 102 526 73 145 40,2
Direct network operating costs 14 140 8 525 65,9
Cost of handsets and other 5 985 5 524 8,3
accessories
Interconnect and roaming 13 217 9 997 32,2
Employee benefits 4 776 3 379 41,3
Selling, distribution and 13 274 9 071 46,3
marketing expenses
Other expenses 7 968 4 804 65,9
Depreciation 9 939 6 774 46,7
Amortisation of intangible 2 820 2 199 28,2
assets
Net finance costs 1 917 3 173 (39,6)
Share of profits from - 8 -
associates (net of tax)
Profit before income tax 28 490 19 707 44,6
Income tax expense 11 355 7 791 45,7
Profit after tax 17 135 11 916 43,8
Attributable to: 17 135 11 916 43,8
Equity holders of the Company 15 315 10 608 44,4
Minority interests 1 820 1 308 39,1
- basic earnings per share 821,0 569,9 44,1
(cents)
- diluted earnings per share 806,1 559,2 44,2
(cents)
Dividends per share (cents) 136,0 90,0 51,1
Condensed consolidated statement of changes in equity
Financial Financial
year ended year ended
31 December 31 December
2008 2007
Audited Audited
Rm Rm
Opening balance 51 502 42 729
Net profit attributable to equity 15 315 10 608
holders of the Company
Dividends paid (6 514) (3 387)
Issue of share capital 41 60
Transactions with minorities 4 020 179
Disposal of non-controlling interest 909 115
Purchase of non-controlling interest (85) -
Purchase of controlling interest - 192
Minorities` share of profits and 1 820 1 308
reserves
Shareholders` loan revaluation reserve 44 565
Share-based payment reserve 75 92
Cancellation of Ivory Coast put option 54 -
Cash flow hedging reserve 138 30
Conversion of shareholders` loans to - (192)
preference shares
Currency translation differences 13 223 (797)
Closing balance 80 542 51 502
Segmental analysis
Financial Financial
year ended year ended
31 December 31 December
2008 2007
Audited Audited
Rm Rm
REVENUE
South and East Africa 37 483 31 453
West and Central Africa 47 682 30 843
Middle East and North Africa 17 215 10 779
Head office companies 146 70
102 526 73 145
EBITDA
South and East Africa 12 878 11 329
West and Central Africa 25 318 16 601
Middle East and North Africa 4 654 2 530
Head office companies 316 1 385
43 166 31 845
PAT
South and East Africa 7 322 6 155
West and Central Africa 9 943 6 529
Middle East and North Africa 1 549 730
Head office companies (1 679) (1 498)
17 135 11 916
Condensed consolidated cash flow statement
Financial Financial
year ended year ended
31 December 31 December
2008 2007
Audited Audited
Rm Rm
Cash inflows from operating activities 34 236 25 850
Cash outflows from investing activities (27 177) (17 152)
Cash in/(out)flows from financing 292 (2 135)
activities
Net movement in cash and cash 7 351 6 563
equivalents
Cash and cash equivalents at beginning 15 546 9 008
of period
Effect of exchange rate changes 2 699 (25)
Cash and cash equivalents at end of 25 596 15 546
period
Notes to the condensed consolidated financial statements
1. 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.
2. General information
MTN 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 financial year end information is
based on the audited financial statements of the Group for
the year
ended 31 December 2008 which have been prepared in accordance
with International Financial Reporting Standards ("IFRS")
IAS 34 - Interim Financial Reporting, the Listings
Requirements of the JSE Limited and the South African
Companies Act 61 of 1973, as amended, 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 2008, as described in the annual financial
statements for the year ended 31 December 2008.
5. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per
ordinary share are based on basic headline earnings of R15
603 million ( 2007: R10 886 million) and adjusted
headline earnings of R16 870 million (2007: R12 693 million)
respectively, and a weighted average number of ordinary
shares in issue of 1 865 298 632 (2007: 1 861 454 696).
12 months 12 months
ended ended
31 December 31 December
2008 2007
Audited Audited
Rm Rm
Net** Net**
Net profit attributable to 15 315 10 608
Company`s equity holders
Adjusted for:
Loss on disposal of property, 111 61
plant and equipment
Impairment of property, plant and 177 173
equipment
Other impairments - 44
Basic headline earnings 15 603 10 886
Adjusted for:
Reversal of deferred tax asset - (223)
Reversal of the subsequent 441 1 664
utilisation of deferred tax asset
Reversal of put option in respect
of subsidiary
- Fair value adjustment 74 262
- Finance costs 914 210
- Minority share of profits (162) (106)
Adjusted headline earnings 16 870 12 693
Reconciliation of headline
earnings per ordinary share
(cents)
Attributable earnings per share 821,0 569,9
(cents)
Adjusted for:
Loss on disposal of property, 6,0 3,3
plant and equipment
Impairment of property, plant and 9,5 9,3
equipment
Other impairments - 2,4
Basic headline earnings per share 836,5 584,8
(cents)
Reversal of deferred tax asset - (12,0)
Reversal of the subsequent 23,6 89,4
utilisation of deferred tax asset
Reversal of put option in respect 44,3 19,7
of subsidiary
Adjusted headline earnings per 904,4 681,9
share (cents)
Contribution to adjusted headline
earnings per ordinary share
(cents)
South and East Africa 385,7 329,2
West and Central Africa 517,6 410,6
Middle East and North Africa 77,0 22,2
Head office companies (75,9) 80,1
904,4 681,9
Number of ordinary shares in
issue:
- Weighted average (`000) 1 865 299 1 861 455
- At period end (`000) 1 868 010 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 (2007: R1 968 million) R441 million excluding minorities (2007:
R1664 million) to the adjusted headline earnings figure. The remaining
pioneer deferred tax asset was fully utilised during 2008.
As previously disclosed, although the Group has complied with the
requirements of IAS 12 in this regard, the Board 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
realistically 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 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.
12 months 12 months
ended ended
31 December 31 December
2008 2007
Audited Audited
Rm Rm
6. Capital expenditure incurred 28 263 15 348
7. Contingent liabilities and
commitments
Contingent liabilities - upgrade 504 957
incentives
Operating leases 801 955
Finance leases 554 581
Other 541 373
8. Commitments for property, plant
and equipment and intangible
assets
Contracted for 11 410 8 671
Authorised but not contracted for 26 257 21 910
9. Cash and cash equivalents
Bank balances, deposits and cash 26 961 16 868
Call borrowings (1 365) (1 322)
25 596 15 546
10. Interest-bearing liabilities
Call borrowings 1 365 1 322
Short-term borrowings 11 125 9 328
Current liabilities 12 490 10 650
Long-term liabilities 29 100 23 007
41 590 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 in the income statement.
12. Business combination
During the year under review, certain subsidiaries of the
group acquired the following entities:
a) Afnet, a local internet service provider, was acquired by
MTN Cote d`Ivoire on 8 May 2008 for an initial purchase
consideration of Euro 10,2 million to be followed by an
additional maximum amount of Euro 9,6 million. To date only
the first part of the purchase consideration has been settled
in cash as the remaining portion is deemed to be contingent
on certain contractual requirements being met.
b) Arobase Telecom SA, a local fixed line operator, was
acquired by MTN Cote d`Ivoireon 23 September 2008 for an
initial purchase consideration of Euro 7,7 million to be
followed by an additional amount of Euro 3,3 million. To
date, only the first part of the purchase consideration has
been settled cash as the remaining portion is deemed to be
contingent on certain contractual requirements being met
c) Otenet and Infotel, were acquired by MTN Cyprus with
effect from November 2008 for a total purchase consideration
of Euro 6,6 million and USD 18 million respectively.
The Group has elected, under IFRS 3, to finalise asset and
liability fair values allocated to each cash generating unit,
and therefore the relocated goodwill, within 12 months
subsequent to the acquisition date
Total book value Carrying amount Total
on acquisition fair
date value
Rm Rm
The assets and liabilities arising
from the acquisitions are as
follows:
Property, plant and equipment 300 300
Trade and other receivables 34 34
Other current assets 4 4
Cash and cash equivalents 7 7
Long term borrowings (267) (267)
Trade and other payables (213) (213)
Unearned income (14) (14)
Tax (13) (13)
Other liabilities (7) (7)
Net asset value (a and b) (169) (169)
Purchase consideration (a and b) 233
Fair value of net assets acquired 169
Goodwill (a and b) 402
Purchase consideration (c) 260
Goodwill 662
13. Post balance sheet events
Subsequent to year end MTN Holdings
acquired 100% of Verizon South
Africa (Pty) Ltd and the remaining
59% in ITalk (Pty) Ltd.
Administration
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
These results can be viewed on www.mtn.com
Fairland
12 March 2009
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 12/03/2009 08:24:28 Produced by the JSE SENS Department.
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