Wrap Text
Reviewed condensed consolidated interim financial results
for the six months ended 30 June 2016
MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
(Share code MTN)
(ISIN ZAE000042164)
(“MTN” or “the Group”)
Reviewed condensed consolidated interim financial results
for the six months ended 30 June 2016
The Group’s results are presented on a regional basis in line with the Group’s new operational structure.
This is comprised of South and East Africa (SEA), West and Central Africa (WECA) and Middle East and North
Africa (MENA).
The SEA region includes: South Africa, Uganda, Zambia, Rwanda, South Sudan, Botswana (joint venture - equity
accounted) and Swaziland (joint venture - equity accounted). The WECA region includes: Nigeria, Ghana,
Cameroon, Ivory Coast, Benin, Congo Brazzaville, Liberia, Guinea Conakry and Guinea Bissau. The MENA region includes:
Iran (joint venture - equity accounted), Syria, Sudan, Yemen, Afghanistan and Cyprus.
Although Iran, Botswana and Swaziland form part of their respective regions geographically and
operationally, they are excluded from their respective regional results due to being equity accounted for by the Group.
MTN is a leading emerging markets mobile operator, connecting 233 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.
Financial results snapshot for the six months ended 30 June 2016
- Group subscribers remained flat at 232,6 million from 31 December 2015
- Revenue increased by 14,0% (1,5%*) to R78 878 million
- Data revenue increased by 32,2% (19,7%*) to R19 849 million
- Voice traffic and data traffic increased by 7,9% and 135,3% respectively
- EBITDA decreased by 3,3% (25,9%*) to R29 273 million
- EBITDA margin decreased 6,6 percentage points to 37,1%
- Headline loss per share of 271 cents**
- Interim dividend of 250 cents per share
- Capex increased by 26,9% (15,4%*) to R13 772 million
- Nigeria regulatory fine re-measurement impact of R10,5 billion
Note: Certain financial information presented in these interim financial results constitutes pro forma
financial information. The pro forma financial information is the responsibility of the Group’s board of
directors and is presented for illustrative purposes only. Because of its nature, the pro forma financial
information may not fairly present MTN’s financial position, changes in equity, results of operations or cash flows.
1. Certain financial information presented in these interim financial results has been prepared excluding
the impact of hyperinflation and the relating goodwill impairment, tower profits and the Nigerian regulatory
fine and constitutes pro forma financial information to the extent that it is not extracted from the segment
disclosure included in the reviewed condensed consolidated interim financial results for the six months ended
30 June 2016. This pro forma financial information has been presented to eliminate the impact of hyperinflation
and the relating goodwill impairment, tower profits and the Nigerian regulatory fine from the financial results
in order to achieve a comparable analysis year on year. Hyperinflation adjustments and the relating goodwill
impairment, tower profits and the Nigerian regulatory fine have been calculated in terms of the Group
accounting policies disclosed in the previous consolidated financial statements for the year ended 31 December 2015.
The pro forma financial information including the constant currency information (refer below) incorporated in
these condensed consolidated interim financial results has not been audited or reviewed by our external
auditors.
2. Constant currency (“organic”) information has been presented to illustrate the impact of changes in
currency rates on the Group’s results. In determining the change in constant currency terms, the current financial
reporting period’s results have been adjusted to the prior 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 based on the current period constant currency results compared to
the prior period results. In addition, in respect of Irancell, MTN Sudan and MTN Syria, the constant currency
information has been prepared excluding the impact of hyperinflation. In 2015, the Iranian economy was assessed
to no longer be a hyperinflationary environment. MTN therefore discontinued hyperinflation accounting in that
operation effective 1 July 2015.
* Constant currency (“organic”) information.
** Reported - includes hyperinflation and the relating goodwill impairment, tower profits and the Nigerian
regulatory fine.
Overview
MTN continued to operate in a challenging environment for the six months ended 30 June 2016. The financial
performance for the period reflects the confluence of a number of material issues, which created the “perfect
storm”. The Group has made strides towards resolving these challenges although many of these factors fall
outside of its control.
The Group’s reported results were significantly impacted by the Nigerian regulatory fine. On 10 June MTN
Nigeria resolved this matter with the Federal Government of Nigeria (FGN) and agreed to pay the FGN a total cash
amount of 330 billion Nigerian naira (US$1,671 billion, using the exchange rate prevailing at the time) over
three years in a full and final settlement. This was agreed in addition to complying with certain other
regulatory conditions imposed as part of the settlement reached. The 50 billion naira (US$250 million) paid in good
faith and without prejudice by MTN Nigeria on 24 February 2016 forms part of the monetary component of the
settlement, leaving a balance of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the
time) outstanding. In June 2016 the first scheduled payment of 30 billion naira (US$124 million) was made. The
remaining cash payable at 30 June 2016 amounted to 250 billion naira (US$882 million).
The Group has accrued the present value of 280 billion naira (US$1,418 billion, using the exchange rate
prevailing at the time), which in total had a negative impact of R10 499 million on reported earnings before
interest, tax, depreciation and amortisation and impairment of goodwill (EBITDA) and a R8 632 million negative
impact on the Group’s reported headline losses, or 474 cents on reported headline losses per share. The reported
impact on the Group’s statement of cash flow for the period amounted to R5 870 million, which equates to the 80
billion naira paid during the period.
During the period, R1 324 million costs were incurred on a range of professional services relating to the
negotiations that led to a reduction of R34 billion in the Nigeria regulatory fine to 330 billion naira
(US$1,671 billion, using the exchange rate prevailing at the time). The board has exercised its judgement and
approved the quantum of the professional fees incurred taking into account global benchmarks and the value
delivered culminating in the final settlement of the Nigeria fine.
Apart from the Nigerian regulatory fine, the depreciation of local currencies against the US dollar had a
substantial impact on the Group’s results. This resulted in foreign exchange losses amounting to R3 606 million
during the period. MTN South Sudan reported an impairment on property, plant and equipment (PPE) of R259 million**
(using a Rand/ Sudanese pound exchange rate of 0.376). When the impairment write-off is presented on an organic
basis the impairment amounts to R2 632 million* (using a rand/Sudanese pound exchange rate of 3.837). This organic
impairment write-off had a significant negative impact on organic EBITDA.
The Group’s underlying performance was impacted by weak macro-economic conditions affecting consumer
spending, the withdrawal of regulatory services in MTN Nigeria from July 2015 until May 2016 and disconnections of
subscribers related to subscriber registration requirements, mainly in Nigeria. MTN Nigeria disconnected the
last batch of 4,5 million subscribers in February 2016. MTN Uganda and MTN Cameroon were also impacted by
subscriber registration requirements. This resulted in significant free minutes provided for subscriber
re-registration campaigns, contributing to a 12,2%* decline in the effective voice tariff. The Group’s performance
was further impacted by aggressive price competition and under-performance of MTN South Africa.
MTN Irancell (joint venture - equity accounted), MTN Ghana and MTN Cyprus delivered strong operational and
financial performances for the period.
EBITDA reconciliation
EBITDA (ZAR ‘million) H1 16 Change %
Reported EBITDA 18 882 (38,4)
Nigeria regulatory fine 10 499
Hyperinflation (90)
Towers (18)
Operational EBITDA 29 273 (3,3)
Organic EBITDA 22 434 (25,9)
Impairment of PPE in South Sudan 2 632
Professional fees relating to Nigerian regulatory fine 1 324
Organic EBITDA excluding above costs 26 390 (12,8)
EBITDA, excluding the impact of the Nigerian regulatory fine (R10 499 million), hyperinflation (R90 million)
and the realisation of the deferred profit from the sale of towers in Ghana (R18 million), declined 3,3%.
This was positively impacted by foreign exchange movements (23%). Organic EBITDA declined 25,9%*, negatively
impacted by R1 324 million in costs incurred on a range of professional services relating to the negotiations that
led to a reduction of R34 billion in the Nigerian regulatory fine and the impairment of PPE in South Sudan of
R2 632 million*. The impairment for PPE of South Sudan impacted organic EBITDA by 8,7%*. MTN South Sudan’s
full results impacted organic EBITDA by 9,8%*. Excluding the impact of professional fees relating to the
Nigerian regulatory fine negotiations and the MTN South Sudan impairment, EBITDA declined 12,8%*.
The Group EBITDA margin declined 6,6 percentage points (pp) to 37,1%. This excludes the impact of the
Nigerian regulatory fine, hyperinflation and the realisation of the deferred profit from the sale of towers
in Ghana.
Losses from joint ventures and associates amounted to R1 692 million**. This included a charge of R1 039
million** incurred by MTN Irancell, mainly relating to the depreciation and amortisation of hyper-inflated assets
that were historically written up under hyperinflation reporting. Upon the discontinuation of hyperinflation
accounting in Iran, effective 1 July 2015, hyperinflation adjustments are limited to the depreciation and
amortisation charges on previously hyper-inflated assets until 2033. The Group reported losses of R2 463 million
in relation to MTN’s share of Nigerian TowerCo losses, which were mainly as a result of foreign exchange losses
incurred on US dollar-denominated loans. In addition, the Group also reported short-term losses on MTN’s
share in Africa Internet Holdings (AIH), Middle East Internet Holdings (MEIH) and Iran Internet Group
(IIG)(R494 million).
HEPS reconciliation
ZAR (cents) H1 16 Change %
Reported attributable earnings/(loss) per share (301) (146)
Profit on disposal of non-current assets (including tower profits) (2) (100)
Profit on dilution of investment in joint venture (15) (100)
Impairment of goodwill, PPE and non-current assets 47 NM
Reported basic headline earnings/(loss) per share (271) (141)
Nigeria regulatory fine 474 -
Basic headline earnings/(loss) per share excluding Nigeria 203 (69)
regulatory fine
Hyperinflation 20 150
Operational basic headline earnings/(loss) per share excluding Nigeria
regulatory fine, hyperinflation and tower profits 223 (63)
Losses from AIH, MEIH, IIG 27 50
Losses from tower companies 136 NM
Net forex losses 135 160
Professional fees related to the Nigerian regulatory fine negotiation 73 -
Basic headline earnings per share excluding Nigeria regulatory fine,
hyperinflation, tower profits, losses
from AIH, MEIH, IIG, tower companies, net forex losses and professional
fees related to the Nigerian regulatory fine 594 (12)
The Group reported a headline loss per share of 271 cents**, which was mainly as a result of the Nigerian
regulatory fine (474 cents**). Excluding the impact of the Nigerian fine, headline earnings per share (HEPS)
declined 69% to 203 cents. In addition, the headline number was negatively impacted by losses from joint ventures
and associates, which were negatively affected by hyperinflation of 20 cents** (positive impact of 40 cents**
in 2015), losses from the TowerCo’s of 136 cents** (3,5 cents** in 2015), AIH, MEIH and IIG of 27 cents**
(18 cents** in 2015) and net forex losses of 135 cents** (52 cents** in 2015). This was further negatively
impacted by a range of professional services relating to the negotiations that led to the reduction in the Nigeria
regulatory fine (73 cents**). Excluding the impact of the fine, hyperinflation, losses from the TowerCo’s, AIH,
MEIH and IIG, forex losses and a range of professional fees relating to the fine negotiations, basic HEPS
declined 11,7% to 594 cents.
Financial performance summary
The Group continued to benefit from its significant scale and footprint, maintaining its leadership position
in 15 markets. Group subscriber numbers remained flat at 232,6 million following 6,6 million subscriber
disconnections over the six month period in Nigeria, Uganda and Cameroon. Since October 2015 approximately
18 million subscribers across the Group were disconnected to ensure compliance with the subscriber registration
processes. MTN South Africa reported a decline in subscriber numbers mainly as a result of strong competition and
economic pressure in a highly penetrated market.
Group revenue increased by 14,0% to R78 878 million, benefiting from the average exchange rate movement of
the rand against the naira. On an organic basis, Group revenue increased by 1,5%*, impacted by a decline in
outgoing voice and data revenue in Nigeria following the withdrawal of regulatory services from MTN Nigeria until
May 2016. This had a significant negative impact on MTN Nigeria’s revenue growth for the first four months of
the period. This was partly offset by higher revenue growth by MTN South Africa, supported by strong device
sales and an increase in data revenue during the period.
The Group benefited from healthy double digit data revenue growth in the majority of the markets in which it
operates. Group data revenue increased by 32,2% (19,7%*) and contributed 25,2% to total revenue despite a
46,9% decline in the effective data tariff (in constant currency US dollar terms). Digital revenue, including
Mobile Financial Services revenue, contributed 32,1% to data revenue. This was supported by a 135% increase in
data traffic and the increased take up of digital lifestyle services.
Outgoing voice revenue increased by 8,0% and decreased by 5,4%* on an organic basis. This was negatively
impacted by a 12,2%* decline in the effective voice tariff (average price per minute, in constant currency US
dollar terms) as a result of continued price competition, subscriber disconnections and free minutes used for
subscriber re-registration campaigns. The use of multiple SIM cards, increased substitution for data services
and increased pressure on consumer spending also negatively impacted outgoing voice revenue.
MTN Nigeria’s competitiveness was compromised by the mandatory disconnection of subscribers and the
suspension of regulatory services until May 2016 when the operation attained the necessary approvals to introduce
market-related pricing plans and promotions. In addition, the introduction of regulatory restrictions on
“out-of-bundle” data tariffs impacted MTN Nigeria’s data revenue growth.
MTN South Africa’s revenue increased mainly as a result of higher device sales and data revenue. These were
supported by our continued investment in our 3G and LTE network as well as attractive data and digital value
propositions. Growth in outgoing voice revenue remained a challenge, impacted by a 48 hour network outage
affecting approximately one million subscribers in February 2016 and higher churn in the post-paid segment.
Excluding the impact of the Nigerian regulatory fine, hyperinflation and tower profits, the Group EBITDA
margin declined by 6,6 pp to 37,1%. This was a result of the lower EBITDA margins in Nigeria and South Africa.
The EBITDA margin in Nigeria was impacted by the 4,8%* decline in revenue and an 11,3%* increase in costs mainly
as a result of the transfer of the second tranche of the previously sold passive infrastructure into the
TowerCo as well as US dollar-denominated expenses associated with the TowerCo and build-to-suit sites. Costs were
further impacted by increased marketing and commission spend related to re-connecting subscribers affected by
the subscriber registration process. MTN South Africa’s EBITDA margin was negatively impacted by lower handset
margins following aggressive handset sales and increased network-related costs associated with the expansion
of 3G and LTE sites.
Cash inflows generated by operations decreased by 9,2%** to R23 870 million** mainly as a result of the down
payment of R5 870 million** relating to the Nigerian regulatory fine during the period.
The Group continued to increase investment in the network with a focus on increasing coverage, speed and
quality of 3G and LTE in prime areas to support the increasing demand for data services. Capital expenditure
(capex) increased by 26,9% (15,4%*) to R13 772 million. MTN South Africa’s capex amounted to R4 773 million,
representing 34,7% of total capex. Capex in Nigeria amounted to R2 534 million and was impacted by delays in
network re-planning. More recently, our capex in Nigeria was impacted by the limited availability
of US dollars. During the period, the Group rolled out 873 2G sites, 3 660 co-located 3G sites and 2 691 LTE
sites. The Group also rolled out 1 132 km of long-distance fibre and connected a total of 422 sites to fibre.
Capex spend included the purchase of LTE spectrum and licences in various markets to enable better quality
data networks across its operations.
Leadership changes
During the period the Group announced the appointment of new executives and additional independent
non-executive directors to the board with the objective of strengthening management, enhancing governance and aiding
the strategy of the Group.
Management
Following a widespread executive search, MTN announced the appointment of Rob Shuter as the new Group
president and CEO. Rob will join MTN as soon as is practically possible in 2017 but no later than 1 July 2017.
Rob has extensive experience in telecoms and banking across Africa and Europe, including holding the position of
CEO, Vodafone Europe cluster. The Group also welcomes the newly appointed vice presidents (VPs):
- Stephen van Coller, VP for M&A and Strategy, effective 1 October 2016, who brings with him commercial and
banking experience, and will help broaden MTN’s skill set as the Company evolves beyond telecommunications;
- Godfrey Motsa, VP for the South and East Africa region (excluding South Africa), who brings vast
experience in telecoms and operating within Sub-Saharan Africa.
- Kholekile Ndamase was appointed as deputy head of mergers and acquisitions, with effect from 10 September
2016. Kholekile joins MTN from Rand Merchant Bank (RMB), where he led the equity based financing business.
The Group appointed Babak Fouladi as Group chief technology and information officer, effective 1 June 2016.
Babak will spend 12 months as chief and technology officer for the South African operation until the network
is operating at an optimum level and higher quality before taking on the Group role. Babak brings with him
global expertise and experience to build and lead strong teams to drive and implement on large-scale converged
networks, complex systems and applications.
Brett Goschen, the Group chief financial officer (CFO), will be leaving MTN after 14 years of service to
MTN, effective 30 September 2016. At the same time he will be stepping down from the board of directors of the
Group. The board of directors and management would like to thank Brett for his valuable contribution to the
Group.Gunter Engling, currently CEO of MTN Rwanda and previously Group finance executive, will assume the position
of Acting Group CFO on Brett’s departure until a permanent CFO is appointed. The Group hopes to appoint a new
CFO before the year-end.
After completing his two key mandates of settling the Nigerian fine and appointing the new Group CEO,
Phuthuma Nhleko will revert to his role as non-executive chairman as soon as Rob Shuter assumes his position as
Group president and CEO. In the interim, Phuthuma will hand over more operational responsibility to Stephen van
Coller and Gunter Engling and will continue to provide the necessary leadership as non-executive chairman for a
maximum period of two years (until no later than December 2018) when he plans to step down from this position.
Board of directors (appointments and resignations)
The Group also refreshed the composition of the board of directors for MTN Group and MTN South Africa,
providing more in-depth commercial, risk and governance skills and experience.
Specifically, the following individuals have been appointed to the Group board of directors as independent
non-executive directors effective 1 August 2016:
- Stan Miller has global experience in expanding businesses into new markets, exposure to convergence, as
well as strong business and operational acumen. His telecoms experience ranges from co-founding subscription
television channel M-Net to leading the growth of Dutch telecoms company KPN in the Netherlands. He is the
executive chairman of AINMT A.B. Sweden and non-executive member of the board of MTS JSC. Russia, a
telecommunications operator in Russia.
- Paul Hanratty brings a wealth of experience in financial services in the UK, US, Africa, Asia and Latin
America. He has worked at Old Mutual for over 30 years and has sat on the boards of various other financial
services companies. Paul has extensive M&A experience and has devised and implemented growth strategies for
businesses in many countries.
- Nkululeko “Nkunku” Sowazi is the chairman of Kagiso Tiso Holdings, a leading South African investment
holding company, with significant interests in the media, financial and industrial sectors. Nkunku was the
executive chairman and co-founder of the Tiso Group and is currently a director of Grindrod Limited, a JSE listed
company, and a non-executive director of listed and unlisted organisations spanning Ghana, the UK, the US and
South Africa. Nkunku has had significant exposure to listed and non-listed Boards and has extensive experience in
M&A and management transformation. He sat on the Nominations Committee, Audit & Risk Committees at Exxaro
and Aveng.
MJN Njeke and JHN Strydom, who served on the board of directors of the Group as independent non-executive
directors for an aggregate period in excess of nine years, retired as directors of the Group at the Annual
General Meeting held on 25 May 2016. The board of directors of the Group thanks them for their valuable
contribution over the years.
Mike Harper, Mike Bosman, Lerato Phalatse and Trudi Makhaya have been appointed as independent non-executive
directors to the board of directors of MTN South Africa, effective 1 July 2016. The commercial experience of
these additional directors will greatly benefit MTN South Africa. These directors collectively have extensive
experience in the media, insurance, retail banking and FMCG sectors as well as in-depth knowledge of
stakeholder engagement.
Prospects
The MTN Group continues to work towards achieving its vision of “leading the delivery of a bold, new Digital
World to our customers”. The Group is in the process of undertaking, with external assistance, a deep and
fundamental strategic review of its operations and processes to ensure it is operating far more optimally given
the pressure on voice revenues, evolving customer needs for high quality data and more complex and competitive
market environments. This will reset and position the business for future growth in a rapidly evolving sector.
As part of the review, the following key areas will be addressed:
- An advanced analytics unit will be established to support the business to drive network quality and
high-speed data connectivity especially in key locations with high demand, provide compelling segmented offerings
to consumers and enterprises, improve customer service and increase targeted smartphone uptake.
- Operating efficiencies and improving customer service remain a priority with a focus on the service
channels productivity through digitisation and leveraging Mobile Money as a distribution channel. Continued network
optimisation and improved opex management, including the implementation of zero-based budgeting, will also
contribute to improving efficiencies.
- The Group will continue to explore opportunities to create value through leveraging its extensive
infrastructure across Africa and the Middle East.
- Improving the way of work through increased co-ordination between different parts of the business is key
to the success of this strategy.
- The Group will embark on a process of housing new revenue streams, particularly Digital services, outside
the core business. This will allow for more agility and greater flexibility to accelerate growth in these
areas. New revenue streams are expected to increase their contribution to revenue over the next 12-18 months.
The Group will also continue to seek value-accretive expansion opportunities in selected geographies across
Africa and the Middle East.
MTN’s investments in towers with IHS Holding Limited are evidenced by our substantial ownership interest in
INT Towers Limited and our direct investment in IHS. IHS continues to grow and develop its business with
leading market positions in 5 markets and has recently led in-market consolidation in Africa through its
acquisition of Helios Towers Nigeria. IHS is now the largest independent tower operator in EMEA by tower count
and the tenth largest independent tower company in the world, with more than 24,000 towers. IHS is extremely well
positioned for future growth and build-out from 3G upgrades and the move to LTE across its key markets. MTN will
benefit from IHS’ strong growth, IHS will also help us accelerate our network expansion in markets such as
Nigeria further improving the benefits and services for our customers.
MTN aims to list MTN Nigeria on The Nigerian Stock Exchange during 2017 and has established a management
task team with the responsibility to guide the company towards such a listing. The proposed listing is subject to
suitable market prevailing circumstances and conditions and the appropriate approvals from relevant
regulators and other stakeholders.
MTN Ghana will proceed with the localisation of 35% of its shares during the course of 2016. This is a
requirement of winning the auction for a 4G/LTE licence earlier this year.
We are confident that by year-end we would have successfully completed our proposed management changes. In
2017, we will have a permanent and refreshed senior management team to take the Group forward.
In Nigeria, following the reinstatement of regulatory services, we expect to improve our competitiveness in
this market and anticipate an improved performance for the remainder of the year. Data growth will also
benefit from the increased investment in 3G and LTE networks in key cities and the utilisation of the recently
acquired spectrum.
We anticipate a positive growth trend in South Africa, supported by a strong focus on customer service and
improving the network quality, capacity and speed. Data growth will continue to be underpinned by our on-going
significant investment in 3G and LTE.
The continued easing of sanctions in Iran and its related economic uplift offers significant opportunities
to expand services particularly in the digital space, benefiting from MTN’s strong position and a youthful
population. MTN continues to work towards remitting some of its cash amounting to approximately R15,4 billion from
MTN Irancell, although this a complex process.
In November 2016, MTN’s Broad-Based Black Economic Empowerment (BBBEE) vehicle, MTN Zakhele will unwind.
Upon unwinding, MTN Zakhele shareholders will be given the option to receive cash, MTN shares or potentially
re-invest into a new scheme. MTN is currently reviewing various options to create a new scheme to maintain its
BBBEE ownership credentials in line with the BBBEE codes.
The Group has declared an interim dividend of 250 cps. The FY 2016 minimum dividend, as previously noted at
the Group’s FY2015 results, is anticipated to be 700cps. This takes into consideration the impact of the
Nigerian regulatory fine and the limited US dollar liquidity in Nigeria. The minimum dividend remains at the
discretion of the board. Should operating conditions improve materially, we would look to declare a higher dividend
than advised.
Net subscriber additions and capex guidance 2016
Net subscriber additions
Country Guidance Updated
provided guidance
March 2016 Actual
SEA 3 515 1 850
South Africa 1 100 1 100
Uganda 1 800 950
Other 615 (200)
WECA 6 825 4 725
Nigeria 3 500 800
Ghana 1 100 1 800
Cameroon 1 000 1 000
Ivory Coast 400 475
Other 825 650
MENA 1 610 1 500
Iran 1 100 1 500
Syria - (100)
Sudan 350 400
Other 160 (300)
Total 11 950 8 075
CAPEX
Authorised Capitalised
ZAR (million) (Rm) June 2016 June 2015
SEA 13 548 5 626 5 896
South Africa 11 280 4 773 4 678
Uganda 807 364 556
Other 1 461 489 662
WECA 16 162 6 975 3 652
Nigeria 11 130 2 534 1 172
Ghana 1 258 1 646 355
Cameroon 1 157 1 121 943
Ivory Coast 815 842 422
Other 1 802 832 760
MENA 3 539 1 064 732
Syria(1) 1 543 191 56
Sudan(1) 1 280 549 337
Other 716 324 339
Head office companies and eliminations 1 865 107 572
Total 35 114 13 772 10 852
Hyperinflation - 78 17
Total reported 35 114 13 850 10 869
Iran (49%)(1) 3 518 2 313 1 854
(1) Excluding hyperinflation
TO LEAD THE DELIVERY OF A BOLD, NEW DIGITAL WORLD TO OUR CUSTOMERS
The Group continues to focus on growing non-voice revenue given the rapid evolution of telecommunications
into a data-led industry. Revenue is no longer driven by subscriber numbers but rather by consumer spending
patterns towards data and digital services. MTN is more agile and innovative and has a deeper understanding of
customer needs, enabling it to compete effectively.
GROUP CONSUMER
The Group Consumer division’s focus for the period was to integrate customer analytics across the operations
to meet customers’ changing needs. Improving analytics is a key priority for the Group with substantial room
for improvement and will form part of the strategic review the Group is currently undergoing.
During the period a number of global value propositions were introduced. “MTN Go”, a bundle plan focusing on
driving the transition to data, was launched in six markets and “MTN Hello World”, a global roaming
proposition, was launched in ten markets.
The Group’s net promoter score (NPS) improved from 24% in December 2015 to 27% in June 2016, closing the gap
with its competitors. This was mainly driven by improvement on the network, value offerings and brand image.
Improving NPS remains a key focus.
GROUP DIGITAL SERVICES
Group Digital Services continued to expand its e-commerce, digital media and mobile financial services
across Africa and the Middle East, leveraging MTN’s core competencies of a strong brand, knowledge of and access
to customers, scale and distribution. MTN recorded strong growth in digital services revenue, supported by
lifestyle and Mobile Financial Services. MTN recently launched Games Club, our premium gaming proposition and
continued to gain strong momentum on its music offerings as one of the major distributors of digital music
in Africa.
MTN Mobile Money registered customers increased by 5,0% to 36,5 million across 15 countries and increased
revenue by 40,8%* to R1 289 million when compared to June 2015. Active customers increased by 18,0%, supported
by a strong performance from MTN Uganda, MTN Ghana, MTN Rwanda and MTN Benin. Revenue growth was supported by
focused customer engagement and a common, more agile platform enabling converged campaigns and incentives. MTN
continues to focus on advanced financial services such as remittance services, micro-lending and saving
offerings and recorded 160 000 agents.
AIH and MEIH, MTN’s e-commerce joint ventures, continue to deliver good growth. While performance in the AIH
business was negatively impacted by the macro-economic slowdown in Nigeria, MEIH continued to gain strong
momentum. Unit economics in both businesses continued to improve. AIH recorded approximately 3 million customers,
and approximately 2,5 million transactions and 1,3 million leads on its classified business in the six-month
period. In addition, MEIH comprises seven companies in the Middle East, with approximately 600 000 customers
and 3,3 million transactions during the period. IIG, our Iranian e-commerce business, gained strong momentum,
supported by its taxi-hailing business benefiting from a youthful population and high smartphone penetration.
The TravelStart business, in which MTN acquired a 37,3% indirect interest through Amadeus, recorded 259 000
bookings during the period.
ENTERPRISE BUSINESS UNIT (EBU)
In the six-month period, EBU continued to align operations to become the ICT partner of choice for corporate,
multinational, SME and public sector customers. While there is a clear opportunity in this market, the EBU
function continues to operate in a competitive environment with little traction gained. The Group, as part of
its strategic review, will embark on a process aimed at accelerating growth in this area.
We continued to focus on the MTN Business Cloud, a hybrid platform using Windows Azure Pack, which is
available across all MTN operating companies offering infrastructure, platforms and databases as services. MTN
Business has also extended its Cloud Delivery Platform to provide various independent software vendor solutions,
particularly to SMEs in four markets. MTN Business invested in the rollout of Global MPLS (multiple protocol
label switching) across 27 points of presence together with centralised global monitoring and reporting services.
In addition, MTN Business has launched dedicated internet services to its clients in 11 markets. It also
extended its Pan African Internet of Things platform to Ghana and Cameroon during the period.
Financial review
Revenue
Group revenue increased 14,0% to R78 878 million for the six-month period. This was positively impacted by
the average exchange rate movement of the rand against the naira when compared to the previous corresponding
period. Over the period, the average rand weakened against all our major revenue contributing currencies,
declining 22,3% against the US dollar and 18,5% against the naira. In addition, the rand weakened 16,0% against the
Iranian rial, 21,9% against the Ghanaian cedi, 21,8% against the Central African franc, 11,7% against the
Ugandan shilling and 20,0% against the Sudanese pound. The rand strengthened 36,6% against the Syrian pound.
On an organic basis, Group revenue increased by 1,5%*. WECA revenue decreased by 2,5%* and remains the
largest contributor to total Group revenue at 59% at the end of June 2016. SEA grew revenue by 7,6%* and
contributed 32% to total Group revenue while MENA increased revenue by 1,9%* and contributed 9% to total Group revenue.
The lower-than-expected revenue growth was negatively impacted by a decline in revenue growth in Nigeria
(down 4,8%*), Cameroon (down 8,7%*), Ivory Coast (down 3,9%*) and Uganda (down 2,3%*). Regulatory challenges and
aggressive competition negatively impacted revenue growth in these markets. This was partly offset by higher
revenue growth in South Africa and Ghana, which increased by 5,1% and 18,9%* respectively. South Africa’s
increase in revenue was driven by higher handset sales and data revenue growth during the period while Ghana’s
healthy revenue growth was attributable to competitive voice and data offerings. Sudan and Syria also supported
growth in total Group revenue and increased revenue by 15,7%* and 10,5%*, respectively.
Total outgoing voice revenue declined by 5,4%* and contributed 57% to total Group revenue while data revenue
increased by 19,7%* and contributed 25% to total Group revenue. Incoming voice revenue declined by 2,7%* and
contributed 10% to total Group revenue. Device revenue increased 36,5%* and contributed 5% to total Group
revenue. SMS and other revenue comprise the remaining 3% of total Group revenue. SMS revenue decreased 22,0%*.
Outgoing voice revenue was negatively impacted by a decline in Nigeria (down 5,6%*) and South Africa (down
6,1%). Nigeria was impacted by the subscriber disconnections related to the subscriber registration process and
the withdrawal of regulatory services until the beginning of May 2016. The decline in South African revenue
was negatively impacted by a 48 hour network outage in February 2016 and increased churn in the post-paid
segment due to competition. While average voice traffic increased 7,9%, the Group US dollar effective voice tariff
in constant currency terms declined 12,2%*. This was largely due to free minutes offered as an incentive to
win-back disconnected subscribers and price competition in the majority of the key markets.
Data revenue growth was supported by healthy double-digit growth in the majority of operations despite a
continued reduction in data pricing as a result of competition. Data traffic increased 135,3% while the effective
data tariff declined 46,9%* (in constant currency US dollar terms). This was partly offset by a decline in
data revenue in Nigeria (down 2,7%*) as a result of stringent regulatory restrictions when charging
“out-of-bundle” data rates.
Digital revenue contributed 32,1% to total Group data revenue, supported by healthy growth in Mobile
Financial Services and an increased uptake of content services. These include entertainment, religious and
educational services.
Costs
Group operating costs excluding the impact of the Nigerian regulatory fine, hyperinflation and tower profits
increased by 27,4% to R49 605 million. This was impacted by average exchange rate movements of the rand against
the operating currencies, which had a negative impact of R1,8 billion.
On an organic basis, total Group costs increased by 22,8%*. WECA increased its costs by 9,1%* and
contributed 52% to total Group costs while SEA increased its costs by 37,2%* and contributed 36% to total Group costs.
MENA increased costs by 1,9%* and contributed 10% to total Group costs. Head office costs contributed 2% to
total Group costs.
Once-off costs included professional fees of R1 324 million and PPE impairment in South Sudan of R2 632
million*. Excluding these costs incurred, costs increased by 12,6%*. During the period R1 324 million* costs were
incurred on a range of professional services relating to the negotiations that led to a reduction of R34
billion in the Nigerian regulatory fine.
The increase in total costs was mainly as a result of higher costs in Nigeria (up 11,3%*). This was largely
impacted by US dollar-denominated exposure mainly associated with the previously concluded tower transactions,
rent and utilities related to build-to-suit sites, as well marketing and distribution costs related to the
subscriber registration process. MTN South Africa costs were higher by 14,0%, impacted by the increase in
network-related costs associated with the network expansion during the period. In South Sudan, the impairment on PPE
of R259 million had a significant impact on SEA costs.
Total direct network operating costs increased 33,3%* and contributed 25% to total costs while device costs
increased by 33,5%* and contributed 12% to total costs. Interconnect and roaming costs increased 2,3%* and
contributed 15% to total costs while staff costs increased 7,6%* and contributed 10% to total Group costs.
Selling, distribution and marketing costs increased marginally and contributed 19% to total Group costs. Government
and regulatory costs declined 5,3%* and contributed 6% to total Group costs while other operating costs
increased 93,9%* and contributed 13% to total Group costs.
The increase in direct network operating costs was due to aggressive 3G and LTE network expansion in key
markets, higher rent and utilities costs and foreign-denominated expenses mainly in Nigeria. The increase in
device costs was mainly a result of higher volumes of smartphones sold in South Africa.
EBITDA
Reported Group EBITDA decreased 38,4%** to R18 882 million**. This was negatively impacted by the accrual
for the Nigerian regulatory fine (R10 499 million**) following the agreed settlement on 10 June 2016. The
deferred profit from the sale of towers in Ghana (R18 million**) and an adjustment for hyperinflation (R90
million**) positively impacted Group EBITDA.
Excluding these, EBITDA decreased by 3,3% to R29 273 million. This was positively impacted by foreign
exchange movements of 23% of which South Sudan made up 8,7%.
On an organic basis, EBITDA declined by 25,9%*. WECA EBITDA declined by 14,0%* and contributed 70% to total
EBITDA. SEA’s EBITDA decreased by 47,3%* and contributed 25% to EBITDA while MENA increased EBITDA by 1,9%*
and contributed 8% to total EBITDA. Head office negatively impacted EBITDA by 3%.
Organic EBITDA was negatively impacted by once-off costs in the period. In addition, organic EBITDA was
negatively impacted by a decline in Nigeria (down 16,9%*) and South Africa (down 11,1%). MTN Nigeria’s decline in
EBITDA was as a result of the second tranche transfer of passive infrastructure into the TowerCo as well as US
dollar-denominated expenses associated with the TowerCo and build-to-suit sites. MTN South Africa’s EBITDA
was negatively impacted by higher device costs and an increase in network-related costs following aggressive
expansion of its 3G and LTE rollout. MTN Ghana (up 16,3%*), MTN Syria (up 94,9%*) and MTN Sudan (up 23,0%*)
supported total Group EBITDA. This was attributable to efficient cost control in Ghana, Cameroon and Sudan despite
the depreciation of local currencies against the US dollar. The growth in MTN Syria’s EBITDA was mainly due to
the decrease in revenue share to 30% from 50% following the conversion of the build-operate-transfer (BOT)
licence into a full licence.
Excluding the impact of the Nigerian regulatory fine, tower profits and hyperinflation, the Group recorded a
6,6 pp decline in its EBITDA margin to 37,1%, largely impacted by lower margins in Nigeria and South Africa
and the once-off costs reported in the period.
Depreciation and amortisation
Depreciation increased by 22,3% (8,1%*) to R10 858 million impacted by higher depreciation charges in South
Africa as a result of higher capex in 2015. Amortisation costs increased by 17,2% (3,9%*) to R2 152 million,
driven by higher spend on software in previous years and the goodwill impairments in Guinea Conakry (R402
million) and Afrihost (R202 million).
Net finance costs
Net finance costs amounted to R5 461 million compared to R2 320 million recorded in the previous comparable
period. This was due to an increase in net foreign exchange losses to R3 606 million from R1 481 million in
the prior period, impacted by unfavourable exchange rates at the end of the period, in particular the
depreciation of the Nigerian naira against the US dollar and the Iranian rial against the rand. An increase in net
interest paid to R1 855 million from R839 million paid in the previous comparable period also contributed to the
increase in net finance costs. The increase in the net interest expense is due to the higher net debt of R49 257
million** compared to R17 161 million** reported in the comparable period.
Net foreign exchange losses include:
- Forex losses in Mauritius of R1 078 million relating mainly to the Iran receivables;
- Forex losses in Nigeria of R1 124 million incurred on US dollar-denominated intercompany loans and third
party payables (R2 034 million of the losses on third party US dollar loans have been deferred in equity
following the application of net investment hedge accounting);
- Forex losses of R408 million in South Sudan on third party US dollar payables;
- Forex losses of R395 million in Sudan mainly on settlement of third party trade payables; and
- Forex losses of R178 million in South Africa on foreign exchange contracts relating to foreign payables in
respect of the purchase of handsets.
Following the significant depreciation of the Sudanese pound, MTN South Sudan’s foreign currency translation
reserves included in equity amounted to approximately R3 billion at 30 June 2016. Should the Group decide to
exit this operation, this amount will be recycled to the income statement as a loss.
Share of results of joint ventures and associates after tax
Joint ventures and associates reported a loss of R1 692 million** compared to a gain of R2 027 million** in
the previous comparable period. This included a charge of R1 039 million** incurred by Iran mainly relating to
the subsequent depreciation and amortisation of previously hyper-inflated assets that were historically
written up under hyperinflation reporting. Iran hyperinflation accounting was discontinued effective 1 July 2015.
Losses of R2 463 million** from the Nigerian TowerCo were mainly as a result of foreign exchange losses (R2 282
million**) on US dollar-denominated loans and short-term losses from AIH, MEIH and IIG (R494 million**).
TAXATION
The Group’s reported effective tax rate decreased to negative 309,5%** from 31,0%** in the previous
comparable period, impacted by the Nigeria regulatory fine and hyperinflation. Excluding this impact, the effective
tax rate increased to 49,2% from 32,9% in the previous comparable period. Lower profit before tax was due to the
reported losses in joint ventures and associates, which impacted profit before tax, the higher ratio of
withholding tax and denied assessed losses in Guinea Conakry and South Sudan as well as by a range of professional
services relating to the negotiations that led to a reduction of R34 billion in the Nigerian regulatory fine.
If the loss before tax is further analysed and adjusted for the effects of losses from joint ventures and
associates, South Sudan unrealised forex losses, the Guinea Conakry goodwill impairment, the South Sudan PPE
impairment and a range of professional fees relating to the Nigerian regulatory fine, the Group effective tax
rate decreases to 33,0%.
The Group’s taxation charge decreased by 24,6% (25,0%*) to R4 694 million for the period. This was a result
of lower profit before tax and a higher deferred tax credit due to increased unrealised foreign exchange
losses on US dollar-denominated intercompany loans and third party payables in Nigeria.
Earnings/losses
The Group reported a basic headline loss per share of 271 cents** largely impacted by the Nigerian
regulatory fine expense (474 cents**), hyperinflation (20 cents**), and losses incurred on the Group’s investments in
Rocket (27 cents**) and tower companies (136 cents**). The headline figure was further impacted by forex losses
(135 cents**) and by a range of professional services relating to the negotiations that led to a reduction in
the Nigerian regulatory fine (73 cents**). Excluding these impacts, HEPS declined 11,7% to 594 cents. The
attributable loss per share was 301 cents** from attributable earnings per share of 653 cents in the comparative
period.
Cash flow
Cash inflows generated from operations decreased by 9,2%** to R23 870 million** mainly as a result of the
Nigerian regulatory fine payments of R5,9 billion** during the period. Cash capex of R14 024 million** included
the purchase of 4G spectrum in Ghana (R973 million**), Nigeria licence spectrum (R1 billion**) and the LTE and
fibre licence in Congo Brazzaville (R289 million**).
Capital expenditure
Capex increased 27,4%** to R13 850 million**, of which R1 241 million was related to foreign currency
movements.
Financial position
Net debt increased to R49 257 million** compared to net debt of R31 635 million** reported at the end of
December 2015. The Group reported a net debt/EBITDA ratio of 0.83 excluding the Nigerian regulatory fine. The net
debt position at the end of the period was mainly impacted by the following:
- Nigerian regulatory fine payment R5 870 million**;
- Group dividend paid to shareholders of R15 212 million**;
- Dividends paid to minority shareholders of R790 million**;
- An increase in capital expenditure and licences to R16 112 million**;
- Investments made in Amadeus (TravelStart), the Autopage acquisition and cash paid to AIH on capital calls
of R1 702 million**;
- Net interest of R2 313 million**; and
- Lower cash generated from operations.
Operational review
SEA
- Subscribers remained flat at 52,8 million
- Revenue increased by 7,6%*
- Data revenue increased by 21,8%*
South Africa
- Subscribers decreased by 2,6% to 29,8 million
- Revenue increased by 5,1%
- Service revenue increased by 0,7%
- Data revenue increased by 19,2%
- EBITDA margin declined by 5,5 pp to 30,1%
MTN South Africa reported a lower-than-expected performance, negatively impacted by network outages in some
areas, competition and economic pressure impacting consumer spending. The result was supported by good growth
in data usage benefiting from aggressive smartphone device sales and continued efforts to improve 3G and LTE
network quality. The operation’s subscriber base declined 2,6% to 29,8 million. The pre-paid and post-paid
segments declined by 2,7% to 24,7 million and 2,1% to 5,1 million, respectively.
Total revenue increased by 5,1% to R19 841 million mainly as a result of higher data and device revenue
growth. This was partly offset by a 6,1% decline in outgoing voice revenue. Service revenue, which excludes device
revenue, remained relatively flat. Data revenue increased by 19,2%, contributing 34,1% to total revenue. The
number of smartphones on the network increased by 18,4% to 9,3 million (restated to align with the Group
definition) while megabytes per user increased 53,8% for the period. Device sales in the previous comparable period
were impacted by the industrial strike action and supply chain challenges.
Digital revenue gained momentum and contributed 13,5% to data revenue. This was attributable to additional
services being offered, including international content. EBU continued to operate in a competitive environment.
During the period the operation entered into a sales agreement to dispose of its 50,02% stake in Afrihost
(Proprietary) Ltd.
The EBITDA margin declined by 5,5 pp to 30,1% mainly as a result of increased device costs relating to
higher volumes sold and the impact of network-related costs as a result of the continued rollout of 3G and
LTE sites.
Capex for the six months amounted to R4 773 million with the rollout of 369 co-located 3G sites and 284 LTE
sites. The operation continued to improve quality and capacity of the network in key cities to cater for
increased data traffic. In addition, 175 sites were connected to fibre. Fibre to the home connections remain a
priority with approximately 10 000 homes passed, of which 40% were rolled out during the period.
On 15 July 2016, the national regulator, Independent Communications Authority of South Africa (ICASA)
published an invitation to apply for high demand spectrum, in the 700MHz, 800Mhz and 2.6GHz spectrum bands. ICASA
expects to conclude the licensing by the end of March 2017. There are four lots on offer with a reserve price of
R3 billion. MTN has been analysing the invitation and is actively preparing documentation to meet the
deadline for enquiries relating to the Information Technology Act (ITA). MTN has noted, with interest, media reports
that the Minister of Telecommunications and Postal Services intends to challenge ICASA regarding the
abovementioned ITA and MTN will continue to monitor the developments.
Other SEA - across the rest of the region subscribers increased by 3,6% to 23,1 million for the period. This
was mainly underpinned by good growth in Uganda.
MTN Uganda increased its subscriber base by 10,8% for the six months to 9,9 million following the
disconnection of subscribers reported in the second half of 2015. This was supported by customer acquisitions through
voice bundle propositions and the continued success of MTN Zone, resulting in market share growth to 52,7%.
Total revenue declined by 2,3%* mainly as a result of a decline in both outgoing and incoming voice revenue
impacted by the implementation of the One Network Area, the decline in mobile termination rates and the impact
of the disconnections in the second half of 2015. Data revenue increased by 22,7%* and contributed 32,8% to
total revenue. This was supported by data bundles, including successful shorter-duration bundles.
Digital revenue contributed 70,5% to data revenue, supported by local content services including MTN Play.
MTN Mobile Money customers decreased 24,4% to 7,2 million mainly as a result of the disconnections during the
subscriber registration process in the second half of 2015.
MTN Uganda’s EBITDA margin decreased by 6,0 pp to 30,0%, impacted by higher network operating costs and
associated US dollar-denominated expenses, as well as higher transmission costs following the rollout of a 3G and
LTE network. Higher marketing and distribution costs were incurred mainly as a result of the launch of 3G and
4G services.
Capex decreased by 42,1%* to R364 million, impacted by a delay in the supply chain process. During the
period, 195 co-located 3G and 100 LTE sites were rolled out.
WECA
- Subscribers decreased by 1,0% to 105,5 million
- Revenue decreased by 2,5%*
- Data revenue increased by 13,8%*
Nigeria
- Subscribers decreased by 3,7% to 58,9 million
- Revenue decreased by 4,8%*
- Data revenue decreased by 2,7%*
- EBITDA margin declined by 7,5 pp to 49,8%
MTN Nigeria continued to experience a challenging operating environment impacted by the disconnection of the
final batch of subscribers in compliance with the subscriber registration process during the period. The
operation was also impacted by the inability to offer competitive prices as a result of the suspension of
regulatory services until May 2016, when the operation obtained the necessary approval to offer competitive pricing
plans and promotions. Tough economic conditions further negatively impacted consumer spending. MTN Nigeria
increased market share to 46,2%, despite the decline in its subscriber base by 3,7% to 58,9 million (including
568 000 Visafone subscribers).
Total revenue declined by 4,8%* as a result of lower outgoing voice revenue and lower data revenue. These
were impacted by regulatory requirements to seek permission to charge “out-of-bundle” data rates, multi-SIMs and
delays in competitive offerings. Data revenue declined by 2,7%* and contributed 19,3% to total revenue. The
number of smartphones on the network increased by 11,2% to 16,0 million.
Digital revenue continued to gain momentum and contributed 51,7% to data revenue. This was supported by good
growth in music and other lifestyle content services.
The number of registered accounts on MTN Nigeria’s Mobile Money offering, Diamond Yellow, increased by 5,0%
to 6,5 million.
The EBITDA margin declined by 7,5 pp to 49,8%, impacted by the transfer of the second tranche of passive
infrastructure into the TowerCo as well as US dollar-denominated expenses associated with the TowerCo and
build-to-suit sites. This was further impacted by a 13,8%* increase in marketing costs relating to the subscriber
registration process as well as a range of professional services fees incurred to the settlement of the
regulatory fine.
Over the six month period, 428 3G sites and 507 LTE sites were rolled out. The operation experienced some
delays in the network re-planning and a delay with equipment purchases as a result of foreign exchange
limitations. Capex for the period increased by 78,9%* to R2 534 million. Improving the quality of the 3G co-located
network and the rollout of LTE remains a priority. During the period, the operation purchased additional LTE
spectrum for a consideration of R1 billion.
Other WECA - the remainder of the region increased its subscriber base by 2,8% to 46,6 million driven by
solid growth in Ghana and satisfactory growth in Cameroon.
MTN Ghana delivered a strong performance and grew its subscriber base by 8,1% to 17,6 million. This was
supported by the launch of LTE services, the first operator to do so, as well as attractive value propositions,
which contributed to market share growth to 53,8%.
Total revenue increased by 18,9%*, supported by strong growth in data and outgoing voice revenue. Data
revenue grew by 68,0%* and contributed 38,5% to total revenue supported by data bundles, including 4G data bundles,
benefiting from superior data network quality and increased smartphone penetration. Smartphones on the
network increased by 21,7% to 3,6 million.
Digital revenue showed healthy growth, underpinned by attractive lifestyle content bundles and good momentum
gained in mobile financial services. Digital revenue contributed 47,9% to data revenue. MTN Mobile Money
subscribers increased by 23,3% to 7,0 million, supported by international remittances.
The EBITDA margin declined 0,9 pp to 38,8% mainly as a result of higher transmission costs and the impact of
foreign-denominated expenses following the depreciation of the cedi, as well as high inflation.
Capex increased by more than 100%* to R1 646 million with a key focus on the rollout of LTE sites. The
operation added 110 co-located 3G and 435 LTE sites during the period. Capex includes the 4G licence acquired
in H2 15.
MTN Cameroon increased its subscriber base by 5,0% to 9,6 million despite the subscriber registration
process, which was relatively well managed and supported by aggressive subscriber registration campaigns. Market
share grew to 57,4% as a result of improved network quality, expansion of the LTE footprint and increased
smartphone penetration.
Total revenue declined by 8,7%* mainly as a result of a decline in outgoing voice revenue impacted by price
competition and free minutes used in relation to the subscriber registration process. However, data revenue
increased by 49,5%* and contributed 18,8% to total revenue. This was supported by increased 3G device
penetration and the rollout of 3G and LTE networks. Smartphones on the network increased by 34,1% to 2,6 million.
Digital revenue contributed 21,7% to data revenue. MTN Mobile Money registered subscribers increased by
21,1% to 2,4 million while active subscribers increased by more than 100%, supported by a Mobile Money brand
campaign to increase activity.
MTN Cameroon’s EBITDA margin increased by 0,2 pp to 38,0%. This was supported by strong cost optimisation
and a substantial reduction in transmission costs due to the use of the WACS cable.
Capex decreased 6,9%* to R1 121 million with a focus on 3G and LTE network rollout and quality. During the
period the operation rolled out 189 co-located 3G sites and 64 LTE sites.
MTN Ivory Coast reported a decline in its subscriber base of 1,3% to 8,2 million, negatively impacted by the
subscriber registration requirements and aggressive competition.
Total revenue decreased by 3,9%* mainly due to lower outgoing voice revenue impacted by a decrease in
minutes from a lower subscriber base. This was partially offset by a 13,4%* increase in data revenue, which
contributed 17,1% to total revenue. This was supported by the introduction of new segmented data bundles and an
increase in 3G and LTE coverage. Growth in data revenue was also attributable to a switch from WiMax devices to LTE
TDD devices.
Digital revenue contributed 50,2% to data revenue, driven by an increase in digital services offered. MTN
Mobile Money continued to make good progress and increased registered subscribers by 10,4% to 3,2 million.
The EBITDA margin decreased by 0,6 pp to 36,0%.
Capex increased 57,1%* to R842 million with a strong focus on 3G and LTE network rollout. During the period,
the operation rolled out 151 co-located 3G sites and 343 LTE sites.
MENA
- Subscribers increased by 1,1% to 74,1 million
- Revenue increased by 1,9%* (excluding Iran)
- Data revenue increased 44,5%*(excluding Iran)
Other MENA - in the remainder of the region, the subscriber base declined marginally by 0,4% to 26,8
million.
MTN Sudan increased its subscriber base by 4,2% to 8,8 million driven by targeted marketing campaigns. Total
revenue increased by 15,7%* mainly as a result of strong data revenue growth. Data revenue increased by
78,3%* and contributed 27,7% to total revenue as a result of increased data users. Data users increased 4,8% to
4,4 million. Digital revenue contributed 19,4% to data revenue. The EBITDA margin decreased by 1,9 pp to
35,4%. Capex amounted to R549 million for the six-month period.
MTN Syria reported a 2,4% decrease in its subscriber base to 5,8 million despite operating in a very
challenging environment. Total revenue increased by 10,5%* mainly supported by outgoing voice and data revenue.
Data revenue increased by 16,9%* and contributed 28,8% to total revenue. The EBITDA margin increased by 12,3 pp to
28,6% mainly supported by the decrease in revenue share to 30% from 50% following the conversion of the BOT
licence and cost optimisation. Capex in the six-month period amounted to R191 million.
IRAN (JOINT VENTURE, EQUITY ACCOUNTED, 49%)
- Subscribers increased by 2,0% to 47,3 million
- Revenue increased by 8,7%*
- Data revenue increased 65,3%*
- EBITDA margin decreased by 2,4 pp to 37,7%
MTN Irancell delivered a sound performance despite a highly competitive environment and regulatory pressure
on data tariffs. Subscribers increased by 2,0% to 47,3 million mainly as a result of attractive segmented
voice and data offerings, data bundles and a quality 3G and LTE network experience.
Total revenue increased by 8,7%* driven by increased data revenue growth partly offset by a decline in
outgoing voice revenue of 4,6%*. Outgoing voice revenue was negatively impacted by the continuous substitution of
data services. Data revenue increased by 65,3%* underpinned by increased smartphone penetration, a strong 3G
and LTE network as well as improved customer experience. The number of smartphones on the network increased
25,8% to 25,8 million. At the end of the period, data revenue contributed 40,6% to total revenue while outgoing
voice revenue contributed 38,5%.
Digital revenue contributed 32,6% to data revenue, supported by strong growth in local lifestyle
content-based usage.
The EBITDA margin decreased by 2,4 pp to 37,7% as a result of increased transmission costs associated with
the data network expansion, rent and utilities as well as marketing costs related to 3G and LTE campaigns.
The operation increased capex by 24,8% to R4 721 million. During the period it added 1 783 co-located 3G
sites and 851 LTE sites.
Annexure
ZAR (million) Actual (1) (2) (3) Actual
H1-16 Hyper- Tower Nigeria 2016
inflation profit regula- adjusted
tory
fine
Revenue 79 115 237 - - 78 878
Other income 367 - 18 - 349
EBITDA 18 882 90 18 (10 499) 29 273
Depreciation, amortisation and impairment
of goodwill 13 691 77 - - 13 614
Profit from operations 5 191 13 18 (10 499) 15 659
Net finance cost 5 945 32 - 452 5 461
Share of results of joint (1 692) (1 039) - - (653)
ventures and associates
after tax
Net monetary gain 919 919 - - -
(Loss)/profit before tax (1 527) (139) 18 (10 951) 9 545
Income tax expense 4 726 32 - - 4 694
(Loss)/profit after tax (6 253) (171) 18 (10 951) 4 851
Non-controlling interests (764) 204 - (2 319) 1 351
Attributable (loss)/profit (5 489) (375) 18 (8 632) 3 500
EBITDA margin 23,9% - - - 37,1%
Effective tax rate (309,6%) - - - 49,2%
ZAR (million) Actual (1) (2) Actual Adjusted
H1-15 Hyper- Tower 2015 change %
inflation profit adjusted
Revenue 69 304 94 - 69 210 14
Other income 411 - 352 59 492
EBITDA 30 675 49 352 30 274 (3)
Depreciation, amortisation and impairment
of goodwill 10 750 35 - 10 715 27
Profit from operations 19 925 14 352 19 559 (20)
Net finance cost 2 319 (1) - 2 320 135
Share of results of joint 2 027 362 - 1 665 (139)
ventures and associates
after tax
Net monetary gain 496 496 - - NM
(Loss)/profit before tax 20 129 873 352 18 904 (50)
Income tax expense 6 249 26 - 6 223 (25)
(Loss)/profit after tax 13 880 847 352 12 681 (62)
Non-controlling interests 1 980 105 75 1 800 (25)
Attributable (loss)/profit 11 900 742 277 10 881 (68)
EBITDA margin 44,3% 43,7% (6,6) pp
Effective tax rate 31,0% 32,9% 16,3 pp
(1) Represents the exclusion of the impact of hyperinflation and the relating goodwill impairment of certain of
the Group’s subsidiaries (MTN Sudan and MTN Syria) and the Group’s joint venture in Iran, being accounted
for on a hyperinflationary basis in accordance with International Financial Reporting Standards (IFRS) on the
respective financial statement line items affected. During 2015, the Iranian economy was assessed to no
longer be hyperinflationary and hyperinflation accounting was discontinued effective 1 July 2015.
(2) Represents the exclusion of the financial impact relating to the sale of tower assets during the
financial period on the respective financial line items impacted, which include:
- Tower sales profits for the period related to the Ghana release of deferred profit of R18 million
(H1 15: The re-measurement of the contingent consideration receivable from the Nigeria tower transaction
(tranche 1) of R339 million and the Ghana release of deferred profit of R13 million).
(3) Represents the impact of the Nigerian regulatory fine subsequent to conclusion of the settlement
agreement on the respective financial line items impacted, which include:
- The re-measurement impact when the settlement agreement was entered into on 10 June 2016, constituting
the difference between the balance of the provision recorded on this date (after taking into account
interest accrued from the beginning of the financial period up to 9 June 2016) and the present value of
the financial liability arising on this date in accordance with IFRS (included in the EBITDA line);
- The unwinding of the finance costs over the period due to the recognition of provision/financial
liability at the present value of the future payments (included on the finance cost line);
- The minority impact on the items noted above.
As the Group will continue in its strategy to monetise its passive infrastructure, similar tower sale
transactions may continue going forward. In addition, the impact of hyperinflation on the Group’s results will
continue for as long as certain of the Group’s operations are considered to be operating in hyperinflationary
economies or the Group’s net assets include historic adjustments for hyperinflation that have not yet been fully
depreciated or amortised through profit or loss. Going forward, the impact of the Nigerian regulatory fine will be
limited to the unwinding of the finance cost element of the future payments over the settlement period, net of
minority interests.
Declaration of interim ordinary dividend
Notice is hereby given that a gross interim dividend of 250 cents per share for the period to 30 June 2016
has been declared payable to MTN shareholders. The number of ordinary shares in issue at the date of this
declaration is 1 844 049 073 (including 10 206 255 treasury shares).
The dividend will be subject to a maximum local dividend tax rate of 15% which will result in a net dividend
of 212,50 cents per share to those shareholders who bear the maximum rate of dividend withholding tax of
37,50 cents per share. The net dividend per share for the respective categories of shareholders for the different
dividend tax rates is as follows:
0% 250 cents per share
5% 237,50 cents per share
7.5% 231,25 cents per share
10% 225,00 cents per share
12.5% 218,75 cents per share
15% 212,50 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 Tuesday, 23 August 2016
First trading day ex dividend on the JSE Wednesday, 24 August 2016
Record date Friday, 26 August 2016
Payment date Monday, 29 August 2016
No share certificates may be dematerialised or re-materialised between Wednesday, 24 August 2016, and
Friday, 26 August 2016, both days inclusive. On Monday, 29 August 2016, 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, 29 August 2016 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, 29 August 2016.
The board of directors confirms that the Group will satisfy the solvency and liquidity test immediately
after completion of the dividend distribution.
For and behalf of the board
PF Nhleko
Executive Chairman
Fairland
4 August 2016
MTN Group Limited
Reviewed condensed consolidated interim financial statements
for the six months ended 30 June 2016
Results overview
Reviewed condensed consolidated interim financial statements in accordance with International Financial
Reporting Standard (IAS) 34 Interim Financial Reporting
The Group’s reviewed condensed consolidated interim financial statements for the six months ended 30 June 2016
have been independently reviewed by the Group’s external auditors. The preparation of the condensed
consolidated interim financial statements was supervised by the Group chief financial officer, BD Goschen, BCom,
BCompt (Hons), CA(SA).
The results were made available on 5 August 2016.
Condensed consolidated income statement
for the
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 20151 2015
Reviewed Reviewed Audited
Note Rm Rm Rm
Revenue 79 115 69 304 147 063
Other income 367 411 8 409
Direct network and technology operating costs2 (12 291) (8 327) (18 809)
Costs of handsets and other accessories (6 065) (4 449) (10 829)
Interconnect and roaming costs (7 358) (6 330) (13 102)
Staff costs (4 777) (4 155) (8 587)
Selling, distribution and marketing expenses (9 624) (8 439) (18 412)
Government and regulatory costs (2 982) (2 835) (5 888)
Other operating expenses3 (7 004) (4 505) (11 433)
EBITDA before Nigeria regulatory fine 29 381 30 675 68 412
Nigeria regulatory fine 17 (10 499) - (9 287)
EBITDA 18 882 30 675 59 125
Depreciation of property, plant and equipment (10 913) (8 905) (19 557)
Amortisation of intangible assets (2 174) (1 845) (3 736)
Impairment of goodwill 8 (604) - (504)
Operating profit 5 191 19 925 35 328
Net finance costs (5 945) (2 319) (3 010)
Net monetary gain 919 496 1 348
Share of results of joint ventures and
associates after tax 9 (1 692) 2 027 1 226
(Loss)/profit before tax (1 527) 20 129 34 892
Income tax expense (4 726) (6 249) (11 322)
(Loss)/profit after tax (6 253) 13 880 23 570
Attributable to:
Equity holders of the Company (5 489) 11 900 20 204
Non-controlling interests (764) 1 980 3 366
(6 253) 13 880 23 570
Basic (loss)/earnings per share (cents) 7 (301) 653 1 109
Diluted (loss)/earnings per share (cents) 7 (301) 650 1 106
1 Restated, refer note 16.
2 The increase in direct network and technology operating costs was mainly due to aggressive 3G and LTE network
expansion in key markets, higher rent and utilities cost and foreign denominated expenses mainly in Nigeria.
3 Including costs amounting to R1 324 million incurred on professional services relating to the negotiations
that led to a reduction of R34 billion in the Nigeria regulatory fine (note 17).
Condensed consolidated statement of comprehensive income
for the
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
(Loss)/profit after tax (6 253) 13 880 23 570
Other comprehensive (loss)/income after tax:
Exchange differences on translating foreign
operations including the effect of hyperinflation1 (12 499) (3 273) 22 203
Equity holders of the Company (11 866) (3 181) 21 033
Non-controlling interests (633) (92) 1 170
Net change in fair value of available-for-sale
investments1, 2 2 672 - -
Equity holders of the Company 2 672 - -
Non-controlling interests - - -
Total comprehensive (loss)/income (16 080) 10 607 45 773
Attributable to:
Equity holders of the Company (14 683) 8 719 41 237
Non-controlling interests (1 397) 1 888 4 536
(16 080) 10 607 45 773
1 This component of other comprehensive income does not attract any tax and may subsequently be
reclassified to profit or loss.
2 The available-for-sale investment relates to the Group’s investment in IHS Holdings Limited (IHS).
Condensed consolidated statement of financial position
as at
Note 30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
Non-current assets 200 447 161 219 218 435
Property, plant and equipment 93 462 85 501 106 702
Intangible assets and goodwill 52 172 37 484 55 887
Investment in joint ventures and associates1 32 169 24 978 35 552
Deferred tax and other non-current assets2 22 644 13 256 20 294
Current assets 82 468 85 269 95 432
Non-current assets held for sale 18 466 3 959 10
82 002 81 310 95 422
Other current assets 12 940 12 292 15 940
Trade and other receivables 41 470 37 003 43 570
Restricted cash 637 1 001 1 735
Cash and cash equivalents 26 955 31 014 34 177
Total assets 282 915 246 488 313 867
Total equity 119 796 127 420 151 838
Attributable to equity holders of the Company 116 669 122 702 146 369
Non-controlling interests 3 127 4 718 5 469
Non-current liabilities 84 000 51 495 72 510
Interest-bearing liabilities 12 64 190 39 511 52 661
Deferred tax and other non-current liabilities 19 810 11 984 19 849
Current liabilities 79 119 67 573 89 519
Non-current liabilities held for sale 18 208 15 -
78 911 67 558 89 519
Interest-bearing liabilities 12 17 757 16 548 22 510
Trade and other payables 43 602 31 896 40 484
Other current liabilities 17 552 19 114 26 525
Total equity and liabilities 282 915 246 488 313 867
1 The decrease in investment in joint ventures and associates since 31 December 2015 is mainly due to the
Group’s share of the attributable loss, amounting to R2,5 billion (note 9) and foreign currency translation
loss amounting to R3,1 billion from its investment in Nigeria Tower InterCo B.V., offset by its increase in
investment of R2 312 million in Africa Internet Holding GmbH (AIH) (note 14) during the period.
2 Other non-current assets include the revaluation of the Group’s investment in IHS amounting to R2,7 billion.
The strengthening of the rand, which is the presentation currency of the Group, against the functional currencies
of the Group’s largest operations contributed significantly to the decrease in assets and liabilities since
31 December 2015 which are translated into the Group’s presentation currency at closing rates at the end of
the reporting period.
Condensed consolidated statement of changes in equity
for the
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
Opening balance at 1 January 146 369 128 517 128 517
Total comprehensive (loss)/income (14 683) 8 719 41 237
(Loss)/profit after tax (5 489) 11 900 20 204
Other comprehensive (loss)/income after tax (9 194) (3 181) 21 033
Transactions with shareholders
Shares issued ^ ^ -
Shares cancelled - (^) (^)
Decrease in treasury shares (^) - 69
Share buy-back - (^) -
Share-based payment transactions 130 140 532
Settlement of vested equity rights - - (288)
Dividends declared (15 231) (14 697) (23 506)
Other movements 84 23 (192)
Attributable to equity holders of the Company 116 669 122 702 146 369
Non-controlling interests 3 127 4 718 5 469
Closing balance 119 796 127 420 151 838
Dividends declared during the period (cents
per share) 830 800 1 280
Dividends declared after the period end (cents
per share) 250 480 830
^ Amount less than R1 million.
Condensed consolidated statement of cash flows
for the
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 20151 2015
Reviewed Reviewed Audited
Rm Rm Rm
Net cash (used in)/generated from operating activities (436) 1 432 13 122
Cash generated from operations 23 870 26 289 57 598
Dividends paid to equity holders of the Company (15 212) (14 697) (23 506)
Dividends paid to non-controlling interests (790) (3 042) (5 777)
Dividends received from associates and joint ventures 426 285 577
Other operating activities (8 730) (7 403) (15 770)
Net cash used in investing activities (14 209) (14 471) (34 290)
Acquisition of property, plant and equipment (10 134) (7 636) (21 612)
Acquisition of intangible assets (3 890) (4 194) (10 412)
Movement in investments and other investing activities (185) (2 641) (2 266)
Net cash from financing activities 13 608 1 558 8 101
Proceeds from borrowings 23 967 9 711 23 384
Repayment of borrowings (10 363) (8 100) (14 802)
Other financing activities 4 (53) (481)
Net decrease in cash and cash equivalents (1 037) (11 481) (13 067)
Cash and cash equivalents at beginning of the period 34 139 43 072 43 072
Exchange (losses)/gains on cash and cash equivalents (6 272) (787) 3 860
Net monetary gain on cash and cash equivalents 107 134 274
Net cash and cash equivalents at end of the period 26 937 30 938 34 139
1 Restated, refer note 16.
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2016
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 independent auditors,
PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc., who have expressed an unmodified conclusion thereon.
A copy of the auditors' report on the condensed consolidated interim financial statements is available for
inspection at the Company's registered office, together with the interim financial statements identified in the
auditors' report. The joint external auditors have performed their review in accordance with International
Standard on Review Engagements (ISRE) 2410. Constant currency and other pro forma financial information
disclosure have 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 associates.
3. BASIS OF PREPARATION
These condensed consolidated interim financial statements for the six months ended 30 June 2016 have been prepared
in accordance with International Financial Reporting Standard (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) and the requirements of the Companies Act of South Africa. The condensed consolidated
interim financial statements should be read in conjunction with the annual financial statements for the year ended
31 December 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRS).
4. PRINCIPAL ACCOUNTING POLICIES
The Group has adopted all the new, revised or amended accounting pronouncements as issued by the International Accounting
Standards Board (IASB) which were effective for the Group from 1 January 2016, 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 accounting policies applied in the preparation of the consolidated financial statements
for the year ended 31 December 2015.
5. FINANCIAL INSTRUMENTS
The Group has not disclosed the fair values of financial instruments measured at amortised cost except for its loans and
borrowings set out below, as their carrying amounts closely approximate their fair values. Other than the equity investment
in IHS, there were no financial instruments measured at fair value that were individually material at the end of the
current reporting period.
Listed long-term borrowings
The Group has listed long-term fixed interest rate senior unsecured notes in issue with a carrying
amount of R11 031 million (June 2015: R9 178 million, December 2015: R11 633 million) and a fair value of R10 731 million
(June 2015: R9 263 million, December 2015: R10 268 million) at 30 June 2016. The fair value of these instruments is determined
by reference to published market values on the relevant exchange.
Loan to Nigeria Tower InterCo B.V.
The Group has a loan to Nigeria Tower InterCo B.V. with a carrying amount of R2 877 million (June 2015: R1 092 million,
December 2015: R2 704 million) and a fair value of R3 373 million as at 30 June 2016. The fair value of this instrument is
determined using a discounted cash flow model. An external borrowing rate for funds advanced to the operating company, which
has been adjusted for differences in risk, has been used as a proxy for a market rate.
Fair value measurement of investments
The Group holds an equity investment in IHS at fair value of R11 354 million at 30 June 2016 (June 2015: R7 259 million,
December 2015: R9 250 million). The investment is classified as available for sale. The fair value of the investment at
30 June 2016 and 30 June 2015 was determined with reference to recent transactions between market participants and has
consequently been transferred from level 3 to level 2 in the fair value hierarchy.
At 31 December 2015, the absence of transactions between market participants resulted in the fair value being determined
using models considered to be appropriate by management. The fair value was calculated using an earnings multiple technique
and was based on unobservable market inputs including average tower industry earnings multiples of between 10 - 14.
Consequently, the investment was categorised within level 3 of the fair value hierarchy. An increase of one in the
multiple would have resulted in an increase in the fair value of R792 million and a one decrease in the multiple would
have resulted in a decrease in the fair value by R792 million as at 31 December 2015.
6. 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
grouped according to their geographic regions/locations.
The Group has changed the composition and presentation of its segment analysis following the announcement of a change
in its operational structure subsequent to the 2015 year-end with a view to strengthen operational oversight, leadership,
governance and regulatory compliance across the 22 operations in Africa and the Middle East.
The MTN Group is now clustered into the following three regions based on the decision taken:
* South and East Africa (SEA)
* West and Central Africa (WECA)
* Middle East and North Africa (MENA).
Comparative numbers for the segments have been restated accordingly.
Operating results are reported and reviewed regularly by the CODM and include items directly attributable to a segment
as well as those that are attributable on a reasonable basis, whether from external transactions or from transactions
with other Group segments.
EBITDA (earnings before interest, tax, depreciation, amortisation, goodwill impairment, tower sale profits and the Nigeria
regulatory fine) is used as the measure of reporting profit or loss for each segment and has remained unchanged.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
SEA 25 156 24 456 51 419
South Africa 19 841 18 882 40 038
Uganda 2 804 2 540 5 148
Other SEA 2 511 3 034 6 233
WECA 46 347 38 296 81 443
Nigeria 28 941 24 649 51 942
Ghana 5 165 3 496 7 903
Cameroon 3 202 2 742 5 806
Ivory Coast 3 751 3 081 6 424
Other WECA 5 288 4 328 9 368
MENA 7 402 6 569 13 766
Syria1 1 068 1 329 2 605
Sudan1 2 345 1 610 3 472
Other MENA 3 989 3 630 7 689
Major joint venture - Iran2 8 324 6 435 13 660
Head office companies and eliminations (27) (111) (275)
Hyperinflation impact 237 94 710
Iran revenue exclusion2 (8 324) (6 435) (13 660)
79 115 69 304 147 063
1 Excludes the increase in revenue resulting from hyperinflation accounting of: Syria R103 million (June 2015:
R28 million, December 2015: R391 million) and Sudan R134 million (June 2015: R66 million, December 2015:
R319 million).
2 Irancell Telecommunication Company Services (PJSC) proportionate revenue forms part of the MENA region but is
reported separately in the segment analysis as reviewed by the CODM and excluded from IFRS reported revenue
due to equity accounting for joint ventures and excludes the increase in revenue resulting from hyperinflation
accounting (June 2015: R271 million and December 2015: R287 million). In 2015, the Iranian economy was assessed
to no longer be hyperinflationary and hyperinflation accounting was discontinued effective 1 July 2015.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
EBITDA
SEA 7 213 8 555 16 903
South Africa 5 979 6 724 13 370
Uganda 842 915 1 775
Other SEA 392 916 1 758
WECA 20 574 19 303 38 116
Nigeria 14 421 14 132 27 504
Ghana 2 004 1 387 3 197
Cameroon 1 218 1 036 2 101
Ivory Coast 1 349 1 126 2 195
Other WECA 1 582 1 622 3 119
MENA 2 359 2 051 4 324
Syria1 305 215 460
Sudan1 829 539 1 216
Other MENA 1 225 1 297 2 648
Major joint venture - Iran2 3 139 2 582 5 665
Head office companies and eliminations (873) 365 575
Hyperinflation impact 90 49 231
Nigeria regulatory fine3 (10 499) - (9 287)
Tower sale profits3 18 352 8 263
Iran EBITDA exclusion2 (3 139) (2 582) (5 665)
EBITDA 18 882 30 675 59 125
Depreciation, amortisation and impairment of goodwill (13 691) (10 750) (23 797)
Net finance cost (5 945) (2 319) (3 010)
Net monetary gain 919 496 1 348
Share of results of joint ventures and associates
after tax (1 692) 2 027 1 226
(Loss)/profit before tax (1 527) 20 129 34 892
1 Excludes the increase in EBITDA resulting from hyperinflation accounting of: Syria R41 million (June 2015:
R25 million, December 2015: R106 million) and Sudan R49 million (June 2015: R24 million, December 2015:
R125 million).
2 Irancell Telecommunication Company Services (PJSC) proportionate EBITDA forms part of the MENA region but
is reported separately in the segment analysis as reviewed by the CODM and excluded from IFRS reported
EBITDA due to equity accounting for joint ventures and excludes the increase in EBITDA resulting from
hyperinflation accounting (June 2015: R141 million and December 2015: R215 million). During 2015, the Iranian
economy was assessed to no longer be hyperinflationary and hyperinflation accounting was discontinued effective
1 July 2015. The Group’s share of results from Irancell Telecommunication Company Services (PJSC) includes
expenses resulting from discontinuation of hyperinflation accounting amounting to R1 039 million mainly
relating to the subsequent depreciation and amortisation of previously hyper-inflated assets that were
historically written up under hyperinflation reporting.
3 Tower sale profit and the expense relating to the regulatory fine imposed by the Nigerian Communications
Commission (NCC) are excluded as the CODM reviews segment results on this basis.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
7. (LOSS)/EARNINGS PER ORDINARY SHARE
Number of ordinary shares in issue
At end of the period (excluding MTN Zakhele
and treasury shares1) 1 822 711 720 1 822 473 178 1 822 517 914
Weighted average number of shares
Shares for (loss)/earnings per share 1 822 527 498 1 821 338 035 1 822 453 695
Add: Dilutive shares2
* MTN Zakhele shares issued - 7 685 193 3 791 878
* Share schemes - 1 333 429 965 612
Shares for dilutive (loss)/earnings per share 1 822 527 498 1 830 356 657 1 827 211 185
Reconciliation between (loss)/profit
attributable to the equity
holders of the Company and headline (loss)/earnings
(Loss)/profit after tax (5 489) 11 900 20 204
Net (profit)/loss on disposal of property, plant
and equipment and intangible assets (IAS 16
and IAS 38) (15) 6 (2)
Profit on dilution of investment in joint
venture (IAS 28) (277) - -
Net impairment loss on property, plant and equipment
and intangible assets (IAS 36) 265 27 38
Impairment of goodwill (IAS 36) 604 - 504
Realisation of deferred gain on disposal of
non-current assets held for sale (IFRS 5) (18) (13) (30)
Profit on disposal of non-current assets held for
sale (IFRS 5) - - (8 264)
Total tax effect of adjustments 1 - (702)
Total non-controlling interest effect of adjustments (2) (6) 1 852
Basic headline (loss)/earnings3 (4 931) 11 914 13 600
(Loss)/earnings per share (cents)
* Basic (301) 653 1 109
* Basic headline (271) 654 746
Diluted (loss)/earnings per share (cents)
* Diluted (301) 650 1 106
* Diluted headline (271) 651 744
1 Treasury shares of 10 206 255 (June 2015: 10 444 797 and December 2015: 11 844 233) are held by the Group and
11 131 098 (June 2015: 12 575 270; December 2015: 11 131 098) shares are held by MTN Zakhele. Due to the call
option over notional vendor finance shares, the MTN Zakhele shares, although legally issued to MTN Zakhele,
are not deemed to be issued from a Group perspective. These shares are therefore excluded from this reconciliation.
2 The share options and share rights issued in terms of the Group’s share schemes, performance share plan and the
MTN Zakhele transaction would not have a dilutive effect on loss per share for the period ended 30 June 2016 and have
therefore not been treated as dilutive.
3 Headline (loss)/earnings is calculated in accordance with circular 2/2015 Headline Earnings as issued by the South
African Institute of Chartered Accountants, as required by the JSE Limited.
8. Goodwill impairment
Areeba Guinea S.A.
Areeba Guinea S.A. (Conakry) experienced a decline in EBITDA since 2013 and Guinea-Conakry has experienced poor
economic performance countrywide. Consequently, a review of the recoverable amount of Conakry was undertaken
during the period ended 30 June 2016 subsequent to which an impairment loss amounting to R402 million (June 2015:
Rnil, December 2015: R504 million) was recognised. As at 30 June 2016, the goodwill balance relating to Conakry
is fully impaired.
Afrihost
Based on an agreement concluded by the Group to sell its 50,02% investment in Afrihost Proprietary Limited (Afrihost) for
R320 million (note 18), a goodwill impairment loss of R202 million was recognised at 30 June 2016 on the remeasurement of
the assets to fair value less cost to sell in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations.
Six months Six months Financial
ended ended year ended
30 June 30 June 31 December
2016 2015 2015
Reviewed Reviewed Audited
Rm Rm Rm
9. SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES AFTER TAX (1 692) 2 027 1 226
Irancell Telecommunication Company Services (PJSC) 936 2 099 1 903
Nigeria Tower InterCo. B.V. (2 463) 63 (545)
Others (165) (135) (132)
10. CAPITAL EXPENDITURE INCURRED 13 850 10 869 29 611
11. CONTINGENT LIABILITIES 1 308 287 875
12. INTEREST-BEARING LIABILITIES
Bank overdrafts 18 76 38
Current borrowings 17 739 16 472 22 472
Current liabilities 17 757 16 548 22 510
Non-current borrowings 64 190 39 511 52 661
81 947 56 059 75 171
13. ISSUE AND REPAYMENT OF DEBT AND EQUITY SECURITIES
During the period under review the following entities raised and repaid significant debt instruments:
- MTN Nigeria repaid R3,2 billion (June 2015: R1,3 billion) relating to long-term borrowings.
- MTN Mauritius raised R3,5 billion (June 2015: R5,9 billion) in debt.
- MTN Mauritius repaid R837 million in debt.
- MTN Holdings raised R9,7 billion additional debt relating to syndicated loan facilities, R2 billion
(June 2015: R3 billion) relating to general banking facilities and R2 billion in terms of the Domestic
Medium Term Programme.
- MTN Holdings repaid R800 million (December 2015: R500 million) relating to the syndicated loan facility and
R1,2 billion (December 2015: R4,2 billion) relating to general banking facilities.
- MTN Uganda raised R1,2 billion relating to the draw down on a syndicated loan facility.
- Cameroon raised R775 million relating to the draw down on a syndicated loan facility.
- MTN Côte d’Ivoire raised R2,8 billion relating to a syndicated loan facility (December 2015: R1,8 billion
relating to short-term borrowings).
- MTN Côte d’Ivoire repaid R1,8 billion relating to short-term borrowings and R992 million relating to a
syndicated loan facility.
14. BUSINESS COMBINATIONS AND ACQUISITION OF JOINT VENTURES AND OTHER INVESTMENTS
Investment in Africa Internet Holding GmbH (AIH)
The Group’s investment of R2 312 million in AIH became effective during March 2016. This investment increased
the Group’s interest in the joint venture from 33,3% to 41,4%. AIH received additional investments from new investors
which became effective during April, May and June 2016. These additional investments diluted the Group’s investment in AIH
to 31,28% and resulted in a profit on dilution of R277 million recorded during the current reporting period. The Group
retains joint control over AIH.
Travelstart
On 22 January 2016, the MTN Group made an investment in TravelLab Global AB (Travelstart) amounting to US$27 million.
Travelstart is an online travel agency focused on emerging markets. MTN Group jointly controls Travelstart indirectly
through funds managed by its venture capital fund manager, Amadeus Capital Partners.
Altech Autopage subscriber base
In March 2016, the Group concluded the acquisition of its Altech Autopage subscriber base from Altron TMT Proprietary
Limited for R678 million. The acquisition of the subscriber base will enable the Group to service and interact directly
with its customers and will reduce future commission expenditure. The purchase price allocation has been finalised and the fair
value of net identifiable assets acquired of R479 million resulted in goodwill of R199 million being recognised.
15. Events after reporting period
Dividends declared
Dividends declared at the board meeting held on 4 August 2016 amounted to 250 cents per share.
16. Restatements
16.1 Reclassification of expenses
Following the restatement of expenses disclosed in the income statement for the year ended 31 December 2015, the expense
categories included below have also been disclosed separately or reclassified between expense categories for the June 2015
reporting period to present the expenses in more appropriate categories in accordance with the classification in the current period.
Government and regulatory costs
Government and regulatory costs that had previously been included in direct network operating costs (R2 534 million) and other
operating expenses (R301 million) have now been disclosed as a significant category of expense in the income statement.
Value-added services (VAS) costs
VAS costs amounting to R1 091 million were previously included in the costs of handsets and other accessories. Based on the
underlying nature of these costs, this has now been reclassified and included in selling, distribution and marketing expenses.
16.2 Reclassification of cash used in investing activities
In line with the current year presentation, cash used in acquiring intangible assets of R4 194 million has now been disclosed
as a significant item separately from cash used in other investing activities.
17. NIGERIA REGULATORY FINE
On 10 June 2016, MTN Nigeria Communication Limited (MTN Nigeria) resolved the matter relating to the previously imposed regulatory
fine with the Federal Government of Nigeria (FGN) after the completion of an extensive negotiation process.
In terms of the settlement agreement reached on 10 June 2016, MTN Nigeria has agreed to pay a total cash amount of Naira 330 billion
over three years (the equivalent of R25,1 billion1) to the FGN as full and final settlement of the matter.
In addition to the monetary settlement set out above:
- MTN Nigeria subscribes to the voluntary observance of the Code of Corporate Governance for the Telecommunications Industry in
Nigeria and will ensure compulsory compliance when the said Code is made mandatory for the Telecommunications Industry.
- MTN Nigeria undertakes to take immediate steps to ensure the listing of its shares on the Nigerian Stock Exchange as soon as
commercially and legally possible after the date of execution of the settlement agreement; and
- MTN Nigeria shall always ensure full compliance with its licence terms and conditions as issued by the NCC.
The Naira 50 billion in good faith payment which was paid without prejudice by MTN Nigeria on 24 February 2016 forms part of the
monetary component of the settlement. A further payment of Naira 30 billion was made on 24 June 2016 resulting in a remaining
cash balance of Naira 250 billion (the equivalent of R12,9 billion2) outstanding at period end.
On 10 June 2016 the nature of the fine changed from a provision under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets to that of a financial liability under IAS 39 Financial Instruments: Recognition and Measurement. As from this date
onwards MTN Nigeria was contractually obliged to settle the fine in cash. Consequently, the outstanding balance ceased to be
discounted at a pre-tax risk- free rate (in terms of IAS 37) and is instead discounted at MTN Nigeria’s incremental borrowing rate
for a liability with similar cash flows (in terms of IAS 39), which approximated 14,71% at the re-measurement date.
Professional services
During the period R1 324 million costs were incurred on professional services relating to the negotiations that led to a reduction
of R34 billion in the Nigeria regulatory fine. The board has exercised its judgement and approved the quantum of the professional
fees incurred taking into account global benchmarks and the value delivered culminating in the final settlement of the Nigeria fine.
1 Amount translated at the 10 June 2016 rate of R1 = N13,15.
2 Amount translated at the 30 June 2016 closing rate of R1 = N19,33.
18 . NON-CURRENT ASSETS HELD FOR SALE
During the period under review, the Group concluded an agreement to sell its 50,02% investment in Afrihost for R325 million. The
transaction is subject to the fulfillment of applicable conditions relevant to the transaction.
Administration
Registration number: 1994/009584/06
ISIN: ZAE000042164
Share code: MTN
Board of Directors
PF Nhleko6
BD Goschen6
PB Hanratty4,8
A Harper3,8
KP Kalyan8
S Kheradpir1,8
NP Mageza8
MLD Marole8
AT Mikati2,7
SP Miller5,8
KC Ramon8
NL Sowazi8
AF Van Biljon8
J Van Rooyen8
1 American
2 Lebanese
3 British
4 Irish
5 Belgian
6 Executive
7 Non-executive
8 Independent non-executive director
Group secretary
SB Mtshali
Private Bag X9955, Cresta, 2118
Registered office
216 - 14th Avenue, Fairland, 2195
American Depository Receipt (ADR) programme:
Cusip No. 62474M108 ADR to ordinary Share 1:1
Depository
The Bank of New York
101 Barclay Street, New York NY. 10286, USA
MTN Group sharecare line
Toll free: 0800 202 360 or +27 11 870 8206
if phoning from outside South Africa
Office of the Transfer Secretaries
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
SizweNtsalubaGobodo Inc.
20 Morris Street East
Woodmead, 2157
PO Box 2939, Saxonwold, 2132
Sponsor
Deutsche Securities (SA) Proprietary Limited
3 Exchange Square, 87 Maude Street, Sandton, 2196
Attorneys
Webber Wentzel
10 Fricker Road, Illovo Boulevard, Sandton, 2107
PO Box 61771, Marshalltown, 2107
Contact details
Telephone: National (011) 912 3000
International +27 11 912 3000
Facsimile: National (011) 912 4093
International +27 11 912 4093
E-mail: investor_relations@mtn.co.za
Internet: http://www.mtn.com
Date: 05/08/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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