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MTN - MTN Group - Final Audited Results For The Year Ended 31 December 2009
MTN Group Limited
(Incorporated in the Republic of South Africa)
Registration Number 1994/009584/06
Share code: MTN
ISIN: ZAE000042164
("MTN" or "MTN Group")
Final audited results for the year ended 31 December 2009
Highlights
- Group subscribers up 28% to 116,0 million
- Revenue up 9,2% to R111,9 billion
- EBITDA up 6,7% to R46,1 billion
- Adjusted Headline EPS down 16.6% to 754,3 cents
- Adjusted Headline EPS, excluding the impact of functional currency losses,
up 8,5% to 878,9 cents
- Dividend per share of 192 cents
Overview
MTN Group revenues increased by 9,2% to R111,9 billion and earnings before
interest, tax and depreciation ("EBITDA") by 6,7% to R46,1 billion based on a
sound operational performance for the year ended 31 December 2009. Movements in
exchange rates in the year, mainly in the South African Rand ("ZAR") and
Nigerian Naira ("NGN"), had a substantially negative impact on the Group`s
financial results. To illustrate this, had there been no change in currency
rates during the year, reported revenues at year end would have been
11 percentage points higher, and EBITDA 12 percentage points above that
reported. Adjusted headline earnings per share ("EPS") decreased by 16,6% to
754.3 cents and, excluding the impact of the functional currency losses,
increased by 8,5% to 878.9 cents. The solid performance of MTN operations in
most of the countries in which the Group has a presence was achieved despite
economic challenges, increased regulatory changes and growing competition.
Continued delivery in accordance with an aggressive network rollout strategy
remained key throughout 2009, enabling MTN to maintain or improve its market
share in most of its operations. Better distribution and a focus on segmental
product offerings were other contributory factors. As a result, subscribers
increased by 28,0% to 116,0 million for the period under review, indicating a
continuing demand for mobile services in countries where mobile penetration is
still relatively low.
MTN initiated several Group projects during 2009 which are being rolled out
through most operations. Although many of these projects are still in progress,
this Group-wide approach allows MTN to differentiate itself from the
competition, thereby ensuring a stronger brand and product preference whilst
leveraging its regional footprint. These projects include the following:
A coordinated effort to improve operational efficiencies through centralised
procurement, best practice guidelines for site build, network management, safety
and activity based costing.
Continued investments in Internet Service Providers ("ISP") across all regions
have been made to ensure that MTN is favourably positioned. MTN South Africa
acquired Verizon Business South Africa (Pty) Ltd in early 2009 and successfully
integrated the company with Network Solutions. The combined entity was launched
in September 2009 with a key focus on converged services to the corporate
segment. It is envisaged that MTN Business, although South African based, will
provide a Pan-African opportunity to service the corporate sector across and
beyond MTN`s footprint.
MTN has committed in excess of USD191 million in various submarine cables to
ensure high-speed connectivity and improved quality and capacity of voice and
data offerings. These include the East Africa submarine cable ("EASSy"); the
Europe India gateway ("EIG"); SAT-3/SAFE; the East Africa Marine system
("TEAMs") and the West Africa Cable System ("WACS").
With an initial focus on money transfers, Mobile Money has been launched to date
in South Africa, Uganda, Rwanda, Ghana, C'te d`Ivoire, Benin and Yemen. The
success of MTN Uganda, which was first to launch the new service in March 2009,
is indicative of the scale of the opportunity: to date, Uganda has more than
680,000 Mobile Money subscribers.
There have been many regulatory changes within the telecommunications industry
over the past year, particularly focused on SIM registration and reductions in
Mobile Termination Rates ("MTR"). Constructive and early engagement with
regulatory authorities by management teams have ensured that MTN`s operations
have been generally well prepared for compliance with the regulatory changes
implemented in 2009, and will be for those to follow in 2010.
Group financial review
Income statement
MTN Group revenues increased by 9, 2% to R111,9 billion, largely driven by
subscriber growth. The movements in foreign currencies, when compared to
December 2008, had a negative impact on reported revenue of R10,9 billion or 11
percentage points, as a strong ZAR eroded foreign earnings.
The Group`s EBITDA increased by 6,7% to R46,1 billion for the year. When
compared to December 2008, the fluctuation in foreign exchange rates had a
negative impact on reported EBITDA of R5,1 billion, or 12 percentage points. The
one percentage point reduction in EBITDA margin was mainly due to an increase in
the revenue share costs in Syria, as well as the impact of reducing fixed to
mobile interconnect traffic and the integration and outsourcing costs in South
Africa.
Currency movements affect the income statement through translated earnings,
functional currency adjustments and the effect of the written put option held by
a minority shareholder in MTN`s Nigerian subsidiary. The ZAR closed 21% stronger
at R7,39 to the USD on the 31 December 2009, compared to the closing rate of
R9,35 the year before, R9,49 in March 2009 and R7,72 in June 2009. Translation
of earnings affected by movements in the various local currencies to the USD was
compounded in the second half of the year by the strong ZAR.
Net finance costs increased by 203% to R5, 8 billion for the year. This was
mainly due to the ZAR/USD exchange rate which, as explained above, significantly
affects a large proportion of MTN`s assets and liabilities denominated in a
currency other than the entities` reporting currency. These foreign-denominated
assets and liabilities resulted in a functional currency loss for the period of
R3,2 billion compared to the R2,4 billion foreign currency gain at the end of
December 2008 - a swing of R5,6 billion. Much of the loss is attributable to
foreign currency denominated loans, receivables and cash balances in Mauritius
(a ZAR reporting entity). In addition, the put option effect on the income
statement was a credit of R701 million (June 2009: R1 billion credit and
December 2008: R1,2 billion debit), mainly as a result of the depreciation in
the NGN/USD exchange rate.
The depreciation charge increased by 18, 8% to R11,8 billion mainly as a result
of an increase in the Group`s depreciable infrastructure assets.
Minority interests increased by 38% to R2,5 billion, compared to R1,8 billion at
31 December 2008.
The Group`s effective taxation charge for the year reduced from 39,9% to 33,4%,
for the comparable period. This was mainly due to the end of the commencement
period following the tax holiday in Nigeria in 2008 and the financial effect of
the put option.
The 24% reduction in tax and the resultant reduction in the effective tax rate
were not sufficient to offset an 18, 8% increase in depreciation, a 203%
increase in net finance costs and a 38% increase in minority interests, and the
overall result was a decrease in the Group`s attributable EPS of 3,6% and
adjusted headline EPS of 16,6% to 791,4 and 754,3 cents respectively, when
compared to the prior year.
The impact of the reversal of the put option on adjusted headline EPS was a
debit of 48,9 cents, while functional currency losses on the revaluation of
assets and liabilities due to the strong ZAR was a debit of 124,6 cents.
Adjusted headline EPS excluding the impact of the functional currency losses of
124,6 cents increased by 8,5% to 878.9 cents for the year.
The Group continues to report adjusted headline earnings per share in addition
to the attributable headline EPS. The adjustment is in respect of the IFRS
requirement that the Group accounts for a written put option held by a minority
shareholder of one of the Group`s subsidiaries, which gives the minority
shareholder the right to require the subsidiary or its holding company to
acquire this shareholding at fair value. Although the Group has complied with
the IFRS requirements, the board of directors (the board) has reservations about
the appropriateness of this interpretation and hence the adjustment.
Balance sheet and cash flow analysis
MTN`s extensive network expansion and investment strategy resulted in capital
expenditure for the year of R31,2 billion, a 10,6% increase on 2008. The final
amount spent was lower than the R42 billion approved during the year due to a
R7,2 billion expenditure rollover into 2010 and the stronger rand, which led to
a R3,5 billion saving on capital expenditure. We expect 2009 to have been our
peak year for capital expenditure. The approved budget for 2010 is R23,6 billion
(including rollover capex), 44% lower than the 2009 amount.
Cash generated from operating activities increased to R36, 3 billion from R34, 2
billion, reflecting another strong operational performance. MTN continued to
reduce its borrowings, with net debt down marginally from R12,9 billion in 2008
to R12,2 billion in 2009, resulting in lower cash balances. The lower borrowings
and cash balances were also partially due to the impact of foreign currency
translation.
During the year, MTN Group concluded the acquisition of 100% of Verizon South
Africa (Pty) Ltd (in February 2009) and 59% of iTalk Cellular (Pty) Ltd (in
January 2009), increased its stake in MTN Uganda from 95% to 97% (in October
2009) and acquired a 20% stake in Belgacom International Carrier Services (in
November 2009) in exchange for selling 100% of its own international carrier
service business. The Group also completed a private placement of 2,2% of MTN
Zambia (in January 2009) and the sale of its 50% stake in DMTV Africa (in
January 2009). The unwinding of black empowerment vehicle Newshelf resulted in a
1,6% reduction in the number of shares in issue.
Operational review
South Africa
MTN`s South African operations had a challenging 2009. External challenges as
the country went through a recession in the first half of the year, combined
with maturing market conditions and increased regulation of the industry were
compounded by difficulties experienced with the outsourcing of various critical
IT functions. High churn and lower gross connections in the prepaid segment
resulted in a 6,4% reduction in subscriber numbers to 16,1 million at 31
December 2009. The lower gross connections were a consequence of the
implementation of new industry regulations (RICA). In line with RICA, mobile
operators have to register subscribers` personal details and to date MTN has
collected the details of 5,5 million prepaid customers. The postpaid segment was
not affected to the same degree by the RICA requirements, and showed subscriber
growth of 9,8%, mainly because of the increasing use of hybrid packages.
MTN South Africa`s revenue increased modestly by 3,1% to R33,1 billion for the
year to 31 December 2009, indicating that those prepaid subscribers lost during
the RICA process were not as meaningful to revenue. Consequently, prepaid
Average Revenue per User per month ("ARPU") increased by R3 to R100 at December
2009, despite the disconnection of 1,4 million prepaid subscribers, as customers
who remained on the network continued to spend. Lower post-paid ARPU, which
decreased by R38 to R365, was mainly due to lower out-of-bundle usage and
migrations to lower-value packages, reflecting slowing consumer spending within
the more formal economy.
The EBITDA margin decrease of 1,7 percentage points to 31,4% at 31 December 2009
was mainly a result of increased distribution costs, following the integration
of i-Talk Cellular and Cell Place as well as the impact of lower fixed to mobile
traffic.
MTN South Africa continued to make substantial investments in its network to
improve capacity and increase 3G coverage. Capacity increased by 12% on 2G and
22% on 3G networks with the integration of 496 2G and 659 3G base transceiver
stations ("BTS`s"), while the 3G population coverage increased from 35% in
December 2008 to 48% in December 2009. The deployment of 5 000 km of national
fibre continued throughout 2009 with 245 km completed along the Gauteng-Durban
route. The southern and northern rings of the Gauteng fibre projects are
expected to be completed by July 2010.
Although some progress has been made on improving the various IT functions,
further improvements are required. Increased management attention is also being
given to support systems, including customer care and call centres, in order to
cope with the challenges.
Nigeria
MTN Nigeria performed well for the period under review. The large capital
investment made to improve network quality and capacity together with the
efficient restructure of the sales and distribution channel have allowed MTN
Nigeria to grow subscribers by 34% to 30,8 million at the end of December 2009,
and increase its market share to 49,6%.
Although local currency revenue increased by 30,0% for the period, in line with
subscriber growth, this translated into a much smaller 5,6% growth in rand terms
to R33,3 billion at December 2009, due to ZAR strength in the second half of the
year compounding NGN weakness in the first half. ARPU in local currency reduced
by 9,6%. This translated into a USD4 decline from December 2008 to USD12, which
was unchanged from the figure reported for June 2009 as the NGN stabilised in
the second half of the year. The decline in ARPU from December 2008 to June 2009
was mostly the result of the depreciation of the NGN against the USD. Local
currency ARPU declined in line with increased penetration into lower-usage
segments and - to a lesser extent - pressure on consumer spending.
The EBITDA margin increased by 1,5 percentage points to 59,3% at December 2009,
mainly due to strong overall cost savings and in particular an 18% decline in
the price of fuel.
High network rollout and investments made to improve the quality and capacity of
the network continued throughout 2009. MTN Nigeria added 1,220 BTS`s during the
period, bringing the total BTS count to 5,996 at December 2009. 561 3G sites
were rolled out during the year, completing phase 2 of the 3G rollout plan.
MTN`s data propositions gained momentum, with 25,363 active Blackberryc
subscribers at the end of December 2009 and 78,331 data modems being sold during
the year. Some 1,562 km of new backbone and 110 km of metro fibre were
introduced during the year. The WACS submarine cable consortium, of which MTN is
a member, has been granted a landing licence in Nigeria.
Ghana
MTN Ghana increased its subscribers by 24% to 8 million for the year ended 31
December 2009. Improvements in network quality and capacity, enhanced value
propositions, the MTN Zone offering as well as loyalty programmes have enabled
MTN Ghana to maintain its market share of 55%, despite fierce competition. An
increased distribution footprint also contributed to the maintenance of market
share.
Although local currency revenue increased by 25,1% for the period, significantly
ahead of subscriber growth, this translated into a 6,3% decline in revenue in
rand terms to R5,7 billion at December 2009 due to the combination of ZAR
strength in the second half of the year and weakness in the Ghanaian cedi
("GHC"), particularly in the first half of the year.
ARPU in local currency was stable from June 2009. This translated to a decrease
to USD8 at the end of December following the stabilisation of the GHC against
the USD in the second half of the year.
MTN Ghana showed a 0,1 percentage point decline in its EBITDA margin to 45,3%,
mainly as a result of the increase in site rentals in line with network
expansion.
MTN Ghana rolled out 729 2G and 531 3G additional BTS`s for the year. 3G mobile
broadband services, including the internet SIM launch and MTN Loaded, have been
introduced to both the consumer and corporate segments. At the end of December
2009, there were approximately 1 million unique hits on MTN Loaded.
Iran
MTN Irancell recorded strong subscriber growth of 45% to 23,3 million in 2009,
increasing its market share to 40%. This was a result of continued attractive
acquisition promotions such as a reduction in the price of SIM starter packs, as
well as loyalty programmes and bonus discount products.
Revenue in local currency increased by 60% for the period, significantly ahead
of subscriber growth, and this translated into a 54,5% increase in revenue in
rand terms. MTN`s 49% share of MTN Irancell`s revenue was R7,6 billion at
December 2009. ARPU declined by USD1 to USD8 at December 2009, in line with
deeper mobile penetration.
MTN Irancell`s EBITDA margin increased by 4,7 percentage points to 34,9% for the
year. This was attributable to cost optimisation from using single-vendor
maintenance, locally manufactured recharge vouchers, as well as a focus on
general cost control and scale efficiencies.
Aggressive rollout continued during 2009, increasing the operation`s coverage of
Iranian cities and roads. A total of 1 429 towns and cities and an additional
4 996 km of roads were covered during 2009, although network quality still
remains a priority in Tehran, Tabriz and Esfahan. WiMax was successfully
launched in December 2009, with a coverage centred on high-density areas, mainly
Tehran and Esfahan. A total of 328 WiMax sites have been integrated.
Syria
MTN Syria increased its subscribers by 20% to 4,2 million at December 2009. The
uptake in subscribers gained momentum in the second half of the year, owing to
the success of various promotions which included MTN Gold, per-second billing,
as well as segmental product offerings to the youth. These value propositions
enabled MTN Syria to increase market share from June to 45% at December 2009.
Local currency revenue increased by 8,2% for the period, slower than subscriber
growth, and this translated into a 7,4% increase in revenue in rand terms to
R7,0 billion at December 2009. ARPU decreased by USD1 over the period to USD18.
The EBITDA margin decreased by 8,5 percentage points to 19,7% as a result of the
full year impact of the revenue share increase in June 2008.
Network expansion and upgrades continued throughout the year, but remain
constrained by the Build, Operate and Transfer (BOT) contract under which the
business operates. Completed network achievements and efficiencies include the
outsourcing of site maintenance, the implementation of a new network management
system and transmission expansion and optimisation.
Succession
Phuthuma Nhleko will not be renewing his long term contract as Group President
and CEO which ends on 30 June 2010. He has, however, agreed to continue in his
current role up to March 2011 focusing on certain key objectives including the
seamless transition to a successor over this period. A board process is underway
to appoint his successor.
The board particularly wishes to record its admiration and appreciation for
Phuthuma`s outstanding leadership role in building MTN into a major global
telecommunications company in his tenure with the Group.
Prospects
Competition across MTN`s footprint is likely to continue to increase and whilst
economies remain fragile, there are tentative signs of a recovery in economic
activity. MTN remains focused on:
Actively seeking value-accretive expansion opportunities in emerging markets to
reduce concentration risk and leverage economies of scale;
Monitoring infrastructure investments to ensure appropriate levels of capacity
and quality of service. The continued investment in fibre and cable requirements
to service evolving voice and data requirements;
Optimising efficiencies including infrastructure sharing, standardisation of
systems and processes, rationalisation of suppliers, cost management and cash
optimisation;
Continued engagement with regulatory authorities in the development and
refinement of the telecommunications sector; and
The implementation of MTN`s BEE transaction.
Subscriber net addition guidance for 2010
South Africa 800 000
Nigeria 6 000 000
Ghana 800 000
Iran 5 000 000
Syria 400 000
Rest 7 000 000
20 000 000
Dividends
Shareholders are advised that a cash dividend of 192 cents per ordinary share in
respect of the period 31 December 2009 has been declared, in line with the
board`s belief that some relaxation in its dividend policy is appropriate. The
dividend is payable to shareholders recorded in the register of the MTN Group at
the close of business on Friday, 9 April 2010. 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 Wednesday, 31 March 2010
Shares commence trading ex Thursday, 1 April 2010
dividend
Record date Friday, 9 April 2010
Payment of dividend Monday, 12 April 2010
Share certificates may not be dematerialised or rematerialised between Thursday,
1 April 2010 and Friday, 9 April 2010, both days inclusive.
On Monday, 12 April 2010, 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, 12 April
2010 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, 12 April 2010.
Condensed consolidated income statement
for the year ended 31 December 2009
31 December 31 December
2009 2008
Audited Audited %
Rm Rm change
Revenue 111 947 102 526 9,2
Direct network operating costs 15 925 14 140 (12,6)
Handsets and other accessories 6 297 5 985 (5,2)
Interconnect and roaming 15 166 13 217 (14,7)
Employee benefits 5 843 4 776 (22,3)
Selling, distribution and marketing 14 649 13 274 (10,4)
expenses
Other expenses 8 004 7 968 (0,5)
Depreciation 11 807 9 939 (18,8)
Amortisation of intangible assets 2 668 2 820 5,4
Net finance costs 5 810 1 917 (203,1)
Share of results of associates (net (5) - -
of tax)
Profit before income tax 25 773 28 490 (9,5)
Income tax expense 8 612 11 355 24,2
Profit after tax 17 161 17 135 0,2
Attributable to: 17 161 17 135 0,2
Equity holders of the company 14 650 15 315 (4,3)
Minority interests 2 511 1 820 (38,0)
Earnings per ordinary share (cents)
attributable
to equity holders of the company
- basic 791,4 821,0 (3,6)
- diluted 781,5 806,1 (3,1)
Dividends per share (cents) 181,0 136,0 33,1
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2009
31December 31 December
2009 2008
Audited Audited %
Rm Rm change
Profit for the year 17 161 17 135 0.2
Other comprehensive income:
Exchange differences on translating (17 700) 13 191 (234,2)
foreign operations
Cash flow hedges (191) 138 (238,4)
Total comprehensive (loss)/income (730) 30 464 (102,4)
for the period
Attributable to:
Equity holders of the company (2 509) 27 341 (109,2)
Minority interests 1 779 3 123 (43,0)
(730) 30 464 (102,4)
Condensed consolidated balance sheet
at 31 December 2009
31 December 31 December
2009 2008
Audited Audited %
Rm Rm change
Non-current assets 110 213 115 319 (4,4)
Property, plant and equipment 67 541 64 193 5,2
Goodwill and other intangible 37 526 45 786 (18,0)
assets
Other non-current assets 5 146 5 340 (3,6)
Current assets 46 024 54 787 (16,0)
Bank and cash 23 999 26 961 (11,0)
Restricted cash 742 1 778 (58,3)
Other current assets 21 283 26 048 (18,3)
ASSETS 156 237 170 106 (8,2)
Total equity 72 866 80 542 (9,5)
Non-current liabilities 28 426 34 973 (18,7)
Long-term borrowings 21 066 29 100 (27,6)
Deferred tax and other non-current 7 360 5 873 25,3
liabilities
Current liabilities 54 945 54 591 0,6
Non-interest bearing liabilities 39 094 42 101 (7,1)
Interest-bearing liabilities 15 851 12 490 26,9
EQUITY AND LIABILITIES 156 237 170 106 (8,2)
Condensed consolidated statement of changes in equity
for the year ended 31 December 2009
31 December 31 December
2009 2008
Audited Audited
Rm Rm
Opening balance 80 542 51 502
Total comprehensive (loss)/income for the (730) 30 464
period
Dividends paid (6 122) (6 514)
Shares issued during the year 20 392 41
Transactions with minorities (43) 4 020
Disposal of non-controlling interest - 909
Purchase of non-controlling interest - (85)
Newshelf share buy-back (21 226) -
Other reserves 53 151
Cancellation of MTN Cote d`Ivoire put - 54
option
Closing balance 72 866 80 542
Condensed consolidated cash flow statement
for the year ended 31 December 2009
31 December 31 December
2009 2008
Audited Audited
Rm Rm
Cash inflows from operating activities 36 282 34 236
Cash outflows from investing activities (33 192) (27 177)
Cash (out)/inflows from financing (926) 292
activities
Net movement in cash and cash equivalents 2 164 7 351
Cash and cash equivalents at beginning of 25 596 15 546
period
Effect of exchange rate changes (5 114) 2 699
Cash and cash equivalents at end of period 22 646 25 596
Segmental analysis
for the year ended 31 December 2009
31 December 31 December
2009 2008
Audited Audited
Rm Rm
REVENUE
South and East Africa 39 669 37 483
West and Central Africa 50 543 47 682
Middle East and North Africa 21 525 17 215
Head office companies 210 146
111 947 102 526
EBITDA
South and East Africa 12 701 12 878
West and Central Africa 27 029 25 318
Middle East and North Africa 5 782 4 654
Head office companies 551 316
46 063 43 166
PAT
South and East Africa 6 875 7 322
West and Central Africa 12 026 9 943
Middle East and North Africa 2 099 1 549
Head office companies (3 839) (1 679)
17 161 17 135
Notes to the condensed consolidated financial statements
for the year ended 31 December 2009
1. Independent audit by the auditors
These condensed consolidated results have been audited by our
joint auditors PricewaterhouseCoopers Inc. and SizweNtsaluba
vsp, who have performed their audit in accordance with the
International Standards on Auditing. A copy of their
unqualified audit report is available for inspection at the
registered office of the Company.
2. General information
MTN Group Limited (the "Group") carries on the business of
investing in the telecommunications industry through its
subsidiary companies, joint ventures and associate companies.
3. Basis of preparation
The condensed consolidated financial year end information is
based on the audited financial statements of the Group for the
year ended 31 December 2009 which have been prepared in
accordance with International Financial Reporting Standards
("IFRS`s") and in compliance with the Listings Requirements of
the JSE Limited and the South African Companies Act (1973), on
a consistent basis with that of the prior period.
4. Accounting policies
The accounting policies adopted are consistent with those of
the annual financial statements for the year ended 31 December
2008, as described in the annual financial statements for the
year ended 31 December 2008.
During the year under review, the Group adopted all the IFRS
and interpretations being effective and deemed applicable to
the Group. None of these had a material impact apart from IAS 1
(Revised) which resulted in a seperate condensed consolidated
statement of comprehensive income being included as part of the
primary financial statements of the Group.
The necessary changes were also made to the condensed
consolidated statement of changes in equity as a result.
5. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per
ordinary share are based on basic headline earnings of
R14 869 million (2008: R15 603 million) and adjusted headline
earnings of R13 963 million (2008: R16 870 million)
respectively, and a weighted average number of ordinary shares
in issue of 1 851 260 (2008: 1 865 299).
31 December 31 December
2009 2008
Audited Audited
Rm Rm
Net ** Net**
Net profit attributable to company`s 14 650 15 315
equity holders
Adjusted for:
Loss on disposal of non current asset 71 111
Impairment of PPE and NCA 148 177
Basic headline earnings 14 869 15 603
Adjustment:
Reversal of the subsequent utilisation - 441
of deferred tax asset
Reversal of put option in respect of
subsidiary:
- Fair value adjustment (537) 74
- Finance costs 537 344
- Forex (701) 569
- Minority share of profits (205) (162)
Adjusted headline earnings 13 963 16 870
Reconciliation of headline earnings per
ordinary share (cents)
Attributable earnings per share (cents) 791,4 821,0
Adjusted for:
Loss on disposal of non current asset 3,8 6,0
Impairment of PPE and NCA 8,0 9,5
Basic headline earnings per share 803,2 836,5
(cents)
Reversal of the subsequent utilisation - 23,6
of deferred tax asset
Reversal of put option in respect of (48,9) 44,3
subsidiary
Adjusted headline earnings per share 754,3 904,4
(cents)
Number of ordinary shares in issue:
- Weighted average (`000) 1 851 260 1 865 299
- At period end (`000) 1 840 536 1 868 010
**Amounts are stated after taking into account minority
interests.
Adjusted headline earnings adjustments
Deferred tax asset
The Group`s subsidiary in Nigeria had been granted a five-year
tax holiday under "pioneer status" legislation. On 31 March
2007 MTN Nigeria exited "pioneer status", and from 1 April 2007
became subject to income tax in Nigeria. A deferred tax asset
of R2,5 billion was created during "pioneer status" in respect
of capital allowances on capital assets that are only claimable
after the company comes out of "pioneer status". The above
resulted in the commencement of the reversal of the deferred
tax asset shown as an adjustment of Rnil (2008: R542 million)
(Rnil excluding minorities (2008: R441 million)) to the
adjusted headline earnings figure. The remaining pioneer
deferred tax asset was fully utilised during 2008.
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. The Board therefore
resolved to report adjusted headline earnings (negating the
effect of the deferred tax asset) in addition to basic headline
earnings, to more fully reflect the Group`s results for the
period.
Put option in respect of subsidiary
IFRS requires the Group to account for a written put option
held by a minority shareholder of one of the Group
subsidiaries, which provides them with the right to require the
subsidiary to acquire their shareholdings 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 shareholders.
IAS 32 requires that in the circumstances described in the
previous paragraph:
(a) the present value of the future redemption amount be
reclassified from equity to financial liabilities and that
financial liability so reclassified subsequently be measured in
accordance with IAS 39;
(b) in accordance with IAS 39, all subsequent changes in the
fair value of the liability together with the related interest
charges arising from present valuing the future liability be
recognised in the income statement;
(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."
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 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 option meets the definition of a derivative
and should therefore be accounted for as a derivative in which
case the liability and the related fair value adjustments
recorded through the income statement would not be required.
31 December 31 December
2009 2008
Audited Audited
Rm Rm
6. Capital expenditure incurred 31 248 28 263
7. Contingent liabilities and commitments
Contingent liabilities - upgrade 1 209 504
incentives
Operating leases - non cancellable 832 801
Finance leases 348 554
Other 749 541
8. Commitments for property, plant and
equipment and intangible assets
- Contracted for 6 780 11 410
- Authorised but not contracted for 16 819 26 257
9. Cash and cash equivalents
Bank balances, deposits and cash 23 999 26 961
Call borrowings (1 353) (1 365)
22 646 25 596
10. Interest-bearing liabilities
Call borrowings 1 353 1 365
Short-term borrowings 14 498 11 125
Current liabilities 15 851 12 490
Long-term liabilities 21 066 29 100
36 917 41 590
11. Other non-current liability
The put option in respect of the subsidiary arises from an
arrangement whereby the minority shareholders of the Group`s
subsidiary have the right to put their remaining shareholding
in the subsidiary to Group companies.
On initial recognition, the put option was fair valued using
effective interest rates as deemed appropriate by management.
To the extent that the put option is not exercisable at a fixed
strike price the fair value will be determined on an annual
basis with movements in fair value being recorded in profit or
loss.
12. Business combinations
Acquisitions
During the year under review, certain subsidiaries of the Group
acquired the following entities:
(a) An additional 59% in iTalk Cellular (Proprietary) Limited,
a cellular service provider, was acquired in January 2009
(b) 100% of Verizon South Arica (Proprietary) Limited, an
internet service provider, was acquired in February 2009
These amounts have been calculated using the Group`s accounting
policies and by adjusting the results of the acquiree to
reflect the additional depreciation and amortisation that would
have been charged assuming that the fair value adjustments to
property, plant and equipment and intangible assets had been
applied from acquisition date, together with the consequential
tax effects.
Carrying Total
amount on
acquisition fair
date value
Rm Rm
The assets and liabilities arising from the
acquisitions are as follows:
Property, plant and equipment 106 106
Other non-current assets 95 95
Investments 1 1
Cash and cash equivalents 95 95
Net working capital 42 42
Long term borrowings (118) (118)
Taxation 7 7
Deferred Taxation (80) (80)
Customer relationships 284 284
Other liabilities (56) (56)
Net asset value 376 376
Purchase consideration 2 126
Fair value of net assets acquired 376
Goodwill 1 750
13. The acquisition of 100% of Newshelf 664 (Proprietary) Limited
MTN acquired the entire issued ordinary share capital of
Newshelf 664 (Proprietary) Limited ("Newshelf") from the PIC.
The Newshelf acquisition was affected by way of a specific
issue of shares to the PIC and the specific repurchase by MTN
of 243.5 million MTN shares held by Newshelf. The transaction
was concluded in April 2009. MTN acquired the Newshelf shares
at an effective discount to market value and intends to apply a
significant portion of this effective discount to future
participants in a BEE transaction as an incentive to invest in
that transaction. The board remains fully committed to
implement a BEE transaction as soon as conditions become
conducive.
14. Post balance sheet events
The directors are not aware of any matter or circumstance
arising since the end of the reporting period, not otherwise
dealt with herein, which significantly affects the financial
position of the Group or the results of its operations or cash
flows for the year ended.
Directorate
MC Ramaphosa (Chairman), PF Nhleko* (Group President and CEO), RS Dabengwa*, N
Patel*, KP Kalyan, AT Mikati, MJN Njeke, JHN Strydom, AF van Biljon, J van
Rooyen, DDB Band, D Marole, P Mageza, A Harper *Executive
Group secretary
SB Mtshali, 216 - 14th Avenue, Fairland, 2195
Private Bag 9955, Cresta, 2118
Registered office
216 - 14th Avenue, Fairland, 2195
American Depository Receipt (ADR) programme
Cusip No. 62474M108 ADR to ordinary share 1:1
Depository
The Bank of New York, 101 Barclay Street, New York NY 10286, USA
Office of the South African registrars
Computershare Investor Services (Proprietary) Limited
Registration number: 2004/003647/07)
70 Marshall Street, Marshalltown, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Joint auditors
PricewaterhouseCoopers Inc.
2 Eglin Road, Sunninghill, 2157
Private Bag X36, Sunninghill, 2157
and
SizweNtsaluba VSP
20 Morris Street East, Woodmead, 2146
PO Box 2939, Saxonwold, 2132
E-mail: investor_relations@mtn.com
Fairland
11 March 2010
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 11/03/2010 08:16:52 Supplied by www.sharenet.co.za
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