MTN
MTN
MTN - MTN Group - Reviewed interim results for the six months ended 30 June 2009
MTN GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
Share code: MTN
ISIN ZAE000042164
("MTN" or "the Group" or "the company")
Reviewed interim results for the six months ended 30 June 2009
Highlights
Group subscribers up 14% to 103,2 million from December 2008
Revenue up 24,2% to R57,3 billion from June 2008
EBITDA up 24,8% to R24,5 billion from June 2008
Headline EPS up 22,5% to 415,5c from June 2008
Adjusted Headline EPS down 10,9% to 363,8c from June 2008
Review of results
MTN Group`s performance for the six months ended 30 June 2009 was satisfactory
considering the economic downturn which affected markets worldwide. Reported
revenue and EBITDA results, when compared to the prior six month period ended 30
June, were not materially impacted by movements in currencies in the majority of
countries in which we operate against the ZAR. However growth in earnings were
negatively impacted by functional currency losses of R2,8 billion (June 2008:
R0,9 million gain) on shareholder loans, receivables and cash.
Although competition increased in most markets following the entry of new
competitors, execution of the operational strategy has generally proved
successful. MTN`s network expansion and capacity investment strategy initiated
in 2008 has also supported the strong performance of the Group`s subsidiaries,
particularly where competitors have elected to scale back on investments.
Enhanced distribution channels and attractive value propositions also
contributed to the positive performance.
The Group`s mobile subscriber base passed the 100 million milestone during the
reported period to reach 103,2 million subscribers at 30 June 2009. This is a
14% increase since 31 December 2008. Subscribers have increased by 39% since 30
June 2008.
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 49% of MTN Irancell`s financials.
Income statement analysis
MTN Group revenues increased by 24,2% to R57,3 billion (30 June 2008: R46,1
billion), largely driven by the strong growth in subscribers since 30 June 2008.
The WECA region remains the largest contributor to Group revenue, contributing
47% of total revenue, up 1 percentage point compared with the six-month period
to 30 June 2008. The SEA and MENA regions contributed 34% and 19% respectively
of the Group`s total revenues.
US dollar-reported average revenue per user (ARPU) declined considerably from
the 30 June 2008 comparative in most operations due to increased penetration and
the depreciation of local currencies against the US dollar. ARPU`s are also
lower than in December 2008 but in line with the ARPU for the first quarter.
Slowing GDP growth, increased penetration into lower-use segments of the market
and aggressive competition also had a negative impact on local-currency ARPU`s.
In line with the strong growth in revenue, MTN`s earnings before interest, tax,
depreciation and amortisation (EBITDA) increased by 24,8% to R24,5 billion for
the six-month period ended 30 June 2009 (June 2008: R19,6 billion). Cost
optimisation and other efficiencies, although partially offset by higher network
operating costs and inflationary increases on staffing, drove margins slightly
higher.
The WECA region recorded 33% EBITDA growth to R14,8 billion (June 2008: R11,2
billion), contributing 61% to the Group`s total EBITDA. The SEA region`s
contribution of 25% based on a 6% growth to R6,2 billion (June 2008: R5,9
billion), was affected by increased operating expenditure partly due to the
integration of newly acquired businesses in MTN South Africa and pricing
pressure from new competition in Rwanda. The MENA region grew EBITDA by 34% to
R2,9 billion (June 2008: R2,2 billion) and contributed 12% to Group EBITDA,
increasing its contribution by 1 percentage point compared with the prior year.
The Group`s EBITDA margin remained relatively stable at 42,8%, compared with
42,6% for the six months to 30 June 2008.
The Group incurred capital expenditure (capex) of R15,5 billion for the half
year, a 50% increase over June 2008. We anticipate that while a substantial
portion of the approved capex has been committed as part of our expansion
strategy, some investments are only likely to be capitalised in the first half
of 2010.
The Group`s depreciation charge increased by R1,6 billion to R5,9 billion (June
2008: R4,4 billion) following the substantial increase in network capital
expansion projects initiated in 2008. Nigeria, Iran and South Africa were the
main contributors to the increase in depreciation, adding R0,5 billion, R0,3
billion and R0,2 billion respectively. The Group amortisation charge was in
line with the prior comparative period.
Net finance costs increased by 143% to R3,6 billion compared to the same period
last year. The large increase is due to the R2,8 billion (June 2008: R0,8
billion gain) functional currency loss in Mauritius which arises on the
translation of US dollar-denominated loans, receivables and cash balances. The
Nigeria put option charge to income was a credit of R1 billion (June 2008: R0.9
billion debit) mostly due to the devaluation of the Naira versus the ZAR.
The Group taxation charge decreased by 18% (R1,0 billion) to R4,5 billion (June
2008: R5,5 billion). The decrease is mainly attributable to the full effect of
the Nigerian commencement provisions having been absorbed in the reporting
period ended 30 June 2008, which decrease is partially offset by additional
withholding tax on dividends from Nigeria that are sourced from post Pioneer
profits.
The Group`s effective tax rate reduced from 44% in June 2008 to 33% in June
2009. The period-to-period decrease in the effective rate is also in part
attributable to the Nigerian put option effect on the profit before tax.
Group basic earnings per share (EPS) increased by 22,4% to 409,7 cents per share
compared to 30 June 2008. Adjusted headline EPS decreased to 363,8 cents, 10.9%
lower than at 30 June 2008. The various contributory factors, both positive and
negative, that resulted in the net decrease in adjusted headline EPS are the
impact of the reversal of the put option, the impact of functional currency
profits in the prior comparative period versus functional currency losses in the
current period as well as the lower effective tax rate.
The Group continues to report adjusted headline EPS in addition to basic
headline EPS. The adjustment is in respect of the IFRS requirement that the
Group accounts for a written put option held by a minority shareholder of one of
the Group subsidiaries, which provides the minority shareholder the right to
require the subsidiary or its holding company to acquire this shareholding at
fair value. Although the Group has complied with the requirements the board of
directors (the board) has reservations about the appropriateness of this
treatment and hence the adjustment. The net impact is that adjusted headline
reflect the decrease of EPS of 51,7 cents (June 2008: 69,2 cents, including the
impact of the reversal of the deferred tax asset).
Balance sheet and cash flow analysis
MTN Group`s assets decreased by 14% to R146 billion compared with R170 billion
at 31 December 2008. This was largely as a result of the depreciation of the
closing rate of the respective local currencies against the ZAR.
Asset classes affected by this include property, plant and equipment which
decreased by 5% from R64,2 billion to R61,0 billion notwithstanding additions of
R15,0 billion; goodwill and intangible assets which decreased by 18% (R8.1
billion) to R37,6 billion compared to December 2008; and current assets which
decreased by 24% (R13,3 billion) to R41,4 billion from December 2008.
Cash generated from operating activities improved from R13,0 billion for the 6
months to 30 June 2008 to R17,0 billion reflecting the strong operational
performance after paying a dividend of R3,4 billion (June 2008: R2,5 billion).
Cash outflows from investing activities utilised R16,9 billion of cash as a
result of the significant capital expenditure programme. The foreign currency
translation losses of R3,9 billion contributed to the net debt increasing to
R15,2 billion from R12,9 billion.
Other
Acquisitions in the six-month period ended 30 June 2009 included 100% of Verizon
South Africa (Pty) Ltd (Verizon) in February 2009 and 59% of i-Talk Cellular
(Pty) Ltd (iTalk) in January 2009. The acquisition of Verizon is expected to
improve MTN South Africa`s competitive position in the rapidly converging
mobile/ISP sector, particularly in the corporate segment. Verizon is currently
being integrated within MTN Business, including the previously acquired Network
Solutions, to allow for a comprehensive and integrated offer to our customer
base. Verizon has been reported under "other" in the SEA region for the review
period.
Changes to shareholding for the six months ended 30 June 2009 include a 2,2%
sale of equity interest in MTN Zambia to Zambian financial institutions by way
of a private placement as part of MTN`s undertaking to broaden its local
shareholder base and fulfil its licence commitment.
MTN purchased the entire issued ordinary share capital of Newshelf 664 (Pty) Ltd
(Newshelf) in May 2009. The Newshelf acquisition was effected by way of a
specific issue of 213.9 million MTN shares to the PIC and the specific
repurchase by MTN of 243,5 million MTN shares. MTN acquired the Newshelf shares
at an effective discount to market value and intends to apply a significant
portion of this effective discount to facilitate a new Black Economic
Empowerment (BEE) transaction. The board remains fully committed to implementing
a BEE transaction as soon as conditions become conducive.
Operational review
South Africa
MTN South Africa`s subscriber base grew by 62 000 during the review period to
17,2 million. The disappointing increase in subscribers was due to a combination
of factors including challenges on the network and supporting systems, slowing
GDP growth, pressure on consumer spend, and competitor activity in the first
half of the year.
Postpaid subscribers grew by 4% to 2,9 million for the six-month period. The
postpaid market has had a challenging six months with economic pressure
affecting growth in the market and generally putting a squeeze on credit. Growth
was mainly attributable to MTN Anytime, which currently makes up 39% of the
postpaid base.
The prepaid subscriber base declined by 52 000 during the period. ARPU in the
prepaid and postpaid market segments declined by 5% to R92 and 10% to R362
respectively.
The proposed Musica transaction has been terminated as certain legal conditions
precedent, beyond the control of the parties, could not be met. The iTalk
acquisition was finalised in January 2009. The branded channel incorporates
eight stores that will ultimately be integrated under the MTN Brand. MTN South
Africa will maintain its focus on distribution.
MTN South Africa also continues to invest in its network (radio, core and
transmission). The Gauteng southern fibre network ring to interconnect the main
switching and data centers has been completed. Further trenching is under way to
complete the Gauteng northern ring which incorporates Pretoria. The 5 000km
national fibre optic network tri-build agreement has been finalised. The
trenching route between Gauteng and the Durban route has begun. The operation
has rolled out 234 second-generation (2G) and 307 third-generation (3G) base
transceiver stations (BTS`s) since the beginning of 2009, enabling it to
increase circuit switch data capacity by 8.5% and packet switch data by 80%
respectively. The 3G population coverage increased from 35% in December 2008 to
44% at the half year.
Nigeria
MTN Nigeria subscribers grew by 19% over the six months to 27.3 million at June
2009. MTN Nigeria recorded strong growth in the first half and improved market
share to 48%. Significant investment in network capacity and improved quality of
service strategies adopted in 2008 and 2009 gave MTN Nigeria an advantage over
its competitors for the period. The operation successfully restructured its
sales and distribution strategy to improve the focus of the dealer channel and
drive acquisitions.
APRU declined by USD4 from December 2008 to USD12. Although the USD ARPU shows a
considerable decline following the depreciation of the Naira against the US
dollar, local-currency ARPU declined at a slower rate and in line with increased
penetration in lower-use segments.
Aggressive network rollout continued in the first half of 2009, as MTN Nigeria
rolled out 426 2G and 236 3G BTS`s. The 3G rollout is gaining momentum with 787
3G BTS`s now live and the completion of phase 2 of the 3G rollout underway. A
further 1 548km of transmission expansion to improve the network is in progress
(66.42% complete).
Ghana
MTN Ghana increased subscribers by 12% over the six months to 7.2 million at 30
June 2009. Market share only reduced slightly from 55% to 54% over the period
despite fierce competition from new market entrants. The launch of a loyalty
programme, Rally Around the Flag, and the continued success of MTN Zone assisted
with subscriber retention.
ARPU decreased by 33% from USD12 to USD8 mostly due to the devaluation of the
Cedi against the US dollar. Local-currency ARPU decreased by 15% after
aggressive price offers by new competitors and deeper penetration into the
market.
MTN Ghana rolled out 289 BTS`s for the six-month period.
Irancell
MTN Irancell increased its subscriber base by 20% over the six month period to
19,2 million at June 2009 through continued promotional campaigns. An enhanced
distribution channel that included efficient subscriber registration has also
contributed to subscriber growth.
ARPU dropped USD1 to USD8 mainly due to increased penetration into lower-use
market segments.
MTN Irancell added 793 BTSs for the period, improving quality and capacity on
the network. During the six months, 368 more cities and an additional 1 434km of
road have been covered. Network coverage of the population increased from 62% at
the beginning of the year to 67% at June 2009. WiMax rollout is successfully on
track with pilot sites identified, call centres set up and dealers selected.
Syria
MTN Syria added 11 000 subscribers to its base in the six month period. The low
growth in subscriber numbers was, however, in line with lower demand in the
telecoms sector in the country with no loss of market share. Segmental product
offerings and churn management initiatives have been put in place to drive new
acquisitions.
Subscriber ARPU declined marginally from USD19 in December 2008 to USD18 in June
2009.
The implementation of planned network expansions and upgrades has decreased
congestion and improved radio capacity. MTN Syria has added 74 BTS`s during the
period. Limited 3G service was commercially launched in January 2009, offering
attractive data bundles.
Proposed transaction with Bharti
On 25 May 2009, MTN Group and Bharti Airtel Limited (Bharti) announced they were
exploring a potential transaction in which MTN and its shareholders would
acquire, pursuant to a scheme of arrangement, an approximate 36% economic
interest in Bharti, of which 25% would be held by MTN with the remainder held
directly by MTN shareholders, and Bharti would acquire an approximate 49%
shareholding in MTN.
The potential transaction between Bharti and MTN would create a leading
telecommunication service provider group, aligning Bharti`s market-leading
Indian business with MTN`s market-leading African and Middle Eastern operations.
The potential transaction is consistent with MTN`s stated vision, addresses
growth objectives and would also represent a significant development in south-
south cooperation between India and South Africa.
The rationale for the transaction is compelling and includes diversification and
synergistic benefits as well as addressing the objective of becoming one of the
pre-eminent emerging-market telecommunications companies.
The exclusivity period has been extended to 30 September 2009. No decision or
agreement to acquire any shares or Global Depository Receipts or implement the
potential transaction outlined above has yet been made by the boards of either
MTN or Bharti. Shareholders will be advised of any further developments.
Prospects
There are some indications that global economic conditions may be starting a
slow recovery although many of our markets remain relatively vulnerable at
present. Competition across MTN`s footprint is likely to continue to increase.
Shorter term prospects in South Africa remain challenging, compounded by the
impact of new subscriber registration requirements from 1 August 2009. MTN
remains focused on:
actively seeking value-accretive expansion opportunities in emerging markets;
tightly monitoring infrastructure investments to ensure appropriate levels of
capacity and quality of service for an enlarged market;
optimising efficiencies in maintaining and improving our competitive position
while ensuring the Group is able to benefit from a rapidly converging technology
market, and continued investment in sub-marine cables for efficient access;
continuing engagement with regulatory authorities in the development and
refinement of the telecommunication sector; and
the implementation of MTN`s proposed BEE deal at the appropriate time.
Revised subscriber net addition guidance
NET ADDITIONS FOR DECEMBER 2009
South Africa 500
Nigeria 7 400
Ghana 1 400
Iran 6 000
Syria 400
Rest 6 900
Total MTN 22 600
For and on behalf of the Board
M C Ramaphosa P F Nhleko Fairland
(Chairman) (Group President and CEO) 27 August 2009
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 (SUBSCRIBERS (`000) AT 30 JUNE 2009)
South and East Africa 25 460
Middle East and North Africa 47 052
West and Central Africa 30 675
MTN Group 103 187
CONDENSED CONSOLIDATED INCOME STATEMENTS
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Change Audited
Rm Rm % Rm
Revenue 57 269 46 128 24,2 102 526
Direct network operating (8 059) (5 891) 36,8 (14 140)
costs
Cost of handsets and (3 292) (2 447) 34,5 (5 985)
other accessories
Interconnect and roaming (7 602) (6 225) 22,1 (13 217)
Employee benefits (2 839) (2 167) 31,0 (4 776)
Selling, distribution (7 261) (6 368) 14,0 (13 274)
and marketing expenses
Other expenses (3 704) (3 383) 9,5 (7 968)
Depreciation and (7 301) (5 714) 27,8 (12 759)
amortisation
Net finance costs (3 630) (1 497) 142,5 (1 917)
Profit before income tax 13 581 12 436 9,2 28 490
Income tax expense (4 488) (5 472) (18,0) (11 355)
Profit after tax 9 093 6 964 30,6 17 135
Attributable to: 9 093 6 964 30,6 17 135
Equity holders of the 7 630 6 240 22,3 15 315
company
Minority interests 1 463 724 102,1 1 820
Earnings per ordinary
share (cents)
attributable to equity
holders of the company
- basic 409,7 334,6 22,4 821,0
- diluted 399,4 326,6 22,3 806,1
Dividends per share 181,0 136,0 33,1 136,0
(cents)
CONDENSED CONSOLIDATED BALANCE SHEETS
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Change Audited
Rm Rm % Rm
ASSETS
NON-CURRENT ASSETS 104 579 98 963 5,7 115 319
Property, plant and 61 007 50 125 21,7 64 193
equipment
Goodwill and other 37 637 43 450 (13,4) 45 786
intangible assets
Investments in associates 27 52 (48,1) 60
Deferred tax assets 1 281 945 35,5 657
Loans and other non- 4 627 4 391 5,4 4 623
current receivables
CURRENT ASSETS 41 439 46 585 (11,0) 54 787
Cash and cash equivalents 19 503 27 058 (27,9) 26 961
Restricted cash 994 524 89,7 1 778
Other current assets 20 942 19 003 10,2 26 048
Total assets 146 018 145 548 0,3 170 106
EQUITY AND LIABILITIES
Shareholders` equity 67 450 67 228 0,3 80 542
Share capital and reserves 64 507 63 112 2,2 76 386
Minority interests 2 943 4 116 (28,5) 4 156
Non-current liabilities 31 236 34 075 (8,3) 34 973
Borrowings 25 537 29 313 (12,9) 29 100
Deferred tax liabilities 5 182 3 812 35,9 4 989
Other non-current 517 950 (45,6) 884
liabilities
Current liabilities 47 332 44 245 7,0 54 591
Non interest-bearing 37 194 32 995 12,7 42 101
liabilities
Interest-bearing 10 138 11 250 (9,9) 12 490
liabilities
Total equity and 146 018 145 548 0,3 170 106
liabilities
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Audited
Rm Rm Rm
Opening balance 80 542 51 502 51 502
Total comprehensive (loss)/income (6 703) 14 924 29 517
for the period
Dividends paid (4 818) (5 165) (6 514)
Shares issued during the period 20 380 8 41
Transactions with minorities 1 785 4 076 4 020
Disposal of non-controlling - 907 909
interest
Purchase of non-controlling - - (85)
interest
Shareholders revaluation reserve (236) 153 44
Share-based payment reserve 6 6 75
Newshelf share buyback (21 226) - -
Other movements on minorities (2 385) 505 505
Other reserves 105 258 474
Cancellation of MTN Cote d`Ivoire - 54 54
put option
Closing balance 67 450 67 228 80 542
SEGMENTAL ANALYSIS
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
South and East Africa 19 399 17 609 37 483
West and Central Africa 26 757 21 132 47 682
Middle East and North Africa 11 062 7 324 17 215
Head office companies 51 63 146
57 269 46 128 102 526
EBITDA
South and East Africa 6 233 5 905 12 878
West and Central Africa 14 849 11 174 25 318
Middle East and North Africa 2 886 2 161 4 654
Head office companies 544 407 316
24 512 19 647 43 166
PAT
South and East Africa 3 339 3 162 7 322
West and Central Africa 6 706 3 985 9 943
Middle East and North Africa 1 091 636 1 549
Head office companies (2 043) (819) (1 679)
9 093 6 964 17 135
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Audited
Rm Rm Rm
Cash inflows from operating 16 899 12 988 34 236
activities
Cash outflows from investing (16 942) (7 444) (27 177)
activities
Cash (out)/inflows from financing (2 771) 3 209 292
activities
Net movement in cash and cash (2 814) 8 753 7 351
equivalents
Cash and cash equivalents at 25 596 15 546 15 546
beginning of period
Effect of exchange rate changes (3 866) 1 705 2 699
Cash and cash equivalents at end of 18 916 26 004 25 596
period
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Audited
Rm Rm Rm
Profit for the year 9 093 6 964 17 135
Other comprehensive income:
Exchange differences on translating (15 796) 7 968 12 244
foreign operations
Cash flow hedges - (8) 138
Total comprehensive (loss)/income (6 703) 14 924 29 517
for the period
Attributable to:
Equity holders of the company (7 467) 14 063 27 337
Minority interests 764 861 2 180
(6 703) 14 924 29 517
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 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`s) IAS 34 - Interim Financial Reporting and
in compliance with the Listings 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 2008, as described in the
annual financial statements.
During the period under review, the Group adopted all the IFRS and
interpretations being effective and deemed applicable to the Group. None of
these had a material impact apart from IAS 1 (Revised) which resulted in a
separate condensed consolidated statement of comprehensive income being included
as part of the primary financial statements of the Group. The necessary changes
were also made to the condensed consolidated statement of changes in equity as a
result.
5. HEADLINE EARNINGS PER ORDINARY SHARE
The calculations of basic and adjusted headline earnings per ordinary share are
based on basic headline earnings of R7 739 million (2008: R6 328 million) and
adjusted headline earnings of R6 776 million (2008: R7 618 million)
respectively, and a weighted average number of ordinary shares in issue of 1 862
519 (2008: 1 864 911).
Reconciliation between net profit attributable to the equity holders of the
company and headline earnings
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Audited
Rm Rm Rm
Net profit attributable to 7 630 6 240 15 315
company`s equity holders
Adjusted for:
Loss on disposal of non-current 109 88 288
assets
Basic headline earnings 7 739 6 328 15 603
Adjustment:
Reversal of the subsequent - 425 441
utilisation of deferred tax asset
Reversal of put option in respect
of subsidiary
- Fair value adjustment (553) 520 74
- Finance Costs (292) 404 914
- Minority share of profits (118) (59) (162)
Adjusted headline earnings 6 776 7 618 16 870
Reconciliation of headline
earnings per ordinary share
(cents)
Attributable earnings per share 409,7 334,6 821,0
(cents)
Adjusted for:
Loss on disposal of non-current 5,8 4,7 15,5
assets
Basic headline earnings per share 415,5 339,3 836,5
(cents)
Reversal of the subsequent - 22,8 23,6
utilisation of deferred tax asset
Reversal of put option in respect (51,7) 46,4 44,3
of subsidiary
Adjusted headline earnings per 363,8 408,5 904,4
share (cents)
Contribution to adjusted headline
earnings per
ordinary share (cents)
South and East Africa 177,3 180,7 385,7
West and Central Africa 291,1 229,9 517,6
Middle East and North Africa 56,5 36,8 77,0
Head office companies (161,1) (38,9) (75,9)
363,8 408,5 904,4
Number of ordinary shares in
issue:
- Weighted average (`000) 1 862 519 1 864 911 1 865 299
- At period end (`000) 1 839 868 1 865 354 1 868 010
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
Rnil (2008: R542 million) Rnil excluding minorities (2008: R425 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 has reservations about the appropriateness
of this treatment in light of the fact that no cognisance may be taken (in
determining the value of such deferred tax assets) of 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
reflect more fully 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, accrue to the minority shareholders.
IAS 32 requires - that in the circumstances described above:
(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 remeasured 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 are to 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 light 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.
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
Reviewed Reviewed Audited
Rm Rm Rm
6. CAPITAL EXPENDITURE INCURRED 15 504 10 311 28 263
7. CONTINGENT LIABILITIES AND
COMMITMENTS
Contingent liabilities - 250 1 013 504
upgrade incentives
Operating leases 756 917 801
Finance leases 520 1 393 554
Other 633 84 541
8. COMMITMENTS FOR PROPERTY,
PLANT AND EQUIPMENT AND
INTANGIBLE ASSETS
- Contracted for 23 260 12 686 11 410
- Authorised but not contracted 3 625 11 816 26 257
for
9. CASH AND CASH EQUIVALENTS
Bank balances, deposits and 19 503 27 058 26 961
cash
Call borrowings (587) (1 054) (1 365)
18 916 26 004 25 596
10. INTEREST-BEARING
LIABILITIES
Call borrowings 587 1 054 1 365
Short-term borrowings 9 551 10 196 11 125
Current liabilities 10 138 11 250 12 490
Long-term liabilities 25 537 29 313 29 100
35 675 40 563 41 590
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.
12. BUSINESS COMBINATIONS
ACQUISITIONS
During the period under review, certain subsidiaries of the Group acquired the
following entities:
(a) An additional 59% in iTalk, a cellular service provider, was acquired in
January 2009
(b) 100% of Verizon, an internet service provider, was acquired in February 2009
The accounting for the acquisition of Verizon has been determined on a
provisional basis as elected under IFRS 3 - to finalise asset and liability fair
values and therefore allocated goodwill, within 12 months subsequent to the
acquisition date.
Carrying
amount on
acquisition Total
date fair value
Rm Rm
The assets and liabilities arising from
the acquisitions are as follows:
Property, plant and equipment 106 106
Other non-current assets 95 95
Investments 1 1
Cash and cash equivalents 95 95
Net working capital 42 42
Long-term borrowings (118) (118)
Taxation 7 7
Other liabilities (56) (56)
Net asset value 172 172
Purchase consideration 2 107
Fair value of net assets acquired 172
Goodwill 1 935
13. THE ACQUISITION OF 100% OF NEWSHELF
MTN purchased the entire issued ordinary share capital of Newshelf from the PIC.
The Newshelf acquisition was affected by way of a specific issue of shares to
the PIC and the specific repurchase by MTN of 243,5 million MTN shares held by
Newshelf. The transaction was concluded in May 2009. MTN acquired the Newshelf
shares at an effective discount to market value and intends to apply a
significant portion of this effective discount to future participants in a BEE
transaction as an incentive to invest in that transaction. The board remains
fully committed to implement a BEE transaction as soon as conditions become
conducive.
14. POST BALANCE SHEET EVENTS
The board is not aware of any matter or circumstance arising since the end of
the reporting period, not otherwise dealt with herein, which significantly
affects the financial position of the Group or the results of its operations or
cash flows for the period ended.
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
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)
70 Marshall Street, Marshalltown, 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.co.za
www.mtn.com
Fairland
27 August 2009
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 27/08/2009 08:35:03 Produced by the JSE SENS Department.
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