MTN
MTN
MTN - MTN Group Limited - Audited results for the year ended 31 December
2011
MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
Share code: MTN
ISIN ZAE000042164
("MTN")
Audited results for the year ended 31 December 2011
Highlights
Group subscribers up 16,2% to 164,5 million
*Revenue up 9,7% to R121 884 million
# EBITDA margin up 3,4% to 44,9%
Adjusted HEPS up 43,2% to 1 070,0 cents
Final dividend per share 476 cents
Dividend payout ratio increased to 70%
Buyback of R927,3 million completed
Overview
MTN Group Limited ("MTN" or "the Group") delivered a satisfactory
performance for the year growing its subscriber base by 16,2% and continuing
to hold a strong market position despite increasing competition and a slower
economic backdrop. Revenue was 9,7% higher on a *constant currency basis
while earnings before tax, depreciation and amortization ("EBITDA") margin
expanded 3,4 percentage points to 44,9%. The Group EBITDA margin includes
the profit from the sale of the Ghana passive infrastructure, which if
excluded, reduces the group EBITDA margin to 43,9%. This is approximately
the same level achieved in the prior year excluding the one time Zakhele
charge of R2 973 million.
More details of the performance of MTN`s larger operations is provided later
in the commentary. However for the other operations it is worth mentioning
the improved performance of MTN Sudan, which added 2,5 million subscribers
in the year, and MTN Cote d`Ivoire, which made a strong recovery in the
second half of the year. MTN Uganda also performed well in a competitive
market increasing its subscriber base by 18,0% to 7,6 million. Political
unrest in the Middle East remains a concern. There has been an impact on
the business environments in Yemen and Syria and MTN will continue to
monitor both situations closely. Business in Iran remains buoyant, but MTN
continues to be sensitive to the international issues relating to Iran
whilst retaining its firm commitment to its operations there. In
partnership with its legal advisors, MTN continues to ensure that it remains
compliant with the various sanctions regimes in place. Following the SENS
announcement on the
2 February 2012 of a potential claim by Turkcell and allegations made
against MTN, the MTN Group Board has proactively responded by setting up the
independent Hoffmann Committee. This has already started its work. Until it
has concluded its deliberations, MTN will not comment further.
On the 14 February 2012, Moody`s upgraded MTN`s global local currency senior
unsecured rating to Baa2 from Baa3 and its national scale issuer rating to
A1.za from A2.za. The outlook on all ratings is positive.
The Group continued to prioritise various initiatives in line with its
strategy to improve returns to shareholders, enhance new and existing
revenue streams and focus on optimising cost.
During the last quarter of 2011 MTN Holdings (Pty) Ltd acquired 6 764 412
MTN shares for a cost of R927,3 million, excluding securities transfer taxes
and other costs. This is in line with MTN`s stated strategy of returning
cash to shareholders. Buybacks will continue to be implemented as and when
appropriate.
Provide competitive voice offerings aimed at maintaining market share as
lower tariffs and Mobile Termination Rates ("MTR"), mainly in South Africa
and Nigeria impact revenue growth.
Continued efforts on data and ICT offerings across the group. South Africa
contributes 57,4% and 35,2% to group data and sms revenue respectively and
remains the largest driver of growth in data services.
Key infrastructure investments to support voice quality, capacity and data
growth. Infrastructure spend was lower in the first half of the year due to
operational and supplier difficulties. However measures were put in place to
address this issue and capital investments of R12 009 million or 67,8% of
the year`s total capital spend were completed in the second half of the
year. This momentum is expected to continue in 2012.
MTN`s mobile transfer service, Mobile Money, is now live in 12 countries
with more than 6 million registered subscribers. This technology and user
experience is to be enhanced in the future.
The South and East Africa IT hub became operational and is now servicing MTN
Uganda and MTN Zambia. Rwanda and Swaziland are to be integrated during the
first half of 2012.
The procurement transformation project, using a more centralised operating
model, continued to gain traction with good progress on the reduction of
equipment prices. The project has evolved considerably to include the
centralisation of other support functions.
Further progress has been achieved in infrastructure sharing following the
establishment of a new joint venture tower company with American Tower
Corporation in Uganda. The tower company, in which MTN will hold 49%, will
acquire all of the approximately 1 000 existing tower sites from MTN Uganda
for an agreed upon purchase price of approximately $175 million. The sale of
1 856 towers in Ghana was concluded during the year.
*The constant currency reported numbers are those restated at the same
average exchange rates that were applicable for the year ended 31 December
2010.
#2011 margin includes the profit from the sale of the Ghana towers of R1 185
million and 2010 margin excludes the MTN Zakhele charge of R2 973 million.
Group financial review
Revenue
Group revenue increased by 6,3% to R 121 884 million due to sound growth in
Nigeria, South Africa and Iran of 4,1%, 7,7% and 20,1% respectively. On a
*constant currency basis, group revenue increased 9,7%. This is meaningfully
higher and more reflective of the group`s operating performance. Local
currency revenue growth in Nigeria, Ghana and Iran increased a healthy 9,6%,
15,1% and 26,5% respectively. An increase in handset sales in South Africa
resulted in a 36,7% increase in handset revenue year on year. Revenue growth
excluding handset sales would have been 5,3%. The contribution of airtime
and subscription revenue reduced to 65,5% from 68,4% for the prior year.
Notwithstanding lower termination rates in some countries, total group
interconnect revenue increased by 8,9%. Data revenue (excluding sms) across
the group remained strong, albeit off a low base, increasing 30,5%. SMS also
continued to grow strongly increasing 14,2% when compared to the prior year.
Operating costs
Group operating costs remained relatively flat and meaningfully below the
revenue growth rate. Total operating costs were R68 592 million, a 2,1%
increase over the prior year. An 11,7% increase in direct operating costs
and a 19,7% increase in handset costs were offset by a 34,4% reduction in
other expenditure and a 0,4% increase in the overall cost of selling,
distribution and marketing. The increase in direct costs was a result of the
impact of the larger number of installed sites, higher diesel costs as well
as increased transmission costs in South Africa. A rise in handset costs was
driven by higher prepaid handset volumes and higher value handsets sold by
MTN South Africa.
Other income
Other income includes the Group`s profit on the sale of the Ghana towers of
R1 185 million as well as a deferred gain of R273 million.
EBITDA margin
Group EBITDA, including the impact of the sale of the Ghana towers,
increased by 15,2% to R54 750 million from R47 537 million in December 2010.
Excluding the profit on the sale of the Ghana tower sale in 2011 and
excluding the MTN Zakhele charge in 2010, EBITDA increased by 6,0% to R53
566 million. This adjusted EBITDA grew by 9,0% on a *constant currency
basis. The growth in EBITDA is mainly due to strong organic growth in
Nigeria, South Africa, and Iran. The EBITDA margin increased 3,4 percentage
points to 44,9%. Excluding the Ghana tower sale profit, the EBITDA margin
was 43,9%. EBITDA margins in Iran and South Africa increased to 42,5%, and
35,2%, respectively.MTN Nigeria EBITDA margin decreased marginally to 61,7%
due to pricing pressure.
Depreciation and amortisation
The Group`s depreciation and amortisation charge increased by 0,6% to R15
459 million as a result of continued investment in network infrastructure by
the Group`s operations and the unwinding of some of the intangible assets
recognised on the Investcom acquisition in 2006.
Net finance costs
Net finance costs decreased by 61,4% to R1 582 million. Functional currency
gains of R778 million were recorded, compared with a loss in the previous
year of R1 223 million. Much of the functional currency gain of R778 million
was attributable to the conversion of cash balances held in Mauritius (a
functional currency rand entity).
Realised gains amounted to R418 million compared to prior realised losses of
R1 440 million reported for 2010. Unrealised losses decreased 45,7% to R384
million in 2011. The realised gains were mainly due to the conversion of
foreign denominated cash in Mauritius into rands.
Taxation
The Group`s taxation charge increased by 22,9% to R13 853 million and the
effective tax rate to 36,8%. The high effective tax rate is mainly due to
increased secondary tax on companies ("STC") on the higher Group dividend
payout ratio as well as withholding taxes related to increased upstreaming
of cash, specifically the dividend declared by MTN Ghana and MTN Nigeria.
Earnings
Headline earnings per share ("HEPS") increased by 40,5% to 1 068,6 cents and
adjusted HEPS by 43,2% to 1 070,0 cents. The increase in the current year`s
adjusted HEPS is positively impacted by charges associated with the
implementation of the MTN Zakhele scheme in the prior year. If these
charges are excluded, prior year adjusted HEPS would have been 909,1 cents,
reducing the current year`s growth in adjusted HEPS to 17,7%.
Cashflow
The combination of higher EBITDA and lower than planned capital expenditure
("capex") spend resulted in an increase in approximate free cashflow by
15,5% to R35 849 million, excluding the profit on the sale of the Ghana
towers. Cash generated by operations remained relatively unchanged while
cash inflows from operating activities decreased by 19,7% principally due to
an 85,7% increase in dividends paid. Expenditure on property, plant and
equipment (excluding software) of R14 035 million was 8,5% lower than the
previous year.
The result is a net outflow in cash and cash equivalents of
R4 775 million and slightly lower cash and cash equivalents balance of R35
213 million. Investments in treasury bills, foreign currency deposits and
bonds of R9 480 million in certain subsidiaries is not included in the year-
end cash balance.
Capex
Capex reduced by 9,0% to R17 717 million due to delays in projects and open
orders in the first half of the year. Second half capex spend picked up
meaningfully following corrective action. A significant portion of the
outstanding capex has been committed to the projects which are expected to
be completed during the first half of 2012. The relatively strong rand had
the effect of reducing the expenditure of the Group by R315 million. Had
there been no change in currency rates during the year, capex would have
been R18 032 million, compared to the approved budget for the period of R22
165 million.
Assets and liabilities
Assets and liabilities at 31 December 2011 were impacted by the movement in
year-end foreign currency exchange rates, and in particular the weakening of
the rand against the US dollar to a closing rate at the end of December 2011
of 8,07 versus 6,61 for the prior year.
Property, plant and equipment increased by 13,0% from December 2010 due to
the impact of the translation of foreign currencies as well as capex
additions of R17 717 million.
Net cash increased meaningfully from R905 million to R11 890 million as cash
balances in Nigeria and Syria increased meaningfully while gross interest
bearing liabilities remained largely the same.
Changes in ownership
* In February 2011, MTN Rwanda divested its 70% investment in Supercell.
* In April 2011, MTN reduced its shareholding in MTN Zambia from 90,0% to
86,0%. For IFRS consolidation purposes the step down in equity
shareholding has not impacted the proportionate consolidation at 97,8%
as risks and rewards are not deemed to have passed fully to the
purchaser.
* In August 2011, MTN settled the Nigeria put option through the
acquisition of the IFC interest and thereby increased its shareholding
in the company from 76,08% to 78,83%.
* In October 2011, MTN increased its shareholding in MTN Rwanda from
55,0% to 80%.
MTN South Africa
MTN South Africa performed well for the year increasing its subscriber base
by 16,9% to 22,0 million. This was mainly due to growth of 17,6% in the
prepaid segment to 18,2 million subscriber`s. The postpaid segment showed
growth mainly in the second half of the year, increasing subscribers for the
year by 14,0% to 3,8 million. Hybrid packages were the primary contributor
to growth in this segment together with telemetry sims. SIM market share
declined marginally in the first half of the year but recovered in H2, with
signs of an upward trend.
Total revenue increased 7,7% due to strong growth in data revenue, which was
up 27,7% (excluding sms), as well as growth in total airtime and
subscriptions of 4,2%. Prepaid airtime and subscription revenue increased
14,0%. The strong growth in handset revenue of 45,3% was as a result of
robust demand for both entry level handsets and demand for smartphones. Data
revenue (excluding sms) now contributes 12,0% of total revenue. At the end
of the year there were 5,5 million 3G devices on the network which included
3,6 million smartphones and 1,4 million dongles and other data devices.
Interconnect revenue declined 9,8% following the reduction in mobile
termination rates to 73 cents from 89 cents in March 2011. Average revenue
per user per month ("ARPU") reduced 12% primarily due to lower interconnect
revenue.
MTN South Africa recorded a 1,1 percentage point increase in EBITDA margin
to 35,2% for the year. This was mainly the result of cost savings in general
expenses, professional and consulting fees as well as lower marketing and
advertising costs.
Capital expenditure for the period was marginally ahead of the Group`s
guidance at R4 105 million as MTN South Africa continued to modernise the
network by introducing IP technology to improve network quality. There were
313 2G and 598 3G base transceiver stations (BTS`s) added during the year
bringing the total BTS`s to 9 785. Fibre rollout remains a priority with the
national long distance fibre project still underway. At the end of December,
89% of the Johannesburg to Durban route was trenched, as was 86% of the
Johannesburg to Bloemfontein route and 58% of the Bloemfontein to Cape Town
route. MTN South Africa has embarked on a pilot of 103 long term evolution
(LTE) base stations in line with its future LTE deployment strategy. MTN has
submitted comments to an invitation from ICASA for 2.6GHz and 800MHz
frequency spectrum band needed to offer LTE services. The frequency decision
has been delayed by ICASA.
MTN Nigeria
MTN Nigeria faced a challenging year as the entire market was negatively
affected by the process of SIM registration. Aggressive price competition
had a negative impact on gross connections and network quality again became
a focus area for the regulator as higher elasticity from lower pricing
impacted traffic demand across almost all of the major networks.
Notwithstanding these challenges the company increased its subscriber base
by 7,7% to 41,6 million and ended the year with a more stabilised market
share of 50%. There is no clarity on the deadline for SIM registration
although the regulator has initiated a process to form a central database of
registration records. At the end of the year MTN Nigeria had registered 83%
of the subscriber base.
Total naira revenue increased 9,6% mainly driven by a 54,5% increase in
interconnect revenue. This was a result of continued changes in traffic
patterns during the year as cheaper off network prices were offered
tactically by the competition. More competitive tariffs by MTN in the second
half of the year have partially stabilised the traffic mix. Data revenue
(excluding sms) grew 105% as more data packages were introduced to the
market. MTN Nigeria has 1,7 million smartphones and 330 000 dongles on the
network. Airtime and subscription revenue increased only 3,7% due to a
reduction in effective tariffs which was not fully compensated by a
proportionate increase in minutes of use. ARPU declined by 8,1% to $9,7 and
by 5,3% in local currency terms.
MTN Nigeria`s EBITDA margin declined by 1,2 percentage points to 61,7% when
compared to the prior year. Higher operating costs were mainly the result of
a 25% increase in the average diesel price as well as increased site rental
costs and professional fees.
The marginally weaker naira against the rand, negatively impacted rand
reported revenue growth for the year resulting in only a 4,1% increase in
revenue to R34 879 million. Reported EBITDA increased 2,2% to R21 536
million.
Network rollout improved in the second half of the year, with the company
adding 529 2G and 453 3G BTS`s in the year bringing the total number of
BTS`s to 9 131. Capital expenditure amounted to R6 331 million compared to
R4 700 million at the end of 31 December 2010. Corrective action and
measures have been put into place to ensure that capital expenditure
programs moving forward are delivered more effectively. MTN Nigeria rolled
out an additional 1 312km of fibre in the year and connected fibre to 90
sites to support its data strategy.
MTN Irancell
MTN Irancell delivered a sound performance increasing its subscriber base by
16,6% in a market where penetration is above 100%. The growth was mainly
attributable to lower denomination vouchers and seasonal promotions,
increasing market share to 45%. The improved distribution of airtime through
ATM`s has also contributed to higher spend by subscribers.
Total rial revenue grew 26,5% for the year. Airtime and subscription revenue
increased 22,8% while interconnect revenue increased 11,4% as the quality of
the network improved. Data revenue (excluding sms) gained momentum
increasing 66,5% off a low base. Sms revenue growth remained robust at
47,0%. ARPU increased by 2,0% to $7,9 and by 5,6% in local currency terms.
EBITDA margin showed a healthy expansion of 1,2 points to 42,5% as MTN
Irancell continues to maintain a low operating cost base. Distribution and
commission costs also reduced as physical recharge vouchers were replaced by
logical airtime distribution. These savings were partially reduced by a
large increase in rent and utilities following the removal of government
subsidies and the increase in fuel prices.
A weaker rial resulted in lower rand reported revenue growth of 20,1% to R11
050 million and EBITDA growth of 24,1% to R4 697 million.
MTN Irancell continued to invest in its network improving quality and
capacity although rollout of some projects have been slower than anticipated
because of delayed equipment delivery. Capital expenditure amounted to R1
168 million, lower than that guided at the interim results. Population and
geographic coverage increased to 77% and 23%. 781 2G BTS`s were added in the
year bringing the total to 7 640.
MTN Ghana
MTN Ghana delivered a solid performance as subscribers increased by 16,5% to
10,2 million. This was mainly attributable to attractive promotions
including bonus on recharge offers which included "weekend super saver" and
a "10 million subscriber promo". Market share declined marginally to 52%
from 53% but is considered highly satisfactory given the very competitive
nature of the market.
Total cedi revenue increased 15,1% for the year. This was mainly due to a
13,9% increase in airtime and subscription revenue and a 35,1% increase in
interconnect revenue. Data revenue (excluding sms) continued to gain
traction, albeit off a low base, increasing 79,7%, while sms revenue
decreased 43,4% due to regulatory requirements to change sms promotions.
ARPU declined 2,8% to $7,0 while in local currency ARPU increased 3,5%.
MTN Ghana`s EBITDA margin, excluding the profit from the sale of the towers,
decreased 6,2 percentage points to 38,1% as interconnect costs rose more
than interconnect revenue due to competitive off network tariffs. EBITDA
margin was also negatively impacted by an increase in transmission and
utility costs. Although there was an increase in lease costs, the full
impact of the new tower arrangements will only be incurred in 2012.
A weaker cedi against the dollar resulted in a lower rand reported revenue
growth of 5,1% to R5 941 million while EBITDA decreased 13,2% to R2 172,
excluding the sale of the towers.
Capital expenditure for the period amounted to R851 million. The lower spend
is mainly due to the change in structure following the establishment of the
tower company. 430 2G and 125 3G BTS`s where rolled out for the period. The
company continued to prioritise capacity and quality on the network as
traffic increased, although quality of service remains a challenge.
MTN Syria
MTN Syria`s performance was dampened by the unrest in the country. The
company increased its subscriber base by 16,7% to 5,7 million marginally
decreasing market share to 45%.
Revenue in Syrian pounds remained flat as airtime and subscription revenue
declined 1,2% as a result of the challenges of providing continuous network
service. Data revenue (excluding sms) increased 17,0% while sms revenue
increased 11,8%.
EBITDA margin increased 2,7 percentage points to 26,2%. This was mainly due
to lower distribution and commission costs associated with reduced sales and
tighter cost management.
Rand reported revenues showed a decline of 5,2% to R6 463 million while
EBITDA grew 5,3% to R1 690 million. These results were also negatively
impacted by a weaker Syrian pound against the rand. Capital expenditure for
the period amounted to R442 million.
Prospects
MTN remains cautiously optimistic about the year ahead with macroeconomic
conditions in key markets not expected to change significantly. The key
focus areas over the year are to maintain and improve our market position
and improve customer experience. There will be continued effort to
strengthen our position in non-voice services in all markets. Increased
efficiency in rolling out investments in infrastructure and cost
optimisation initiatives are a priority in support of this strategy. Value
accretive opportunities which fit within the parameters of MTN`s M&A
strategy will still be considered. We will continue to manage the challenges
brought about by sanctions and political instability in some of our markets.
The MTN Group Board remains committed to improving shareholder returns.
Subscriber net additions guidance for 2012 is detailed below.
`000
South Africa 2 900
Nigeria 4 000
Ghana 950
Iran 4 000
Syria 450
Rest 8 000
Total 20 300
Total capital expenditure guidance for the year is R24 401 million.
Declaration of final ordinary dividend
Shareholders are advised that a final dividend of 476 cents per ordinary
share in respect of the period to 31 December 2011 has been declared and is
payable to shareholders recorded in the register of the MTN Group at the
close of business on Friday, 30 March 2012.
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, 23 March 2012
Shares commence trading ex dividend Monday, 26 March 2012
Record date Friday, 30 March 2012
Payment of dividend Monday, 2 April 2012
Share certificates may not be dematerialised or rematerialised between
Monday, 26 March 2012 and Friday, 30 March 2012, both days inclusive.
On Monday, 2 April 2012, 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, 2
April 2012 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, 2 April
2012.
For and behalf of the Board
MC Ramaphosa
(Chairman)
RS Dabengwa
(Group President and CEO)
Fairland
7 March 2012
Condensed consolidated income
statement
for the year ended 31 December
2011 2010
Note Rm Rm
Revenue 121 884 114 684
Other income 1 458 -
Direct network operating costs (18 (16
782) 818)
Cost of handsets and other accessories (8 160) (6 819)
Interconnect and roaming (13 (12
395) 593)
Employee benefits (6 754) (5 961)
Selling, distribution and marketing (14 (14
expenses 805) 741)
Other operating expenses (6 696) (10
215)
Depreciation of property, plant and (13 (13
equipment 296) 248)
Amortisation of intangible assets (2 163) (2 120)
Impairment of goodwill (31) (32)
Net finance costs (1 582) (4 094)
Share of results of associates (38) 52
Profit before tax 37 640 28 095
Income tax expense (13 (11
853) 268)
Profit after tax 23 787 16 827
Attributable to: 23 787 16 827
Equity holders of the Company 20 754 14 300
Non-controlling interests 3 033 2 527
Basic earnings per share (cents) 6 1 119,5 776,2
Diluted earnings per share (cents) 6 1 110,8 764,5
Condensed consolidated statement of comprehensive income
for the year ended 31 December
2011 2010
Rm Rm
Profit after tax 23 787 16 827
Other comprehensive income:
Exchange differences on translating foreign 10 796 (9 811)
operations
Cash flow hedges - 77
Total comprehensive income for the year 34 583 7 093
Attributable to:
Equity holders of the Company 31 169 5 059
Non-controlling interests 3 414 2 034
34 583 7 093
Condensed consolidated statement of
financial position
at 31 December
2011 2010
Note Rm Rm
Non-current assets 113 787 99 727
Property, plant and equipment 71 610 63 361
Intangible assets 34 540 30 266
Investment in associates 2 681 1 302
Deferred tax and other non-current 4 956 4 798
assets
Current assets 66 801 54 234
Other current assets* 30 449 18 002
Restricted cash 546 285
Cash and cash equivalents 35 806 35 947
Non-current assets held for sale 820 825
TOTAL ASSETS 181 408 154 786
Total equity 92 699 74 074
Equity holders of the Company 88 897 71 855
Non-controlling interests 3 802 2 219
Non-current liabilities 33 392 33 995
Interest bearing liabilities 10 23 554 24 857
Deferred tax and other non-current 9 838 9 138
liabilities
Current liabilities 55 317 46 717
Interest bearing liabilities 10 10 462 10 471
Non-interest bearing liabilities 44 855 36 246
TOTAL EQUITY AND LIABILITIES 181 408 154 786
**Included in other current assets are treasury bills and
foreign currency bills of R8 567 million and bonds of R913
million.
Condensed consolidated statement of changes in equity
for the year ended 31 December
2011 2010
Rm Rm
Opening balance 71 855 70 011
Share buy-back* (930) -
Shares issued during the year 6 11
MTN Zakhele transaction - 2 676
Employee share option plan - 171
Settlement of put option (1 -
662)
Transactions with non-controlling interests (30) 60
Share-based payment reserve 74 87
Total comprehensive income 31 169 5 059
Dividends paid (11 (6 313)
722)
Other movements 137 93
Attributable to the equity holders of the 88 897 71 855
Company
Non-controlling interests 3 802 2 219
Closing balance 92 699 74 074
*Dividends per share (cents) 622 349
*During 2011 MTN Holdings Proprietary Limited bought 6 764 412
MTN Group Limited shares for the value of R930 million.
Condensed consolidated statement of cash flows
for the year ended 31 December
2011 2010
Rm Rm
Net cash from operating activities 27 874 34 728
Net cash used in investing activities (20 (15 701)
616)
Net cash used in financing activities (12 (2 055)
033)
Net (decrease)/increase in cash and cash (4 775) 16 972
equivalents
Cash and cash equivalents at beginning of 35 907 22 646
year
Exchange gains/(losses) on cash and cash 4 081 (3 711)
equivalents
Cash and cash equivalents at end of year 35 213 35 907
Notes to the condensed consolidated financial statements
for the year ended 31 December
1. INDEPENDENT AUDIT
These condensed consolidated results have been audited by
our joint auditors PricewaterhouseCoopers Inc. and
SizweNtsalubaGobodo Inc., who have performed their audit in
accordance with International Standards on Auditing. A copy
of their unqualified audit report is available for
inspection at the registered office of the Group.
2. GENERAL INFORMATION
MTN Group Limited (the Company) 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 condensed consolidated results are a summary
of the audited consolidated financial statements and are
prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards
Board (IASB), the preparation and disclosure requirements of
IAS 34 Interim Financial Reporting, the AC 500 Standards as
issued by the Accounting Practices Board, the Listings
Requirements of the JSE Limited and the requirements of the
South African Companies Act No. 71, 2008.
4. PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies and methods of computation
applied are consistent in all material respects with those
applied in the previous period and are available for
inspection at the Group`s registered office. The Group has
adopted all the new, revised or amended accounting
pronouncements as issued by the IASB which were effective
for the Group from 1 January 2011. None of the adopted
pronouncements had a material impact on the Group`s results
for the year ended 31 December 2011.
2011 2010
Rm Rm
5. OPERATING SEGMENTS
Revenue
South and East Africa 45 106 42 502
West and Central Africa 52 579 49 887
Middle East and North Africa 24 009 22 008
Head office companies and eliminations 190 287
121 884 114 684
EBITDA
South and East Africa 15 637 14 556
West and Central Africa 29 716 27 683
Middle East and North Africa 8 220 7 393
Head office companies and eliminations 1 177 (2 095)
54 750 47 537
Profit after tax
South and East Africa 7 208 7 511
West and Central Africa 13 645 12 003
Middle East and North Africa 3 609 3 740
Head office companies and eliminations (675) (6 427)
23 787 16 827
2011 2011
Gross Weighted
number number
of shares of shares
6. EARNINGS PER ORDINARY SHARE
Balance at beginning of year 1 854 515 1 854 515
(excluding Zakhele) 165 165
Share options exercised 301 452 111 781
1 854 816 1 854 626
617 946
Less treasury shares (6 764 412) (704 965)
Shares for earnings per share 1 848 052 1 853 921
205 981
Add dilutive shares
MTN Zakhele 12 327 694
Share schemes 2 073 167
Shares for diluted earnings per 1 868 322
share 842
2011 2010
Rm Rm
Net Net
6. EARNINGS PER ORDINARY SHARE (continued)
Reconciliation between profit
attributable to the equity holders of the
Company and headline earnings
Profit after tax 20 754 14 300
Adjusted for:
Net profit on disposal of non-current (900) (132)
assets
Net reversal of impairment of property, (43) (157)
plant and equipment and other non-current
assets
Headline earnings* 19 811 14 011
Adjustment:
Reversal of put options in respect of 25 (250)
subsidiaries
Adjusted headline earnings 19 836 13 761
Earnings per share (cents):
- Basic 1 119,5 776,2
- Headline 1 068,6 760,6
- Adjusted headline 1 070,0 747,0
Diluted earnings per share (cents):
- Basic 1 110,8 764,5
- Headline 1 060,4 748,9
- Adjusted headline 1 061,7 735,4
Amounts are presented after taking into account non-
controlling interests and tax.
*Headline earnings is calculated in accordance with
Circular 3/2009 Headline Earnings issued by the South
African Institute of Chartered Accountants at the request
of the JSE Limited.
6. EARNINGS PER ORDINARY SHARE (continued)
Adjusted headline earnings adjustments
Put options in respect of subsidiary
IFRS requires the Group to account for a written put option
held by a non-controlling shareholder of the Group`s
subsidiaries, which provides them with the right to require
the subsidiary to acquire its shareholdings at fair value.
Prior to the implementation of IFRS the shareholding was
treated as a non-controlling shareholder in the subsidiary
as all risks and rewards associated with these shares,
including dividends, accrued to the non-controlling
shareholder.
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
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 or loss; and
(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 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 contract
that is outstanding, have the same rights as any other
shares and should therefore be accounted for as a
derivative rather than creating an exception to the
accounting required under IAS 39.
2011 2010
Rm Rm
7. CAPITAL EXPENDITURE INCURRED 17 717 19 466
8. CONTINGENT LIABILITIES AND COMMITMENTS
Contingent liabilities - upgrade 838 941
incentives
Operating leases - non-cancellable 668 349
Finance leases 279 303
Other commitments 752 491
9. COMMITMENTS FOR PROPERTY, PLANT AND 24 400 22 131
EQUIPMENT AND SOFTWARE
10 INTEREST BEARING LIABILITIES
.
Bank overdrafts 593 40
Short-term borrowings 9 869 10 431
Current liabilities 10 462 10 471
Long-term liabilities 23 554 24 857
34 016 35 328
11. NON-CURRENT ASSETS HELD FOR SALE
MTN Uganda Limited entered into a transaction with American
Tower Company (ATC) which involves the sale of 997 of MTN
Uganda`s existing base transceiver stations (BTS) sites to
TowerCo Uganda for an agreed purchase price of USD175
million. ATC will hold a 51% stake in TowerCo Uganda`s
holding company, with the remaining 49% stake held by MTN
(Dubai) Limited. MTN Uganda will be the anchor tenant, on
commercial terms, on each of the towers being sold. The
transaction is expected to close in 2012, subject to
customary closing conditions.
In 2011 Scancom Limited (MTN Ghana) concluded a transaction
with ATC which involves the sale of MTN Ghana`s existing BTS
sites to TowerCo Ghana. This resulted in a profit on sale of
R1 185 million being recognised in profit and loss.
12. EVENTS AFTER THE REPORTING PERIOD
Potential litigation by Turkcell Hetism Hizmetiera AS
(Turkcell)
On 2 February 2012, Turkcell, the largest mobile phone
operator in Turkey, indicated its intention to bring a legal
claim against the Group and its Iranian joint venture,
Irancell Telecommunications Service Company (Proprietary)
Limited, of which the Group holds 49%. The claim, which
Turkcell intends to bring before a United States (US) court,
is based on allegations that the Group violated certain US
laws in its efforts to obtain Iran`s second GSM licence.
The Group`s Board, on legal advice, believes that the
Turkcell claim lacks legal merit and that a US court would
not have jurisdiction to hear the claim.
Administration
Directorate: MC Ramaphosa (Chairman), RS Dabengwa* (Group President and
CEO), NI Patel*, KP Kalyan, AT Mikati1, MJN Njeke, JHN Strydom,
AF van Biljon, J van Rooyen, MLD Marole, NP Mageza, A Harper2
Group secretary: SB Mtshali, 216 - 14th Avenue, Fairland, 2195
Private Bag
X9955, 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
SizweNtsalubaGobodo Inc., 20 Morris Street East, Woodmead, 2191
PO Box
2939, Saxonwold, 2132
E-mail: investor_relations@mtn.co.za
*Executive?1Lebanese?2British
Fairland
7 March 2012
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 07/03/2012 08:30:01 Produced by the JSE SENS Department.
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