Wrap Text
Reviewed condensed interim financial results for the six months ended 30 June 2014
MTN Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1994/009584/06
Share code: MTN
ISIN code: ZAE000042164
("MTN Group", "MTN" or "the Group")
Reviewed condensed interim financial results
for the six months ended 30 June 2014
MTN is a leading emerging markets mobile operator, connecting over 215 million people in
22 countries across Africa and the Middle East. We are committed to continuously improving our
customers' experience and delivering a bold, new Digital World to them.
Highlights
- Group subscribers up 3,5% to 215,0 million
- Revenue increased by 10,7% (4,1%*) to R72 759 million
- MTN Nigeria revenue 21,5% (8,0%*) higher at R27 099 million
- MTN South Africa revenue 7,0% (3,4%**) lower at R19 157 million
- Data revenue increased by 38,9% (33,1%*) to R12 708 million
- Data users 7,3% higher at 88,5 million
- MTN Mobile Money subscribers up 24,3% to 18,4 million
- EBITDA increased by 19,6%***(10,6%*) to R33 663 million
- EBITDA margin widened 3,5 percentage points to 46,3%***
- MTN Nigeria EBITDA increased by 11,3%**** to R16 280 million
- HEPS 9,0% up at 729 cents
- Interim dividend up 20,3% to 445 cents per share
Explanatory notes:
* Constant currency ("organic") information disclosed in these results is the responsibility of the Group's board of directors. The constant
currency information has been presented to illustrate the impact of changes in currency rates on the Group's results and hence may not
fairly present the Group's results of operations. In determining the change in constant currency terms, the current financial reporting
period's results have been adjusted to the prior comparable period's average exchange rates determined as the average of the monthly
exchange rates which can be found on www.mtn.com/investors. The measurement has been performed for each of the Group's currencies,
materially being that of the US dollar and Nigerian naira. The organic growth percentage has been calculated by utilising the constant
currency results compared to the prior year's results. The constant currency information presented here has not been reviewed or reported
on by the Group's external auditors.
** Includes 2013 revenue adjustments for comparative purposes
*** Excluding profit from the sale of towers of R99 million (June 2013: R856 million)
**** Organic EBITDA growth excluding 2013 management fee adjustment
OVERVIEW
The MTN Group delivered a solid operational performance for the six-month period to 30 June 2014.
Good growth was experienced in data and MTN Mobile Money usage but voice revenue continued to
be impacted by aggressive competition, regulatory pressures and a weakening economic environment
in key markets. MTN Nigeria delivered a robust performance in line with market expectations,
however the South African operation remained under pressure and steps were taken to improve its
performance. The Group continued to benefit from the ongoing investment in its network, which
enhances MTN's offering and positions us well for sustained growth.
Group subscribers increased by 3,5% to 215,0 million. During the period we focused on reducing
churn, offering competitive segmented offerings as well as improving network quality and capacity as
key differentiators in our value proposition. Continued macro-economic weakness in some of our key
markets, however, led to a decline in overall market net additions against the comparable prior
period.
Reported revenue for the six months increased by 10,7%, supported by the continued weakness of the
South African rand against our operating currencies, in particular the relatively stronger Nigerian naira,
Central African franc and Ugandan shilling. On a constant-currency basis, revenue increased by 4,1%*.
This was largely the result of 8,0%* revenue growth in MTN Nigeria, tempered by a 7,0% (3,4%**)
revenue decline in MTN South Africa. The Large opco cluster delivered pleasing results in line with
guidance, growing revenue by 13,4%*, with encouraging growth reported by operations in Ghana,
Cameroon and Sudan. The Small opco cluster delivered a modest 5,7%* increase in revenue as
conditions in Guinea Conakry, Liberia and Yemen remained challenging.
Although MTN Nigeria delivered a solid performance, the operation faced regulatory pressures and
localised network performance challenges. Notwithstanding this, the operation remains on track to
deliver solid results for the full year. MTN South Africa took aggressive steps to regain its competitive
market position. While financial performance will continue to be subdued in the short term, the South
African operation expects to resume positive subscriber and revenue growth over the next 6 months.
Group EBITDA increased by 19,6% (10,6%*) to R33 663 million excluding the profit from the sale of
towers. This reflects the success of the Group-wide cost-control initiatives, particularly in Nigeria
where EBITDA increased by 11,3%****.
Capital expenditure for the period of R9 199 million reflected a decrease of 28,1% (32,7%*) from the
same period in 2013. More than two thirds of the full year's capex budget has been committed. The
Group's operations rolled out 1 716 2G and 2 232 3G sites, providing greater capacity, quality and
faster data speeds on our 3G and LTE networks.
PROSPECTS
MTN has made substantial progress on many of its strategic themes over the period. The Group
continues to improve operational and cost effectiveness with initiatives including the monetisation of
passive infrastructure through tower deals across a number of key markets as well as Project Next!,
the back-office transformation programme, which commenced a pilot in Ghana during the period. The
shared services hub located in Johannesburg will be fully operational within 18 months and the
outsourcing of non-core network management services will be rolled out wherever clear and
demonstrable efficiencies exist.
We continue to explore opportunities to expand our product offering outside of traditional voice and
expect to increase our presence in the digital space by leveraging technology and maximising the
opportunity of low internet penetration in many of our markets. The successful completion of the
transactions with Africa Internet Holding (AIH) and Middle East Internet Holding (MEIH) positions the
Group well to broaden our e-commerce platform and lifestyle offerings. Furthermore, we are well
placed to continue the expansion of our MTN Mobile Money and broader financial services offerings
and grow our innovative ICT solutions to corporate and SME customers. We remain committed to
providing a distinct customer experience through value-driven and competitive initiatives and ongoing
investment to improve network quality and capacity. We will continue to explore value-accretive M&A
opportunities in line with our strategy.
In South Africa, we expect to build on the momentum gained in the second quarter to regain market
share by providing innovative and affordable products to both our post-paid and pre-paid subscribers.
The Nigerian operation will focus on meeting the significant market demand for financial services and
mobile content with an expected positive impact on data revenue. Infrastructure sharing will be a
priority for MTN South Africa and MTN Nigeria in increasing their operational effectiveness.
Any forward-looking information contained in this announcement has not been reviewed or reported
on by the Company's external auditors.
SANCTIONS
MTN continues to work closely with all relevant authorities in managing US and EU sanctions against
Iran, Syria and Sudan. International legal advisors have been appointed to assist the Group in
remaining compliant with all applicable sanctions.
CHANGES TO THE BOARD OF DIRECTORS (the Board)
Ms KC Ramon was appointed as an Independent Non-Executive Director of the Board, effective 1 June
2014.
ACQUISITION OF AFRICA INTERNET HOLDING
The Group has acquired 33,3% of Africa Internet Holding (AIH), a joint venture between Rocket
Internet and Millicom International Cellular, to develop internet businesses in Africa. The Group,
Millicom International Cellular and Rocket International have become 33,3% shareholders in AIH.
The Group expects to invest approximately EUR168 million over the next two to four years into AIH.
The transaction closed on 1 July 2014.
EXPANSION OF LICENCE AGREEMENT IN IRAN
On 4 August 2014 Irancell Telecommunications Services Company (PJSC), the Group’s joint venture in
the Islamic Republic of Iran, entered into an arrangement to upgrade its licence agreement with the
Communications Regulatory Authority in Iran to include 3G mobile broadband and higher standard
(such as 4G) as well as obtain access to additional spectrum frequency for an amount of IRR 3000 billion,
payable by March 2015 in four instalments which will be funded by the local operation.
SYRIA BUILD, OPERATE AND TRANSFER LICENCE
MTN Syria operates under a contractual service arrangement granted and controlled by the Syrian
Telecommunications Establishment (STE). The contract known as a Build, Operate and Transfer (BOT)
provides for revenue sharing between MTN Syria and the STE and requires the handing over of the
network to the STE at the end of the licence period. Subsequent to the reporting period, the Group
has made significant progress in converting the current BOT to a freehold licence. It is anticipated that
this process will ultimately culminate in the awarding of the licence and termination of the related
BOT contract. This process is expected to be concluded before the end of 2014 and it is estimated that
the initial licence fee will be between SYP18 billion and SYP25 billion (which approximates one year's
revenue share). This will be funded through cash balances maintained within the local operation.
DISPOSAL OF BASE STATION TRANSCEIVER STATIONS (BTS/TOWERS) IN NIGERIA
Subsequent to the period end the Group has advanced negotiations to sell its tower business in its
operation in Nigeria, that includes 8 640 existing and 543 towers under development, to an entity that
will be managed by a large mobile telecommunications infrastructure provider. The Group intends to
retain a non-controlling interest of 51% with protective rights in the new entity and will enter into a
lease agreement for the use of the tower infrastructure. The contractual agreements are expected to
be finalised in due course and the transaction is expected to close in various tranches under customary
closing conditions.
LEADING THE DELIVERY OF A "BOLD NEW DIGITAL WORLD"
We continue to make good progress in the execution of our strategy to lead the delivery of a "bold,
new Digital World" to our customers. Over the medium term, our focus is to drive growth beyond
voice, create a distinct customer experience and ensure that our scale provides a solid base from
which to optimise costs.
During the period, we delivered on a number of initiatives towards achieving this.
VOICE
Voice revenue continued to face pressure as a result of aggressive price competition, lower mobile
termination rates, particularly in South Africa and Nigeria, and lower traffic volumes in some markets.
The total minutes across the Group remained stable at approximately 100 billion. These factors,
together with the growing contribution of data to the revenue mix, resulted in a decline in voice's
contribution to total revenue from 74,1% in the first half of 2013 to 72,7% at end-June 2014. Despite
these challenges, MTN remained competitive and successfully defended its market-leading position in
15 out of 22 operations.
DATA
Data services delivered consistently strong results across all of our markets, contributing 17,5% to
total revenue, from 13,9% in the same period last year. Data traffic across the network grew by
84,8% to over 47 000 TB. The number of data users increased by 7,3% to 88,5 million as we
expanded our 3G networks, enhanced the data product offering and stimulated the adoption of data-
enabled devices and smartphones. At the end of June 2014, there were 38,5 million smartphones on
our network, an increase of 31,6% from the same period last year. The launch of our own Steppa
smartphone contributed to the availability of and access to affordable data-enabled devices.
FINANCIAL SERVICES
MTN Mobile Money and financial services are an increasingly important part of our service offering.
The number of registered MTN Mobile Money subscribers grew by 24,3% to 18,4 million during the
period, with a higher percentage of active users. Over the past few years, we have introduced a
number of tailored financial products such as short-term insurance solutions, utility payments and
remote payments for airline tickets. In South Africa, this has been extended beyond a mobile wallet
and now includes a regulatory compliant bank account which allows transactions at any VISA point-of-
sale and automated teller machine (ATM) within the country.
DIGITAL
During the period, MTN successfully concluded its investment in MEIH as part of the Group's strategy
to broaden its e-commerce platform. In line with this strategy, on 1 July 2014, the Group's investment
in AIH was concluded and various operations have identified areas of co-operation. Reviews are being
conducted to select appropriate launch windows. The Group acquired an interest in Bidu, an online
insurance price comparison and brokerage provider in Brazil, through the venture capital fund,
Amadeus Digital Prosperity Fund IV.
ICT
We have made good progress in the provision of ICT services to our SME and corporate customers in
all key markets where these are offered. The acquisition of 50% plus one share in Afrihost Proprietary
Ltd (Afrihost), a leading internet service provider (ISP), will provide MTN South Africa with access to an
established client base in both the SME and corporate segments as well as hosting and ISP best
practices. The transaction is expected to be concluded before the end of 2014, pending regulatory
approval. MTN Nigeria revised its enterprise business offering to include shared voice and data
bundles between company employees through MTN Biz Plus, facilitating broader access to our
enterprise solutions.
TRANSFORMING OUR OPERATING MODEL
The Group continues to leverage its scale and improve operational efficiency through the
monetisation of passive infrastructure and the standardisation of back office processes. During the
period we concluded tower deals in Rwanda and Zambia. Subsequent to the end of the period, the
Group advanced negotiations to dispose of its towers in Nigeria to a telecoms infrastructure provider,
while retaining an interest in the new entity. The Group continued to invest and restructure the
organisation to ensure we have the appropriate skills to support growth in the digital and ICT
segments of our business.
FINANCIAL REVIEW
REVENUE
Group revenue increased by 10,7% (4,1%*) to R72 759 million despite a 7,0% (3,4%**) contraction in
the South African operation's revenue as competition intensified. MTN Nigeria's revenue growth
maintained its positive momentum, increasing by 21,5% (8,0%*).
Revenue for the Large opco cluster increased by 13,5% (13,4%*), in line with guidance and supported
by an improved performance in Cameroon (32,0% (9,2%*)) and Syria (1,2% (35,3%*)). The balance of
the Large opco cluster faced weaker economic conditions, which slowed the pace of growth. MTN
operations in Zambia, Congo-Brazzaville and Cyprus provided the impetus that boosted the
performance of the Small opco cluster.
The movements in some of the major functional currencies positively impacted Group performance.
Despite regaining some lost ground in the first half of 2014, the average rand exchange rate for the full
six-month period was 16,2% weaker against the dollar than in the comparable period last year.
Furthermore, the rand weakened by 10,5% against the Nigerian naira, by 18,2% against the CFA franc
and by 15,6% against the Ugandan shilling, providing support to MTN Group's reported revenue.
Outgoing voice revenue increased by 10,5% (2,9%*) compared to the prior year and contributed 62,5%
to total revenue. Performance was negatively affected by price competition in key markets, a
contraction of 1,1% in voice traffic and lower voice tariffs, particularly in South Africa. The average
price per minute (APPM) declined by 4,5% from the comparable period last year in US dollar terms
across our operations.
Group data revenue (excluding SMS) increased by 38,9% (33,1%*), supported by an expanded 3G
network, strong growth in data usage and an increase in smartphone adoption. Data's contribution to
total revenue was 17,5%, 3,6 percentage points higher than the comparable period last year.
MTN South Africa and MTN Nigeria were the largest contributors to data revenue and together
accounted for 70,9% of total data revenue. MTN operations in Ghana, Uganda, Cameroon and Ivory
Coast as well as the Small opco cluster also delivered good data revenue growth.
Group interconnect revenue declined marginally by 0,8% (7,5%*) following cuts in termination rates in
our Nigerian and South African operations. These came into effect in April and May respectively.
Interconnect revenue in South Africa may be further impacted by the regulatory review that is
currently underway.
EBITDA
Group earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 19,6%
(10,6%*) to R33 663 million, excluding the profit on tower sales. The Group EBITDA margin expanded
by 3,5 percentage points to 46,3% as cost-containment initiatives gained traction throughout the
Group. Distribution costs, inclusive of commissions, service provider discounts and marketing costs,
were significantly reduced. Staff costs remained flat year-on-year.
The upward trend in the Group's EBITDA margin was supported by increased margins in
Nigeria (1,9pp), Syria (2,4pp) and Sudan (3,5pp). MTN South Africa's EBITDA margin remained under
pressure and contracted by 1,5**pp.
DEPRECIATION AND AMORTISATION
Depreciation increased by 20,7% as a result of the accelerated capex rollout in the second half of
2013, particularly in Nigeria and South Africa. Amortisation costs increased by 22,1%, driven by
increased spending on software in Nigeria, Ghana and Uganda.
NET FINANCE COSTS
Net finance costs of R1 668 million increased sharply from the R88 million recorded in the comparable
period of last year. This was largely due to foreign currency losses in the current year of R736 million
versus foreign currency gains of R1 014 million in the prior period. Interest paid increased mainly due
to the higher debt levels in Nigeria as the business invested in its capex programme. This was offset by
higher interest received, due to higher cash balances held in Mauritius prior to the payment of the final dividend.
TAXATION
The Group's absolute taxation charge increased by 7,9% to R7 261 million and the effective tax rate
increased by 0,5 percentage points to 31,7%. The increase is largely due to an increase in the income
received by the Group from operations and related withholding tax payable.
EARNINGS
Basic headline earnings per share (HEPS) increased by 9,0% to 729 cents and attributable earnings per
share (EPS) rose by 4,4% to 731 cents.
CASHFLOW
Cash inflows generated by operations increased by 17,3% to R30 078 million. The increase in cash
generated and the reduction in net interest paid resulted in a 28,4% increase in cash flows from
operations to R6 234 million.
CAPITAL EXPENDITURE
Capex decreased by 28,1% (32,7%*) to R9 199 million, of which R591 million related to foreign
currency movements. We expect the capex roll-out for the remainder of the year to accelerate in most
of our markets, however in some markets where there are changes in market conditions, it will
reduce.
The Group capex steering committee regularly reviews the Group capex requirements and will inform
stakeholders of any adjustments.
CASH BALANCE
The Group reported net debt of R4 927 million at the period end. This excludes R3 940 million (49%) of
net cash in MTN Irancell, which is accounted for on an equity basis.
BUSINESS COMBINATIONS/ACQUISITION OF JOINT VENTURES
Acquisition of Middle East Internet Holding (MEIH)
The Group and Rocket Internet have formed a joint venture, Middle East Internet Holding (MEIH),
to develop internet businesses in the Middle East, with the Group and Rocket Internet being 50%
shareholders in MEIH. The Group invested EUR120 million consisting of a EUR40 million cash payment
and EUR80 million contingent consideration into MEIH and the transaction closed on 20 May 2014.
Acquisition of Afrihost
During the period under review the Group agreed to acquire 50% and one share of Afrihost. Afrihost is
an ISP and will provide MTN South Africa with access to an established client base in both the SME and
corporate segments in addition to hosting and ISP best practices. This transaction remains subject to
regulatory approval.
OPERATIONAL REVIEW
SOUTH AFRICA
- Revenue declined by 7,0% (3,4%**)
- Data revenue increased by 13,7%
- Interconnect revenue down by 30,4%
- EBITDA margin declined by 1,5** percentage points to 33,3%
MTN South Africa showed resilience in the face of significant market and operational challenges.
Market share declined by 2,7 percentage points to 31,9% as competition intensified in the pre-paid
segment. During the first quarter of 2014, the operation's subscriber base contracted by 825 000
subscribers and during the second quarter added 394 000 to reach 25,3 million subscribers at period-
end.
The improvement in subscriber growth was largely a result of focused and targeted promotions to the
pre-paid segment, which included the introduction of the widely successful "79 cents per minute"
price plan. Other competitively priced voice and data bundle promotions included MTN Sky, WOW,
Happy Hour and Friends and Family. Customers responded positively to these initiatives and for the
second quarter of 2014, pre-paid traffic on the network grew by 33,5%. Despite these improvements,
the pre-paid subscriber base declined by 4,3%, bringing the total pre-paid segment to 19,8 million. The
post-paid segment (excluding telemetry SIMs) increased by 4,6% to 3,5 million. We expect a return to
normalised growth in revenue and subscribers over the next 6 months.
Total revenue declined by 7,0% (3,4%**) to R19 157 million. This was mainly the result of lower
outgoing voice revenue, which declined by 8,6% to R8 470 million. Incoming voice revenue declined by
30,4% as the impact of the mobile termination rates (MTR) reduction took effect during the second
quarter. Data revenue, including MTN Business, increased by 13,7% to R4 483 million and contributed
23,4% to total revenue. This was a satisfactory result despite a decrease of 38,1% in the average price
per megabyte given the aggressive price competition. Increased 3G coverage and competitive data
bundles were the main contributors to this growth. The number of data users increased by 2,7% to
14,7 million and the operation had 5,3 million active smartphones on its network.
MTN South Africa made good progress in controlling costs and operating expenses declined 6,8%,
underpinned by savings in distribution and marketing costs. Despite this, the EBITDA margin declined
by 1,5** percentage points, largely as a result of the decline in revenue and an impairment relating to
passive infrastructure of R172 million. We continue to review our cost structures, including employee
costs, to ensure better alignment with revenue performance.
Capex for the period of R2 000 million was focused mainly on improving 3G capacity. During the
period we added 220 new 2G sites and 400 co-located 3G sites. Our 3G population coverage had
increased to 83,9% at the period end.
NIGERIA
- Net subscriber additions of 1,7 million
- Revenue increased by 8,0%*
- Data revenue increased by 16,0%*
- EBITDA 11,3%**** higher
- EBITDA margin 1,9 percentage points up at 60,1%
- Launched MTN Mobile Money "Diamond Yellow" account
MTN Nigeria delivered pleasing results and maintained its market share by growing its subscriber base
by 3,0%, bringing total subscribers to 58,4 million. Increased regulatory pressures, changes to the SIM
registration platform and the ban on the sale of SIM cards for the month of March affected
performance during the period. MTN Nigeria, however, remained focused on providing value-driven,
segmented offerings and continued to invest in its network.
Total revenue increased by 8,0% with voice revenue increasing by 7,4%* in line with traffic growth on
the network. Interconnect revenue increased by 7,7%* notwithstanding the 10% reduction in the
mobile termination rate in April.
Data revenue increased by 16,0%*, bringing its contribution to total revenue to 16,7%. This growth
was underpinned by the success of value-added services as volumes on our digital platforms grew
strongly. At end-June 2014, the MTN Play platform had in excess of 33 million subscribers, having
consistently recorded over 10 million downloads daily. The number of active 3G phones on the
network increased by 45,0% to 8,1 million. In July 2014, the operation formally launched the
MTN Diamond Yellow account, offering mobile financial services in partnership with a large domestic
bank.
A well-executed cost-management strategy helped lift the EBITDA margin by 1,9 (1,8*) percentage
points to 60,1% mainly due to a reduction in distribution costs. MTN Nigeria's EBITDA increased by
11,3%****.
Capital expenditure of R3 189 million for the period was focused on improving network coverage and
quality. During the period, 754 new 2G sites and 1 219 co-located 3G sites were added. To date, MTN
Nigeria has committed 73% of its capex budget and in the second half of 2014, will accelerate network
rollout.
To ensure compliance with regulations, MTN Nigeria rigorously monitors the KPIs set by the Nigerian
Communications Commission.
LARGE OPCO CLUSTER
- Subscribers increased by 5,4% to 98,5 million
- Revenue 13,4%* higher in line with guidance
- Data revenue increased by 111,0%*
- EBITDA (excluding tower profits) 12,0%* up
MTN Irancell delivered a satisfactory performance, increasing its subscriber base by 3,2% to
42,7 million despite the impact of sanctions on growth in a highly penetrated market. Some positive
economic trends are starting to emerge with the relatively stable average rate for the Iranian rial
against the US dollar for the six months to June 2014 and the decline in Iran's month-on-month
inflation rate in June 2014.
The results below exclude the effects of hyperinflation:
Total revenue increased by 13,8%* compared to the same period in the prior year. Outgoing voice
revenue grew by 5,1%*, driven by an 8,0% increase in minutes of use (MOU) and a 4,3% decrease in
the effective voice tariff. SMS revenue decreased by 0,3%* and data revenue grew by 110,7%* as
average data consumed increased by 93,1% to 66 megabytes per subscriber. At end-June, data
revenue contributed 16,4% to total revenue.
MTN Irancell will begin the rollout of a 3G network with LTE-capable frequency during the second half
of 2014, following approval by the Communications Regulatory Authority. At the end of June 2014, the
operation had 13,0 million active smartphones on its network and 12,6 million data users. The number
of WiMax subscribers increased by 3,4% to 351 520 from December 2013.
MTN Irancell's EBITDA margin declined by 0,2 (0,2*) percentage points to 44,4% as the operation
made good progress in mitigating the foreign currency risk associated with key vendor contracts.
Operating expenses increased by 15,2%*, below the official inflation rate. MTN Irancell continued to
focus its capex on improving the quality and capacity of the network. During the period it invested
R1 818 million (representing 100% of the operation) and rolled out 274 new 2G sites.
MTN Ghana increased subscribers by 3,9% to 13,4 million and maintained its market share. This
performance is notable as MTN Ghana faced tough competition and a declining macro-economic
environment. The 40,0% decline in the average exchange rate of the Ghanaian cedi against the US
dollar from the comparative prior period and higher inflation levels contributed to a slowdown in
growth in the country. Despite this, the operation delivered a solid performance, supported by
campaigns targeted at improving loyalty, driving data growth and increasing the uptake of
MTN Mobile Money.
Total revenue increased by 13,7%*, supported by the 180,0%* growth in data revenue. Data
contributed 17,4% to total revenue, underpinned by a 4,7% increase in data users to 7,1 million. The
efforts to grow MTN Mobile Money yielded positive results with MTN Mobile Money revenue
increasing by 287,3%*, albeit off a low base. At end-June, the service had over 2,6 million registered
customers and increasing usage levels. Outgoing voice revenue increased by 2,4%*, supported by a
price increase despite lower MOU.
MTN Ghana's EBITDA margin declined by 0,3 (+0,2*) percentage points to 38,7%, excluding the profit
from tower sales, due largely to higher lease costs following the tower transaction as well as the sharp
increase in fuel and other US dollar-denominated expenses, a consequence of the weaker economic
environment. This decline was partially offset by the reversal of management fees. Excluding this
reversal, the EBITDA margin declined by 3,3 percentage points to 35,7%.
Capex amounted to R597 million. The operation rolled out 30 2G sites and 58 3G co-located sites to
improve coverage and capacity on the network.
MTN Cameroon surpassed 10 million subscribers, growing its subscriber base by 17,5% to 10,2 million
subscribers and increasing its market share by 3,2 percentage points to 62,5%. The strong
performance was supported by a well-executed churn management strategy and innovative offerings.
Total revenue grew by 9,2%* despite increased competition. This performance was achieved as a
result of a strong expansion in data revenue, which increased by 61,0%* and contributed 7,8% to total
revenue despite the absence of a 3G licence. MTN's attractive data bundles and value-added services
such as Mobile Surf Mini and Magic Voice were the main contributors to growth in data revenue.
Voice revenue increased by 7,0%* as traffic increased by 17,3% and the effective tariff remained
stable.
The operation continued to focus on the MTN Mobile Money offering, which had 1,4 million registered
subscribers at the end of the period. The expanded distribution network of over 2 000 merchants,
competitively priced products and increased activity levels resulted in revenue increasing by 191,5%*.
MTN Cameroon's EBITDA margin decreased by 3,2 percentage points to 42,4%, excluding profit from
the sale of towers, largely as a result of higher lease rental costs following the tower transaction.
Capex amounted to R373 million and the operation remains on track to the meet full-year guidance of
R697 million. During the period, MTN Cameroon rolled out 77 2G sites and made improvements to
quality and capacity at high traffic sites in the main cities.
MTN Ivory Coast delivered a satisfactory performance, growing subscribers by 9,4% to 7,7 million and
increasing its market share by 1,5 percentage points to 39,4%, despite aggressive competition. This
was driven by compelling value propositions, which attracted new customers and reduced churn
levels.
Total revenue increased by 5,1%*, supported by data revenue growth of 91,1%*. Voice revenue grew
by 4,2%* despite lower MOU offset by an increase in the retail tariff.
MTN Mobile Money started gaining momentum as active subscribers grew by 39% over the period.
The distribution network now has more than 3 000 merchants with a focus on expanding the rural
footprint.
The operation's EBITDA margin excluding profit on tower sales declined by 0,4 (0,4*) percentage
points to 37,5%. This was impacted by the introduction of an additional levy on revenue. The ongoing
focus on cost efficiency resulted in a 5,8%* decrease in operating expenses.
MTN Ivory Coast invested R584 million on its capex programme, rolling out 66 new 2G sites and 44 co-
located 3G sites in the period. Accelerating the rollout of 3G coverage and improving network quality
remain key focus areas for the remainder of the year.
MTN Uganda delivered a good performance, increasing its subscriber base by 12,6% to 9,9 million and
increasing market share by 3,3 percentage points to 56,8%. The consistent focus on bundled and
segmented offerings across voice and data underpinned this growth.
Total revenue increased by 6,8%*, benefiting from a 54,7%* increase in data revenue. At end-June,
data contributed 24,7% to total revenue, supported by increased investment in the 3G network and
improved data speeds in the major centres. Price increases were partly offset by lower international
incoming voice traffic and lower MOU on the network.
MTN Mobile Money continued to perform well and recorded a 20,7% increase in registered users from
December 2013. At end-June 2014 it had 6,2 million users. Revenue from MTN Mobile Money grew by
39,4%*, supported by an expanded agent distribution network of over 30 000 merchants and monthly
transaction volumes of over 28,5 million.
MTN Uganda's EBITDA margin remained stable at 36,9%. Capex in the period amounted to
R407 million, with the rollout of 117 new 2G sites and 130 co-located 3G sites significantly improving
quality and capacity on the network.
MTN Syria continued to operate under very challenging conditions that impacted on network
availability and subscriber acquisition. The operation recorded a 3,0% decrease in subscribers to
5,7 million for the period. Sustained efforts to ensure improved network performance enabled
revenue to increase by 35,3%* given higher traffic volumes and a higher effective tariff. Data revenue
increased by 151,2%* from the comparable prior period, bringing its contribution to 22,0% of total
revenue. MTN Syria's EBITDA margin expanded by 2,4 (2,5*) percentage points to 18,8%. Employee
safety is a priority and we continuously monitor the operating environment to ensure this.
MTN Sudan increased its subscriber base by 1,3% to 8,8 million. Market share contracted to
approximately 33,0% with performance affected by the weak economic environment, higher churn
rate and the reclassification of registered subscribers as required by the regulator. Total revenue
increased by 17,3%* and the EBITDA margin expanded by 3,5 (3,5*) percentage points to 33,6%. Data
revenue continued to show good growth, increasing by 114,8%* from the prior comparable period.
Capex amounted to R481 million for the period.
REVISED SUBSCRIBER NET ADDITION GUIDANCE FOR 2014
'000
South Africa 1 500
Nigeria 5 000
Large opco cluster 8 050
Iran 2 500
Ghana 900
Cameroon 2 000
Ivory Coast 1 000
Sudan 400
Syria (250)
Uganda 1 500
Small opco cluster 2 700
Total 17 250
Declaration of interim ordinary dividend
Notice is hereby given that a gross interim dividend of 445 cents per share for the period to 30 June 2014 has been
declared payable to MTN shareholders. The number of ordinary shares in issue at the date of this declaration is 1 848 298 679.
The dividend will be subject to a maximum local dividend tax rate of 15% which will result in a net dividend of
378.29548 cents per share to those shareholders that bear the maximum rate of dividend withholding tax of 66.70452 cents per
share and STC credits amounting to 0.303223 cents per share will be utilised. The net dividend per share for the respective
categories of shareholders for the different dividend tax rates is as follows:
0% 445.00000 cents per share
5% 422.76516 cents per share
7.5% 411.64774 cents per share
10% 400.53032 cents per share
12.5% 389.41290 cents per share
15% 378.29548 cents per share
These different dividend tax rates are a result of the application of tax rates in various double taxation agreements as well
as exemptions from dividend tax.
MTN Group Limited’s tax reference number is 9692/942/71/8. In compliance with the requirements of Strate, the electronic settlement
and custody system used by the JSE Limited, the salient dates relating to the payment of the dividend are as follows:
Last day to trade cum dividend on the JSE Friday, 22 August 2014
First trading day ex dividend on the JSE Monday, 25 August 2014
Record date Friday, 29 August 2014
Payment date Monday, 1 September 2014
No share certificates may be dematerialised or re-materialised between Monday, 25 August 2014 and Friday, 29 August 2014, both days
inclusive. On Monday, 1 September 2014, 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, 1 September 2014 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, 1 September 2014.
The MTN Board confirms that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend
distribution.
For and on behalf of the Board
PF Nhleko RS Dabengwa
Chairman Group President and CEO
Fairland
7 August 2014
MTN Group Limited reviewed condensed consolidated interim financial statements // for the six months ended 30 June 2014
Reviewed condensed consolidated
interim financial statements in accordance with
International Financial Reporting Standards (IFRS)
The Group's reviewed condensed consolidated interim financial statements for the six months ended
30 June 2014 have been independently reviewed by the Group's external auditors. The preparation
of the Group's reviewed condensed consolidated interim financial statements was supervised by the
Group chief financial officer, BD Goschen, BCom, BCompt (Hons), CA(SA).
These results were made available on 7 August 2014.
Condensed consolidated income statement
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Note Rm Rm Rm
Revenue 72 759 65 709 137 270
Other income 303 1 027 1 327
Direct network operating costs (10 692) (8 412) (18 299)
Costs of handsets and other accessories (5 667) (4 883) (10 744)
Interconnect and roaming (6 734) (6 714) (13 816)
Staff costs (4 289) (4 272) (8 670)
Selling, distribution and marketing expenses (7 179) (8 601) (16 362)
Other operating expenses (4 739) (4 861) (10 276)
EBITDA 33 762 28 993 60 430
Depreciation of property, plant and equipment (9 274) (7 683) (16 458)
Amortisation of intangible assets (1 612) (1 320) (2 820)
Operating profit 22 876 19 990 41 152
Net finance costs (1 668) (88) (1 234)
Share of results of joint ventures and
associates after tax 9 1 691 1 658 3 431
Profit before tax 22 899 21 560 43 349
Income tax expense (7 261) (6 730) (12 487)
Profit after tax 15 638 14 830 30 862
Attributable to:
Owners of MTN Group Limited 13 390 12 821 26 751
Non-controlling interests 2 248 2 009 4 111
15 638 14 830 30 862
Basic earnings per share (cents) 8 731 700 1 460
Diluted earnings per share (cents) 8 727 695 1 452
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
Condensed consolidated statement of comprehensive income
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Rm Rm Rm
Profit after tax 15 638 14 830 30 862
Other comprehensive (loss)/income after tax:
Exchange differences on translating foreign operations:° (1 955) 8 280 11 078
– Owners of MTN Group Limited (1 882) 7 942 10 179
– Non-controlling interests (73) 338 899
Total comprehensive income for the period 13 683 23 110 41 940
Attributable to:
Owners of MTN Group Limited 11 508 20 763 36 930
Non-controlling interests 2 175 2 347 5 010
13 683 23 110 41 940
° This component of other comprehensive income does not attract any tax and may subsequently be reclassified to profit and loss.
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
Condensed consolidated statement of financial position
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Note Rm Rm Rm
Non-current assets 147 166 134 552 153 083
Property, plant and equipment 88 689 83 866 92 903
Intangible assets and goodwill 33 785 36 482 37 751
Investments in joint ventures and associates 15 859 6 929 12 643
Deferred tax and other non-current assets 8 833 7 275 9 786
Current assets 75 493 65 691 76 573
Non-current assets held for sale 15 137 190 1 281
75 356 65 501 75 292
Other current assets 37 028 37 260 33 470
Restricted cash 745 2 825 2 222
Cash and cash equivalents 37 583 25 416 39 600
Total assets 222 659 200 243 229 656
Total equity 120 445 105 527 121 812
Attributable to owners of MTN Group Limited 115 509 101 396 116 479
Non-controlling interests 4 936 4 131 5 333
Non-current liabilities 51 947 44 674 49 860
Interest-bearing liabilities 13 38 803 31 964 34 664
Deferred tax and other non-current liabilities 13 144 12 710 15 196
Current liabilities 50 267 50 042 57 984
Interest-bearing liabilities 13 8 973 10 184 11 361
Other current liabilities 41 294 39 858 46 623
Total equity and liabilities 222 659 200 243 229 656
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
Condensed consolidated statement of changes in equity
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Note Rm Rm Rm
Opening balance at 1 January 116 479 89 006 89 006
Restatement for impact of hyperinflation – – 5 563
Restatement for voluntary change in
accounting policy 5 – 1 579 1 579
Restated opening balance at 1 January 116 479 90 585 96 148
Shares issued during the period ^ ^ 5
Shares cancelled during the period ^ ^ ^
Transactions with non-controlling interests – (495) (495)
Share-based payment reserve 47 88 215
Total comprehensive income 11 508 20 763 36 930
Profit after tax 13 390 12 821 26 751
Other comprehensive (loss)/income after tax (1 882) 7 942 10 179
Dividends paid (12 302) (9 362) (16 210)
Other movements (223) (183) (114)
Attributable to owners of MTN Group Limited 115 509 101 396 116 479
Non-controlling interests 4 936 4 131 5 333
Closing balance 120 445 105 527 121 812
Dividends per share (cents)
Declared during the period 665 503 873
Declared after the period end 445 370 665
^Amount less than R1 million.
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
Condensed consolidated statement of cash flows
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013 2013
Reviewed Reviewed Audited
Rm Rm Rm
Net cash inflow from operating activities 6 234 4 854 27 025
Net cash outflow from investing activities (8 607) (9 104) (19 835)
Net cash inflow from financing activities 1 439 5 495 6 264
(Decrease)/increase in cash and cash equivalents (934) 1 245 13 454
Cash and cash equivalents at beginning of period 39 577 22 539 22 539
Exchange (losses)/gains on cash and cash equivalents (1 071) 1 529 3 584
Cash and cash equivalents at end of period 37 572 25 313 39 577
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2014
1. INDEPENDENT REVIEW
The directors of the Company take full responsibility for the preparation of the condensed consolidated
interim financial statements.
The condensed consolidated interim financial statements have been reviewed by our joint auditors,
PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc., who have expressed an unmodified
conclusion. The joint external auditors have performed their review in accordance with International
Standards on Review Engagements 2410. A copy of their report and the condensed consolidated
interim financial statements are available for inspection at the registered office of the Company. Constant
currency disclosure has not been reviewed by our joint external auditors.
2. GENERAL INFORMATION
MTN Group Limited (the Company) carries on the business of investing in the telecommunications
industry through its subsidiary companies, joint ventures and associate companies.
3. BASIS OF PREPARATION
The condensed consolidated interim financial statements have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB), the preparation and disclosure requirements
of IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council
(FRSC), the JSE Listings Requirements and the requirements of the South African Companies Act, No 71
of 2008.
4. PRINCIPAL ACCOUNTING POLICIES
The Group has adopted all the new, revised or amended accounting pronouncements as issued by the
IASB which were effective for the Group from 1 January 2014, none of which had a material impact on
the Group.
The accounting policies applied in the preparation of the condensed consolidated interim financial
statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual
financial statements, with the exception of the voluntary change in accounting policy in respect of
revenue recognition (notes 5 and 18).
5. VOLUNTARY CHANGE IN ACCOUNTING POLICY
IAS 18 Revenue
Previously, the Group accounted for arrangements with a multiple of deliverables (i.e. multiple element
revenue arrangements) by dividing these arrangements into separate units of accounting and recognising
revenue through the application of the residual value method.
During the period under review, the Group resolved to change its accounting policy in recognising
revenue relating to these arrangements from applying the residual value method to the relative fair value
method. This change was effected by the Group on a voluntary basis.
Previously under the residual value method, fair value was ascribed to each of the undelivered elements
(typically the service contract) and any consideration remaining (after reducing the total consideration
of the arrangement with the fair value of the undelivered elements) was allocated to the delivered
element(s) in the transaction (typically the handset). This resulted in limited amounts of revenue being
allocated to the elements delivered upfront (i.e. the handset). Under the relative fair value method, the
consideration received or receivable is allocated to each of the elements (delivered and undelivered)
according to the relative fair value of the elements included in the arrangement.
The Group believes that the change results in more relevant and reliable information being presented in
respect of revenue recognised in relation to multiple element revenue arrangements, as revenue is now
being recognised in relation to each of the elements delivered and to be delivered based on the relative
fair value of the relating elements in relation to the total consideration received. The new accounting
policy also results in an improved correlation between the recognition of revenue and associated costs
and also aligns the Group's policy more closely with the requirements of the recently issued IFRS 15
Revenue from Contracts with Customers.
As required in terms of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the change in
accounting policy was applied retrospectively which resulted in an increase in revenue and income tax
expenses, trade and other receivables, non-current loans and other receivables, equity and deferred tax
liabilities as included in respect of prior periods. The impact on the Group's financial results and position is
disclosed in note 18.
6. FINANCIAL INSTRUMENTS
The carrying amount of all financial instruments measured at amortised cost closely approximate its fair
value.
7. SEGMENT ANALYSIS
The Group has identified reportable segments that are used by the Group executive committee (chief
operating decision maker (CODM)) to make key operating decisions, allocate resources and assess
performance. The reportable segments are geographically differentiated regions and grouped by their
relative size.
Operating results are reported and reviewed regularly by the Group executive committee and include
items directly attributable to a segment as well as those that are attributed on a reasonable basis, whether
from external transactions or from transactions with other Group segments. EBITDA is used as a measure
of reporting profit or loss for each segment.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Rm Rm Rm
Revenue
South Africa 19 157 20 607 40 482
Nigeria 27 099 22 303 48 159
Large opco cluster 21 454 18 321 38 659
Iran†† 5 660 4 402 9 514
Ghana 3 792 4 002 8 269
Cameroon 3 048 2 309 5 204
Ivory Coast 3 232 2 543 5 480
Uganda 2 624 2 051 4 467
Syria 1 802 1 780 3 229
Sudan 1 296 1 234 2 496
Small opco cluster 10 910 9 080 19 804
Head office companies and eliminations (201) (200) (320)
Iran revenue exclusion† (5 660) (4 402) (9 514)
72 759 65 709 137 270
† Irancell Telecommunication Company Services (PJSC) proportionate revenue is included in the segment analysis as reviewed by
the CODM and excluded from IFRS reported revenue due to equity accounting for joint ventures.
†† Excludes the impact of hyperinflation of R215 million (December 2013: R1 714 million). The amount including the
hyperinflation impact is R5 875 million (December 2013: R11 228 million). There was no hyperinflation impact for the period
ended 30 June 2013.
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Rm Rm Rm
EBITDA
South Africa 6 382 6 897 14 067
Nigeria 16 280 14 762 29 235
Large opco cluster 8 244 7 782 15 517
Iran°° 2 514 1 948 4 075
Ghana 1 486 1 560 3 123
Cameroon 1 291 1 447 2 550
Ivory Coast 1 213 1 409 2 813
Uganda 967 756 1 603
Syria 338 291 561
Sudan 435 371 792
Small opco cluster 4 173 3 163 6 732
Head office companies and eliminations 1 197 (1 663) (1 046)
Iran EBITDA exclusion°°° (2 514) (1 948) (4 075)
33 762 28 993 60 430
Depreciation, amortisation and
impairment of assets (10 886) (9 003) (19 278)
Net finance cost (1 668) (88) (1 234)
Share of results of joint ventures and
associates after tax 1 691 1 658 3 431
Profit before tax 22 899 21 560 43 349
°°° Irancell Telecommunication Company Services (PJSC) proportionate EBITDA is included in the segment analysis as reviewed by
the CODM and excluded from IFRS reported EBITDA due to equity accounting for joint ventures.
°° Excludes the impact of hyperinflation of R84 million (December 2013: R739 million). The amount including the
hyperinflation impact is R2 598 million (December 2013: R4 814 million). There was no hyperinflation impact for the period
ended 30 June 2013.
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013 2013
Reviewed Reviewed Audited
8. EARNINGS PER ORDINARY SHARE
Number of ordinary shares in issue
At end of the period
(excluding MTN Zakhele and treasury shares~) 1 832 860 765 1 881 924 634 1 832 845 805
Weighted average number of shares
Shares for earnings per share 1 832 859 145 1 832 276 798 1 832 729 584
Add: dilutive shares
– MTN Zakhele shares issued 7 050 704 10 766 448 6 740 791
– Share schemes 2 548 461 1 900 017 2 988 671
Shares for dilutive earnings per share 1 842 458 310 1 844 943 263 1 842 459 046
~ Treasury shares of 1 592 211 (June 2013: 22 337 752 and December 2013: 23 402 918) are held by the Group and are therefore
excluded in this reconciliation.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2014 2013# 2013#
Reviewed Reviewed Audited
Rm Rm Rm
Reconciliation between profit attributable to the
owners of MTN Group Limited and headline earnings~~
Profit after tax 13 390 12 821 26 751
Net profit on disposal of non-current assets
held for sale (75) (424) (510)
Loss on disposal of property, plant
and equipment and intangible assets 38 13 34
Impairment of property, plant and equipment
and non-current assets 213 46 (20)
Realisation of deferred gain (197) (170) (357)
Realisation of deferred gain on disposal
of non-current assets held for sale (15) (21) (38)
Basic headline earnings^^ 13 354 12 265 25 860
Earnings per share (cents)
– Basic 731 700 1 460
– Basic headline 729 669 1 411
Diluted earnings per share (cents)
– Diluted 727 695 1 452
– Diluted headline 725 665 1 404
~~ Amounts are presented after taking into account the impact of non-controlling interests and tax.
^^ Headline earnings is calculated in accordance with circular 2/2013 Headline Earnings as issued by the South African Institute of
Chartered Accountants at the request of the JSE Limited.
# 2013 restated amounts have been reviewed, refer to notes 5 and 18.
30 June 30 June 31 December
2014 2013 2013
Reviewed Reviewed Audited
Rm Rm Rm
9. SHARE OF RESULTS OF JOINT VENTURES AND
ASSOCIATES AFTER TAX 1 691 1 658 3 431
Irancell Telecommunication Company
Services (PJSC) 1 547 1 361 3 115
Others 144 297 316
10. CAPITAL EXPENDITURE INCURRED 9 199 12 792 30 164
11. CONTINGENT LIABILITIES 886 630 1 023
12. AUTHORISED CAPITAL EXPENDITURE
FOR PROPERTY, PLANT AND EQUIPMENT
AND SOFTWARE 26 151 27 157 26 151
13. INTEREST-BEARING LIABILITIES
Bank overdrafts 11 103 23
Current borrowings 8 962 10 081 11 338
Current liabilities 8 973 10 184 11 361
Non-current borrowings 38 803 31 964 34 664
47 776 42 148 46 025
14. ISSUE AND REPAYMENT OF DEBT AND EQUITY SECURITIES
During the period under review the following entities raised and repaid significant debt instruments:
- MTN Nigeria Communications Limited raised R1,4 billion additional debt through an export credit
facility.
- MTN Nigeria Communications Limited repaid R800 million relating to an export credit facility.
- MTN Holdings Proprietary Limited raised R1,0 billion additional debt through a syndicated loan facility,
R1,0 billion through a revolving credit facility, R2,0 billion through a long-term loan and R12,45 billion
through short-term general borrowings.
- MTN Holdings Proprietary Limited repaid R1,0 billion relating to long-term borrowings and R12,1 billion
relating to short-term general borrowings.
In accordance with the Domestic Medium Term Note Programme previously established by MTN Holdings
Proprietary Limited, the Group issued no Senior Unsecured Zero Coupon Notes in the current period
(December 2013: R3,9 billion). R1,1 billion (December 2013: R6,0 billion) of the Senior Unsecured Zero
Coupon Notes has been repaid in the period.
15. NON-CURRENT ASSETS HELD FOR SALE
During the current period, equipment relating to the tower sale in Cameroon was identified as part of the
sale and has been reclassified as non-current assets held for sale at period end. The equipment will be sold
in the second half of 2014.
Further, the Group concluded the transaction with IHS Holding Limited (IHS) in which IHS acquired
550 mobile network towers from MTN Rwandacell Limited and 719 towers from MTN (Zambia) Limited
during the current period. IHS is a 100% shareholder of the tower companies set up in each country to
manage the towers and other passive infrastructure. MTN Rwandacell Limited and MTN (Zambia) Limited
are the anchor tenants on commercial terms of the towers for an initial term of 10 years.
In 2013, the Group concluded the transaction with IHS in which IHS acquired 911 mobile network
towers from MTN Côte d'Ivoire S.A. for USD141 million and 820 towers from Mobile Telephone Network
Cameroon Limited for USD143 million, which were previously classified as held for sale.
16. BUSINESS COMBINATIONS AND ACQUISITION OF JOINT VENTURES
Middle East Internet Holding
The Group and Rocket Internet have formed a joint venture, Middle East Internet Holding (MEIH),
to develop internet businesses in the Middle East, with the Group and Rocket Internet being 50%
shareholders in MEIH. The Group invested EUR120 million consisting of a EUR40 million cash payment
and EUR80 million contingent consideration into MEIH and the transaction closed on 20 May 2014.
Afrihost
During the period under review, the Group agreed to acquire 50% and one share of Afrihost Proprietary
Limited (Afrihost), a leading internet service provider. This transaction remains subject to regulatory approval.
17. EVENTS AFTER REPORTING PERIOD
Acquisition of Africa Internet Holding
The Group has acquired 33,3% of Africa Internet Holding (AIH), a joint venture between Rocket Internet
and Millicom International Cellular, to develop internet businesses in Africa. The Group, Millicom
International Cellular and Rocket International have become 33,3% shareholders in AIH.
The Group expects to invest approximately EUR168 million over the next two to four years into AIH.
The transaction closed on 1 July 2014.
Syria Build, Operate and Transfer Contract
MTN Syria operates under a contractual service arrangement granted and controlled by the Syrian
Telecommunications Establishment (STE). The contract known as a Build, Operate and Transfer (BOT)
provides for revenue sharing between MTN Syria and the STE and requires the handing over of the
network to the STE at the end of the licence period. Subsequent to the reporting period, the Group has made
significant progress in converting the current BOT to a freehold licence. It is anticipated that this process
will ultimately culminate in the awarding of the licence and termination of the related BOT contract. This
process is expected to be concluded before the end of 2014 and it is estimated that the initial licence fee
will be between SYP18 billion and SYP25 billion (which approximates one year's revenue share). This will be funded
through cash balances maintained within the local operation.
Disposal of Base Transceiver Stations (BTS/Towers) in Nigeria
Subsequent to the period end the Group has advanced negotiations to sell its tower business in its
operation in Nigeria, that includes 8 640 existing and 543 towers under development, to an entity that
will be managed by a large mobile telecommunications infrastructure provider. The Group intends to
retain a non-controlling interest of 51% with protective rights in the new entity and will enter into a
lease agreement for the use of the tower infrastructure. The contractual agreements are expected to be
finalised in due course and the transaction is expected to close in various tranches under customary
closing conditions.
Expansion of licence agreement in Iran
On 4 August 2014 Irancell Telecommunications Services Company (PJSC), the Group's joint venture in
the Islamic Republic of Iran, entered into an arrangement to upgrade its licence agreement with the
Communications Regulatory Authority in Iran to include 3G mobile broadband and higher standard
(such as 4G) as well as obtain access to additional spectrum frequency for an amount of IRR 3 000 billion,
payable by March 2015 in four instalments which will be funded by the local operation.
Dividends declared
Dividends declared at the board meeting held on 6 August 2014 amounted to 445 cents per share.
18. IMPACT OF THE IAS 18 VOLUNTARY CHANGE IN ACCOUNTING POLICY
18.1 Income statement
Six months Financial year ended
ended 30 June 2013 31 December 2013
Adjust- Adjust-
ments for ments for
change in change in
Previously accounting Previously accounting
reported policy Restated reported policy Restated
Rm Rm Rm Rm Rm Rm
Revenue 65 248 461 65 709 136 495 775 137 270
Other operating expenses (4 794) (67) (4 861) (10 143) (133) (10 276)
EBITDA 28 599 394 28 993 59 788 642 60 430
Operating profit 19 596 394 19 990 40 510 642 41 152
Profit before tax 21 166 394 21 560 42 707 642 43 349
Income tax expense (6 620) (110) (6 730) (12 307) (180) (12 487)
Profit after tax 14 546 284 14 830 30 400 462 30 862
Basic earnings per share
(cents) 684 16 700 1 434 26 1 460
Basic headline earnings
per share (cents) 654 15 669 1 386 25 1 411
Diluted earnings per share
(cents) 680 15 695 1 427 25 1 452
Diluted headline earnings
per share (cents) 649 16 665 1 378 26 1 404
for the six months ended 30 June 2014
18.2 Statement of financial position
30 June 2013 31 December 2013
Adjust- Adjust-
ments for ments for
change in change in
Previously accounting Previously accounting
reported policy Restated reported policy Restated
Rm Rm Rm Rm Rm Rm
Non-current assets 132 636 1 916 134 552 150 910 2 173 153 083
Deferred tax and other
non-current assets 5 359 1 916 7 275 7 613 2 173 9 786
Current assets 65 020 671 65 691 75 911 662 76 573
Other current assets 36 589 671 37 260 32 808 662 33 470
Total assets 197 656 2 587 200 243 226 821 2 835 229 656
Total equity 103 664 1 863 105 527 119 771 2 041 121 812
Attributable to owners of
MTN Group Limited 99 533 1 863 101 396 114 438 2 041 116 479
Non-controlling interests 4 131 – 4 131 5 333 – 5 333
Non-current liabilities 43 950 724 44 674 49 066 794 49 860
Deferred tax and other
non-current liabilities 11 986 724 12 710 14 402 794 15 196
Current liabilities 50 042 – 50 042 57 984 – 57 984
Total equity and liabilities 197 656 2 587 200 243 226 821 2 835 229 656
Administration
Registration number: 1994/009584/06 MTN Group sharecare line
ISIN code: ZAE000042164 Toll free: 0800 202 360 or +27 11 870 8206
Share code: MTN if phoning from outside South Africa
Board of Directors Office of the Transfer Secretaries
PF Nhleko## Computershare Investor Services Proprietary Limited
RS Dabengwa**** Registration number 2004/003647/07
BD Goschen**** 70 Marshall Street, Marshalltown
KP Kalyan### Johannesburg, 2001
AT Mikati†**** PO Box 61051, Marshalltown, 2107
MJN Njeke###
KC Ramon###
JHN Strydom****
AF van Biljon### Joint Auditors
F Titi### PricewaterhouseCoopers Inc.
J van Rooyen###
MLD Marole### 2 Eglin Road, Sunninghill, 2157
NP Mageza### Private Bag X36, Sunninghill, 2157
A Harper###***** SizweNtsaluba Gobodo Inc,
†Lebanese 20 Morris Street East
*****British Woodmead, 2157
****Executive PO Box 2939, Saxonwold, 2132
##Non-executive
###Independent non-executive director Sponsor
Deutsche Securities (SA) Proprietary Limited
3 Exchange Square, 87 Maude Street, Sandton, 2196
Attorneys
Webber Wentzel
Group Secretary 10 Fricker Road, Illovo Boulevard, Sandton, 2107
SB Mtshali PO Box 61771, Marshalltown, 2107
Private Bag X9955, Cresta, 2118
Contact details
Registered Office Telephone: National (011) 912 3000
216 – 14th Avenue, Fairland, 2195 International +27 11 912 3000
Facsimile: National (011) 912 4093
American Depository Receipt International +27 11 912 4093
(ADR) programme:
Cusip No. 62474M108 ADR to ordinary Share 1:1 E-mail: investor_relations@mtn.co.za
Internet: http:/www.mtn.com
Depository
The Bank of New York
101 Barclay Street, New York NY. 10286, USA
For further information on MTN results please refer to the Investor Relations section on the Group's
website: www.mtn.com/investors
Date: 07/08/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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