MTN
MTN
MTN - MTN Group Limited - Reviewed interim results for the six months ended 30
June 2011
MTN Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1994/009584/06
Share code: MTN
ISIN code: ZAE000042164
("MTN" or "the MTN Group")
Reviewed Interim Results for the six months ended 30 June 2011
Highlights
Group subscribers up 7.5% since 31 December 2010 to 152.3 million
EBITDA margin up 1.3 percentage points to 44.6%
Free cash flow* up 23.7% to R19,494 million
Adjusted HEPS up 7.2% to 470.1 cents
Interim dividend of 273 cents per share
Payout ratio increased to 65%
* EBITDA minus capital expenditure
Overview
The MTN Group Limited ("MTN" or "the group") continued to deliver a satisfactory
operational performance for the six months with subscriber growth of 7.5%,
revenue 9.4% higher on a constant currency basis and a 1.3 percentage points
expansion in the earnings before interest, tax, depreciation and amortization
("EBITDA") margin to 44.6%. The EBITDA margin was buoyed by the profit on the
sale of towers in Ghana. If excluded, along with the Conakry settlement, the
margin of 44.0% is still higher than the prior year. The average rand:dollar
exchange rate strengthened from R7.52 in the first half of 2010 to R6.80 in the
current period, dampening the reported results. The constant currency reported
numbers are those restated at the same average exchange rates that were
applicable for the first half of 2010. Notwithstanding all the challenges,
revenue increased by 1.0% to R56,542 million. There was strong subscriber growth
in most of the group`s operations including an encouraging performance in Sudan.
Political instability in Yemen and Syria continues to create a challenging
business environment. Trading conditions in Cote d`Ivoire have improved
following the disruptions in the first three months of the year. The dispute
with the government of Guinea Conakry has been resolved.
The various group initiatives maintained momentum over the period and assisted
in improving margins while sourcing and growing new revenue streams. These
initiatives include:
Continued investment in transmission (undersea cables and fibre) and radio
technologies (2G, WIMAX and 3G) as well as mobile data solutions and sourcing of
appropriate handsets. These have enabled the group to increase data revenues
(excluding SMS) by 24.1% to R3,558 million and total data revenues (including
SMS) by 14.2% to R6,950 million.
Mobile Money has been implemented in 12 countries. Nigeria is expected to
introduce this utilising a partnership model. At 30 June 2011, there were 5.1
million registered mobile money subscribers, with Uganda and Ghana, each
accounting for 37% of the total.
The shared services IT hub in the South and East African region is now
operational and the procurement transformation project has gained momentum with
cost savings targets being identified. Marketing and sponsorship costs have also
been reviewed following the investments in the 2010 FIFA World Cup TM.
The conclusion of the tower deal by MTN Ghana and the first closing of 400
towers in May 2011. This marked the start of true infrastructure sharing and
opportunities to unlock value. Other projects of this nature are under
consideration.
During the period under review, Mr Phuthuma Freedom Nhleko and Mr Douglas Denoon
Balharrie Band resigned from the board effective 31 March 2011 and 11 March 2011
respectively.
Group financial review
Revenue
Group revenue increased by 1.0% to R56,542 million mainly due to strong growth
in MTN`s South African and Iranian operations of 5.9% and 12.1% respectively.
This was offset by negative growth in Ghana and Syria and no growth in Nigeria.
On a constant currency basis, growth was 9.4%. Local currency growth in Nigeria,
Ghana and Iran increased by a healthy 13.1%, 11.9% and 28.2% respectively,
despite increased competition. Airtime and subscription revenue remain the key
contributors comprising 66.1% of the group`s total revenue despite decreasing
2.8% year on year. Interconnect revenue grew by 3.8% as lower termination rates
in South Africa were more than made up for by incoming traffic increases in
Nigeria. Data growth, excluding SMS, increased by 24.1% to R3,558 million as
most of the larger operations enhanced their propositions both from a network
and product perspective. Data growth was still primarily driven by South Africa.
Data revenue (excluding SMS) overtook SMS revenue for the first time and now
contribute 6.3% and 6.0% respectively of total revenue.
Operating costs
Group operating costs decreased 1.3% mainly as a result of a 14.6% reduction in
selling, distribution and marketing costs. These costs also include the R445
million profit on the sale of the towers as well as the R147 million Guinea
Conakry settlement. On a constant currency basis, costs increased 5.0%, still
below constant currency revenue growth and including a 9.6% increase in direct
network operating costs.
EBITDA
EBITDA increased by 3.9% to R25,202 million and by 14.0% on a constant currency
basis. This was due to EBITDA increases on a local currency basis of 9.4% in
South Africa, 16.8% in Nigeria and 30.8% in Iran.
Net finance costs
Net finance costs decreased by 73.3% to R587 million (June 2010: R2,198 million)
mainly due to a reduction in forex losses and an increase in functional currency
gains, principally on cash balances held offshore in currencies other than the
reporting currency, as well as lower net interest costs.
Taxation
The Group reported an effective tax rate of 36.95% for the period compared to
36.77% in June 2010. The higher effective tax rate was mainly due to the
Secondary Tax on Companies ("STC") on the dividend paid in April 2011, foreign
withholding taxes and capital gains tax on the sale of towers in Ghana.
Earnings
The Group`s attributable earnings per share ("EPS") increased by 15.9% from 30
June 2010 to 509.6 cents. Adjusted headline EPS increased by 7.2% to 470.1 cents
which is lower than attributable EPS due to the reversal of the profit on the
disposal of the towers in Ghana and a small increase in the reversal of the put
options.
The Group continues to report adjusted headline EPS in addition to the
attributable headline EPS. The adjustment is because of the International
Financial Reporting Standards ("IFRS") requirement that the Group accounts for
written put options held by non controlling shareholders in two of the Group`s
subsidiaries, which provides the non controlling shareholders with the right to
require the subsidiary or its holding company to acquire this shareholding at
fair value.
Cashflow
Cash generated by operations decreased 1.9% while cash inflows from operating
activities decreased by 16.7%, principally due to a 86.0% increase in dividends
and lower net interest payments. Expenditure on property, plant and equipment
(excluding software) of R5,580 million was 28.5% lower. The significant movement
in investing activities was principally due to cash invested in T-bills in
Nigeria. The result is a negative net movement in cash and cash equivalents of
R4,310 million but a slightly higher cash and cash equivalents balance of
R32,341 million.
Capital expenditure
Capital expenditure for the period of R5,708 million was 32.8% lower than the
comparative period following delays in the rollout of certain capital
expenditure projects and a R603 million currency impact. We expect to step up
the pace of rollout in the second half of the year to make up for the delays.
Full year capital expenditure guidance has been revised marginally up to R22,165
million.
Net debt
The group is currently in a net cash position of R2,666 million (R9,885
including investments) because of its lower capital expenditure and improved
EBITDA margins. Investments in liquid instruments such as USD-denominated T-
bills in Nigeria are disclosed in other current assets and not included in cash
and cash equivalents, resulting in an understatement of potentially available
cash of R7,219 million. Good up-streaming of dividends and management fees from
the various group companies during the period have resulted in a positive cash
balance at the holding company level notwithstanding the reduction in holding
company debt and the settlement of the final dividend.
Supplementary information is available in the shareholder booklet at
www.mtn.com.
South Africa
MTN South Africa delivered a sound performance for the period increasing its
subscriber base by 5.1% to 19.8 million for the six months to 30 June 2011. This
was mainly due to growth in the prepaid segment which increased its subscriber
base by 5.0% to 16.2 million subscribers helped by MTN Zone Mahala offerings and
strong promotional campaigns. These efforts also contributed to the increase in
on-net traffic. The postpaid segment subscriber base grew by 5.7% to 3.6 million
subscribers. Hybrid type packages continued to be the main contributor to
postpaid growth, contributing 41% to the postpaid subscriber base at the end of
the period. Following the registration deadline of 30 June 2011, MTN suspended
340,842 subscribers who had not been registered, of which 115,879 were
reconnected by 31 July 2011.
Total revenue grew by 5.9% mainly due to the growth in airtime, subscription and
data revenue. Data increased by 17.9%, excluding SMS. At 30 June 2011, there
were 4.6 million 3G devices on the network of which 2.6million were smartphones.
SMS revenue growth remained relatively robust at 8.5% while airtime and
subscription revenue grew at 4.8% mainly due to strong growth in prepaid revenue
offset by lower postpaid revenue. Interconnect revenue decreased 9.8% as a
result of the lower interconnect rate. Peak mobile termination rates decreased
again from 89c to 73c and off peak rates dropped from 77c to 65c on 1 March
2011. Blended average revenue per user ("ARPU") decreased by R18.5 to R133.8 per
month mainly due to lower interconnect rates and the prepaid versus postpaid
mix. Prepaid ARPU decreased by R12.4 to R99.8, while postpaid ARPU declined by
R37.9 to R290.6 due to an increase in lower ARPU telemetry SIM cards diluting
the postpaid base.
MTN South Africa recorded a 1.2 percentage point increase in its EBITDA margin
to 35.1% after having successfully decreased commission and distribution costs
as well as advertising, promotion and public relations costs. Maintenance costs
remained stable.
Capital expenditure for the period amounted to R1,292 million, with most
projects substantially on track. MTN South Africa continued to enhance network
capacity while improving power saving and focusing on environmental initiatives
for sustainability. MTN South Africa also continued to migrate various voice
bearing interfaces which allow for enhanced scalability and network simplicity.
The Southern and Northern Gauteng fibre rollout ring, comprising 220km of fibre,
has been completed and traffic from leased lines successfully migrated. The long
distance fibre initiatives continues to progress, with 500km trenched on the
Johannesburg to Durban route, 469km on the Johannesburg to Bloemfontein route
and 296km on the Bloemfontein to Cape Town route. To further support its data
strategy, MTN South Africa has also embarked on a pilot long term evolution
(LTE) network which consists of 100 LTE-capable base stations. At the end of
July 2011, 40.0% of the remaining capital expenditure guidance had been
committed.
Nigeria
MTN Nigeria performed satisfactorily in the face of aggressive competition
during the period under review. The company grew its subscriber base by 4.8% to
40.5 million. At 30 June 2011 MTN Nigeria had registered 50% of its subscriber
base. The deadline for existing SIM registration remains 28 September 2011.
Total revenue in naira grew by 13.1% driven mainly by airtime and subscription
revenue growth as well as an increase in interconnect revenue. This was driven
by an increase in traffic from other networks. Traffic patterns of our own
subscribers remained 83% on-net. Data remains in its infancy in Nigeria, but
showed strong growth due to an increased focus on data packages and promotions.
Reported ARPU declined by 6.7% to $9.8 while local currency ARPU decreased by
5.1% from 31 December 2010.
MTN Nigeria increased its EBITDA margin by 2.0 percentage points from the
previous period to 63.3%. This was a result of the operation`s increased scale,
combined with a continued effort to reduce operating costs. The reduction in
transmission costs resulting from the commencement of the Main One undersea
cable, as well as a decrease in marketing expenditure, were the primary
contributors to the increased margin, while the decrease in general expenses
also contributed.
The strong rand and a marginally weaker naira against the dollar, negatively
affected and resulted in reported revenue growth of 0.4% to R16,538 million and
a 3.8% increase in EBITDA to R10,475 million.
Capital expenditure was slower than planned mainly because of logistical delays
in the delivery of equipment as well as political unrest in the Northern parts
of the country. Capital expenditure for the period was R2,068 million. Rollout
is expected to gain momentum in the second half of the year. Network quality was
impacted temporarily in the first quarter by the "magic number" promotion which
increased traffic volumes and was subsequently withdrawn. At the end of July
2011, 69.0% of the remaining capital expenditure guidance had been committed.
Iran
MTN Irancell continued to deliver solid results maintaining market share at 44%.
The company recorded an 8.2% increase in its subscriber base from 31 December
2010 to 32.2 million. The lower price of SIM starter packs together with
continued attractive promotions were the main contributors to growth over the
period. Improvements in network quality and brand perception also contributed.
To date the third operator has not yet been launched commercially.
Total rial revenue grew by 28.2% for the six months to June. This was mainly
because of high growth in SMS revenue which increased by 56.8% thanks to the
introduction of "the Farsi SMS service" in July last year, as well as a 25.8%
increase in airtime and subscription revenue.
MTN Irancell recorded a 0.8 percentage point increase in its EBITDA margin to
42.0%. Cost containment initiatives in various areas included marketing and
advertising expenses, distributor commissions and discounts, costs of handsets
and accessories and maintenance. These cost efficiencies helped offset the
effect of large hikes in the price of electricity and fuel costs that resulted
from the withdrawal of government subsidies. Reported ARPU remained relatively
flat at $7.9.
The proportionately consolidated results were dampened by the strong rand,
resulting in a 12.1% increase in revenue to R5,010 million and a 14.3% increase
in EBITDA to R2,103 million .
MTN Irancell continued to invest in its network although capital expenditure for
the first six months was slower than expected due to delays in the delivery of
equipment as well as the continued challenge of obtaining sites. MTN`s 49% share
of capital expenditure for the period amounted to R413 million. Population and
geographic coverage increased to 79% and 22% respectively. MTN Irancell also
augmented its WIMAX rollout, increasing customer confidence. At the end of June
2011, the company had 99 000 WIMAX customers. At the end of July 2011, 70.0% of
the remaining capital expenditure guidance had been committed.
Ghana
MTN Ghana`s performance was sound for the period. Subscribers increased by 9.6%
to 9.6 million from December 2010 and market share remained stable at 53%. The
company`s good performance was mainly the result of attractive value
propositions, "golden SIM" promotions, increased penetration into rural areas as
well as enhanced data offerings. The regulator extended the deadline for SIM
registration by three months to 30 September 2011. As at 30 June 2011, MTN Ghana
had registered 90% of its subscriber base.
Total cedi revenue increased by 11.9% for the six months. This was mainly driven
by 9.5% growth in airtime and subscription revenue as well as a 48.0% growth in
interconnect revenue, resulting from lower off-net tariffs by competitors. SMS
revenue decreased by 53.3% as a result of a required change in promotions. While
reported ARPU decreased by 3.9% to $7.0, local currency ARPU increased
marginally due to improved minutes of use.
MTN Ghana`s EBITDA margin, before the profit from the sale of the towers,
decreased to 38.7% from 42.0% in the prior period. This was mainly due to a
65.2% increase in interconnect costs as changes to traffic patterns resulted in
increased off-net traffic as on-net traffic reduced marginally to 81,0%. Direct
network operating costs increased 51.9% because of higher electricity and diesel
costs. Following the conclusion of a tower sharing arrangement, the first 400
towers were sold to the new entity in May 2011. Including the profit from this
sale the EBITDA margin was 54.9%.
Due to the strong rand and exacerbated by the cedi`s weakness against the
dollar, revenue decreased by 3.9% to R2,703 million and EBITDA increased by
25.6% to R1,485 million (including the impact of the tower transaction).
MTN Ghana`s rollout in the first half of the year was slower than planned
because of the change in tower strategy. Total capital expenditure for the
period was R137 million. Despite increased traffic on the network, MTN Ghana
maintained high quality and sufficient capacity. At the end of July 2011, 61.0%
of the remaining capital expenditure guidance had been committed.
Syria
MTN Syria`s subscriber base increased by 4.6% from 31 December 2010 to 5.1
million. The market was dampened by the ongoing political unrest affecting the
economy, customer behaviour and business efficiency. MTN Syria will continue to
adopt a conservative market approach until clarity is obtained on the timing of
the conversion of the build, operate and transfer arrangement into a free hold
licence.
Syrian pound revenue increased only marginally, helped by 44.8% increase in data
revenue (excluding SMS). Airtime and subscription revenue as well as
interconnect revenue showed negative growth as a result of lower subscriber
growth and obligatory network service interruptions. Reported ARPU declined by
13.9% to $14.1 and local currency ARPU decreased by 12.5%.
MTN Syria increased its EBITDA margin by 4.0 percentage points to 25.6%. This
was mainly due to lower commissions resulting from lower revenue but also due to
a reduction in direct network operating costs and marketing costs.
Due to the strong rand, revenue decreased by 10.7% to R2,985 million and EBITDA
increased by 5.9% to R764 million.
MTN Syria`s capital expenditure for the period was R86 million, a result of the
delay in converting the licence. The network has also been put under pressure
due to security risks associated with maintenance.
Subscriber guidance
Subscriber net additions guidance has been updated since that announced in May
2011 and is detailed below.
Net additions 000`s Net additions
May 2011 000`s
August 2011
South Africa 2,000 2,000
Nigeria 4,400 4,400
Ghana 900
1,300
Iran 4,200 4,200
Syria 500 500
Rest 6,435 7,700
Total 18,435 20,100
Supplementary information is available in the shareholder booklet on
www.mtn.com.
Prospects
MTN is confident of the opportunities that exist within its footprint and of its
ability to profitably maintain and grow its market share. The group will
continue to evolve its business model to better support ICT convergence and cost
optimisation through various initiatives.
Operations in countries affected by local political tensions continued to
operate satisfactorily with the group taking precautionary measures wherever
necessary.
The board has taken account of the group`s strong financial position and
considers that an increase in the dividend payment policy is appropriate. As a
result, shareholders are advised that the dividend payment policy has been
increased to 65% of annual adjusted headline EPS. The interim dividend is based
on 30% of the prior year`s adjusted headline EPS.
For and on behalf of the Board
MC Ramaphosa RS Dabengwa
(Chairman) (Group president and CEO)
Fairland
17 August 2011
Declaration of interim ordinary dividend
Dividends
Shareholders are advised that an interim dividend of 273 cents per ordinary
share in respect of the period to 30 June 2011 has been declared and is payable
to shareholders recorded in the register of the MTN Group at the close of
business on Friday, 16 September 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, 9 September 2011
Shares commence trading ex dividend Monday, 12 September 2011
Record date Friday, 16 September 2011
Payment of dividend Monday, 19 September 2011
Share certificates may not be dematerialised or rematerialised between Monday,
12 September 2011 and Friday, 16 September 2011.
On Monday, 19 September 2011, 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, 19
September 2011 will be posted on or about that date. Shareholders who hold
dematerialized shares will have their accounts held by the Central Securities
Depository Participant or broker credited on Monday, 19 September 2011.
Condensed consolidated reviewed interim results in accordance with International
Financial Reporting Standards ("IFRS")
The MTN Group`s condensed consolidated reviewed interim results for the six
months ended 30 June 2011 have been independently reviewed by the Group`s
external auditors. The preparation of the Group`s condensed consolidated
reviewed interim results was supervised by the Group Chief Financial Officer,
Nazir Patel, BCom, BCompt (Hons), CA(SA).
These results were made available on 17 August 2011.
Condensed consolidated income statement
Six months Six months Financial
ended ended year ended
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 56 542 55 989 114 684
Direct network operating costs (8 755) (8 320) (16 818)
Costs of handsets and other accessories (3 657) (2 992) (6 819)
Interconnect and roaming (6 206) (6 191) (12 593)
Employee benefits (2 975) (2 793) (5 961)
Selling, distribution and marketing (6 615) (7 748) (14 741)
expenses
Other operating expenses (3 132) (3 696) (10 215)
Depreciation of property, plant and (6 293) (6 273) (13 248)
equipment
Amortisation of intangible assets (1 142) (1 070) (2 120)
Impairment of goodwill - - (32)
Net finance costs (587) (2 198) (4 094)
Share of results of associates after (14) 59 52
tax
Profit before tax 17 166 14 767 28 095
Income tax expense (6 343) (5 430) (11 268)
Profit after tax 10 823 9 337 16 827
Attributable to: 10 823 9 337 16 827
Equity holders of the Company 9 450 8 094 14 300
Non-controlling interests 1 373 1 243 2 527
Basic earnings per share (cents) 509,6 439,7 776,2
Diluted earnings per share (cents) 497,3 433,5 764,5
Condensed consolidated statement of comprehensive income
Six Six months Financial
months
ended ended year ended
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
Profit after tax 10 823 9 337 16 827
Other comprehensive income:
Exchange differences on translating 1 277 (468) (9 811)
foreign operations
Cash flow hedges - 77 77
Total comprehensive income for the 12 100 8 946 7 093
period
Attributable to:
Equity holders of the Company 10 607 7 791 5 059
Non-controlling interests 1 493 1 155 2 034
12 100 8 946 7 093
Condensed consolidated statement of financial position
30 June 30 June 31 December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
Non-current assets 99 505 112 356 99 727
Property, plant and equipment 63 224 68 711 63 361
Goodwill, intangible assets and 31 918 36 415 31 568
investments in associates
Other non-current assets 4 363 7 230 4 798
Current assets 57 938 47 204 54 234
Cash and cash equivalents 32 760 30 149 35 947
Restricted cash 653 585 285
Other current assets* 24 525 16 470 18 002
Assets of a disposal group 738 - 825
classified as held for sale
ASSETS 158 181 159 560 154 786
Total equity 78 140 76 975 74 074
Non-current liabilities 34 710 32 590 33 995
Interest-bearing liabilities 26 016 23 536 24 857
Deferred tax and other 8 694 9 054 9 138
liabilities
Current liabilities 45 331 49 995 46 717
Interest-bearing liabilities 4 776 12 434 10 471
Non interest-bearing liabilities 40 555 37 561 36 246
EQUITY AND LIABILITIES 158 181 159 560 154 786
*Included in other current assets are bonds of R190 million,
treasury bills of R6,004 million and foreign currency deposits of
R1,025 million which have been included in the calculation of net
debt.
Condensed consolidated statement of changes in equity
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
Opening balance 74 074 72 866 72 866
Total comprehensive income for the 12 100 8 946 7 093
period
Dividends paid* (8 158) (4 689) (9 083)
Shares issued during the year 2 2 11
Transactions with non-controlling - - 60
interests
Zakhele transaction - - 2 847
Other reserves 122 (150) 280
Closing balance 78 140 76 975 74 074
*Dividends per share (cents) 349,0 192,0 343,0
Condensed consolidated statement of cash flows
Six Six months Financial
months
ended ended year ended
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
Cash inflows from operating 12 720 15 269 34 728
activities
Cash outflows from investing (12 280) (7 206) (15 701)
activities
Cash outflows from financing (4 750) (1 801) (2 055)
activities
Net movement in cash and cash (4 310) 6 262 16 972
equivalents
Cash and cash equivalents at 35 907 22 646 22 646
beginning of year
Effect of exchange rate changes 744 174 (3 711)
Cash and cash equivalents at end of 32 341 29 082 35 907
period
Segmental analysis
Six Six months Financial
months
ended ended year ended
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
South and East Africa 21 058 20 563 42 502
West and Central Africa 24 526 24 721 49 887
Middle East and North Africa 10 817 10 660 22 008
Head office companies 141 45 287
56 542 55 989 114 684
EBITDA
South and East Africa 7 185 7 070 14 556
West and Central Africa 13 998 13 375 27 683
Middle East and North Africa 3 684 3 323 7 393
Head office companies 335 481 (2 095)
25 202 24 249 47 537
PAT
South and East Africa 3 811 3 773 7 511
West and Central Africa 6 394 5 773 12 003
Middle East and North Africa 1 590 1 605 3 740
Head office companies (972) (1 814) (6 427)
10 823 9 337 16 827
Notes to the condensed consolidated interim financial information
1. Independent review by the auditors
The condensed consolidated interim financial information has
been reviewed by our joint auditors PricewaterhouseCoopers Inc.
and SizweNtsaluba vsp, who have performed their review in
accordance with the International Standards on Review
Engagements 2410. A copy of their unqualified review report is
available for inspection at the registered office of the
Company.
2. General information
MTN Group Limited (the "Group") carries on the business of
investing in the telecommunications industry through its
subsidiary companies, joint ventures and associate companies.
3. Basis of preparation
The condensed consolidated interim financial information
(interim financial information) was prepared in accordance with
International Financial Reporting Standards ("IFRS"), the
presentation and disclosure requirements of IAS 34 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, No 71 of 2008, 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
period under review, the Group adopted all the IFRS and
interpretations that were effective and deemed applicable to the
Group. None of these had a material impact on the results of the
Group.
5. Acquisition of 49% interest in TowerCo Ghana
During the period, MTN Dubai acquired a 49% holding in TowerCo
for a cash consideration of USD60,5 million (R409 million). The
equity interest is accounted for under IAS 28 Investment in
Associates.
6. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per
ordinary share are based on basic headline earnings of R8 788
million (2010: R7 954 million) and adjusted headline earnings
of R8 718 million (2010: R8 072 million) respectively, and a
weighted average number of ordinary shares in issue of 1 871
686 073 (2010: 1 840 551 451).
Reconciliation between net profit attributable to the equity
holders of the Company and headline earnings
Six Six Financial
months months
ended ended year ended
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
Net** Net** Net**
Net profit attributable to 9 450 8 094 14 300
Company`s equity holders
Adjusted for:
Profit on disposal of non- (637) (48) (132)
current assets
Reversal of impairment of (25) (92) (157)
property, plant and equipment
and other non-current assets
Basic headline earnings 8 788 7 954 14 011
Adjustment:
Reversal of put options in
respect of subsidiaries:
- Fair value adjustment (275) (114) (172)
- Finance costs 240 242 471
- Forex 97 98 (277)
- Non-controlling shareholders (132) (108) (272)
share of profits
Adjusted headline earnings 8 718 8 072 13 761
Reconciliation between net profit attributable to the equity
holders of the company and headline earnings
Six Six Financial
months months
ended ended year ended
30 June 30 June 31
December
2011 2010 2010
Reviewed Reviewed Audited
R R R
Net** Net** Net**
Reconciliation of headline
earnings per ordinary share
(cents)
Attributable earnings per share 509,6 439,7 776,2
(cents)
Adjusted for:
Profit on disposal of non- (34,4) (2,6) (7,1)
current assets
Reversal of impairment of (1,3) (5,0) (8,5)
property, plant and equipment
and other non-current assets
Basic headline earnings per 473,9 432,1 760,6
share (cents)
Reversal of put options in (3,8) 6,5 (13,6)
respect of subsidiaries
Adjusted headline earnings per 470,1 438,6 747,0
share (cents)
Diluted headline earnings per 462,1 425,9 748,9
share (cents)
Number of ordinary shares in
issue:
- Weighted average (`000) 1 871 1 840 1 844 321
686 551
- At period end (`000) 1 884 1 840 1 884 529
610 616
** Amounts are stated after taking into account non-
controlling interests.
Adjusted Headline Earnings adjustments
Put options in respect of subsidiaries
IFRS requires the Group to account for written put options held by non-
controlling shareholders of certain of the Group subsidiaries, which
provides the non-controlling shareholders with the right to require the
subsidiaries to acquire their shareholding at fair value. Prior to the
implementation of IFRS, the shareholdings were treated as non-
controlling shareholders interest 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 the 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 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 derivatives in which case the
liabilities and the related fair value adjustments recorded through the
income statement would not be required.
30 June 30 June 31 December
2011 2010 2010
Reviewed Reviewed Audited
Rm Rm Rm
7. Capital expenditure incurred 5 708 8 496 19 446
8. Contingent liabilities and
commitments
Contingent liabilities - 936 930 941
upgrade incentives
Operating leases - non- 326 579 349
cancellable
Finance leases 281 328 303
Other 777 664 491
9. Commitments for property, plant 16 457 15 103 22 131
and equipment (including
software)
10. Cash and cash equivalents
Bank balances, deposits and 32 760 30 149 35 947
cash
Call borrowings (419) (1 067) (40)
32 341 29 082 35 907
11. Interest-bearing liabilities
Call borrowings 419 1 067 40
Short-term borrowings 4 357 11 367 10 431
Current liabilities 4 776 12 434 10 471
Long-term borrowings 26 016 23 536 24 857
30 792 35 970 35 328
12. Events after reporting period
The International Finance Corporation (IFC) has exercised its rights in
respect of the put option it held in MTN Nigeria and has put these
shares to MTN Mauritius. The acquisition cost amounted to USD390
million and payment was made on 15 August 2011. MTN Mauritius has
indirectly made available 0,4% of these shares to the local
shareholders of MTN Nigeria for purchase at the same price as acquired
from the IFC.
In 2010, MTN Ghana (Scancom Limited) concluded a deal with American
TowerCompany (ATC) to dispose of 1 876 sites to TowerCo Ghana in three
phases. The first phase was concluded on 6 May 2011, whereby 400 sites
were transferred in terms of the agreement. The second phase of the
transaction took place on 11 August 2011 whereby a further 770 sites
were transferred. The final phase is expected to be completed before 31
December 2011 when the remaining sites will be transferred.
Administration
Directorate: MC Ramaphosa (Chairman), RS Dabengwa* (Group President and CEO), NI
Patel*, KP Kalyan, AT Mikati, MJN Njeke, JHN Strydom, AF van Biljon, J van
Rooyen, MLD Marole, NP 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
17 August 2011
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 17/08/2011 08:30:01 Produced by the JSE SENS Department.
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