Wrap Text
MTN - MTN Group - Reviewed interim results for the six months ended 30 June 2010
MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
Share code: MTN
ISIN ZAE000042164
("MTN")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010
Highlights
Group subscribers up 11,4% since 31 December 2009 to 129,2 million
EBITDA margin up 0,5 percentage points to 43,3%
Free cash flow up 164% to R6,8 billion
Adjusted HEPS up 20,6% to 438.6 cents
Maiden interim dividend of 151 cents per share
Overview
The MTN Group Limited delivered a sound operational performance for the six
months ended 30 June 2010, increasing subscribers by 11,4% to 129, 2 million.
This was the result of a solid performance in all aspects of the business, aided
by high quality networks, robust and competitive distribution channels,
attractive segmented product offerings and an increased focus on value added
services.
Group revenue decreased by 2,2% to R56,0 billion while earnings before interest,
tax, depreciation and amortization ("EBITDA") decreased by 1,1% to R24,2 billion
for the current period compared to the prior comparative period.
The average exchange rate of the rand to the USD strengthened from R9.06 in the
first half of 2009 to R7.52 in the period under review. This together with the
rand`s strength against the basket of currencies in which the group operates has
had a dampening effect on the rand reported results.
On a constant currency basis (which restates the current period income statement
at the same average exchange rates as were applicable for the first half of
2009) total revenue would have been R8,7 billion higher than reported, a 12,9%
increase on the prior reported period. Similarly, EBITDA would have shown growth
of 16,3% from the prior comparative period based on a R4,3 billion increase on
the reported number. These positive growth rates are more reflective of the
underlying organic performance of the company for the period.
MTN`s EBITDA margin increased 0, 5 percentage points to 43,3% compared to the
prior comparative period and by 3,9 percentage points compared to the six months
to 31 December 2009. This was mainly attributable to improved margins in MTN
South Africa, MTN Irancell and sustained margins in MTN Nigeria.
Adjusted headline earnings per share ("HEPS") increased by 20,6% to 438,6 cents
for the period.
Various Group initiatives gained momentum and assisted the various operations in
maintaining or improving market share, increasing brand awareness and leveraging
product offerings in competitive environments. These key projects included:
Continued investment in mobile data solutions, accessibility of 3G handsets and
aggressive 3G rollout have enabled the Group to increase data revenues by 46% to
R2, 9 billion compared with the same period last year;
The formal launch of Mobile Money in Uganda, Ghana, Cote d`Ivoire, Rwanda, Benin
and Guinea Bissau. Other countries are in the process of obtaining regulatory
approval. At 30 June 2010 there were 2,2 million mobile money subscribers,
Uganda accounting for more than 43% of the total;
The 2010 FIFA World Cup provided significant opportunity for Africa to showcase
its ability to host an event of this scale. The positive communications
campaign, leading up to and during the 2010 FIFA World Cup, created a meaningful
increase in brand awareness for the company;
Segmentation analysis across MTN`s markets has been undertaken. This has
facilitated improved product offerings.
Group financial review
Income statement
Revenue growth in local currency remained relatively robust in key markets
driven largely by subscriber growth. However, with the strengthening rand, this
translated into a decrease in rand reported revenue of 2,2% to R56,0 billion
compared to the prior comparable period.
Rand strength also negatively impacted reported EBITDA which decreased by 1,1%
to R24,2 billion despite strong EBITDA growth in local currency in key markets
including South Africa (15,9%), Nigeria (15,1%) and Iran (67,3%). The Group
EBITDA margin increased by 0, 5 percentage points to 43,3% primarily due to the
improved margin in the South African and Iranian operations.
Net finance costs decreased by 39.4% to R2,2 billion, mainly due to a functional
currency gain of R70 million (June 2009: R2,8 billion loss). The movement in the
current period was mainly due to the significant reduction in functional
currency exposure through capital restructuring. However, foreign currency
losses of R957 million were incurred partly as a result of the translation of
various Euro-denominated inter-company loans and bank account balances.
MTN Group`s depreciation charge increased by 5,5% or R0,3 billion to R6,3
billion compared with June 2009 as a result of higher levels of investment in
network infrastructure in prior years.
The Group reported an effective tax rate of 36,8% for the period compared to
33,0% in June 2009. The higher effective tax rate was mainly due to Secondary
Tax on Companies ("STC") on the dividend paid in April 2010, foreign withholding
taxes and the impact of the increase in the value of the put option in Nigeria.
Nigeria and South Africa reported a higher deferred tax charge as a result of
the significant capital expenditure in prior reporting periods.
The Group`s basic HEPS increased by 4% to 432,1 cents compared to 30 June 2009.
Adjusted HEPS (which eliminates the impact of the put option) increased by 20,6%
to 438,6 cents primarily due to the functional currency gain compared to the
functional currency loss in the prior period.
The Group continues to report adjusted HEPS in addition to the attributable
HEPS. The adjustment is in respect of the International Financial Reporting
Standards ("IFRS") requirement that the Group accounts for a written put option
held by a minority shareholder of one of the Group`s subsidiaries, which
provides the minority shareholder with the right to require the subsidiary or
its holding company to acquire this shareholding at fair value.
Minority or non-controlling interests were 15% down on the previous period
mainly due to decreased rand earnings in the Group`s non South African
operations.
Balance sheet and cash flow analysis
Capital expenditure for the period of R8,5 billion was R7,0 billion lower than
the comparative period. The Group`s capital expenditure peaked in 2009 due to an
extensive network expansion and investment strategy undertaken in the previous
years. The reduced spend in the current period reflects a trend as markets
mature and growth rates are at a lower level, although a pick up is anticipated
in the second half of the year. The strength of the rand also had a marginally
positive impact on capital spending of R0,2 billion.
Net debt levels continued to reduce, ending at R5,2 billion for the period and
lowering the Group`s net debt/EBITDA ratio to 0,11 times. The reduction in net
debt was mainly due to higher cash balances across the Group, particularly in
Nigeria and Iran, and to a lesser extent in MTN`s holding companies. Gross debt
remained fairly stable during the period. A focus during the first six months of
the year was the refinancing of maturing debt at the holding company and
Nigerian levels. This was successfully concluded.
Strong operating cash flows at local operations were sustained for the period
and cash available after investing activities improved as expenditure on
property plant and equipment (excluding software) decreased by more than R5,4
billion compared to the prior period. This resulted in R6,8 billion of free cash
flow and a R10,2 billion positive movement in cash and cash equivalents for the
period. Free cash flow is calculated using cash flow from operating activities
less capital expenditure and intangibles.
Nigeria
The sustained quality and capacity of the network together with improved
segmented product offerings enabled MTN Nigeria to increase its subscriber base
by 14% to 35, 1 million subscribers. Although MTN continued to increase its
market share, the overall market has slowed as penetration increased to beyond
45%. MTN ended the period with a market share of over 51%.
Local currency revenue increased by 14, 7% for the period, although this
translated into a disappointing 7,7% decline in rand terms to R16,5 billion, due
to the continued strengthening of the rand and compounded by the relative
weakness of the naira when compared to the prior period. Local currency revenue
growth was mainly attributable to an increase in airtime and subscription
revenue. These increases were partly offset by a reduction in interconnect
revenue following the decrease in interconnect tariffs effective 31 December
2009. Local currency average revenue per user ("ARPU") declined by 10% compared
to December 2009, in line with penetration into lower usage segments, with
reported ARPU for the period of USD11.
The EBITDA margin was maintained mainly due to the benefit of economies of
scale.
Network investments for the first half of the year were significantly lower than
the prior period and slightly behind the rollout target. MTN Nigeria completed
the rollout of 373 2G and 279 3G Base Transceiver Stations ("BTS`s").
Maintenance of network quality remains a priority to ensure appropriate levels
of quality to the customer. In addition, approximately 694km of backbone and
45km of metro fibre were deployed. The backbone project is 81% completed to
date.
South Africa
MTN South Africa performed well for the period under review, increasing its
subscribers by 6,4% to 17,1 million. Market share improved to 36% mainly due to
growth in the prepaid segment and a market clean up post Regulation of
Interception of Communications and Provision of Communication-Related
Information Act ("RICA"). The introduction and refinement of various value
propositions, including MTN Zone 100% Mahala and One rate calls, resulted in a
6,5% increase in prepaid subscribers to 13,9 million. The network and billing
systems were stable during the period and distribution capacity and efficiency
improved, decreasing churn rates and contributing to the success of the six
month period.
The postpaid subscriber base increased by 6,1%, mainly due to an increase in
hybrid packages.
During the 2010 FIFA World Cup, MTN displayed its ability to meet the high
demands, carrying one terabyte of traffic in locations such as stadia, airports
and fan parks. In addition, MTN customers accounted for approximately 590
million SMS`s and 10 million MMS`s in South Africa during the tournament.
The negative impact of RICA on the prepaid subscriber base has now stabilised,
with gross additions increasing by 19,7% compared to the second six month period
of 2009.
MTN South Africa`s revenue increased by 7,1% to R17, 1 billion compared to the
previous period. This was mainly a result of an increase in data revenue.
Segmented data offerings for the prepaid consumer boosted data revenues by 42%.
Prepaid ARPU increased by R9 to R109. Postpaid ARPU decreased by R29, mainly due
to the continued lower out-of-bundle usage and migrations to lower-value
packages which are both indicative of the slow pace of the recovery of the local
economy and a stricter credit policy.
EBITDA growth was much stronger at 15,9% as the EBITDA margin increased by a
healthy 2,6 percentage points to 33,9% at 30 June 2010. This was mainly due to
lower handset costs, partly as a result of foreign exchange gains on handsets.
MTN South Africa`s spend on infrastructure over the six months was mainly on
increased 2G rural coverage, improved coverage and capacity of 3G networks and
the continued rollout of fibre. During the period 140 2G and 108 3G BTS`s were
integrated into the network. The deployment of 220km of fibre on the Southern
and Northern rings in the Gauteng area have been completed and this is now
carrying all traffic between the core nodes in the Gauteng region. The National
Long Distance Fibre deployment has experienced some difficulties that resulted
in an extension of the completion date for the project and continued
transmission spending. To date, 440km on the Gauteng- Durban route has been
trenched. As part of the 2010 FIFA World Cup preparations, MTN activated high
capacity solutions within the 10 stadia and fan parks.
Ghana
MTN Ghana delivered a solid operational performance for the period under review,
despite the number of competitors in the market. The large capital investment
in infrastructure, initiated in 2008, to improve quality and capacity, together
with innovative product offerings, enabled MTN Ghana to increase its subscriber
base by 9% to 8, 7 million for the period and so increased its market share to
56%. Other contributory factors included the improved distribution footprint and
2010 FIFA World Cup promotions.
Revenue in local currency increased by 19,2% for the period. This translated
into a 4,8% decrease in rand terms due to the stronger rand. Revenue growth in
local currency was mainly due to an increase in airtime and subscription
revenue. SMS revenue, following the 2010 FIFA World Cup based SMS promotions,
also contributed to revenue growth. Local currency ARPU decreased by 8%, in line
with deeper penetration into lower usage segments, while reported ARPU declined
by USD1 to USD7.
The EBITDA margin decrease of 2,9 percentage points to 42% was mainly due to an
increase in network operating costs, an increase in interconnect and roaming
costs due to an increase in off-net calls and investment in value added
products.
MTN Ghana added 104 2G and 133 3G BTS`s for the period, improving network
quality and capacity. Rollout was slower than expected following a ban on new
sites by the regulator. The ban has since been lifted and site rollout is
expected to continue on track for the year. Data usage continues to gain
momentum with data traffic increasing by 45% for the period.
Iran
MTN Irancell recorded strong subscriber growth of 16% to 27,0 million for the
period under review. This was due to appealing seasonal and segmented
acquisition and usage promotions including WOW and GPRS bolt-on`s. A wider
electronic distribution channel also contributed to subscriber growth.
Revenue in local currency increased by 42%, although this translated into a
14,7% increase to R9,1 billion in rand terms. MTN`s 49% share of MTN Irancell`s
revenue was R4,5 billion for the six month period, with revenue growth mainly
due to higher airtime and subscription revenue. Local currency ARPU increased
marginally as a result of increased usage while reported ARPU remained stable at
USD8.
The EBITDA margin increased by 6,5 percentage points to 41% as a result of
savings on general operational expenditure, local production of SIM`s and the
launch of multi-pin vouchers. Economies of scale benefits and single vendor
maintenance also contributed to the margin improvement.
During the six months under review, MTN Irancell added 728 2G BTS`s improving
network quality and capacity, especially in key cities such as Tehran.
Population coverage also increased to 75%. WIMAX rollout in Tehran and Esfahan
remains a priority following its launch last year.
Syria
MTN Syria increased its subscriber base by 4% to 4,4 million. The increase was
due to the launch of numerous segmented value propositions and loyalty
programmes aimed at the youth and strong a focus on churn management.
Revenue in local currency increased by 12%, although this performance was lower
in rand terms, and translated into a 5,0% decrease in rand terms. Revenue growth
was partly due to the increase in data uptake. Local currency ARPU decreased by
9% while reported ARPU decreased by USD2 to USD16.
The EBITDA margin declined marginally to 21,6%.
MTN Syria enhanced quality and capacity on its network adding 215 2G BTS`s for
the six months. In addition, a complete frequency plan was implemented in all
main cities allowing for an increase in capacity without adding new sites. Re-
engineering of the radio transmission network was completed to ensure additional
capacity and availability.
Negotiations are in progress to convert the current build-operate-transfer
licence to a normalized licence.
Prospects
As set out in the announcement of 15 July 2010, the board will continue to
evaluate and consider value accretive opportunities going forward. However, due
to the limited number of such opportunities, the board is confident that growth
aspirations can be accommodated within the imperative of improved short term
returns to shareholders and by increasing its focus on the following:
Optimising efficiencies including infrastructure sharing, standardisation of
systems and processes, rationalisation of suppliers, cost management and cash
optimisation;
Monitoring infrastructure investments to ensure appropriate levels of capacity
and quality of service, incorporating continued investment in fibre and cable
requirements to service evolving voice and data requirements;
Continued engagement with regulatory authorities in the development and
refinement of the telecommunications sector in its markets;
Evaluating options to further improve cash returns to shareholders in addition
to an increased payout ratio; and
Conclusion of our BEE transaction announced on the 15 July 2010.
MTN is well positioned in its markets to compete within a changing competitive
and regulatory landscape with a focus on cost management as pressure on the
revenue line increases. MTN continues to monitor the economic development of its
markets with cautious optimism.
Updated net additions guidance to December 2010 is as follows:
New (`000) Old(`000)
South Africa 1 800 800
Nigeria 6 350 6 000
Ghana 600 800
Iran 5 000 5 000
Syria 400 400
Rest 7 000 7 000
Total 21 150 20 000
Interim dividend
Shareholders are advised that the MTN board has approved a policy of interim
dividend payments. Accordingly, an interim dividend of 151 cents per ordinary
share in respect of the period to 30 June 2010, has been declared and is payable
to shareholders recorded in the register of MTN at the close of business on
Friday, 17 September 2010.
It is MTN`s intention to increase its total annual dividend payout ratio to 40%
of the full year`s adjusted HEPS (after accounting for STC). The maiden interim
dividend has been calculated using a 40% payout ratio on 50% of the adjusted
HEPS (after accounting for STC) reported for the 2009 financial year.
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 Friday, 10 September 2010
Shares commence trading ex Monday, 13 September 2010
dividend
Record date Friday, 17 September 2010
Payment of dividend Monday, 20 September 2010
Share certificates may not be dematerialised or rematerialised between Monday,
13 September 2010 and Friday, 17 September 2010.
On Monday, 20 September 2010, 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, 20
September 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, 20 September 2010.
Condensed consolidated income statements
Six Six Financial
months months
ended ended year ended
30 June 30 June 31
December
2010 2009 2009
Reviewed Reviewed Variance Audited
Rm Rm % Rm
Revenue 55 989 57 269 (2,2) 111 947
Direct network (8 320) (8 059) (3,2) (15 925)
operating costs
Cost of handsets and (2 992) (3 292) 9,1 (6 297)
other accessories
Interconnect and (6 191) (7 602) 18,6 (15 166)
roaming costs
Employee benefits (2 793) (2 839) 1,6 (5 843)
Selling, distribution (7 748) (7 261) (6,7) (14 649)
and marketing expenses
Other operating (3 696) (3 704) 0,2 (8 004)
expenses
Depreciation of (6 273) (5 948) (5,5) (11 807)
property, plant and
equipment
Amortisation of (1 070) (1 353) 20,9 (2 668)
intangible assets
Net finance costs (2 198) (3 630) 39,4 (5 810)
Share of results of 59 - - (5)
associates
Profit before income 14 767 13 581 8,7 25 773
tax
Income tax expense (5 430) (4 488) (21,0) (8 612)
Profit after tax 9 337 9 093 2,7 17 161
Attributable to: 9 337 9 093 2,7 17 161
Equity holders of the 8 094 7 630 6,1 14 650
company
Non-controlling 1 243 1 463 15,0 2 511
interest
Earnings per ordinary
share (cents)
attributable to equity
holders of the company
- basic 439,7 409,7 7,3 791,4
- diluted 433,5 399,4 8,5 781,5
Dividends per share 192,0 181,0 6,1 181,0
(cents)
Condensed consolidated statements of comprehensive income
Six Six Financial
months months year
ended ended ended
30 June 30 June 31
December
2010 2009 2009
Reviewed Reviewed Variance Audited
Rm Rm % Rm
Profit for the year 9 337 9 093 0,0 17 161
Other comprehensive
income:
Exchange differences (468) (16 032) (1,0) (17 700)
on translating foreign
operations
Cash flow hedges 77 (191) - (191)
Total comprehensive 8 946 (7 130) (2,3) (730)
income/(loss) for the
period
Attributable to:
Equity holders of the 7 791 (7 894) (2,0) (2 509)
company
Non-controlling 1 155 764 0,5 1 779
interest
8 946 (7 130) (2,3) (730)
Condensed consolidated balance sheets
30 June 30 June 31
December
2010 2009 2009
Reviewed Reviewed Variance Audited
Rm Rm % Rm
Non-current assets 112 356 104 579 7,4 110 213
Property, plant and 68 711 61 007 12,6 67 541
equipment
Goodwill, intangible 36 415 37 637 (3,2) 37 526
assets and investment
in associates
Other non-current 7 230 5 935 21,8 5 146
assets
Current assets 47 204 41 439 13,9 46 024
Bank and cash 30 149 19 503 54,6 23 999
Restricted cash 585 994 (41,2) 742
Other current assets 16 470 20 942 21,4 21 283
Assets 159 560 146 018 9,3 156 237
Total equity 76 975 67 450 14,1 72 866
Non-current 32 590 31 236 4,3 28 426
liabilities
Non-current borrowings 23 536 25 537 (7,8) 21 066
Deferred tax and other 9 054 5 699 58,9 7 360
non-current
liabilities
Current liabilities 49 995 47 332 5,6 54 945
Non-interest bearing 37 561 37 194 1,0 39 094
liabilities
Interest bearing 12 434 10 138 22,6 15 851
liabilities
Total equity and 159 560 146 018 9,3 156 237
liabilities
Condensed consolidated statements of changes in equity
Six Six months Financial
months year
ended ended ended
30 June 30 June 31
December
2010 2009 2009
Reviewed Reviewed Audited
Rm Rm Rm
Opening balance 72 866 80 542 80 542
Total comprehensive 8 946 (7 130) (730)
income/(loss) for the period
Dividends paid (4 689) (4 818) (6 122)
Shares issued during the year 2 20 380 20 392
Transactions with non- - (600) (43)
controlling interest
Newshelf share buy-back - (21 226) (21 226)
Other reserves (150) 302 53
Closing balance 76 975 67 450 72 866
Condensed consolidated cash
flow statements
Six Six months Financial
months year
ended ended ended
30 June 30 June 31
December
2010 2009 2009
Reviewed Reviewed Audited
Rm Rm Rm
Cash inflows from operating 15 269 16 899 36 282
activities
Cash outflows from investing (7 206) (16 942) (33 192)
activities
Cash outflows from financing (1 801) (2 771) (926)
activities
Net movement in cash and cash 6 262 (2 814) 2 164
equivalents
Cash and cash equivalents at 22 646 25 596 25 596
beginning of period
Effect of exchange rate changes 174 (3 866) (5 114)
Cash and cash equivalents at 29 082 18 916 22 646
end of period
Segmental analysis
Six Six months Financial
months year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
South and East Africa 20 563 19 399 39 669
West and Central Africa 24 721 26 757 50 543
Middle East and North Africa 10 660 11 062 21 525
Head office companies 45 51 210
55 989 57 269 111 947
EBITDA
South and East Africa 7 070 6 233 12 701
West and Central Africa 13 375 14 849 27 029
Middle East and North Africa 3 323 2 886 5 782
Head office companies 481 544 551
24 249 24 512 46 063
Profit after tax
South and East Africa 3 773 3 339 6 875
West and Central Africa 5 773 6 706 12 026
Middle East and North Africa 1 605 1 091 2 099
Head office companies (1 814) (2 043) (3 839)
9 337 9 093 17 161
Notes to the condensed consolidated financial statements
1. Independent review by the auditors
These condensed consolidated results have been reviewed by our
joint auditors PricewaterhouseCoopers Inc. and SizweNtsaluba
VSP, who have performed their review in accordance with the
International Standard on Review Engagements 2410. A copy of
their unqualified review report is available for inspection at
the registered office of the company.
2. General information
MTN Group Limited (the "Group") carries on the business of
investing in the telecommunications industry through its
subsidiary companies, joint ventures and associate companies.
3. Basis of preparation
The condensed consolidated interim financial information
("interim financial information") was prepared in accordance
with International Financial Reporting Standards ("IFRS") IAS
34 - Interim Financial Reporting 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
2009, as described in the annual financial statements.
During the period under review, the Group adopted all the IFRS
and interpretations being effective and deemed applicable to
the Group. None of these standards and interpretations had a
material impact on the results.
5. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per
ordinary share are based on basic headline earnings of R7 953
million (2009: R7 739 million) and adjusted headline earnings
of R8 072 million (2009: R6 776 million) respectively, and a
weighted average number of ordinary shares in issue of 1 840
551 (2009: 1 862 519).
Reconciliation between net profit attributable to the equity
holders of the company and headline earnings.
Six months Six months Financial
year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Reviewed Reviewed Audited
Rm Rm Rm
Net profit attributable to 8 094 7 630 14 650
company`s equity holders
Adjusted for:
(Profit)/loss on disposal (48) 109 71
of non-current assets
Reversal of impairment of (92) - 148
property, plant and
equipment and non-current
assets
Basic headline earnings 7 954 7 739 14 869
Adjustment:
Reversal of put option in
respect of subsidiary:
- Fair value adjustment (114) (553) (537)
- Finance costs 242 (585) 537
- Foreign exchange 98 293 (701)
loss/(gain)
- Non-controlling (108) (118) (205)
shareholders share of
profit
Adjusted headline earnings 8 072 6 776 13 963
Reconciliation of headline
earnings per ordinary share
(cents)
Attributable earnings per 439,7 409,7 791,4
share (cents)
Adjusted for:
(Profit)/loss on disposal (2,6) 0,3 3,8
of non-current assets
(Reversal of (5,0) 5,5 8,0
impairment)/impairment of
property, plant and
equipment and non-current
assets
Basic headline earnings per 432,1 415,5 803,2
share (cents)
Reversal of put option in 6,5 (51,7) (48,9)
respect of subsidiary
Adjusted headline earnings 438,6 363,8 754,3
per share (cents)
Number of ordinary shares
in issue:
- Weighted average (`000) 1 840 551 1 862 519 1 851 260
- At period end (`000) 1 840 616 1 839 868 1 840 536
Adjusted headline earnings adjustments
Put option in respect of subsidiary
IFRS requires the Group to account for a written put option
held by a non-controlling shareholder of one of the Group
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,
currently accrue to the non-controlling shareholders.
IAS 32 requires that in the circumstances described in the
previous paragraph:
(a) the present value of the future redemption amount be
reclassified from equity to financial liabilities and that
financial liability so reclassified subsequently be measured in
accordance with IAS 39;
(b) in accordance with IAS 39, all subsequent changes in the
fair value of the liability together with the related interest
charges arising from present valuing the future liability be
recognised in profit or loss;
(c) the non-controlling shareholder holding the put option no
longer be regarded as a non-controlling shareholder but rather
as a creditor from the date of receiving the put option.
Although the Group has complied with the requirements of IAS 32
and IAS 39 as outlined above, the board of directors has
reservations about the appropriateness of this treatment in
view of the fact that:
(a) the recording of 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 that
are 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.
Six months Six months Financial
year
ended ended ended
30 June 30 June 31
December
2010 2009 2009
Reviewed Reviewed Audited
Rm Rm Rm
6. Capital expenditure incurred 8 496 15 504 31 248
7. Contingent liabilities and
commitments
Contingent liabilities - 930 250 1 209
upgrade incentives
Operating leases - non- 579 756 832
cancellable
Finance leases 328 520 348
Other 664 633 749
8. Commitments for property,
plant and equipment and
intangible assets
- Contracted for 6 124 23 260 6 780
- Authorised but not 8 979 3 625 16 819
contracted for
9. Cash and cash equivalents
Bank balances deposits and 30 149 19 503 23 999
cash
Call borrowings (1 067) (587) (1 353)
29 082 18 916 22 646
10 Interest-bearing liabilities
.
Call borrowings 1 067 587 1 353
Short-term borrowings 11 367 9 551 14 498
Current liabilities 12 434 10 138 15 851
Long-term liabilities 23 536 25 537 21 066
35 970 35 675 36 917
11 Other non-current liability
.
The put option in respect of the subsidiary arises from an
arrangement whereby the non-controlling 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 and
loss.
12 Post balance sheet events
.
The directors are not aware of any matter or circumstance
arising since the end of the reporting period, not otherwise
dealt with herein, which significantly affects the financial
position of the Group or the results of its operations or cash
flows for the period ended.
Administration
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 andSizweNtsaluba VSP , 20 Morris Street East,
Woodmead, 2191
PO Box 2939, Saxonwold, 2132
E-mail: investor_relations@mtn.com
Fairland
19 August 2010
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 19/08/2010 08:30:01 Supplied by www.sharenet.co.za
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