MTN - MTN Group Limited - 15TH Annual general meet15 Jul 2010
MTN
MTN                                                                             
MTN - MTN Group Limited - 15TH Annual general meeting business update and future
prospects                                                                       
MTN Group Limited                                                               
(Incorporated in the Republic of South Africa)                                  
(Registration number 1994/009584/06)                                            
(Share code MTN)                                                                
(ISIN code ZAE000042164)                                                        
("MTN" or "the Group")                                                          
15TH ANNUAL GENERAL MEETING BUSINESS UPDATE AND FUTURE PROSPECTS                
1.  BUSINESS UPDATE                                                             
At the Annual General Meeting to be held later today, Chief executive and       
president, Phuthuma Nhleko will make the following comments regarding the       
Group`s performance for the first five months of 2010 in comparison with the    
similar period for 2009:                                                        
The majority of the markets in which MTN operates have continued to show strong 
subscriber growth to the end of May 2010 despite increasing competition. Group  
subscribers increased nearly 10% for the 5 months to the end of May 2010. This  
positive subscriber growth translated to sound revenue growth and profitability 
in the various local currencies. As the Group`s non-SA operations contribute in 
excess of 70% of MTN`s revenue, the continuing strength of the South African    
currency has again had a negative impact on the translation of these earnings   
resulting in a marginal reduction in rand reported revenue and EBITDA relative  
to the same period last year. Had rates been the same as the prior year, revenue
and EBITDA would have been meaningfully higher.                                 
Group EBITDA margins improved marginally as a result of an increase in margin in
its three larger operations, although margin declines were experienced in some  
of the medium and smaller operations. Margins for the first five months of 2010 
have as a result strengthened in comparison with the margins experienced in the 
second half of 2009.                                                            
MTN`s spend on capital expenditure was lower, partially due to the stronger rand
and partially due to slower deliveries. The current capital expenditure levels  
are anticipated to pick up during the rest of the year to levels closer to those
guided in March of this year excluding the impact of the stronger rand.         
MTN`s Nigerian operation recorded sound organic revenue growth albeit at a lower
rate than last year falling to the mid to low teens. Future competition is      
anticipated to increase pressure on revenue growth and EBITDA margin in the     
medium term although short term profitability remains robust.                   
MTN`s operations in Iran have continued to exceed expectations with margin      
improvement together with a solid growth in market share. There is still limited
clarity on the launch of the third operator.                                    
South African margins improved in the first half of the year, mainly due to     
better distribution cost management and lower handset costs. There was also an  
improvement in MTN`s market share although future competition and regulatory    
impacts remain uncertain. Diversification of revenue from voice to data has     
continued with strong volume growth.                                            
In line with an increased focus on procurement and products, a dedicated        
function, VP Commercial, has been created at the Group level. Examples of       
products being leveraged across the Group include Mobile money which shows      
strong potential and is now launched in 5 countries with over 2.1 million       
customers across the footprint. Cost efficiencies will also be driven more      
effectively from the core.                                                      
MTN announced separately on SENS and the media this morning its proposed R8.1   
billion Broad-Based Black Economic Empowerment Transaction and ESOP scheme, the 
highlights of which are:                                                        
-     Execution of MTN`s continued commitment to BEE in South                   
Africa through its local listing                                           
-     R8.1 billion BEE transaction consisting of up to 4%                       
     equity ownership in MTN - the largest empowerment                          
     transaction in the telecommunications sector in South                      
Africa to date                                                             
-     Translates to an additional effective indirect black                      
     ownership of up to 29.1% of MTN`s South African                            
     operations                                                                 
-     Broadening MTN South Africa`s effective BEE ownership                     
     through a black public offer to black individuals and                      
     groups                                                                     
-     An ESOP, excluding management and directors, requiring                    
no equity contribution from eligible participants to                       
     augment MTN South Africa`s BEE initiatives                                 
-     Provides exposure to MTN`s diversified operations and                     
     growth markets                                                             
-     Facilitation that is in line with precedent transactions                  
-     MTN to provide additional equity for the MTN BEE                          
     Transaction equal to 80% of the equity raised from the                     
     black public                                                               
-     Transaction leveraged through vendor and third party                      
     funding                                                                    
2.  FUTURE PROSPECTS                                                            
The activities of MTN have for many years been guided by its vision to be a     
leader in telecommunications in emerging markets supported by the following key 
strategic pillars:                                                              
-  participating in the consolidation of the emerging                           
  markets telecoms sector and reducing the concentration                        
of MTN`s earnings; and                                                        
-  leveraging MTN`s existing footprint and intellectual                         
  capacity; and                                                                 
-  pursuing convergence and operational evolution.                              
MTN has delivered on this strategy through the numerous organic and acquisitive 
opportunities it has invested in to date. However, the board of MTN ("the       
Board") recognises that as the sector continues to mature there are a limited   
number of value accretive consolidation opportunities left within emerging      
market telecoms. The Group has also invested heavily in infrastructure across   
all its operations over the past few years. Therefore, the level of capital     
expenditure investments in infrastructure is anticipated to be lower as emerging
markets enter a phase of higher penetration. As a consequence of the sector     
evolution and MTN`s anticipated future cash generation, going forward, the Board
is able to more easily balance its growth aspirations with that of ensuring     
improved short term returns to shareholders.                                    
Accordingly, while MTN will continue to evaluate and consider value accretive   
opportunities, the Group will increase its focus on the following issues:       
-   optimising efficiencies including infrastructure                            
   sharing, standardisation of systems and processes,                           
   rationalisation of suppliers, cost management and cash                       
optimisation; and                                                            
-   monitoring infrastructure investments to ensure                             
   appropriate levels of capacity and quality of service,                       
   incorporating continued investment in fibre and cable                        
requirements to service evolving voice and data                              
   requirements;                                                                
-   continued engagement with regulatory authorities in the                     
   development and refinement of the telecommunications                         
sector in its markets;                                                       
-   investigating options to meaningfully improve cash                          
   returns to shareholders; and                                                 
-   conclusion of the MTN BEE transaction announced earlier                     
today.                                                                       
MTN is well positioned in its markets to compete within a changing competitive  
and regulatory landscape with a strong focus on cost management as pressure on  
the revenue line increases.                                                     
Given the above, the Board is investigating options to meaningfully improve cash
returns to MTN shareholders and envisage the declaration of a top up dividend at
the interim stage as part of a sustainable strategy towards improving the annual
dividend payout ratio to MTN shareholders.                                      
The information in this Business Update has not been reviewed or reported on by 
the Group`s external auditors. MTN is currently in a closed period and will be  
announcing its interim results on the 19 August 2010.                           
Fairland                                                                        
15 July 2010                                                                    
Sponsor                                                                         
Deutsche Securities (SA) (Pty) Ltd                                              
Date: 15/07/2010 12:37:01 Produced by the JSE SENS Department.                  
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