MTN
MTN
MTN - MTN Group - Final audited results for the year ended 31 December 2010
MTN Group Limited
Registration number: 1994/009584/06
ISIN code: ZAE 000042164
Share code: MTN
Final audited results for the year ended 31 December 2010
Highlights
141,6 million Group subscribers up 22,0%
44%EBITDA margin up 2,9 percentage points
R31,0 billion Approximate FCF* up 108%
909,1 cents Adjusted HEPS (excluding Zakhele)up 20,5%
349 cents Final dividend per share
*EBITDA - Capex (approximately free cash flow)
Group subscribers increased by 22.0% to 141,6 million
EBITDA** margin increased by 2.9 percentage points to 44.0%
Adjusted HEPS** increased by 20.5% to 909,1 cents
Dividend payout ratio increased to 55%
Final cash dividend of 349 cents per share declared
Approximate Free Cash Flow* of R31,0 billion compared to R14,9 billion in 2009
* EBITDA** less Capex
** Excluding the impact of the MTN Zakhele transaction
Performance review
MTN Group enjoyed a satisfactory operational performance for the year to 31
December 2010 despite being negatively impacted by the strong rand, as the
translation of the various group companies` earnings into rand dampened the
reported numbers. Economies across our footprint have emerged relatively
strongly from the challenges of the global financial crisis of 2008. The
commodity cycle upswing together with continued infrastructure investment and
improved governance helped maintain a positive trading momentum.
MTN concluded the largest telecommunications BEE deal in South Africa. Worth
R8,1 billion, this has enabled MTN South Africa to achieve its objective of
creating a broad-based empowerment holding following the unwinding of Newshelf
664 in 2008. MTN Zakhele (a BEE special purpose vehicle) now holds 4% of the
MTN Group and has 120,349 individual and 2,203 BEE groups as shareholders. The
total cost of the transaction, together with the related ESOP scheme, was R2,9
billion. The analysis of the company`s results below excludes the impact of
MTN Zakhele, which has been separately detailed where appropriate.
Profit analysis Variance Constant
currency
variance
ZAR million %
2010 2009 %
Total revenue 114 684 111 947 2.5 14
Total operating costs 64 174 65 884 (2.6)
EBITDA (excl Zakhele) 50 510 46 063 9.7 23
EBITDA margin % (excl 44.0 41.1 2.9 pts
Zakhele)
MTN Zakhele costs 2 973
EBITDA (incl Zakhele) 47 537 46 063 3.2
On a constant currency basis, revenue grew by 14% when compared to the
comparative period. However, due to the continued strengthening of the rand,
reported revenue at R114,7 billion was 2.5% higher than the prior year as 68%
of the Group`s revenue is generated in currencies other than the rand.
Regulation of mobile termination rates, mainly in South Africa and Nigeria,
resulted in a decline of 13% in interconnect revenue, whilst data revenue,
including SMS and MTN Business Solutions, increased by 33% albeit off a low
base and notwithstanding the impact of the rand.
A sound operational performance resulted in a 23% increase in earnings before
interest, tax, depreciation and amortisation ("EBITDA") on a constant-currency
basis. The strong rand, however, meant the increase in reported EBITDA** was
9.7%. The Group`s EBITDA** margin increased by 2.9 percentage points to 44.0%.
The decrease in costs in the year was mainly due to the decrease in
interconnect costs together with a reduction in selling, distribution and
marketing costs. Despite the lower interconnect revenue in the year, the
increase in on-net traffic had a positive impact on the margin contribution of
interconnect to the Group. Reported EBITDA, excluding the MTN Zakhele
transaction, increased to R50,5 billion despite the effect of the strong rand.
The R2,9 billion MTN Zakhele charge to income is in respect of costs of the
transaction that included the notional vendor finance of R1,4 billion, the
donation of R1,3 billion, the employee share option scheme of R171 million
and other transaction costs of R126 million.
The Group`s strong operational performance was under-pinned by a 22% increase
in subscribers to 141,6 million from 116,0 million in the prior year, as well
as improved efficiencies due to various cost initiatives and despite higher
levels of mobile penetration, aggressive competition and increased regulatory
requirements. MTN continued to maintain network quality and capacity and to
offer attractive segmented value propositions to customers.
Details of the performance of MTN`s main operations are provided below under
individual country headings.
Net finance costs 2010 2009 Variance
%
ZAR million
Net interest paid 1 925 2 201 (12.5)
Net forex losses 924 1 106 (16.5)
Functional currency 1 223 3 204 (61.8)
losses
Put option 22 (701) (103.0)
Total 4 094 5 810 (29.5)
Net finance costs decreased by 29.5% to R4,1 billion in 2010 from R5,8 billion
the previous year. This was mainly due to a 61.8% reduction in functional
currency losses to R1,2 billion at the end of December 2010. The functional
currency loss relates to the foreign currency cash balances in Mauritius.
Foreign currency losses reduced by 16.5% to R924 million.
The Group`s depreciation charge increased by 12% to R13,2 billion at December
2010. This was mainly the result of the impact of the first full year of
depreciation in respect of the significant 2009 capital expenditure programme.
Tax
Variance
ZAR million 2010 2009 %
Normal tax 7 834 6 425 21.9
Deferred tax 1 984 992 100.0
STC and other 1 449 1 195 21.3
withholding taxes
Total 11 267 8 612 30.8
Effective tax rate (%) 36.3 33.4 1.7 pts
- excl MTN Zakhele
Effective rate (%) - 40.1
incl MTN Zakhele
The Group`s effective tax rate increased to 36.3% from 33.4% in 2009. This was
mainly due to the impact of the Secondary Tax on Companies ("STC") on the
maiden interim dividend paid on 20 September 2010 and the reduced effect of
the Nigerian put option on profit before tax. The decrease in the Nigerian
investment allowance as a result of reduced capital expenditure also
contributed to the higher tax rate. On including the impact of MTN Zakhele,
the rate increases to 40,1% due to the non deductibility of these expenses.
Basic headline earnings per share ("HEPS") decreased by 1.9% to 776,2 cents
and adjusted HEPS by 1.0% to 747,0 cents. After excluding the impact of MTN
Zakhele adjusted HEPS increased by 20.5% to 909,1 cents. Adjusted HEPS
excludes the impact of the put options.
Minority or non-controlling interests remained stable at R2,5 billion because
of lower rand earnings from non-South African operations and an increased
contribution by the South African operation to profit after tax.
Capital expenditure Authorised Actual Actual
ZAR million 2011 2010 2009
South and East Africa 5 676 5 421 8 645
South Africa 3 920 3 908 6 034
Other operations 1 756 1 513 2 611
West and Central Africa 10 723 9 919 16 518
Nigeria 7 784 4 700 10 222
Ghana 1 221 3 092 2 586
Other operations 1 718 2 127 3 710
Middle East and North 4 871 3 402 5 785
Africa
Iran 1 317 1 661 3 326
Syria 1 066 410 748
Other operations 2 488 1 331 1 711
Head office companies 861 724 300
Total 22 131 19 466 31 248
Reported capital expenditure ("capex") was R19,5 billion, 38% lower than in
2009 and slightly below estimate. The lower-than-expected expenditure was
partially attributable to rand strength as well as lower expenditure in
Nigeria and Iran. The stronger rand reduced reported capex for the year by
R2,3 billion. In Ghana, MTN`s capex was higher than expected because of the
roll-out of fibre and a new switch centre. Group capex in 2011 is planned to
be marginally higher partly due to a roll-over from 2010.
The R13,3 billion increase in the Group`s cash and cash equivalents at year
end was mainly the result of the R11,7 billion reduction in the Group`s capex
requirement, as outlined above. This was also the key driver of the increase
in approximate free cash flow* for the period to R31,0 billion from R14,9
billion in 2009.
The increase in cash and cash equivalents, combined with marginally lower
gross debt levels, resulted in a net cash position of R905 million at 31
December 2010 compared with a net debt position of R12,2 billion in the prior
year.
Group initiatives
MTN recognises the importance of evolving its business as the industry matures
and converges and as consumers demand broader product offerings. Even though
MTN`s 21 markets are at varying stages of development, a number of data and
value-added service initiatives continued to gain momentum during 2010. These
included:
The introduction of a dedicated `Commercial and Innovation` function which has
developed a comprehensive data strategy for the Group`s operations. Partner
relationships, products and process frameworks are now better established for
roll-out across the Group.
Investment and upgrade of network and IT infrastructure to support converged
and IP-based services including 3G and WiMax;
Investment in undersea cables and fibre transmission both on a national and
international level;
Launch of MobileMoney in three more markets to date, bringing the total number
of countries that have launched this service to 11 and the total number of
MobileMoney subscribers to 4,3 million at the end of December 2010.
In order for MTN to continue to operate at historical levels of profitability
and maintain its competitive edge, the Group has embarked on structural cost
efficiencies and savings initiatives. These include:
The adoption of an infrastructure tower-sharing strategy to pursue more
extensive sharing of passive infrastructure and fibre.
A structural framework for key projects including:
Cost-effective platforms for delivery of data and services;
Standardisation and optimisation of systems and processes;
Increased centralisation of procurement activities and rationalisation of
suppliers; and
Shared services and outsourcing
The Ghanaian market presented an ideal opportunity to commence the Group`s
medium-term objectives with respect to its towers. MTN and American Tower
Corporation ("ATC") announced that they have entered into a definitive
agreement for the establishment of a joint venture in Ghana. This includes the
sale of 1,876 of MTN Ghana`s towers for approximately USD428,3 million, of
which ATC will pay USD218,5 million for its 51% stake. This is expected to be
implemented during the first half of 2011.
South Africa
MTN South Africa`s performance was encouraging in a market that is technically
more than 100% penetrated, driven by high growth in the prepaid segment. The
operation increased its market share to 36%, as a result of leveraging a
strong brand and improved segmented propositions in the prepaid and hybrid
segments of the market. The brand perception was greatly supported by MTN`s
affiliation to the 2010 FIFA World CupTrade Mark and the Ayoba campaign.
Subscribers increased by 17.3% for the period to 18,8 million. This was mainly
due to the 18.6% increase in the prepaid segment to 15,5 million users. The
strong product offering in this segment, including the enhanced MTN Zone
offering, was a big contributor to growth. The postpaid segment continued to
grow, albeit at a slower pace, increasing its subscriber base by 11.3% to 3,4
million at the end of 2010. The increased use of hybrid packages was partly
offset by a fall in classic-type packages. As at 31 December 2010, 81% of the
prepaid base and 71% of the postpaid base had been RICA`d and the deadline was
extended to 30 June 2011.
MTN South Africa`s revenue grew by 8% for the year, driven mainly by an 8%
growth in airtime and subscription revenue. Strong growth in data revenue of
47% was offset by a 10% decrease in interconnect revenue. The first reductions
in mobile termination rates were effective in March 2010 and, following the
publication of the final termination regulation on 29 October 2010, these
reductions will continue until both peak and off-peak rates are at 40c in
March 2013. Prepaid average revenue per user per month ("ARPU") increased by
R12 to R112 because of an increase in the percentage of revenue-generating
subscribers in the reported base and an increase in data revenue spend.
Postpaid ARPU declined by R36 to R329 a month due to continued lower out-of-
bundle spend and migrations to lower-value packages.
MTN South Africa`s EBITDA margin increased by 2.6 percentage points to 34.0%
from the prior year. This was partly driven by an increase in on-net traffic
which resulted in interconnect costs reducing by more than the reduction in
interconnect revenue. Margins were also positively affected by relatively
lower distribution costs and changes in the licence fee terms.
MTN South Africa continued to invest in and upgrade the network, rolling out
369 2G and 284 3G BTSs and bringing the total BTS count to 8,912 at the end of
the year. Capex reduced to 11% of revenue, from 18% in the prior year although
3G, data and IP interfaces, coverage and capacity increased significantly in
support of the growing data revenue opportunity. To further support the
network, long-distance fibre initiatives continue to be rolled out but
progress on these initiatives has been slower than expected. By the end of
December 2010, 472 km of the Johannesburg-to-Durban route had been trenched,
while 172 km and 80 km of the Johannesburg-to-Bloemfontein and Bloemfontein-to-
Cape Town routes respectively had been trenched.
Nigeria
MTN Nigeria performed well for the period under review despite increased
competition in the fourth quarter, increasing its market share to 52% through
the capture of more than 60% of the subscribers added by the market in 2010.
This was as a result of attractive segmented promotions to customers and
effective churn management. Improved customer service and product
accessibility through enhanced distribution channels and customer call centres
also contributed to the subscriber base increasing by 25% over the year to
38,7 million. Registration of the existing subscriber base is progressing
steadily with approximately 34% of the total base registered at 31 January
2011. From 14 February 2011, all new SIM cards are being sold partially
activated in line with regulatory requirements. This gives customers 30 days
to register the SIM card during which time they can only receive calls.
Naira ("NGN") revenue grew by 16% mainly as a result of increased airtime and
subscription revenue (up 19%), which was partially offset by lower
interconnect revenue. Interconnect revenue decreased by 25% following the
introduction by the regulator of lower mobile termination rates at the end of
the prior year. Data and SMS revenue continued on a strong trajectory albeit
off a very low base. ARPU declined by 10% in local currency and 11% in dollar
terms to USD11, in line with penetration into lower-usage segments of the
market. Mobile penetration in Nigeria increased by 7 percentage points to 49%
during the year.
MTN Nigeria`s EBITDA margin increased by 3.7 percentage points to 62.9% at 31
December 2010. This was mainly due to the operation achieving better economies
of scale and various ongoing cost control initiatives.
The strength of the rand dampened the rand reported results for Nigeria
resulting in a 0.5% revenue growth to R33,4 billion and a 6.8% EBITDA growth
to R21,1 billion.
Site roll-out only gained momentum in the second half of the year as the
company added 1,504 2G and 480 3G BTSs, bringing the total BTS count to 9,110
at the year end. Capital expenditure reduced to 14% of revenue from 31% the
prior year. Despite the slower roll-out, the operation maintained network
quality and capacity and this will remain a priority as competition
intensifies. In addition to the increase in BTS coverage, 4,800 existing BTS
sites were upgraded. Nigeria also continued to roll-out fibre across the
country, completing a 696 km fibre ring between Yola, Bauchi and Gombe. In an
effort to enhance data capabilities, a national fibre expansion project (phase
1) was initiated linking 71 high-capacity BTS sites on fibre and integrating
66 sites. Further roll-out of WiMax continued to gain momentum, increasing the
roll-out to three additional states.
Ghana
MTN Ghana performed satisfactorily in one of the Group`s most competitive
markets, with market share decreasing to 53% from 55% in 2009. MTN Ghana
recorded a 9% increase in subscribers to 8,7 million at December 2010, driven
largely by the introduction of new price plans and the revision of MTN Zone to
allow subscribers to view discounts in terms of monetary value rather than as
discount percentages. MTN Ghana`s performance was encouraging given aggressive
competition through headline tariff reductions and the impact of SIM card
registration. This regulatory requirement resulted in net disconnections in
the second half of the year. As at 31 December 2010, 70% of the base had been
registered. The final deadline for registration is June 2011.
Cedi ("GHC") revenue grew by 14%, ahead of subscriber growth, mainly because
of the increase in airtime and subscription revenue. Although data revenue
grew strongly, this was off a low base and only contributed 1.9% to total
revenue. SMS revenue also increased significantly, but again only contributed
5% to revenue. Reported ARPU decreased by USD1 to USD7 while GHC ARPU remained
stable despite the disconnections in the second half of the year.
MTN Ghana`s EBITDA margin decreased slightly to 44.3% from 44.5% in the prior
period. This was mainly because of the increase in direct network operating
costs, specifically rent and utilities, and maintenance costs associated with
a price hike in May 2010 as well as a bigger network. Staff costs also
contributed to the decrease in margin as a result of improved retention
initiatives.
Due to the strong rand, there was no revenue growth in rand terms and a 0.7%
decrease in EBITDA to R2,4 billion for the year.
MTN Ghana rolled out 940 BTSs during the year, bringing the total number of
BTSs to 4,033. Capex increased to 55% of revenue from 46% the prior year as
the roll-out gained momentum in the second half of the year, enabling the
operation to maintain network quality and capacity despite a meaningful
increase in traffic. A further 77 3G BTSs were added.
Iran
MTN Irancell reported a strong operational performance, increasing its market
share to 44% in December 2010 from 40% the prior year. This was mainly due to
improved network coverage and quality, attractive seasonal promotions, the
continued roll-out of electronic distribution channels and improved brand
perception. Subscriber numbers increased by 28% to 29,7 million at the end of
the year.
Rial ("IRR") revenue increased by 42%, significantly ahead of subscriber
growth for the same period. This was largely due to the 42% growth in airtime
and subscription revenue and the 73% growth in SMS revenue, which were partly
offset by lower connection revenue as a result of the lower prices charged on
prepaid connections. Data revenue growth was high but not yet significant as a
percentage of revenue because of content limitations. Reported ARPU remained
stable at USD8 , although IRR ARPU increased marginally as a result of
improved network quality.
MTN Irancell`s EBITDA margin increased by 6.2 percentage points to 41.1% at
the end of December 2010. This was mainly because of cost efficiencies in
maintenance and transmission eminating from renegotiated supplier contracts,
as well as a change in the transmission leasing strategy. A reduction in
prepaid dealer commissions and tighter control of marketing costs also
contributed.
Owing to the strength of the rand, these figures in rand terms translated into
21% revenue growth and 42% growth in EBITDA for the year. MTN Group
consolidates only 49% of MTN Irancell.
During the year 1,284 BTS`s were added, resulting in a total 6,859 at the end
of the year. Capex declined to 18% of revenue from 44% in the prior year,
although MTN Irancell increased its population and geographic coverage to 77%
and 20% respectively. It also added 5,772 km of road coverage during the year.
WiMax roll-out continued, increasing the number of live sites to 535, mainly
in major cities.
Syria
MTN Syria`s performance remained stable as it maintained its market share at
45% and recorded a 15% increase in subscriber numbers to 4,9 million at the
end of December 2010. These results were underpinned by attractive segmented
customer value propositions, loyalty programmes and improved brand perception.
A memorandum of understanding for the conversion of the build-operate-transfer
arrangement to a freehold licence was signed with the Ministry of
Telecommunications and is expected to be implemented in the first half of
2011.
Syrian pound ("SYP") revenue increased by 10.4% in the year, mainly
attributable to the 10% increase in airtime and subscription revenue and the
9% growth in interconnection revenue. Data revenue has also started to show
growth as a result of increased data product offerings. Data revenue now
comprises 4.4% of total revenue and SMS revenue 6.6%.
Reported ARPU decreased by USD2 to USD16, as SYP ARPU declined by 8% in line
with penetration into lower-usage segments.
MTN Syria`s EBITDA margin increased by 4.1 percentage points to 23.7% at the
end of the year. This was largely because of a decrease in rent and utility
costs resulting from a change in the electricity provision and usage
estimation policy. Transmission and maintenance costs also decreased following
the adoption of lower pricing from the regulator. In addition, there was a
general reduction in commissions paid in the market which led to a material
reduction in distribution costs.
Because of the strong rand, MTN Syria reported a 2.5% reduction in revenue in
rand terms to R6,8 billion and a 14% increase in EBITDA to R1,6 billion for
the 2010 year.
MTN Syria added 415 BTSs in the year, bringing the cumulative total at the end
of the period to 3,912. Capital expenditure dropped to 6% of revenue from 11%
in the prior year without negatively affecting performance. This is because
the operation has already completed its frequency plans and re-engineered
radio transmission aimed at enabling increased network quality and capacity.
Prospects
MTN`s vision is to be the leader in telecommunications in emerging markets.
The board will continue to evaluate and consider value accretive opportunities
going forward. However, due to the limited number of such opportunities, the
board is confident that growth aspirations can be accommodated within the
imperative of improved short term returns to shareholders.
With a strong market position and penetration still at a weighted average of
50%*** in the markets in which it operates, MTN is well positioned to continue
to deliver good organic growth. Increased voice penetration, intense
competition, at times challenging regulatory environments and the evolution of
industry and customer trends are likely to continue to place pressure on
revenue growth and EBITDA margins. However, these are expected to be offset in
part by growth in data and other value added services, increased voice usage
and cost reduction strategies.
The markets and economies in which MTN operates continue to evolve and MTN is
responsive to the management of risks in these markets. Operations in
countries affected by local tensions have continued to function with the Group
taking precautionary measures wherever necessary.
Further to the announcement of 20 December 2010, the Group continues to look
for ways to optimise the management and structure of MTN`s International
operations and will make further announcements in due course in line with its
strategy.
Subscriber net additions guidance for 2011
Net additions
000`s
South
Africa 2,000
Nigeria
4,200
Ghana
390
Iran
3,350
Syria
600
Rest
6,385
Total
16,925
*** Excluding South Africa and Iran
Dividends
Shareholders are advised that the MTN board has approved an increase in the
payout ratio to 55%. Accordingly, a final cash dividend of 349 cents per share
in respect of the period to 31 December 2010 has been declared. This will
bring the total dividend for the year to 500 cents. The dividend is calculated
based on a full-year adjusted HEPS of 909,1 cents, after a once-off adjustment
for the impact of MTN Zakhele. As 151 cents was paid at the interim period, a
final dividend of 349 cents is payable to shareholders recorded in the
register of the MTN Group at the close of business on Friday, 1 April 2011. 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, 25 March 2011
Shares commence trading ex dividend Monday, 28 March 2011
Record date Friday, 1 April 2011
Payment of dividend Monday, 4 April 2011
Share certificates may not be dematerialized or rematerialized between Monday,
28 March 2011 and Friday, 1 April 2011, both days inclusive.
On Monday, 4 April 2011, the dividend will be transferred electronically 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, 4
April 2011 will be posted on or about that date. Shareholders who hold
dematerialised shares will have their accounts held by the Central Securities
Depository Participant or broker credited on Monday, 4 April 2011.
Condensed consolidated 31 31 December
December
income statement 2010 2009
Audited Audited
Rm Rm
Revenue 114 684 111 947
Direct network operating costs (16 818) (15 925)
Cost of handsets and other accessories (6 819) (6 297)
Interconnect and roaming (12 593) (15 166)
Employee benefits (5 961) (5 843)
Selling, distribution and marketing (14 741) (14 649)
expenses
Other expenses (10 215) (8 004)
Depreciation of property, plant and (13 248) (11 807)
equipment
Amortisation of intangible assets (2 120) (2 668)
Goodwill impairment (32) -
Net finance costs (4 094) (5 810)
Share of results of associates after tax 52 (5)
Profit before income tax 28 095 25 773
Income tax expense (11 268) (8 612)
Profit after tax 16 827 17 161
Attributable to:
Equity holders of the company 14 300 14 650
Non-controlling interests 2 527 2 511
Earnings per ordinary share (cents)
attributable to equity holders of the
company
- basic 776,2 791,4
- diluted 764,5 781,5
Dividends per share (cents) 343,0 181,0
Condensed consolidated statement 31 31 December
December
of comprehensive income 2010 2009
Audited Audited
Rm Rm
Profit after tax 16 827 17 161
Other comprehensive income:
?Exchange differences on translation of (9 811) (17 700)
foreign operations
?Cash flow hedges 77 (191)
Total comprehensive income/(loss) for 7 093 (730)
the year
Attributable to:
Equity holders of the company 5 059 (2 508)
Non-controlling interests 2 034 1 778
7 093 (730)
Condensed consolidated 31 31 December
December
statement of financial position 2010 2009
Audited Audited
Rm Rm
Non-current assets 99 727 110 213
Property, plant and equipment 63 361 67 541
Goodwill, intangible assets and 31 568 37 526
investments in associates
Other non-current assets 4 798 5 146
Current assets 54 234 46 024
Cash and cash equivalents 35 947 23 999
Restricted cash 285 742
Other current assets 18 002 21 283
Assets of disposal group classified as 825 -
held for sale
ASSETS 154 786 156 237
Total equity 74 074 72 866
Non-current liabilities 33 995 28 426
Borrowings 24 857 21 066
Deferred tax and other non-current 9 138 7 360
liabilities
Current liabilities 46 717 54 945
Non interest-bearing liabilities 36 246 39 094
Interest-bearing liabilities 10 471 15 851
EQUITY AND LIABILITIES 154 786 156 237
Condensed consolidated statement 31 31 December
December
of changes in equity 2010 2009
Audited Audited
Rm Rm
Opening balance 72 866 80 542
Total comprehensive income/(loss) for 7 093 (730)
the year
Dividends paid (9 083) (6 122)
Shares issued during the year 11 20 392
Transactions with non-controlling 60 (43)
interests
MTN Zakhele transaction 2 847 -
Newshelf share buy back - (21 226)
Other reserves 280 53
Closing balance 74 074 72 866
Condensed consolidated 31 31 December
December
statement of cash flows 2010 2009
Audited Audited
Rm Rm
Cash inflows from operating activities 34 728 36 282
Cash outflows from investing activities (15 701) (33 192)
Cash outflows from financing activities (2 055) (926)
Net movement in cash and cash 16 972 2 164
equivalents
Cash and cash equivalents at beginning 22 646 25 596
of year
Exchange losses on cash and cash (3 711) (5 114)
equivalents
Cash and cash equivalents at end of year 35 907 22 646
Segmental analysis 31 31 December
December
2010 2009
Reviewed Audited
Rm Rm
REVENUE
South and East Africa 42 502 39 669
West and Central Africa 49 887 50 543
Middle East and North Africa 22 008 21 525
Head office companies 287 210
114 684 111 947
EBITDA
South and East Africa 14 556 12 701
West and Central Africa 27 683 27 029
Middle East and North Africa 7 393 5 782
Head office companies (2 095) 551
47 537 46 063
PAT
South and East Africa 7 511 6 875
West and Central Africa 12 003 12 026
Middle East and North Africa 3 740 2 099
Head office companies (6 427) (3 839)
16 827 17 161
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 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
These audited results are a summary of the consolidated
financial statements and are prepared in accordance with the
recognition and measurement criteria of International
Financial Reporting Standards (IFRS), the presentation and
disclosure requirements of IAS34 Interim Financial
Reporting, the AC500 Standards as issued by the Accounting
Practices Board or its successor, the Listings Requirements
of the JSE Limited and the requirements of the South African
Companies Act 61 of 1973, as amended, on a basis consistent
with the prior year.
4. ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of
the annual financial statements for the year ended 31
December 2010, as described in the annual financial
statements.
During the year, the Group adopted all the IFRS and
interpretations being effective and deemed applicable to the
Group. None of these had a material impact on the results of
the Group.
5. HEADLINE EARNINGS PER ORDINARY
SHARE
The calculations of basic and adjusted headline earnings per
ordinary share are based on basic headline earnings of R14
011 million (2009: R14 869 million) and adjusted headline
earnings of R13 761 million (2009: R13 963 million)
respectively and a weighted average number of ordinary
shares in issue of 1 844 321 478 (2009: 1 851 260 334).
Reconciliation between net profit attributable to the equity
holders of the company and headline earnings
31 31 December
December
2010 2009
Audited Audited
Rm Rm
Net** Net**
Net profit attributable to 14 300 14 650
company`s equity holders
Adjusted for:
(Gain)/loss on disposal of non- (132) 71
current assets
(Reversal of)/impairment of (157) 148
property, plant and equipment and
other non-current assets
Basic headline earnings 14 011 14 869
Adjustment:
Reversal of put options in respect
of subsidiaries:
- Fair value adjustment (172) (537)
- Finance costs 471 537
- Forex (277) (701)
- Non-controlling interests` share (272) (205)
of profits
Adjusted headline earnings 13 761 13 963
Reconciliation of headline earnings
per ordinary share (cents)
Attributable earnings per share 776,2 791,4
(cents)
Adjusted for:
(Gain)/loss on disposal of non- (7,1) 3,8
current assets
(Reversal of impairment)/impairment (8,5) 8,0
of property, plant and equipment
and other non-current assets
Basic headline earnings per share 760,6 803,2
(cents)
Reversal of put options in respect (13,6) (48,9)
of subsidiaries
Adjusted headline earnings per 747,0 754,3
share (cents)
Diluted headline earnings per share 748,9 793,2
Number of ordinary shares in issue:
- Weighted average (`000) 1 844 321 1 851 260
- At period end (`000) 1 884 529 1 840 536
**Amounts are stated after taking into account non-
controlling interests.
Adjusted headline earnings adjustments
Put option in respect of
subsidiaries
IFRS requires the Group to account for written put options
held by non-controlling shareholders of Group subsidiaries,
which provides the non-controlling shareholders with the
right to require the subsidiaries to acquire its
shareholding at fair value. Prior to the implementation of
IFRS, the shareholdings were treated as non-controlling
shareholders in the subsidiaries as all risks and rewards
associated with these shares, including dividends, accrued
to the non-controlling 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 profit and loss;
(c) the non-controlling shareholder holding the put option
no longer be regarded as a non-controlling 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 liabilities for the present value of
the future strike price of the written put options result in
the recording of liabilities 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;
(c) the written put options meet the definition of a
derivative and should therefore be accounted for as a
derivatives in which case the liabilities and the related
fair value adjustments recorded through the profit and loss
would not be required.
31 31 December
December
2010 2009
Audited Audited
Rm Rm
6. CAPITAL EXPENDITURE INCURRED 19 466 31 248
7. CONTINGENT LIABILITIES AND
COMMITMENTS
Contingent liabilities - upgrade 941 1 209
incentives
Operating leases - non-cancellable 349 832
Finance leases 303 348
Other 491 749
8. COMMITMENTS FOR PROPERTY, PLANT AND 23 599
EQUIPMENT AND INTANGIBLE ASSETS 22 131
9. CASH AND CASH EQUIVALENTS
Bank balances, deposits and cash 35 947 23 999
Call borrowings (40) (1 353)
35 907 22 646
10. INTEREST-BEARING LIABILITIES
Call borrowings 40 1 353
Short-term borrowings 10 431 14 498
Current liabilities 10 471 15 851
Non-current liabilities 25 857 21 066
35 328 36 917
11. ASSETS OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
MTN`s Ghana subsidiary, Scancom Limited announced on 6
December 2010 that it has concluded a transaction with the
American Tower Company (ATC) which involves the sale of up
to 1 876 of Scancom Limited`s existing sites to TowerCo
Ghana for an agreed purchase price of up to approximately
USD 428,3 million, of which ATC will hold a 51% stake in
Towerco Ghana`s holding company, with the remaining 49%
stake held by MTN Dubai Limited. Scancom Limited will be the
anchor tenant, in commercial terms, on each of the towers
being purchased. The transaction is expected to be finalised
during 2011, subject to customary closing conditions.
12. POST BALANCE SHEET EVENTS
The directors are 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 year ended.
13. EFFECTS OF MTN ZAKHELE TRANSACTION
MTN concluded its Broad-Based Economic Empowerment
transaction "MTN Zakhele" during October 2010. The
transaction is designed to provide long term, sustainable
benefits to all BEE participants and will run for a period
of six years. Over 122 552 applicants subscribed for shares
and were successful.
The total cost of this transaction was R2 973 million which
was recognised as a once-off charge in the income statement
for the year. This charge includes the once-off IFRS 2 Share-
based Payment transactions charges for the notional vendor
finance of R1 382 million, the Employee Share Option Plan of
R171 million and a donation of R1 294 million. Transaction
costs amounted to R126 million.
If this transaction is excluded, attributable earnings would
have been 18% higher.
Net profit attributable to the company`s equity 14 300
holders
Add back once off MTN Zakhele cost 2 973
Net profit attributable to the company`s equity 17 273
holders excluding MTN Zakhele
Adjusted headline earnings per share excluding 909,1 cents
MTN Zakhele
For and behalf of the board
Directorate:
MC Ramaphosa (Chairman), PF Nhleko* (Group President and CEO), RS Dabengwa*, N
Patel*, KP Kalyan, AT Mikati, MJN Njeke, JHN Strydom, AF van Biljon, J van
Rooyen, DDB Band, D Marole, P Mageza, A Harper *Executive
Group 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, 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, 2191 PO Box 2939, Saxonwold, 2132
E-mail:
investor_relations@mtn.com
Fairland
9 March 2011
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Date: 09/03/2011 08:30:01 Produced by the JSE SENS Department.
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