MTN
MTN
MTN Group Limited - Final audited results for the nine-month period ended 31
December 2005 and dividend declaration
MTN GROUP LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
REGISTRATION NUMBER 1994/009584/06)
SHARE CODE: MTN
ISIN ZAE000042164
("MTN")
Final audited results for the nine-month period ended 31 December 2005 and
dividend declaration
HIGHLIGHTS OF RESULTS
- Group subscribers exceeded 23 million
- Revenue of R27,2 billion
- EBITDA of R11,2 billion
- EBITDA margin of 41,3%
- PAT of R6,7 billion
- Adjusted headline EPS of 338,2 cents
- Headline EPS of 359,8 cents
- Dividend per share of 65 cents
- New investments in Cote d"Ivoire (51%), Zambia (100%), Botswana (44%), Congo
Brazzaville (100%) and Iran (49%)
REVIEW OF RESULTS
The MTN Group Limited (MTN Group) reports adjusted headline earnings per share
(adjusted headline EPS) of 338,2 cents for the nine months to 31 December 2005
(the period) compared with 366 cents for the 12-month period ended 31 March
2005. The MTN Group has changed its financial year end to 31 December in line
with its operational cycle and to align itself with its international peer group
and is reporting on this basis for the first time. Although not directly
comparable with the prior 12-month period ended 31 March 2005, revenue for the
current period of R27,2 billion compares favourably to revenue of R29 billion
for the prior 12-month period, while earnings before interest, tax, depreciation
and amortisation (EBITDA) of R11,2 billion also demonstrated sound growth when
compared to the EBITDA of R12 billion (restated) for the prior 12 month period.
In line with these results, the adjusted profit after tax (PAT) of R6,7 billion
for the period was very satisfactory being only 8% lower than the R7,3 billion
(restated) for the prior 12-month period. The reported adjusted headline EPS and
adjusted PAT exclude the beneficial financial impact of the further recognition
of the deferred tax asset accounted for by MTN Nigeria Communication Limited
(MTN Nigeria), as well as the effect of an obligation which one of our
subsidiaries has to purchase a certain portion of its own equity ("put option").
Basic headline EPS is 359,8 cents compared to 382 cents (restated) for the prior
12-month period.
In line with its vision of consolidating its position as the leading provider of
telecommunications services in developing markets, the MTN Group during the
period successfully concluded acquisitions in Cote d"Ivoire (51%), Zambia (100%)
and Congo Brazzaville (100%), which are being consolidated as subsidiaries, as
well as in Iran (49%) and Botswana (44%), which are being proportionally
consolidated as joint ventures.
As at 31 December 2005, these new operations accounted for 1 866 000
subscribers, being 8%, of the Group"s 23,2 million subscriber base. The results
of these operations are only accounted for from the effective date of
acquisition and the full financial benefits of the acquisitions will only be
reflected in the next financial year. The new acquisitions accounted for 3,5% of
revenue and 3,7% of EBITDA, but had an insignificant impact on adjusted
headline EPS for the nine-month period to 31 December 2005 as the positive
contribution of the new operations was offset by exchange losses and finance
costs related to the funding of the acquisitions.
The overall contribution by all the operations outside of South Africa,
including the new acquisitions, increased to 44% of revenue, 56% of EBITDA and
49% of adjusted headline EPS, from 40%, 50% and 44% respectively for the 12
month prior period. As a significant proportion of the Group"s revenue and
profit is generated outside of South Africa, the fluctuation in the functional
currencies of our international operations against the Rand continues to affect
the Group"s consolidated results. Most significantly, the closing value of the
Nigerian Naira at 20,42 naira per rand has strengthened by 5% from the exchange
rate at 31 March 2005 increasing the rand value of the Nigerian assets and
liabilities, while the average exchange rate of 20,23 naira per rand is 6%
stronger than the average rate for the prior 12 month period increasing the rand
earnings contributed by MTN Nigeria.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Group is reporting its final audited financial results in accordance with
International Financial Reporting Standards ("IFRS"). Results for the prior
period, being the year end to 31 March 2005, have been restated. The conversion
to IFRS has had a limited effect on the Group"s results. Adjusted headline EPS
reported for the prior period ended 31 March 2005 decreased by 0,6 cents to 366
cents. The reason for this are outlined in the reconciliation of SA GAAP to
IFRS. Volatility in our earnings will continue in the future due to the impact
of currency movements. Due to the early adoption of IAS 21 (revised), exchange
differences arising from the translation of US$ denominated shareholder loans
granted to operating companies which are deemed to be part of the Group"s net
investment in a foreign operation, are recorded on consolidation as a separate
component of equity as opposed to being accounted for through profit or loss.
This is similar to the accounting treatment of these loans prior to the
introduction of IFRS.
INCOME STATEMENT ANALYSIS
MTN Group consolidated revenue of R27,2 billion for the period compared
favourably against the prior 12-month period of R29 billion. This result was
mainly due to the strong performance of MTN South Africa with revenue of R15,1
billion (31 March 2005: R17,4 billion (restated)) and MTN Nigeria with revenues
of R 9,0 billion (31 March 2005: R 9,3 billion). Other operations contributed
11% (31 March 2005: 8,0%), and new operations accounted for 3,5% of the Group"s
revenue.
The MTN Group"s EBITDA for the nine-month period was R11,2 billion which also
compares favourably on a relative basis with EBITDA of R12,0 billion (restated)
for the prior 12-month period and, pleasingly, the Group"s EBITDA margin
remained stable at 41,3%.
MTN South Africa recorded an EBITDA margin of 33% for the period compared with
34,6% for the prior year. This performance was primarily due to seasonality in
gross connections because a significant number of subscribers are acquired
during December with the acquisition costs also expensed in the same month. In
prior reporting periods this was then offset by revenues earned from these
subscribers in the quarter to 31 March, thereby delivering a higher EBITDA
margin.
MTN Nigeria"s EBITDA margins remained strong at 52,3%. The remaining,
International operations recorded EBITDA margins of between 45% and 57%. MTN
Irancell will be launched commercially during 2006, and Zambia, which is
virtually a start-up operation, reflected negative margins.
Depreciation and amortisation charges of R2,5 billion and R0,3 billion
respectively for the period (31 March 2005: R2,8 billion and R 0,2 billion)
continue to increase mainly due to the network rollout in Nigeria.
Amortisation relates to: (a) software which is now reflected as part of
intangible assets (previously part of property plant and equipment); (b) the
amortisation of purchased subscriber bases, primarily in the new operations,
which have been fair valued and capitalised on initial recognition in terms of
IFRS 3 and (c) the amortisation of license fees for the existing as well as new
operations which were fair valued and capitalised on initial recognition.
Net finance costs of R373 million for the period are higher than the R270
million for the prior 12 month period. They include non-cash charges of R330
million, mainly comprising charges of R124 million relating to written put
options held by minorities million and unrealised foreign exchange losses of
R181 million.
The Group"s taxation charge of R1,4 billion for the period includes R135 million
of secondary tax on companies in respect of the dividend paid to shareholders in
July 2005. The Group"s effective tax rate remains low, primarily as a result of
MTN Nigeria still being within its five-year tax holiday period under Pioneer
Status granted from 1 April 2002, and the consequential impact of the increase
in the Nigerian deferred tax asset.
The Board continues to report adjusted headline earnings in addition to basic
headline earnings. Adjusted headline earnings have been adjusted as follows:
- The positive impact on earnings that the deferred tax credit has in
Nigeria during the period in which Pioneer Status in in effect, has been
reversed. This has decreased earnings per share by 20 cents.
- The implementation of IFRS requires the Group to account for a written
put option held by a minority shareholder of one of the Group"s subsidiaries,
which provides them with the right to require the subsidiary to acquire their
shareholding at fair value. Prior to the implementation of IFRS the
shareholding was treated as a minority shareholder in the subsidiary as all
risks and rewards associated with these shares, including dividends,
currently accrue to the minority shareholder.
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 the income statement and (c)
the minority shareholder holding the put option no longer be regarded as a
minority shareholder, but rather as a creditor from the date of receiving the
put option. The fair value movements on the financial instrument resulted in
an increase of 1,1 cents per share. The finance charges reflected as a result
of this treatment had a negative impact of 5,8 cents and the Group"s
increased share in the results of the subsidiary, as a consequence of the
minority shareholder being accounted for as a creditor, was 6,3 cents. This
resulted in a net positive impact of 1,6 cents which has been reversed in
the adjusted headline EPS.
The Board believes that accounting for this put option as required by IAS 32
and 39 does not adequately reflect the economic realities of the transaction
in that: (a) the minority shareholder currently fully shares in the equity
risks and rewards of the subsidiary and that (b) accounting for changes in
the fair value of the financial instrument in the income statement is
misleading because if the put option were to be excercised at fair value it
stands to reason that these shares could be onsold for the same price with no
impact on profitability or cash flow. Inherently, a transaction at fair
market value implies that one party receives an asset at fair value and the
other party pays for it at fair value and to suggest that a profit or loss is
made on this transaction is, in the opinion of the directors, misleading.
Adjusted headline EPS of 338,2 cents for the period compare favourably to the
adjusted headline EPS of 366 cents for the prior 12-month period. South African
operations contributed 171,2 cents or 51% of total adjusted headline EPS. The
adjusted headline EPS contribution from international operations increased by
3,2% to 167 cents.
BALANCE SHEET AND CASH FLOW
The Group"s total assets have increased by 50,7% to R44,8 billion compared to
R29,7 billion (restated) at 31 March 2005. Long-term borrowings increased to
R7,5 billion (March 2005: R3,0 billion), while interest bearing short-term
borrowings increased to R1,1 billion (March 2005: R221 million).
The Group"s goodwill, other intangible assets and investments and loans have
increased significantly since 31 March 2005 mainly due to the new acquisitions.
At 31 December 2005, the Group had cash on hand, including securitised cash
deposits of R338 million against letters of credit in Nigeria, of R7,6 billion.
R2,4 billion of the cash on hand is in South Africa. Group net cash (Including
securitised cash deposits) decreased from R3,2 billion at 31 March 2005 to net
debt of R1 billion at 31 December 2005. This was largely attributable to the
acquisitions in Cote d"Ivoire, Zambia, Botswana , Iran and Congo Brazzaville for
a total consideration of R6,8 billion as well as the R1,1 billion dividend
payment in July 2005, offset by operational cash generation in South Africa and
Nigeria.
Operating cash flow (before dividends) of R10,3 billion was generated, with free
cash flow (being operating cash inflows less capital expenditure) of R 3.9
billion being recorded. MTN Nigeria invested R 3.8 billion in property, plant
and equipment, representing 59% of the Group"s R 6,4 billion capital expenditure
for the nine months.
OPERATIONAL REVIEW
MTN SOUTH AFRICA continued to achieve strong subscriber growth in both the
postpaid and prepaid segments with subscribers increasing by 28% to 10 235 000
at 31 December 2005. The prepaid component of the subscriber base continued to
drive this growth and increased by 30% or 1 971 000 net connections to 8 581 000
subscribers representing 83,8% (31 March 2005: 82,6%) of the total subscriber
base. The postpaid base increased by a healthy 19% over the nine-month period to
1 654 000 subscribers. The strong prepaid subscriber growth in the last quarter
was partially as a result of connection promotions.
As expected, blended ARPU for the nine-month period declined by 8% to R169.
Postpaid and prepaid ARPU experienced decreases to R541 (March 2005: R576) and
R93 (March 2005: R97) respectively. The ARPU decreases were the result of
continued penetration into lower usage segments. Included in total postpaid
subscribers are 281 000 My Choice Top-up subscribers which generate
significantly lower ARPU than average postpaid subscribers.
MTN South Africa currently estimates its market share at 35%.
MTN South Africa launched broadband (3G and EDGE) services in June 2005. 3G
coverage is currently available in the key metropolitan centres while 31% of our
South African network is EDGE enabled. This provides customers with high speed
access to MTN South Africa"s data offerings as well as video-based services. It
is encouraging to note that more than 57 000 subscribers have utilised our 3G
offering.
Data services contributed 8,2% towards total revenue excluding handset revenue.
As expected, because of the slower uptake of new data services, more than 95% of
data revenue is still being generated by SMS.
During August 2005, MTN Banking, a joint venture with Standard Bank, was
launched in South Africa to leverage the strategic mobile banking opportunity.
The Group acquired the remaining 40% in MTN Network Solutions, a first-tier
Internet Service Provider, to better position itself in a converged
telecommunications environment. This investment is now accounted for as a
subsidiary.
MTN Nigeria continued to perform well, increasing its subscriber base to 8 370
000, a 50% growth since 31 March 2005. The strong growth in subscriber numbers
was fuelled by sustained demand and very low connection fees. The tariff
environment has remained competitive, particularly in the reseller market. MTN
has managed to increase tariffs from the extremely low levels in February 2005.
Blended ARPU declined to US$22 but has remained strong and relatively stable
throughout the year, with a marginal ARPU level of approximately US$14.
MTN NIGERIA continues to hold the largest share of the local market with an
estimated 47% market share. The focus of the operation remains on maintaining
network quality standards while increasing coverage in the rapidly expanding
market.
MTN Nigeria"s network roll out is proceeding as planned with the commissioning
of 498 new base stations and five new switches during the nine month period. 980
kilometres of optic fibre have been installed which will only be commissioned in
the next financial year, and this will significantly increase backbone capacity.
Total capital expenditure for the period was lower than expected at R 3,8
billion. All profits generated by the business to date have been reinvested
into the Nigerian operation.
As previously reported, identifying the most appropriate mechanism to broaden
the Nigerian shareholder base continues to receive attention and further
announcements will be made at an appropriate time.
OTHER OPERATIONS
MTN Cameroon has maintained market leadership in a highly competitive trading
environment, and has an estimated market share of 54% and 1 248 000 subscribers.
The growth in subscribers is largely due to the launch of per second-billing as
well as the "Me2U" airtime transfer product. ARPU declined to US$16 for the
period, driven by the connection of lower usage subscribers.
MTN Cote d"Ivoire, recorded 1 079 000 subscribers as at 31 December 2005, being
a 16% increase from 932 000 since acquisition. Market share is estimated at 47%
and ARPU for the six months ended 31 December 2005 was US$20. The acquisition of
the 51% controlling interest for R1,398 billion, became effective on 1 July
2005.
Aggressive marketing and promotional strategies helped MTN Uganda increase its
mobile subscriber base by 26% to 982 000 from 31 March 2005. MTN Uganda still
enjoys its position as the market leader, with 63% of mobile market share.
However, increased market penetration resulted in ARPU declining slightly to
US$15.
MTN Rwanda still enjoys 100% mobile market share with 275 000 subscribers and
recorded an ARPU of US$17. A second operator has been licensed but has not yet
commenced operation.
MTN Swaziland increased its subscriber base to 213 000, a 36% increase from 31
March 2005 and still enjoys 100% mobile market share. ARPU has remained constant
at R149.
MTN Zambia recorded a 6% increase in subscribers since acquisition to 97 000
subscribers with an ARPU of US$20. The acquisition of the 100% interest for R347
million became effective on 10 August 2005. In terms of the licence, 10% of the
equity in this business will be available for ownership by Zambians.
Mascom Wireless Botswana recorded 479 000 subscribers on 31 December 2005, an
estimated market share of 67% with an ARPU of US$21. The acquisition of the 44%
interest for R846 million became effective on 29 September 2005.
MTN Congo Brazzaville recorded 210 000 subscribers as at 31 December 2005 with
an ARPU of US$21. MTN purchased 100% of this company for R656 million which was
effective on 1 December 2005.
During the year, the Group obtained competition approval for the sale of
Orbicom, and this transaction was concluded at a profit of R23 million to the
Group.
IRANCELL
On 21 November 2005, the Minister of Communications and Information Technology
of the Islamic Republic of Iran (the Ministry) issued the second GSM licence to
Irancell Telecommunications Services Company (Irancell). MTN acquired a 49%
share in Irancell. This is an exciting greenfield opportunity with Iran"s
population estimated at 69 million and current mobile penetration of
approximately 11%. MTN Group funded the licence fee of Euro300 million (US$350
million) through a commercial arrangement with Irancell. In addition, Irancell
was capitalised with Euro150 million (US$175 million) as part of the licence
requirement and MTN funded its own and its partners" share of working capital.
The partners" share was funded through a commercial arrangement. Irancell has
awarded the infrastructure tenders and is expected to launch commercially by
September 2006.
PROSPECTS
The Group"s vision is to be the leader in telecommunications in developing
markets. The Group currently has operations in 10 countries across Africa, and
commencement of commercial operations in Iran is expected in the second half of
2006. In order to further consolidate its position on the continent and to
diversify its investment portfolio, the Group will continue to explore value-
enhancing expansion opportunities principally in Africa and the Middle East.
Opportunities complementary to the core mobile telephony business will also be
pursued.
On the assumption that current market conditions endure, the Board expects the
Group to continue to show good subscriber growth, maintain a strong market
position in all of its existing operations and deliver sustainable and
increasing medium to long term returns to its shareholders. Capital expansion
programmes in Nigeria, South Africa and Iran are expected to provide further
impetus to subscriber and revenue growth. As a consequence, the Board expects
continued satisfactory growth in earnings for the year ahead.
DIVIDEND DECLARATION
In light of the Group"s strong free cash flow generation, especially by the
South African operation, coupled with its strong financial position, a dividend
of 65 cents per share (December 2005: 65 cents per share) has been declared.
Notice is hereby given that a dividend (number 7) of 65 cents per ordinary share
has been declared and is payable to shareholders recorded in the register of the
MTN Group at the close of business on Friday 21 April 2006.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Limited, the MTN Group has determined the
following salient dates for the payment of the dividend:
Last day to trade cum dividend Wednesday, 12 April 2006
Shares commence trading ex dividend Thursday, 13 April 2006
Record date Friday, 21 April 2006
Payment date of dividend Monday, 24 April 2006
Share certificates may not be dematerialised / rematerialised between Thursday
13 April 2006 and Friday 21 April 2006 both days inclusive.
On Monday 24 April 2006 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 24 April
2006 will be posted on or about that date. Shareholders who have dematerialised
their shares will have accounts held by their Central Securities Depository
Participant or broker credited on Monday 24 April 2006.
For and on behalf of the Board
M C Ramaphosa P F Nhleko
(Chairman) (Group Chief Executive Officer)
Fairland
23 March 2006
Certain statements in this announcement that are neither reported financial
results nor other historical information are forward-looking statements,
relating to matters such as future earnings, savings, synergies, events, trends,
plans or objectives.
Undue reliance should not be placed on such statements because they are
inherently subject to known and unknown risks and uncertainties and can be
affected by other factors, that could cause actual results and company plans and
objectives to differ materially from those expressed or implied in the forward-
looking statements (or from past results).
Unfortunately the company cannot undertake to publicly update or revise any of
these forward-looking statements, whether to reflect new information of future
events or circumstances or otherwise.
Registration number: 1994/009584/06 ISIN code: ZAE 0000 42164 Share code: MTN
Directorate: M C Ramaphosa (Chairman), P F Nhleko* (Group CEO), D D B Band, S L
Botha*, I Charnley*, Z N A Cindi, R S Dabengwa*, P L Heinamann, M A Moses, R D
Nisbet*, J H N Strydom, A F van Biljon *Executive
Company Secretary: S B Mtshali, 216 - 14th Avenue, Fairland, 2195, RSA. Private
Bag 9955, Cresta, 2118
Registered office: 216 - 14th Avenue, Fairland, 2195, RSA
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 2004
(Proprietary) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107
Joint auditors: PricewaterhouseCoopers Inc., 2 Eglin Road, Sunninghill, 2157
Private Bag X36, Sunninghill, 2157 and SizweNtsaluba VSP, 1 Woodmead Drive,
Woodmead Estate, PO Box 2939, Saxonwold, 2132
E-mail: investor_relations@mtn.co.za
CONDENSED CONSOLIDATED INCOME STATEMENTS
9 months 12 months
ended ended
31 December 31 March
2005 2005
Audited Audited
(Restated)
Rm Rm
Revenue 27 212 28 994
Direct network operating costs (1 992) (2 171)
Cost of handsets and other
accessories (2 717) (3 053)
Interconnect and roaming (3 736) (3 670)
Employee benefit costs (1 310) (1 435)
Selling, distribution and
marketing expenses (4 736) (4 736)
Other expenses (1 490) (1 929)
Depreciation (2 497) (2 813)
Amortisation of intangible assets (256) (189)
Net finance costs (373) (270)
Share of results of associates 10 18
Profit before tax 8 115 8 746
Income tax expense (1 411) (1 494)
Profit for the period 6 704 7 252
Attributable to:
Equity holders of the company 5 866 6 357
Minority interest 838 895
6 704 7 252
Earnings per share 352,7 383,0
Diluted earnings per share 349,7 379,4
Dividend per share 65,0 41,0
CONDENSED CONSOLIDATED BALANCE SHEETS
31 December 31 March
2005 2005
Audited Audited
(Restated)
Rm Rm
ASSETS
Non-current assets 31 136 19 151
Property, plant and equipment 20 676 15 787
Goodwill 2 650 33
Other intangible assets 4 057 1 846
Investments in associates 54 43
Financial assets held at fair value
through profit or loss 312 300
Loans and other non-current receivables 2 001 324
Deferred income tax assets 1 386 818
Current assets 13 676 10 579
Cash and cash equivalents 7 222 5 822
Restricted cash** 338 607
Other current assets 6 116 4 150
Total assets 44 812 29 730
EQUITY AND LIABILITIES
Shareholders" equity
Share capital and reserves 19 716 16 083
Minority interest 3 380 2 333
23 096 18 416
Non-current liabilities 9 765 3 715
Borrowings 7 505 3 019
Deferred income tax liabilities 853 696
Other non-current liabilities 1 407 -
Current liabilities 11 951 7 599
Non-interest bearing liabilities 10 851 7 378
Interest-bearing liabilities 1 100 221
Total equity and liabilities 44 812 29 730
**This consists primarily of monies that are placed on deposit with banks in
Nigeria to secure letters of credit.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
9 months 12 months
ended ended
31 December 31 March
2005 2005
Audited Audited
(Restated)
Rm Rm
Restated opening balance 18 416 11 752
Net profit 5 866 6 357
Dividends paid (1 081) (680)
Issue of share capital 33 55
Effect of put option (1 284) (12)
Minorities interest on acquisition 124 -
Minorities share of profits and reserves 838 895
Revaluation of shareholders loan 79 19
Treasury shares sold - 6
Share-based payments reserve 17 17
Currency translation differences 88 7
23 096 18 416
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
12 months
9 months ended
ended 31 March
31 December 2005
2005 Audited
Audited (Restated)
Rm Rm
Cash inflows from operating activities 9 161 9 513
Cash outflows from investing activities (12 922) (7 562)
Cash inflows from financing activities 5 357 222
Net movement in cash and cash equivalents 1 596 2 173
Cash and cash equivalents at beginning of
period 5 772 3 542
Cash acquired through acquisitions (152) -
Foreign entities translation adjustment (52) 57
Cash and cash equivalents at end of period 7 164 5 772
OPERATIONAL DATA
31 December 31 March
2005 2005
South Africa
Subscribers 10 235 000 8 001 000
ARPU (Rand) 169 184
Nigeria
Subscribers 8 370 000 5 574 000
ARPU (USD) 22 40
Cameroon
Subscribers 1 248 000 919 000
ARPU (USD) 16 23
Uganda
Subscribers 982 000 782 000
ARPU (USD) 15 19
Rwanda
Subscribers 275 000 209 000
ARPU (USD) 17 19
Swaziland
Subscribers 213 000 156 000
ARPU (Rand) 149 178
Cote d"Ivoire
Subscribers 1 080 000 -
ARPU (USD) 20
Mascom Botswana
Subscribers 479 000 -
ARPU (USD) 21
Congo Brazzaville
Subscribers 210 000 -
ARPU (USD) 21
Zambia
Subscribers 97 000 -
ARPU (USD) 20
Total subscribers 23 189 000 15 641 000
Note:
1. Subscriber figures for the year ended March 2005 have been restated and are
now based on 90-day subscriber activity.
2. ARPU figures for the year ended 31 March 2005 are still based on 30-day
subscriber activity - not restated.
RECONCILIATION OF SAGAAP TO IFRS INCLUDING THE EFFECT OF EARLY ADOPTING IAS 21
(REVISED)
IFRS
Transition
date
31 March 1 April
2005 2004
Audited Audited
Rm Rm
Reconciliation of equity
Equity previously reported under SA GAAP 18 257 11 546
Adjustment upon adoption of IFRS 159 206
Equity reported under IFRS 18 416 11 752
Equity adjustments
Leases (31) (31)
Property, plant and equipment 168 246
Intangible assets 68 53
Other (46) (62)
159 206
Reconciliation of income statement
Net profit after tax previously reported 7 314
Share-based payments (17)
Foreign exchange gain 26
Property, plant and equipment (78)
Intangible assets 18
Other 8
As reported under IFRS 7 271
Early adoption of IAS 21 (revised) (19)
31 March 2005 - restated 7 252
SEGMENT ANALYSIS
9 months 12 months
Period ended
ended 31 March
31 December 2005
2005 Audited
Audited (Restated)
Rm Rm
REVENUE
South Africa 15 507 17 350
Nigeria 9 034 9 310
Rest of Africa and Middle East 2 671 2 334
27 212 28 994
EBITDA
South Africa 5 009 5 996
Nigeria 4 727 4 884
Rest of Africa and Middle East 1 495 1 120
11 231 12 000
PAT
South Africa 2 871 3 402
Nigeria 3 293 3 454
Rest of Africa and Middle East 540 396
6 704 7 252
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The condensed consolidated financial information ("financial information")
announcement is based on the audited financial statements of the Group for the
period ended 31 December 2005 which have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), the listing requirements
of the JSE Limited and the South African Companies Act (1973).
The financial year-end for MTN Group and its subsidiaries has changed from 31
March to 31 December. The financial statements are therefore for the nine months
ended 31 December 2005.
Although the financial statements for the period ended 31 December 2005 are
MTN"s first published financial statements stating full compliance with IFRS,
MTN had already complied in the prior year with effect from 17 July 2000 with
the following SA GAAP standards that had identical requirements to the IFRS
standards:
IFRS 3 (AC140) (issued 2004) - Business combinations
IAS 36 (AC128) (revised 2004) - Impairment of Assets
IAS 38 (AC129) (revised 2004) - Intangible Assets
IAS 27 (AC132) (revised 2004) - Consolidated and Separate Financial Statements
The "31 March 2005 IFRS restated" figures have therefore only been adjusted to
comply with the remainder of the International Financial Reporting Standards,
while the "31 December 2005" figures have been adjusted to comply with all
International Financial Reporting Standards. Refer to the Reconciliation of SA
GAAP to IFRS for the effects of IFRS-compliance on previously reported financial
statements. The nature of all items reconciling SAGAAP to IFRS has been
described in detail in the financial statements for the period ended 31 December
2005.
2. HEADLINE EARNINGS PER ORDINARY SHARE
The calculations of basic and adjusted headline earnings per ordinary share are
based on basic headline earnings of R5984 million (March 2005: R6339 million)
and adjusted headline earnings of R5626 million (March 2005: R6074 million)
respectively, and a weighted average of 1 663 208 548 (March 2005: 1659670617)
ordinary shares in issue.
RECONCILIATION BETWEEN NET PROFIT ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE
COMPANY AND HEADLINE EARNINGS
9 months ended 12 months ended
31 December 31 March
2005 2005
Audited Audited
(Restated)
Rm Rm
Net profit attributable company"s
equity holders 5 866 6 357
Adjusted for:
Loss/(profit) on disposal of
property, plant and equipment 27 (3)
Profit on sale of subsidiary (23) -
Profit on sale of associate - (4)
Effect of disposal of stake
in MTN Cameroon to reflect
net asset value - (11)
Impairment of property, plant and
equipment 114 -
Basic headline earnings 5 984 6 339
Adjusted for:
Reversal of deferred tax asset (332) (265)
Impact of put option:
- Fair value adjustment (19) -
- Finance costs 97 -
- Minority share of profits (104) -
Adjusted headline earnings 5 626 6 074
Reconciliation of headline earnings
per ordinary share (cents)
Attributable earnings per share
(cents) 352,7 383,0
Adjusted for:
Loss/(Profit) on disposal of
property, plant and equipment 1,6 (0,2)
Profit on sale of subsidiary (1,4) -
Profit on sale of associate - (0,2)
Effect of disposal of stake in
MTN Cameroon - (0,6)
Impairment of property, plant and
equipment 6,9 -
Basic headline earnings per share
(cents) 359,8 382
Effect of reversal of deferred
tax asset (20,0) (16,0)
Effect of reversal of put option (1,6) -
Adjusted headline earnings per
share (cents) 338,2 366
Contribution to adjusted headline
earnings per ordinary share (cents)
South Africa 171,2 204,1
Rest of Africa and Middle East 167,0 161,9
Adjusted headline earnings per
share (cents) 338,2 366
Number of ordinary shares in issue:
- Weighted average (000) 1 663 209 1 659 671
- At period end (000) 1 665 317 1 662 497
DEFERRED TAX ASSET
The Group"s subsidiary in Nigeria has been granted a five-year tax holiday under
"Pioneer Status" legislation. Capital allowances arising on capital expenditure
incurred during this period may be carried forward and claimed as deductions
against taxable income from the sixth year of operations onwards. A deferred tax
credit of R332 million (March 2005: R265 million) excluding minority interests
relating to these deductible temporary differences has been recognised for the
period ended 31December 2005 in terms of IAS 12-Income Taxes. A deferred tax
asset is raised where it is probable that future profits will be generated in
order to utilise the deductible temporary differences.
As previously disclosed, although the Group has complied with the requirements
of IAS 12 in this regard, the Board of Directors has reservations about the
appropriateness of this treatment in view of the fact that no cognisance may be
taken in determining the value of such deferred tax assets for uncertainties
arising out of the effects of the time value of money or future foreign exchange
movements.
IMPACT OF PUT OPTION
Refer to the commentary for an explanation of the impact of these entries.
The Board therefore resolved to report adjusted headline earnings (negating the
effect of the deferred tax asset) and the put option in addition to basic
headline earnings, to more fully reflect the Group"s results for the period.
3. 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.
9 months 12 months
ended ended
31 December 31 March
2005 2005
Audited Audited
(Restated)
Rm Rm
4. CAPITAL EXPENDITURE INCURRED
(INCLUDING SOFTWARE) 6 732 7 576
5. CONTINGENT LIABILITIES AND
LEASE COMMITMENTS
Contingent liabilities 781 1 372
Operating lease commitments 331 679
Finance lease commitments 638 308
6. COMMITMENTS FOR PROPERTY, PLANT
AND EQUIPMENT AND INTANGIBLE ASSETS
- Contracted for 2 902 3 144
- Authorised but not contracted for 10 039 7 247
7. CASH AND CASH EQUIVALENTS
BANK BALANCES, DEPOSITS AND CASH 7 222 5 822
Call borrowings (58) (50)
7 164 5 772
8. INTEREST-BEARING LIABILITIES
Call borrowings 58 50
Short-term borrowings 1 042 171
Current liabilities 1 100 221
Long-term liabilities 7 505 3 019
8 605 3 240
9. BUSINESS COMBINATIONS
9.1 The acquisition of 51% of Telecel Cote d"Ivoire.
On 1 July 2005, the Group acquired 51% of the share capital of Loteny Telecom,
trading under the name Telecel Cote d"Ivoire, a telecommunications company
operating in Cote d"Ivoire. The acquired business contributed revenues of R392,5
million and profit after tax of R83,5 million to the Group for the period from 1
July 2005 to 31 December 2005.
If the acquisition had occurred on 1 April 2005 the contribution to Group
revenue would have been R571,2 million, and the contribution to profit after tax
would have been R98,3 million. These amounts have been calculated using the
Group"s accounting policies and by adjusting the results of the subsidiary to
reflect the additional depreciation and amortisation that would have been
charged assuming the fair value adjustments to property, plant and equipment and
intangible assets had applied from 1 April 2005, together with the consequential
tax effects.
The goodwill is attributable to the high profitability of the acquired business
and the significant synergies expected to arise after the Group"s acquisition of
Telecel Cote d"Ivoire.
1 July 2005
Audited
Details of the net assets acquired and goodwill
are as follows: Rm
Total purchase consideration 1 398
Fair value of net assets acquired (142)
Goodwill 1 256
Fair value Acquiree"s
1 July 2005 carrying amount
Audited 1 July 2005
The assets and liabilities arising
from the acquisition are as follows: Rm Rm
Cash and cash equivalents 41 41
Property, plant and equipment 621 1 031
Intangible asset 603 376
Inventories and receivables 109 109
Payables (1 001) (988)
Borrowings (142) (148)
Net deferred tax asset 48 -
Net assets 279 421
Minority interests (49%) (137)
Net assets acquired 142
Purchase consideration settled in
cash 1 398
Cash and cash equivalents in
subsidiary acquired (41)
Cash outflow on acquisition 1 357
9.2 THE ACQUISITION OF 100% OF TELECEL ZAMBIA, 40% OF MTN NETWORK SOLUTIONS
(PTY) LIMITED, 44% OF MASCOM WIRELESS (PTY) LIMITED AND 100% OF LIBERTIS TELECOM
On 1 August 2005, the Group acquired 100% of the share capital of Telecel
Zambia, a telecommunications company operating in Zambia, on 1 April 2005, the
Group acquired 40% of Network Solutions (Pty) Limited, an internet service
provider company incorporated in South Africa, and on 1 December 2005, the Group
acquired 100% of Libertis Telecom, a telecommunications company incorporated in
the Republic of Congo. On 28 September 2005, the Group acquired 44% of Mascom
Wireless Botswana (Pty) Limited, a telecommunications company operating in
Botswana.
The acquired businesses contributed revenues of R372 million and profit after
tax of R54 million to the Group for the period.
If the acquisitions had occurred on 1 April 2005 the contribution to Group
revenue would have been R708 million, and the contribution to profit after tax
would have been R149 million. These amounts have been calculated using the
Group"s accounting policies and by adjusting the results of the acquirees to
reflect the additional depreciation and amortisation that would have been
charged assuming the fair value adjustments to property, plant and equipment and
intangible assets had applied from 1 April 2005, together with the consequential
tax effects.
The goodwill is attributable to the high profitability of the acquired
businesses and the significant synergies expected to arise after the Group"s
acquisition of these businesses.
On acquisition
dates
Reviewed
Details of the net assets acquired and
goodwill as at acquisition are as follows: Rm
Total purchase consideration 1 932
Fair value of net assets acquired (494)
Goodwill 1 438
Acquiree"s
Fair values carrying
on amounts
acquisitions on
date aquisition date
Audited
The assets and liabilities arising
from the acquisition are as follows: Rm Rm
Cash and cash equivalents 105 105
Property, plant and equipment 350 350
Intangible assets 230 5
Inventories and receivables 70 70
Payables (141) (141)
Borrowings (102) (102)
Net deferred tax liability (18) (18)
Net assets acquired 494 269
Purchase considerations 1 932
Cash and cash equivalents in
businesses acquired (111)
Purchase consideration not
yet settled in cash (36)
Cash outflow on acquisition 1 785
The business combinations outlined above were determined provisionally by the
end of December 2005. In accordance with IFRS 3, these will be finalised within
12 months of the respective acquisition dates and appropriate adjustments may be
required.
10. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities relate to put options in respect of subsidiaries
arising from arrangements whereby minority shareholders of two of the Group"s
subsidiaries have rights to put their shareholdings in the subsidiaries to Group
companies. On recognition, the put options were fair valued using the effective
interest rate as deemed appropriate by management.
11. POST BALANCE SHEET EVENTS
There are no significant post balance sheet events.
12. NET ASSET VALUE PER ORDINARY SHARE AND NET (DEBT)/CASH EQUITY RATIOS
9 months 12 months
ended ended
31 December 31 March
2005 2005
Audited Audited
(Restated)
Net asset value 11,84 9,67
Net (debt)/cash equity (4,5%) 17%
These results can be viewed on our website at www.mtn.co.za
Date: 23/03/2006 08:27:30 AM Produced by the JSE SENS Department
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