Wrap Text
Reviewed Condensed Consolidated Financial Results for the six months ended 30 June 2017
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 FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017
SALIENT FEATURES
Group revenue Group service revenue
up by 6,7%* up by 7,5%*
(decreased by 18,5%) (decreased by 19,1%)
to R64 315 million to R60 003 million
Data revenue Digital revenue
up by 31,9%* up by 24,7%*
(increased by 9,6%) (decreased by 9,3%)
to R13 952 million to R6 460 million
Active MTN Mobile Money customers EBITDA
up by 2,7 million up by 3,1%*
to 17,9 million (decreased by 27,7%)
to R21 179 million
EBITDA margin Positive HEPS of
down by 4,2 percentage 217 cents**
points to 32,9%
Adjusted free cash flow Interim dividend of
down by 2,7%* 250 cents
(29,8%) per share declared
to R10 874 million
* Constant currency information.
** Reported - includes the impact of pro forma adjustments as defined.
EBITDA margin and numbers in brackets exclude pro forma adjustments as defined.
RESULTS OVERVIEW
Group President and CEO, Rob Shuter comments:
"We are seeing pleasing progress in our key growth drivers of data and digital services against headwinds of
challenging macro-economic conditions and foreign exchange currency pressures. We continue to strengthen our
focus on operational excellence with our six strategic pillars integrated in our new BRIGHT strategy. Our
focus during the second half of the year will be to entrench our BRIGHT strategy, complete our network
investment programme and build medium-term financial KPIs and targets for the BRIGHT strategy."
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 (the Board) 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. The pro forma financial information, including the constant currency information
(refer below) as well as any forward looking financial information incorporated in these condensed
consolidated interim financial results, have not been audited or reviewed or otherwise reported on by
our external joint auditors.
1. The financial information presented in these condensed consolidated financial results has been prepared
excluding the impact of hyperinflation and the relating goodwill and asset impairments, tower profits
(including a profit of R6 017 million relating to the profit realised on the exercise of the IHS exchange
right whereby the Group's interest in the Nigeria Tower Company was exchanged for additional shareholding
in IHS Holdings) and the Nigerian regulatory fine (consisting of the re-measurement impact when the
settlement was entered into and the finance costs recognised as a result of the unwind of the initial
discounting of the liability) (the pro forma adjustments) 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 statements for the period ended 30 June 2017. This pro forma financial
information has been presented to eliminate the impact of the pro forma adjustments from the financial
results in order to achieve a comparable analysis period on period. The pro forma adjustments have been
calculated in terms of the Group's accounting policies disclosed in the consolidated financial statements
for the year ended 31 December 2016.
2. Constant currency 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 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 constant
currency growth percentage has been calculated based on the current year constant currency results compared
to the prior year results. In addition, in respect of MTN Irancell, MTN Sudan, MTN South Sudan and MTN Syria,
the constant currency information has been prepared excluding the impact of hyperinflation. Hyperinflation
accounting was discontinued for MTN Irancell and MTN Sudan on 1 July 2015 and 1 July 2016 respectively.
The economy of South Sudan was assessed to be hyperinflationary effective 1 January 2016, and hyperinflation
accounting was applied from December 2016 onwards.
* Constant currency information.
** Reported – includes the impact of the pro forma adjustments as defined.
The Group's results are presented on a regional basis in line with the Group's operational structure.
This comprises South and East Africa (SEA), West and Central Africa (WECA) and Middle East and North Africa
(MENA) and their respective underlying operations as further outlined below.
The SEA region includes: South Africa, Uganda, Zambia, Rwanda, South Sudan, Botswana (joint venture, equity
accounted), Swaziland (joint venture, equity accounted) and Business Group. 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 because they are equity accounted for by the Group.
OVERVIEW
MTN delivered improved results for the six months ended 30 June 2017 and is on track to meet the financial
year 2017 (FY2017) guidance communicated in March 2017. Macro-economic conditions remain challenging across
a number of our markets, with Nigeria continuing to experience a weaker naira as well as hard currency
liquidity challenges. Although South Africa entered a technical recession in the first quarter, the rand
strengthened considerably against the US dollar during the period, while many of the currencies in our
other markets weakened. Despite these macro-challenges, the Group continues to deliver on its
operational targets.
During the past six months the management team undertook a thorough review of the Group strategy and developed
a clear growth plan for MTN that will be arranged under six strategic pillars comprising: Best customer experience;
Returns and efficiency focus; IGNITE commercial performance; Growth through data and digital; Hearts and minds;
and Technology excellence. We refer to this as the "BRIGHT" strategy.
BRIGHT builds on work done over the past 18 months, in particular the Project IGNITE, our operational execution
programme embarked on last year, in our two largest markets MTN South Africa and MTN Nigeria.
Group revenue in constant currency grew by 6,7%* to R64 315 million, underpinned by 10,8%* growth in revenue in
Nigeria and a 5,2% (on an organic basis) improvement in service revenue growth in South Africa. MTN Uganda, MTN
Ghana and MTN Ivory Coast also contributed positively to the Group's top-line growth. MTN Cameroon experienced
a challenging period, negatively impacted by the data network shutdown in some parts of the country in the
first quarter.
The improvement in Group revenue was mostly attributable to strong growth in data and digital revenue, supported
by stable outgoing voice revenue. Data revenue increased by 31,9%* to R13 952 million, supported by the improved
quality and capacity of our data networks in key markets. Digital revenue increased by 24,7%*, driven mainly by
mobile financial services (MFS). MFS continued to gain traction, with the Group adding 2,7 million active MTN
Mobile Money (MoMo) customers in the first half of the year. Outgoing voice revenue remained flat for the period
at R32 768 million.
The Group's reported earnings before interest, tax, depreciation and amortisation, impairment of goodwill, net
monetary gains and share of results of joint ventures and associates after tax (EBITDA) margin was 37,9%**. This
was mainly as a result of the once-off profit (R6 017 million) realised on the exercise of the exchange right
where the Group's interest in the Nigeria Tower InterCo B.V. (INT) was exchanged for a higher shareholding in
IHS Holding Limited (IHS). This was partly offset by fixed asset impairments for MTN Sudan (R1 690 million) and
MTN Syria (R1 125 million) relating to the carrying value previously written up under hyperinflation.
On an operational basis (excluding pro forma adjustments), the Group's EBITDA margin declined by 4,2 percentage points
(pp) to 32,9%. MTN Nigeria's EBITDA margin (excluding the Nigerian regulatory fine) declined by 11,5pp* to 38,3%*.
This was largely as a result of higher foreign-currency-denominated expenses in Nigeria following the depreciation
of the naira against the US dollar. This was partly offset by a 3,4pp growth to 33,5% in the EBITDA margin in
South Africa. The MTN South Africa margin improvement was largely supported by lower handset subsidies and volumes,
as well as a strong rand benefiting the cost of handsets in the period. MTN Uganda, MTN Ghana and MTN Ivory Coast
reported an increase in EBITDA margins while MTN Cameroon's margin declined largely as a result of lower
revenue growth.
Reported headline earnings per share (HEPS) were 217 cents** compared to a 271 cents** headline loss per share in
the comparable period, impacted by the Nigerian regulatory fine of 474 cents** (454 cents of the Nigerian fine fully
expensed and 20 cents of the interest unwind). In the current period, the Nigerian regulatory fine interest unwind
reduced HEPS by 24 cents.
Subscriber numbers in the period decreased by 3,6% to 231,8 million impacted by a decline in subscriber numbers in
MTN Nigeria and MTN Ghana. This was largely a result of the Group's initiative to modernise subscriber definitions
to reflect the business's changing mix of revenue streams. The implementation of the modernised definitions continues
and is expected to be completed by the end of the year.
The Group continued to invest in the roll out of network and information technology across its markets. Capital
expenditure (capex) was lower than expected, impacted by limited foreign currency availability in Nigeria, some
execution challenges as well as the seasonality of the capex cycle. In the period, a total of 4 404 3G and
3 478 4G co-located sites were rolled out.
PROSPECTS AND GUIDANCE
Africa and the Middle East remain among the world's key growth regions over the medium to long term. As the prospects
for telecommunications are closely aligned to this growth trajectory, we see a number of opportunities and believe that
MTN is well placed to benefit given our unique position in the markets in which we operate.
With a strengthened leadership team, the Group continues to work towards achieving our vision "to lead the delivery of
a bold, new Digital World to our customers". We will continue to leverage our scale and enhance our competitive
position, benefiting from favourable demographic growth (that will mitigate expected future declines in voice revenue),
low data penetration in our markets and the unique opportunity we have to provide our customers with a wide range of
digital services across our operations.
To ensure that management remains focused on delivering on the BRIGHT strategy to the benefit of our stakeholders,
we will establish clearly defined initiatives and KPIs for each of the six areas of "BRIGHT" in the second half
of the year. We expect these initiatives to support improved top-line growth, EBITDA margins and cash flow over
the medium term.
Our recent extensive capex investments across our operations will enable the business to provide a superior customer
experience and competitive data networks. This will support the increasing demand for data and digital services.
We have reduced our capex guidance for 2017 to R30,0 billion from previous guidance of R34,8 billion. We expect
to accelerate expenditure in the second half and meet the revised capex guidance for the full year.
MTN Nigeria continues to make progress with preparations to list MTN Nigeria shares on the Nigerian Stock Exchange.
We anticipate completing this process in 2018, should market conditions permit. MTN Ghana is working with relevant
regulators on a transaction to increase Ghanaian ownership of MTN Ghana shares. We expect to complete this in the
course of 2017.
We remain on track to meet our FY2017 guidance despite the muted economic growth forecast across our markets.
In South Africa, we expect mid-single-digit service revenue growth and EBITDA margin expansion of 50 and 100 basis
points year-on-year (YoY). This will be supported by a strong focus on customer service and significantly improved
network quality, capacity and speed. Targeted cost-optimisation initiatives will support EBITDA growth. We do not
expect the recent credit ratings downgrade of MTN following the sovereign downgrade of South Africa to have a
material impact on existing facilities or the cost of new funding in 2017.
In Nigeria, we anticipate upper single-digit revenue growth YoY. This will be supported by an improved competitive
position, improved network quality and capacity, smartphone penetration and an increased focus on growing data and
digital revenue. We expect continued improvement in foreign currency liquidity following central bank interventions
since February 2017. Encouragingly, post period end MTN Nigeria declared an interim dividend which after adjusting
for withholding taxes and minorities will result in USD95 million being received by MTN Group.
In Iran, we expect to benefit from growth in the Iranian economy and from the country's youthful population,
particularly in the digital services space. The Group will continue to focus on the upstreaming of dividends across
all operations, including MTN Irancell.
Any forward-looking financial information disclosed in this results announcement has not been reviewed or audited
or otherwise reported on by our external joint auditors.
DIVIDENDS
The Board has declared an interim dividend of 250 cents per share. This is in line with the FY2017 guidance
of 700 cents per share communicated in March 2017.
2017 Capital expenditure guidance
Old Capitalised Capitalised
guidance June June
ZAR (million) Estimated 2017 2017 2016
SEA 13 152 13 368 4 129 5 626
South Africa 11 501 11 526 3 475 4 773
Uganda 886 992 356 364
Other 765 850 298 489
WECA 13 840 16 314 5 368 6 975
Nigeria 6 966 9 543 2 749 2 534
Ghana 2 435 2 164 912 1 646
Cameroon 1 077 834 694 1 121
Ivory Coast 1 575 1 690 499 842
Other 1 787 2 083 514 832
MENA 1 888 2 134 734 1 064
Syria 716 840 85 191
Sudan 325 376 268 549
Other 847 918 381 324
Head office 1 074 2 937 74 107
Total 29 954 34 753 10 305 13 772
Hyperinflation - - 3 78
Total reported 29 954 34 753 10 308 13 850
Iran (49%)# 5 727 5 396 3 850 2 313
#Excluding hyperinflation.
FINANCIAL REVIEW
Reconciliation of pro forma financial information
ZAR (million) IFRS Hyper- Nigeria Opera- IFRS Hyper- Nigeria Opera- Adjusted
reported infla- Tower regulatory tional reported infla- Tower regulatory tional change
1H17 tion(1) profit(2) fine(3) 1H17 1H16 tion(1) profit(2) fine(3) 1H16 %
Revenue 64 386 71 - - 64 315 79 115 237 - - 78 878 (18,5)
Other income 6 090 - 6 030 - 60 367 - 18 - 349 (82,8)
EBITDA 24 399 (2 810) 6 030 - 21 179 18 882 90 18 (10 499) 29 273 (27,7)
Depreciation, amortisation
and impairment of goodwill# 14 374 722 - - 13 652 13 691 77 - - 13 614 0,3
Profit from operations 10 025 (3 532) 6 030 - 7 527 5 191 13 18 (10 499) 15 659 (53,7)
Net finance cost 3 457 (15) - 537 2 935 5 945 32 - 452 5 461 (46,3)
Net monetary gains 67 67 - - - 919 919 - - - -
Share of results of joint
ventures and associates
after tax 602 (640) - - 1 242 (1 692) (1 039) - - (653) NM
Profit/(loss) before tax 7 237 (4 090) 6 030 (537) 5 834 (1 527) (139) 18 (10 951) 9 545 (38,9)
Income tax expense 2 312 (205) - - 2 517 4 726 32 - - 4 694 (46,4)
Profit/(loss) after tax 4 925 (3 885) 6 030 (537) 3 317 (6 253) (171) 18 (10 951) 4 851 (31,6)
Non-controlling interests (282) (779) - (114) 611 (764) 204 - (2 319) 1 351 (54,8)
Attributable profit/(loss) 5 207 (3 106) 6 030 (423) 2 706 (5 489) (375) 18 (8 632) 3 500 (22,7)
EBITDA margin 37,9% 32,9% 23,9% 37,1% (4,2)pp
Effective tax rate 31,9% 43,1% (309,6%) 49,2% (6,1)pp
(1) Represents the exclusion of the impact of hyperinflation and related goodwill and asset impairments for certain
of the Group's subsidiaries (MTN Syria, MTN South Sudan and MTN Sudan) being accounted for on a hyperinflationary
basis in accordance with International Financial Reporting Standards (IFRS) on the respective financial statement
line items affected.
The economies of Iran and Sudan were assessed to no longer be hyperinflationary effective 1 July 2015 and
1 July 2016 respectively and hyperinflation accounting was discontinued from this date onwards.
The economy of South Sudan was assessed to be hyperinflationary effective 1 January 2016 and hyperinflation
accounting was applied from this date onwards.
Included in EBITDA is the fixed asset impairments for MTN Sudan (R1 690 million) and MTN Syria (R1 125 million)
relating to the carrying value previously written up for the impact of hyperinflation.
# An amount of R192 million of the goodwill impairment on MTN Sudan relates to the carrying value previously written
up for the impact of hyperinflation.
(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 profits, including R6 017 million relating to the profit realised on the exercise of the exchange right
where the interest in the Nigeria tower company was exchanged for an increased shareholding in IHS Holdings.
- Release of Ghana deferred gain of R13 million (1H16: R18 million).
(3) Represents the impact of the Nigerian regulatory fine subsequent to conclusion of the settlement agreement during
2016 on the respective financial line items impacted, which include:
- 2016: The remeasurement 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 finance cost
accrued from the beginning of the financial year 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);
- 2016 and 2017: The finance cost impact recognised as a result of the unwind of the discounting of the provision
(for the period from 1 January to 9 June 2016) and the financial liability (for the period from 10 June 2016
to 30 June 2016 and from 1 January 2017 to reporting date).
EXCHANGE RATES
The stronger rand and the significant year-on-year (YoY) depreciation of the naira against the US dollar had a
negative translation impact on rand reported results for the period. The average naira depreciated by 35,3% against
the US dollar in comparison to the prior period. The average rand strengthened by 14,7% against the US dollar YoY
and closed 5,2% higher than the previous period.
REVENUE
Group total revenue increased by 6,7%* to R64 315 million. This was supported by encouraging revenue growth in
Nigeria (up 10,8%*), Uganda (up 9,4%*), Ghana (up 22,6%*) and Ivory Coast (up 13,0%*). This was mainly a result
of strong data and digital revenue growth in these markets. MTN Cameroon reported a 4,2%* decline in revenue,
while total revenue growth in MTN South Africa increased by 1,6%.
Data revenue increased by 31,9%*, benefiting from significantly improved data network quality and capacity across
our key markets and a 9,1% increase in data users to 122,7 million. Data revenue increased in South Africa
(up 14,4%), Nigeria (up 70,4%*), Uganda (up 29,2%*), Ghana (up 65,9%*), Cameroon (up 14,1%*) and Ivory Coast
(up 74,6%*).
Digital revenue increased by 24,7%*, underpinned by solid growth in MFS. This was partly offset by slower growth in
value-added services (VAS) revenue, impacted by the ongoing review of VAS across our markets, in particular Nigeria.
Outgoing voice revenue remained flat. This is a positive reinforcement of our work to stem the decline in the
contribution of voice to the business, particularly in Nigeria.
COSTS
Total costs increased by 12,5%*, negatively impacted by foreign-denominated expenses in Nigeria and costs
associated with the rollout of network sites in the period. Lower handset cost subsidies and volumes as well
as a strong rand benefited the total cost of handsets in South Africa.
EBITDA
Group EBITDA declined by 3,1%*, mainly impacted by a 14,8%* decrease in MTN Nigeria's EBITDA as a result of higher
foreign-denominated expenses following the depreciation of the naira against the US dollar. This was, however,
offset by a 13,1% increase in MTN South Africa's EBITDA. MTN Uganda (up 20,5%*), MTN Ghana (up 15,6%*) and
MTN Ivory Coast (up 10,2%*) contributed positively to Group EBITDA while MTN Cameroon recorded a 22,1%*
decline in EBITDA. Head office costs were lower than the prior comparable period mainly as a result of
a number of once-off costs incurred in the prior period.
Consequently, the Group EBITDA margin decreased by 4,2 percentage points to 32,9%.
DEPRECIATION, AMORTISATION AND IMPAIRMENT OF GOODWILL
The Group depreciation charge increased by 9,0%* to R9 123 million as a result of higher capex in 2016.
Amortisation costs increased by 25,7%* to R2 090 million, mainly because of higher spend on software in the
previous period. Non-hyperinflation-related goodwill impairments consisted of impairments in MTN Afghanistan
(R841 million), MTN Sudan (R791 million) and MTN Yemen (R807 million).
NET FINANCE COSTS
Net finance costs decreased by 46,3% to R2 935 million. This was mainly due to a 58,0% reduction in net foreign
exchange (forex) losses to R1 515 million for the period. The decline in forex losses was largely as a result
of lower foreign-denominated receivables in Mauritius following the repatriation of funds from MTN Irancell
in 2016. A 23,5% decrease in the Group's net interest charge was driven by the stronger rand against the
US dollar, resulting in lower finance costs paid on US dollar bonds as well as the translation of the Nigeria
finance charge following a weaker naira against the rand. South Africa and Dubai reported forex gains in
the period.
Net forex losses mainly included:
- Forex losses in head office of R578 million due to the Iran dividend repatriation and the short-term loan
to MTN Irancell;
- Forex losses in Nigeria of R893 million incurred on US dollar-denominated third-party payables; and
- Forex losses of R191 million in Sudan on foreign-denominated third-party funding and payables.
SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES AFTER TAX
Joint ventures and associates reported a profit of R1 242 million compared to a loss of R653 million in the
comparative period. This was mainly as a result of the exercise of the exchange right where MTN exchanged
its 51% shares of Nigeria Tower InterCo B.V. for an increased equity stake in IHS. Following this
transaction (effective 1 February 2017), we no longer own and equity account for a share of the results
of INT.
TAXATION
The reported effective tax rate was 31,9%**, impacted mainly by lower normalised profit before tax (PBT)
and the effects of tower profits, the turnover-based tax system in Sudan, the Sudanese impairments, as well
as withholding taxes on upstreamed dividends and other fees.
The Group's reported taxation charge decreased by 51,1%** to R2 312 million for the period. This was impacted
by higher taxable income in the prior period.
EARNINGS
Reported headline earnings per share (HEPS) were 217 cents** compared to a 271 cents** headline loss per share
in the comparable period.
CASH FLOW
Cash inflows from operations decreased to R17 763 million**. This was mainly as a result of lower attributable
profits in Nigeria. The repatriation of cash from MTN Irancell of R6 509 million supported cash flows for the
period. Key cash outflows for the period included dividends paid of R8 475 million** and cash capex of
R12 419 million**.
CAPITAL EXPENDITURE
Capex decreased by 25,2% (3,6%*) to R10 305 million. Capex in the first half of the year was slower than expected,
impacted by limited foreign currency availability in Nigeria, some execution challenges as well as the seasonality
of the capex cycle.
FINANCIAL POSITION
Net debt increased to R52 337 million** from R51 902 million** reported at year-end. The increase was mainly impacted
by lower cash generated from operations offset by cash repatriated from Iran amounting to R6 509 million** and an
increase in head office net debt.
OPERATIONAL REVIEW OF KEY MARKETS
South and East Africa (SEA)
- Subscribers increased by 0,3% to 54,9 million
- Revenue increased by 2,9%*
- Data revenue increased by 14,5%*
- Digital revenue increased by 29,6%*
South Africa
- Subscribers increased by 1,5% to 31,2 million
- Revenue increased by 1,6%
- Service revenue increased by 5,2%#
- Data revenue increased by 18,5%#
- Digital revenue increased by 37,6%
- EBITDA margin increased by 3,4pp to 33,5%
- Capex decreased by 27,2% to R3 475 million
# On an organic basis.
MTN South Africa delivered an encouraging performance, supported by a strong prepaid performance, network
expansion and a strengthened leadership team. The subscriber base increased by 1,5% to 31,2 million. The
prepaid segment's subscriber base increased by 1,7% to 26,0 million, while the postpaid segment showed
early signs of a recovery and increased its subscriber base by 0,2% to 5,2 million. Total revenue increased
by 1,6% to R20 156 million. Service revenue increased by 5,2%# to R16 753 million, supported by strong growth
in data revenue and digital revenue, up 18,5%# and 37,6% respectively. Prepaid service revenue increased
by 9,2% while we saw a decline in postpaid service revenue, down by 3,9%.
MTN Uganda increased its subscriber base by 5,8% to 11,2 million, driven by attractive personalised bundled
products, superior network quality and effective distribution. MTN Uganda successfully registered 89% of
the subscriber base under the new SIM registration requirements ahead of the end-August 2017 deadline.
Total revenue increased by 9,4%*, supported by strong growth in data and digital. Data revenue increased
by 29,2%*. This was mainly underpinned by an increase in data traffic and good growth in data bundle adoption.
Digital revenue increased by 19,7%*, supported mainly by MFS. The number of active MoMo customers increased
by 11,3% to 4,6 million.
West and Central Africa (WECA)
- Subscribers decreased by 8,5% to 102,3 million
- Revenue increased by 9,1%*
- Data revenue increased by 56,7%*
- Digital revenue increased by 23,1%*
Nigeria
- Subscribers decreased by 14,3% to 53,1 million
- Revenue increased by 10,8%*
- Data revenue increased by 70,4%*
- Digital revenue increased by 14,1%*
- EBITDA margin declined by 11,5pp to 38,3% (excluding the impact of the fine)
- Capex increased by 92,4%* to R2 749 million
MTN Nigeria continued to focus on healthy growth despite a challenging macro-economic environment. The operation
continued to focus on reviewing and optimising both subscriber definitions and VAS subscriptions, placing some
short-term pressure on subscriber net additions and VAS revenue. The subscriber base declined by 14,3% to
53,1 million, following both this review as well as lower gross connections as a result of new regulations
that require all subscriber connections take place in permanent structures. Total revenue increased by 10,8%*,
largely attributable to strong data revenue growth. Data revenue increased by 70,4%*, benefiting from
customised data offerings and improved network quality driving data usage. Digital revenue grew by 14,1%*
with active MoMo customers growing by 22,9% to 1,9 million.
MTN Ghana continued to benefit from an improving economy. MTN Ghana's subscriber base declined by 10,3% to 17,3
million, impacted by the internal review of subscriber definitions. Strong growth in revenue, up by 22,6%*, was
supported by data and digital revenue growth. Data revenue increased by 65,9%*, led by a data-bundled smartphone
drive and youth value propositions. Digital revenue grew by 43,6%* with the number of active MoMo subscribers
growing by 9,5% to 6,2 million.
MTN Cameroon continued to experience a challenging operating environment, following the data shutdown and a
slowdown in economic activity which had a material impact on subscriber and revenue growth in the period.
The subscriber base declined by 3,3% to 9,5 million and total revenue decreased by 4,2%*. Despite this,
active MoMo customers more than doubled to 730 776.
MTN Ivory Coast showed a positive turnaround in the period. Benefiting from significant network investments,
it increased its subscriber base by 16,2% to 11,0 million. Total revenue increased by 13,0%*, underpinned
by good growth in outgoing voice and data revenue, up by 9,8%* and 74,6%* respectively. Digital revenue
increased by 41,9%* with active MoMo customers increasing by 8,2% to 1,3 million.
Middle East and North Africa (MENA)
- Subscribers increased by 1,1% to 74,5 million
- Revenue increased by 6,5%* (excluding Iran)
- Data revenue increased by 33,4%*(excluding Iran)
- Digital revenue increased by 22,2%* (excluding Iran)
IRAN (joint venture, equity accounted, 49%)
- Subscribers increased by 3,0% to 49,0 million
- Revenue increased by 17,2%*
- Data revenue increased by 67,7%*
- Digital revenue increased by 3,7%*
- EBITDA margin declined by 1,4pp to 36,3%
- Capex increased by more than 100% to R3 850 million
MTN Irancell delivered a solid performance despite pressure on data pricing. The number of subscribers
increased by 3,0% to 49,0 million, supported by attractive data bundles and a superior quality 3G and
4G network. Total revenue increased by 17,2%*, driven by increased data revenue. Data revenue increased
by 67,7%*, supported by growth in data bundles, modernisation of 2G and 3G sites and expansion of the
4G network. Digital revenue increased by 3,7%*, aided by an increase in local content offers.
LEGAL AND REGULATORY
The Turkcell lawsuit currently before the South Gauteng High Court in South Africa is not a new action
and was initiated by Turkcell Iletisim Hizmetleri A.S (Turkcell) and East Asian Consortium (EAC) in 2013.
It relates to Turkcell's alleged grievances arising from its unsuccessful bid to obtain a mobile licence
in Iran, and the awarding of that licence to MTN Irancell in 2005. Recent developments in the matter were
procedural in nature and had nothing to do with the merits of the case. MTN continues to believe that
there is no legal merit to Turkcell's claim and will accordingly oppose it.
BOARD CHANGES
Alan van Biljon, who served as lead independent director from 2011, stepped down from this role on
31 May 2017. Alan will remain an independent non-executive director on the Board until his retirement at
the end of the 2017 financial year. Alan Harper was appointed as the new lead independent director of the
Board with effect from 1 June 2017.
Rob Shuter and Ralph Mupita were appointed as executive directors of the Board with effect from
13 March 2017 and 3 April 2017 respectively.
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 2017 has been declared. The number of ordinary shares in issue at the date of this declaration
is 1 884 269 758 (including 9 983 286 treasury shares held by MTN Holdings and 76 835 378 shares held by
MTN Zakhele Futhi).
The dividend will be subject to a maximum local dividend tax rate of 20% which will result in a net
dividend of 200 cents per share to those shareholders who bear the maximum rate of dividend
withholding tax of 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 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:
Declaration date Thursday, 3 August 2017
Last day to trade cum dividend on the JSE Tuesday, 22 August 2017
First trading day ex dividend on the JSE Wednesday, 23 August 2017
Record date Friday, 25 August 2017
Payment date Monday, 28 August 2017
No share certificates may be dematerialised or rematerialised between Wednesday, 23 August 2017 and
Friday, 25 August 2017, both days inclusive.
On Monday, 28 August 2017, 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, 28 August 2017 will be posted
on or about this date. Shareholders who hold dematerialised shares will have their accounts held by
the Central Securities Depository Participant or broker credited on Monday, 28 August 2017.
For and on behalf of the Board
RA Shuter PF Nhleko
Group President and CEO Chairman
2 August 2017
Fairland
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 2017 have
been independently reviewed by the Group's external auditors. The preparation of the Group's reviewed condensed
consolidated interim financial statements was supervised by the Group chief financial officer, RT Mupita, BSc Eng
(Hons), MBA, GMP.
The interim results were made available on 3 August 2017.
Condensed consolidated income statement
for the
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
Revenue 64 386 79 115 147 920
Other income 7 6 090 367 335
Direct network and technology operating costs (12 460) (12 291) (23 520)
Costs of handsets and other accessories (5 088) (6 065) (12 304)
Interconnect and roaming costs (5 393) (7 358) (13 393)
Staff costs (4 420) (4 777) (9 152)
Selling, distribution and marketing expenses (8 399) (9 624) (19 172)
Government and regulatory costs (2 405) (2 982) (5 191)
Other operating expenses 9 (7 912) (7 004) (14 273)
EBITDA before Nigeria regulatory fine 24 399 29 381 51 250
Nigeria regulatory fine 8 - (10 499) (10 499)
EBITDA 24 399 18 882 40 751
Depreciation of property, plant and equipment (9 595) (10 913) (20 988)
Amortisation of intangible assets (2 148) (2 174) (4 748)
Impairment of goodwill 9 (2 631) (604) (873)
Operating profit 10 025 5 191 14 142
Net finance costs 10 (3 457) (5 945) (10 495)
Net monetary gain 67 919 1 723
Share of results of joint ventures and
associates after tax 11 602 (1 692) (127)
Profit/(loss) before tax 7 237 (1 527) 5 243
Income tax expense (2 312) (4 726) (8 346)
Profit/(loss) after tax 4 925 (6 253) (3 103)
Attributable to:
Equity holders of the Company 5 207 (5 489) (2 614)
Non-controlling interests (282) (764) (489)
4 925 (6 253) (3 103)
Basic earnings/(loss) per share (cents) 12 290 (301) (144)
Diluted earnings/(loss) per share (cents) 12 283 (301) (144)
Condensed consolidated statement of comprehensive income
for the
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
Profit/(loss) after tax 4 925 (6 253) (3 103)
Other comprehensive income after tax
Items that may be subsequently reclassified
to profit or loss
Net investment hedges 18 760 (1 422) (1 887)
Foreign exchange movement on hedging instruments 1 052 (2 032) (2 684)
Deferred tax (292) 610 797
Available-for-sale financial assets1 817 2 672 2 672
Gains arising during the period 13 817 2 672 2 672
Exchange differences on translating foreign
operations including the effect of hyperinflation1 (3 866) (11 077) (22 907)
Losses arising during the period 18 (3 866) (11 077) (22 907)
Items that have been reclassified to profit or loss1 18 3 298 - -
Other comprehensive income/(loss) for the period 1 009 (9 827) (22 122)
Attributable to equity holders of the Company 1 004 (9 194) (21 077)
Attributable to non-controlling interests 5 (633) (1 045)
Total comprehensive income/(loss) 5 934 (16 080) (25 225)
Attributable to:
Equity holders of the Company 6 211 (14 683) (23 691)
Non-controlling interests (277) (1 397) (1 534)
5 934 (16 080) (25 225)
1 This component of other comprehensive income does not attract any tax.
Condensed consolidated statement of financial position
as at
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
Non-current assets 186 637 200 447 189 089
Property, plant and equipment 90 652 93 462 95 633
Intangible assets and goodwill 40 305 52 172 46 473
Investment in joint ventures and associates 7 22 465 32 169 26 669
Investments 7 25 714 12 145 11 841
Deferred tax and other non-current assets 7 501 10 499 8 473
Current assets 69 342 82 468 79 611
Non-current assets held for sale - 466 -
69 342 82 002 79 611
Other current assets 14 783 12 940 13 853
Trade and other receivables 29 527 41 470 37 363
Restricted cash 1 681 637 1 020
Cash and cash equivalents 23 351 26 955 27 375
Total assets 255 979 282 915 268 700
Total equity 102 894 119 796 105 231
Attributable to equity holders of the Company 100 859 116 669 102 380
Non-controlling interests 2 035 3 127 2 851
Non-current liabilities 82 054 84 000 85 743
Interest-bearing liabilities 15, 16 66 935 64 190 67 319
Deferred tax and other non-current liabilities 15 119 19 810 18 424
Current liabilities 71 031 79 119 77 726
Non-current liabilities held for sale - 208 -
71 031 78 911 77 726
Interest-bearing liabilities 15, 16 17 910 17 757 19 635
Trade and other payables 42 180 43 602 45 142
Other current and tax liabilities 10 941 17 552 12 949
Total equity and liabilities 255 979 282 915 268 700
Condensed consolidated statement of changes in equity
for the
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
Opening balance at 1 January 102 380 146 369 146 369
Opening reserve adjustment for impact
of hyperinflation 5 - - (123)
Restated balance at 1 January 102 380 146 369 146 246
Total comprehensive income 6 211 (14 683) (23 691)
Profit/(loss) after tax 5 207 (5 489) (2 614)
Other comprehensive income 1 004 (9 194) (21 077)
Transactions with owners of the Company
Shares issued - ^ ^
Shares cancelled - - (^)
Share-based payment transactions 217 130 1
Shares repurchased from MTN Zakhele - - (3 462)
Share-based payment transaction with
MTN Zakhele Futhi - - 2 919
Dividends declared (8 078) (15 231) (19 816)
Other movements 129 84 183
Attributable to equity holders of the Company 100 859 116 669 102 380
Non-controlling interests 2 035 3 127 2 851
Closing balance 102 894 119 796 105 231
Dividends declared during the period
(cents per share) 450 830 1 080
Dividends declared after the period
(cents per share) 250 250 450
^Amount less than R1 million.
Condensed consolidated statement of cash flows
for the
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
Net cash generated from/(used in)
operating activities 12 069 (436) 20 716
Cash generated from operations 17 763 23 870 55 681
Dividends paid to equity holders
of the Company (8 069) (15 212) (19 792)
Dividends paid to non-controlling
interests (406) (790) (1 178)
Dividends received from associates
and joint ventures 11 6 952 426 692
Other operating activities (4 171) (8 730) (14 687)
Net cash used in investing activities (14 696) (14 209) (40 408)
Acquisition of property, plant and equipment (11 331) (10 134) (29 899)
Acquisition of intangible assets (1 088) (3 890) (5 348)
Increase in non-current investments (158) (1 545) (2 199)
(Acquisition)/disposal of bonds,
treasury bills and foreign deposits (1 274) 677 (2 704)
Movement in other investing activities (845) 683 (258)
Net cash from financing activities (1 043) 13 608 20 951
Proceeds from borrowings 16 11 106 23 967 59 647
Repayment of borrowings 16 (12 223) (10 363) (37 211)
Other financing activities 74 4 (1 485)
Net (decrease)/increase in cash and
cash equivalents (3 670) (1 037) 1 259
Cash and cash equivalents at
beginning of the period 27 375 34 139 34 139
Exchange losses on cash and cash
equivalents (554) (6 272) (8 192)
Net monetary gain on cash and
cash equivalents 11 107 169
Net cash and cash equivalents at
end of the year 23 162 26 937 27 375
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2017
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. The joint external auditors have performed their review in accordance with International Standard on
Review Engagements (ISRE) 2410. A copy of the independent auditors' review 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 independent auditors' review report.
The independent auditors' review report does not necessarily report on all of the information contained in this
announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the independent auditors' engagement they should obtain a copy of the independent auditors' review report
together with the accompanying interim financial statements from the Company's registered office.
2. GENERAL INFORMATION
MTN Group Limited (the Company) carries on the business of investing in the telecommunications industry through
its subsidiary companies, joint ventures, associates and related investments.
3. BASIS OF PREPARATION
These condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared
in accordance with International Financial Reporting Standard (IFRS), 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 South African Companies Act, No 71
of 2008. The condensed consolidated interim financial statements should be read in conjunction with the annual
financial statements for the year ended 31 December 2016, 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 Boards (IASB) which were effective for the Group from 1 January 2017, 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 previous consolidated
annual financial statements.
5. HYPERINFLATION
The financial statements of the Group entities whose functional currencies are the currencies of hyperinflationary
economies are adjusted in terms of the measuring unit current at the end of the reporting period.
The economy of Sudan was assessed to no longer be hyperinflationary, effective 1 July 2016, and hyperinflation
accounting was discontinued from this date onwards. As at 30 June 2017 the historical increase in the asset value
as a result of hyperinflation accounting has been fully impaired, which resulted in a R1 690 million decrease in
EBITDA for the period under review.
The economy of South Sudan was assessed to be hyperinflationary, effective 1 January 2016, and hyperinflation
accounting was applied for the year ended 31 December 2016. Upon first application of hyperinflation, prior period
losses of R123 million arising from the net monetary position were recognised directly in equity. As at 31 December
2016 and 30 June 2017, the property, plant and equipment of South Sudan was fully impaired, resulting in no hyperinflation
adjustment on capital expenditure (capex) for the period under review or during the year ended 31 December 2016.
In 2015, the Iranian economy was assessed to no longer be hyperinflationary and hyperinflation accounting was discontinued
effective 1 July 2015. The Group's results from Iran includes expenses resulting from the discontinuation of hyperinflation
accounting mainly relating to the subsequent depreciation of assets that were historically written up under hyperinflation
accounting. The additional income statement charge reduced equity accounted earnings from Iran by R640 million for the six
months ended 30 June 2017 (June 2016: R1 039 million, December 2016: R1 853 million).
The economy of Syria was assessed to be hyperinflationary, effective 1 January 2014, and hyperinflation accounting has
been applied since. As at 30 June 2017, R1 125 million of assets previously written up for hyperinflation have been
impaired with the impact being included in EBITDA for the period under review.
The impact of hyperinflation on the segment analysis is as follows:
Six months ended 30 June 2017
Reviewed
Rm
Revenue EBITDA Capex
Syria 40 (1 110) 3
Sudan - (1 690) -
South Sudan (included in other SEA) 31 (10) -
71 (2 810) 3
Iran - major joint venture - 69 -
Six months ended 30 June 2016
Reviewed
Rm
Revenue EBITDA Capex
Syria 103 41 36
Sudan 134 49 42
South Sudan (included in other SEA) - - -
237 90 78
Iran - major joint venture - - -
Financial year 31 December 2016
Audited
Rm
Revenue EBITDA Capex
Syria 484 164 310
Sudan 122 41 38
South Sudan (included in other SEA) 420 41 -
1 026 246 348
Iran - major joint venture - (294) 326
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 locations.
The MTN Group is clustered into the following three regions and their respective underlying operations:
- South and East Africa (SEA)
- West and Central Africa (WECA)
- Middle East and North Africa (MENA).
Operating results are reported and reviewed regularly by the CODM and include external transactions or transactions
with other Group segments that can be attributable to a segment on a reasonable basis.
EBITDA is used as the measure of reporting profit or loss for each segment and represents the basis on which the
CODM reviews segment results. It is defined as earnings before interest, tax, depreciation, amortisation, impairment
of goodwill, net monetary gains and share of results of joint ventures and associates after tax and further excludes
the following items:
- Hyperinflation (note 5)
- Tower sale and exchange right profit on IHS investment (note 7)
- Nigeria regulatory fine (note 8)
- MTN Zakhele Futhi share-based payment expense.
Other than for the exclusion of the exchange right profit on the IHS investment during the period under review (note 7),
this measure has remained unchanged in comparison to prior periods.
Irancell Telecommunication Company Services (PJSC) (Iran) proportionate results are included in the segment analysis
as reviewed by the CODM and excluded from IFRS reported results for revenue, EBITDA and capex due to equity accounting
for joint ventures. The results of Iran in the segment analysis exclude the impact of hyperinflation accounting.
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
REVENUE
SEA 24 767 25 156 52 142
South Africa 20 156 19 841 41 922
Uganda 2 506 2 804 5 465
Other SEA 2 105 2 511 4 755
WECA 33 308 46 347 80 655
Nigeria 18 037 28 941 47 122
Ghana 4 864 5 165 10 291
Cameroon 2 609 3 202 6 189
Ivory Coast 3 639 3 751 7 176
Other WECA 4 159 5 288 9 877
MENA 6 299 7 402 14 288
Syria 952 1 068 2 123
Sudan 2 272 2 345 4 585
Other MENA 3 075 3 989 7 580
Major joint venture - Iran 7 869 8 324 16 536
Head office companies and
eliminations (59) (27) (191)
Hyperinflation impact 5 71 237 1 026
Iran revenue exclusion (7 869) (8 324) (16 536)
64 386 79 115 147 920
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
EBITDA
SEA 7 958 7 213 16 368
South Africa 6 760 5 979 13 811
Uganda 830 842 1 620
Other SEA 368 392 937
WECA 11 840 20 574 33 045
Nigeria 6 906 14 421 21 854
Ghana 1 786 2 004 4 184
Cameroon 808 1 218 2 065
Ivory Coast 1 276 1 349 2 333
Other WECA 1 064 1 582 2 609
MENA 1 848 2 359 4 657
Syria 248 305 689
Sudan 750 829 1 471
Other MENA 850 1 225 2 497
Major joint venture - Iran 2 860 3 139 6 455
Head office companies and (467) (873) (2 089)
eliminations
Hyperinflation impact (2 810) 90 246
Nigeria regulatory fine - (10 499) (10 499)
Tower sale profits 13 18 31
Profit on exercise of exchange
right of IHS 7 6 017 - -
MTN Zakhele Futhi share-based
payment expense - - (1 008)
Iran EBITDA exclusion (2 860) (3 139) (6 455)
EBITDA 24 399 18 882 40 751
Depreciation, amortisation and
impairment of goodwill (14 374 (13 691) (26 609)
Net finance cost (3 457) (5 945) (10 495)
Net monetary gain 67 919 1 723
Share of results of joint ventures
and associates after tax 602 (1 692) (127)
Profit/(loss) before tax 7 237 (1 527) 5 243
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Note Rm Rm Rm
CAPITAL EXPENDITURE INCURRED
SEA 4 129 5 626 12 896
South Africa 3 475 4 773 11 085
Uganda 356 364 758
Other SEA 298 489 1 053
WECA 5 368 6 975 17 325
Nigeria 2 749 2 534 8 701
Ghana 912 1 646 2 435
Cameroon 694 1 121 2 166
Ivory Coast 499 842 1 721
Other WECA 514 832 2 302
MENA 734 1 064 3 310
Syria 85 191 1 049
Sudan 268 549 1 549
Other MENA 381 324 712
Major joint venture - Iran 3 850 2 313 5 138
Head office companies and
eliminations 74 107 1 389
Hyperinflation impact 5 3 78 348
Iran capex exclusion (3 850) (2 313) (5 138)
10 308 13 850 35 268
7. INVESTMENT IN IHS
In January 2017, the Group exchanged its 51% interest in Nigeria Tower InterCo B.V., the parent company of INT Towers
Limited (INT), the Nigerian telecom tower operator, for an additional shareholding in IHS Holding Limited (IHS Group)
("the transaction"). As a result of the transaction, the Group's economic interest in the IHS Group increased from
approximately 15% class B non-voting shares to an economic interest of approximately 29% comprising class A voting
shares and class B non-voting shares. The original IHS Group shareholders' agreement remains in place and there are
no changes to IHS Group's independence as an operator. Neither the interest prior to, nor the interest obtained
subsequent to the transaction will allow the Group to appoint a board member. In addition, IHS Group has the right
to decide what strategic, financial and operational information is shared with the Group. As a result of these
restrictions, the Group's vote is limited to matters which relate to fundamental changes in the business or which
apply in exceptional circumstances and are considered to be protective in nature. The Group's rights do not constitute
significant influence to participate in the financial and operating policy decisions of IHS Group. Consequently,
the Group continues to account for its investment in IHS Group as an available-for-sale financial instrument.
The exchange, which closed on 23 February 2017, has been accounted for as a disposal of the Group's equity accounted
interest in INT and an acquisition of an additional investment in the IHS Group. The net impact on profit before tax is
R6 017 million, which was determined as the difference between the fair value of the new interest obtained and the
carrying value of the equity-accounted interest in INT and after recycling the applicable amount included in the foreign
currency translation reserve (FCTR) (note 18) to the income statement. This resulted in a decrease of R4 452 million in
investments in associates and an increase of R13 767 million in available-for-sale investments.
The decision to exchange the shares was made following a thorough review of the commercial benefits of the exchange and
an agreement on the number of shares that the Group will qualify for in IHS Group. Consensus on these matters and board
approval for the transaction was obtained in January 2017. As a result, the investment in INT was not accounted for as
held for sale in accordance with the requirements of IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations
at 31 December 2016.
The transaction had no tax impact.
8. NIGERIA REGULATORY FINE
On 10 June 2016, MTN Nigeria Communications 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 agreed to pay a total cash amount of
N330 billion over three years (the equivalent of R25,1 billion 1) to the FGN as full and final settlement of the matter.
The regulatory fine was fully expensed in the prior period with an additional expense recognised in the income statement
amounting to R10,5 billion for the periods ended 30 June 2016 and 31 December 2016. A discount unwind of R537 million
(June 2016: R452 million; December 2016: R1,0 billion) was recognised in finance costs during the current period relating
to the outstanding liability. The balance of the liability at 30 June 2017 amounts to R7,2 billion (December 2016:
R8,7 billion) after taking into account the payment of N30 billion (R1,3 billion 2) on 24 March 2017 and the unwinding
of the interest.
1 Amount translated at 10 June 2016 rate R1 = N13,15.
2 Amount translated at March 2017 average rate R1 = N23,68.
9. IMPAIRMENT OF GOODWILL AND PROPERTY, PLANT AND EQUIPMENT
Current period impairments
In a number of the Group's operations in the MENA region the socio-political instability experienced in these
markets resulted in suppressed revenue growth and lower operating margins being experienced resulting in decreased
forecast cash flows. This necessitated impairment reviews being performed on the Group's operations in Guinea-Bissau,
Guinea-Conakry, Liberia, Ghana, Afghanistan, Sudan, Yemen and Syria where the carrying amounts of these
cash-generating units were compared to their respective recoverable amounts. The recoverable amounts were
determined through value-in-use calculations where future cash flows were estimated and discounted at the weighted
average cost of capital discount rates. The discount rates and the perpetuity growth rates used in the value-in-use
calculations of the operations impairment changes were recorded during the period under review are as follows:
June 2017 December 2016
Growth Discount Growth Discount
rate rate rate rate
% % % %
MTN Afghanistan 6,0 18,8 7,0 20,2
MTN Sudan 14,0 33,0 13,7 32,9
MTN Yemen 5,0 24,8 9,0 23,9
MTN Syria (JSC) 15,0 35,2 15,0 35,5
The following impairment losses were recognised in the income statement in the goodwill impairment and other
operating expenses lines, respectively:
Impairment
of property,
plant and
equipment
Goodwill and intangible Recoverable
impairment assets amount
Rm Rm Rm
MTN Afghanistan 841 - 1 971
MTN Sudan 983 1 690 3 416
MTN Yemen 807 - 2 758
MTN Syria (JSC) - 1 125 2 007
Total 2 631 2 815 10 152
MTN Sudan was operating in a hyperinflationary economy up to 30 June 2016 while MTN Syria (JSC) continues to
operate in a hyperinflationary economy. Hyperinflation accounting resulted in the write up of non-monetary
assets and a resulting increase in the carrying value of these operations. The total impairment of property,
plant and equipment and intangible assets amounting to R2 815 million and R192 million of the MTN Sudan goodwill
impairment for the current period relate to the carrying value previously written up to account for the impact
of hyperinflation, exceeding the calculated value in use.
The goodwill of MTN Sudan and MTN Syria has been fully impaired as at 30 June 2017 and the remaining goodwill
in MTN Afghanistan and MTN Yemen amount to R527 million and R1 984 million at 30 June 2017 respectively.
Prior period impairments
Areeba Guinea S.A.
Areeba Guinea S.A. (Conakry) experienced a decline in EBITDA and Guinea-Conakry experienced poor economic
performance countrywide. Consequently, a review of the recoverable amount of Conakry was undertaken during
2016 subsequent to which an impairment loss amounting to R402 million was recognised. As at 31 December 2016,
the goodwill balance relating to Conakry is fully impaired. No further impairments were deemed necessary
as at 30 June 2017.
Afrihost
Based on an agreement concluded by the Group to sell its 50,02% investment in Afrihost Proprietary Limited
(Afrihost) for R325 million, 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. The investment was disposed of during the second half of 2016.
10. NET FINANCE COSTS
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Rm Rm Rm
Interest income on loans and receivables 1 240 1 167 2 462
Interest income on bank deposits 817 986 1 962
Finance income 2 057 2 153 4 424
Interest expense on financial liabilities
measured at amortised cost (4 004) (4 466) (9 020)
Net foreign exchange losses (1 510) (3 632) (5 899)
Finance costs (5 514) (8 098) (14 919)
Net finance costs recognised in profit or loss (3 457) (5 945) (10 495)
11. SHARE OF RESULTS OF JOINT VENTURES
AND ASSOCIATES AFTER TAX 602 (1 692) (127)
Irancell Telecommunication Company Services (PJSC) 674 936 2 073
Nigeria Tower InterCo. B.V. (8) (2 463) (2 227)
Others (64) (165) 27
Dividends of R6 509 million were received from Irancell in the six months ended 30 June 2017.
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
12. EARNINGS PER ORDINARY SHARE
Number of ordinary shares in issue
At end of the period (excluding MTN Zakhele,
MTN Zakhele Futhi and treasury shares) 1 797 451 094 1 822 711 720 1 797 228 125
Weighted average number of shares
Shares for earnings/(loss) per share 1 797 377 182 1 822 527 498 1 819 974 274
Add: Dilutive shares
- Share options - MTN Zakhele - 6 807 058 -
- Share options - MTN Zakhele Futhi 38 681 604 - 42 508 806
- Share schemes 898 793 890 439 1 042 243
Shares for dilutive earnings per share 1 836 957 579 1 830 224 995 1 863 525 323
Treasury shares
Treasury shares of 9 983 286 (June 2016: 10 206 255, December 2016: 10 206 255) are held by the Group and
76 835 378 (June 2016: 11 131 098 shares held by MTN Zakhele, December 2016: 76 835 378) are held by MTN
Zakhele Futhi (RF) Limited (MTN Zakhele Futhi).
Dilutive shares
The share options and share rights issued in terms of the Group's share schemes, performance share plan,
MTN Zakhele and MTN Zakhele Futhi did not have a dilutive effect on the loss per share for the period ended
30 June 2016 and the year ended 31 December 2016, and have therefore not been treated as dilutive for these
comparative periods.
Headline earnings/(loss) is calculated in accordance with the circular titled Headline Earnings as issued by
the South African Institute of Chartered Accountants as amended from time to time and as required by the
JSE Limited.
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Rm Rm Rm
Basic headline earnings/(loss) per share
Reconciliation between profit/(loss)
attributable to the equity holders of the
Company and headline earnings/(loss)
Profit/(loss) after tax 5 207 (5 489) (2 614)
Net profit on disposal of property, plant and equipment (21) (15) (1)
- Subsidiaries (IAS 16) (20) (16) 4
- Joint ventures (IAS 28) (1) 1 (5)
Net profit on disposal of intangible assets - - (47)
- Subsidiaries (IAS 38) - - (47)
Profit on disposal of subsidiary (IFRS 10) - (277) (130)
Net (profit)/loss on dilution of investment in
joint venture (IAS 28) (28) - 349
Net impairment loss on property, plant and equipment
and intangible assets (IAS 36) 2 786 265 205
Impairment of goodwill (IAS 36) 2 631 604 873
Realisation of deferred gain on disposal of non-current
assets held for sale (IFRS 5) (13) (18) (31)
Profit on derecognition of equity-accounted
investment (IAS 28) (6 017) - -
Total tax effects of adjustments (157) 1 (10)
Total non-controlling interest effect of adjustments (486) (2) (3)
Basic headline earnings/(loss) 3 902 (4 931) (1 409)
Earnings/(loss) per share (cents)
- Basic 290 (301) (144)
- Basic headline 217 (271) (77)
Diluted earnings/(loss) per share (cents)
- Diluted 283 (301) (144)
- Diluted headline 212 (271) (77)
13. FINANCIAL INSTRUMENTS
Financial instruments at amortised cost
The Group has not disclosed the fair values of financial instruments measured at amortised cost except for
the borrowings and the loan set out below, as their carrying amounts closely approximate their fair values.
Listed long-term borrowings
The Group has listed long-term fixed interest rate senior unsecured notes in issue which were issued in
prior years, with a carrying amount of R23 117 million at 30 June 2017 (June 2016: R11 031 million,
December 2016: R24 059 million) and a fair value of R23 036 million (June 2016: R10 731 million
December 2016: R23 179 million). The fair values of these instruments are determined by reference to
quoted prices in the Irish bond market. The market for these bonds is not liquid and consequently the
fair value measurement is categorised within level 2 of the fair value hierarchy.
Loan to Nigeria Tower InterCo B.V.
The Group has a loan to INT with a carrying amount of R2 864 million (June 2016: R2 877 million,
December 2016: R2 863 million) and a fair value of R2 982 million (June 2016: R3 373 million,
December 2016: R2 969 million). The fair value of this instrument is determined by a discounted cash
flow analysis using a market-related interest rate. The fair value measurement is categorised within
level 3 of the fair value hierarchy.
Financial instruments measured at fair value
The fair values of financial instruments measured at fair value are determined as follows:
Treasury bills
The fair value of these investments is determined by reference to published price quotations in an
active market. The Group has classified treasury bills with a carrying amount of R293 million (June 2016:
R121 million, December 2016: R282 million) as available for sale and with a carrying amount of R697 million
(June 2016: R nil, December 2016: R669 million) as at fair value through profit or loss. The fair value of
these investments is categorised within level 1 of the fair value hierarchy.
Fair value measurement of investment in IHS
Included in investments in the condensed consolidated statement of financial position is an equity
investment in IHS Group at fair value of R24 859 million at 30 June 2017. As stated in note 7, the Group
increased its interest in IHS Group during the period under review following an exchange of its 51% interest
in Nigeria Tower InterCo B.V. Prior to the increase, the Group reported fair values of R11 240 million and
R11 354 million at 31 December 2016 and 30 June 2016 respectively, for the investment classified as available
for sale. The fair value at 30 June 2016 and 31 December 2016 was determined with reference to recent transactions
between market participants, consequently the investment was previously categorised within level 2 of the fair
value hierarchy. For 30 June 2017, 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 tower industry
earnings multiples of between 13x to 17x applied to MTN management estimates of earnings, less estimated
net debt.
Given the confidentiality restrictions in the shareholders' agreement with IHS Group, MTN does not have
access to the IHS Group business plans or 2016 actual financial information. Any estimated earnings used to
derive the existing fair value are therefore based solely on MTN management, market estimates and assumptions
on financial growth, currency movements, costs and performance. The investment has therefore been transferred
from level 2 to level 3 in the fair value hierarchy for the current reporting period. An increase of one in the
low and high end of the multiple range would have resulted in an increase in the fair value of R1 014 million
and a decrease of one in the low and high end of the multiple range would have resulted in a decrease in the
fair value by R1 014 million as at 30 June 2017. An increase of R817 million (June 2016 and December 2016:
R2 672 million) has been recognised for the period under review in other comprehensive income resulting from
the change in fair value.
Reconciliation of level 3 financial assets
The table below sets out the reconciliation of financial assets that are measured at fair value based on
inputs that are not based on observable market data (level 3):
Balance at 1 January 2016 9 707
Transfers to level 2 (IHS) (9 250)
Acquisitions 61
Foreign exchange differences (138)
Balance at 1 January 2017 380
Transfers from level 2 (IHS) 11 240
Acquisitions 143
Exchange right exercise 13 767
Gain on available-for-sale investment 817
Foreign exchange differences (981)
Balance at 30 June 2017 25 366
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Rm Rm Rm
14. AUTHORISED COMMITMENTS FOR THE
ACQUISITION OF PROPERTY, PLANT AND
EQUIPMENT AND SOFTWARE 20 924 18 267 34 753
- Contracted 12 046 9 292 11 458
- Not contracted 8 878 8 975 23 295
15. INTEREST-BEARING LIABILITIES
Bank overdrafts 189 18 -
Current borrowings 17 721 17 739 19 635
Current liabilities 17 910 17 757 19 635
Non-current borrowings 66 935 64 190 67 319
84 845 81 947 86 954
16. ISSUE AND REPAYMENT OF DEBT AND EQUITY SECURITIES
During the period under review the following entities raised and repaid significant debt instruments:
MTN Holdings raised R2,1 billion (June 2016: R9,7 billion, December 2016: R18,1 billion) additional debt
through syndicated loan facilities, R4,1 billion (June 2016: R2 billion, December 2016: R2 billion) on
general banking facilities and R757 million (June 2016: R2 billion, December 2016: R2,1 billion) through
the Domestic Medium Term Programme.
MTN Holdings repaid R2,0 billion (June 2016: R800 million, December 2016: R7,4 billion) of the syndicated
loan facility, R3,2 billion (June 2016: R1,2 billion, December 2016: R2,9 billion) of general banking facilities
and R746 million (June 2016: R nil, December 2016: R154 million) of the Domestic Medium Term Programme.
MTN International (Mauritius) Limited (MTN Mauritius) raised R1,3 billion (June 2016: R3,5 billion,
December 2016: R11,2 billion) and repaid R nil (June 2016: R837 million, December 2016: R12,9 billion)
on a revolving credit facility.
MTN Nigeria Communications Limited raised R1,5 billion (June 2016: R nil, December 2016: R nil) long-term
borrowings and repaid R2,1 billion (June 2016: R3,2 billion, December 2016: R5,4 billion).
Other borrowings raised and repaid across the Group amounted to R1,3 billion (June 2016: R6,8 billion,
December 2016: R12 billion) and R4,1 billion (June 2016: R4,4 billion, December 2016: R8,4 billion),
respectively.
During the second half of 2016, MTN (Mauritius) Investments Limited raised R14,2 billion debt through
long-term fixed interest rate unsecured notes. These notes are listed on the Irish Stock Exchange.
Financial
Six months Six months year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Reviewed Reviewed Audited
Rm Rm Rm
17. CONTINGENT LIABILITIES 9 950 1 308 8 127
Uncertain tax exposures
The Group operates in numerous tax jurisdictions and the Group's interpretation and application of the
various tax rules applied in direct and indirect tax filings may result in disputes between the Group
and the relevant tax authority. The outcome of such disputes may not be favourable to the Group.
At period end there were a number of tax disputes ongoing in various of the Group's operating entities,
the most significant of which relates to a transfer pricing dispute which the Group is contesting.
Legal disputes
The Group is involved in various legal disputes, the outcome of such disputes may not be favourable
to the Group. The Group has applied its judgement and has recognised liabilities based on whether additional
amounts will be payable, and has included contingent liabilities where considered possible but not probable.
Six Six Financial Six Six Financial
months months year months months year
ended ended ended ended ended ended
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2017 2016 2016 2017 2016 2016
Reviewed Reviewed Audited Reviewed Reviewed Audited
18. EXCHANGE RATES
Closing rates Average rates
United States dollar USD 0,08 0,07 0,07 0,08 0,07 0,07
Nigerian naira NGN 24,92 19,33 22,81 23,91 13,52 18,28
Iranian rial IRR 2 491,24 2 081,00 2 355,36 2 460,84 1 984,95 2 119,83
Ghanaian cedi GHS 0,34 0,26 0,31 0,33 0,25 0,27
Cameroon Communaute
Financière Africaine franc XAF 44,38 40,46 45,34 45,55 38,79 40,23
Côte d'Ivoire Communaute
Financière Africaine franc CFA 44,29 40,46 45,56 45,63 39,18 40,55
Ugandan shilling UGX 275,23 232,12 261,73 270,40 220,40 232,52
Syrian pound SYP 39,67 33,06 37,71 38,87 27,41 32,41
Sudanese pound SDG 0,51 0,42 0,48 0,50 0,40 0,43
The Group's functional and presentation currency is rand. The strengthening of the closing rate of the rand
against the functional currencies of the Group's largest operations contributed to the decrease in the
consolidated assets and liabilities and the resulting foreign currency translation reserve (FCTR) reduction
of R3 866 million (June 2016: R11 077 million, December 2016: R22 907 million) for the current period.
Following the exercise of the exchange rights in INT Towers Limited (note 7), a foreign currency translation
loss of R3 298 million was released to the condensed consolidated income statement.
Net investment hedges
During 2016 and for the period ended 30 June 2017, the Group hedged a designated portion of its dollar net
assets in MTN (Dubai) Limited (MTN Dubai) for forex exposure arising between the USD and ZAR as part of the
Group's risk management objectives. The Group designated external borrowings (Eurobonds) denominated in USD
held by MTN Mauritius with a value of R23 billion (December 2016: R23,1 billion) and external borrowings
denominated in USD held by MTN Nigeria Communications Limited with a value of R3,5 billion (December 2016:
R4,5 billion) as hedging instruments. For the period of the hedge relationship, foreign exchange movements
on these hedging instruments are recognised in other comprehensive income as part of the foreign currency
translation reserve (FCTR), offsetting the exchange differences recognised in other comprehensive income,
arising on translation of the designated dollar net assets of MTN Dubai to ZAR. The cumulative forex
movement recognised in other comprehensive income will only be reclassified to profit or loss upon loss
of control over MTN Dubai. There was no hedge ineffectiveness recognised in profit or loss during the current
or prior period.
Nigerian exchange rate
On 24 April 2017, a new quoted exchange rate window was established in Nigeria, the Nigerian Autonomous
Foreign Exchange Fixing (NAFEX). For the current reporting cycle, due to the short time period that has
elapsed between the introduction of this rate and period end, the Group has exercised judgement in determining
the most appropriate rate to be used to convert foreign denominated balances at period end in Nigeria, and
concluded to continue using the Interbank exchange rate for purposes of its interim results. The Group will
monitor the market liquidity in these quoted rates going forward in assessing the most appropriate rate at
which foreign denominated transactions and balances are to be translated for reporting purposes. The Interbank
exchange rate quoted was N325,00:USD1 and the exchange rate quoted in the NAFEX window was approximately
N366,41:USD1 as at 30 June 2017.
19. RELATED PARTY TRANSACTIONS
Transactions between members of the Group
Scancom Limited (MTN Ghana) entered into operating lease agreements with Ghana Tower InterCo B.V. The expense
recorded amounted to R348 million for the six months ended 30 June 2017 (June 2016: R313 million, December 2016:
R532 million). The rental amounts escalate every year by inflation and the initial term is 10 years, followed
by four times five-year renewal periods.
MTN Uganda Limited entered into operating lease agreements with Uganda Tower InterCo B.V. The expense recorded
amounted to R232 million for the six months ended 30 June 2017 (December 2016: R432 million; June 2016:
R244 million). The rental amounts escalate every year by inflation and the initial term is 10 years, followed
by four times five-year renewal periods.
MTN Nigeria Communications Limited entered into operating lease agreements with INT Towers Limited, a wholly
owned subsidiary of Nigeria Tower InterCo B.V, which are considered related parties up to the date of exercise
of the exchange right (note 7). The expense recorded from the beginning of the current reporting period to the
date of the exercise of the exchange right (note 7) amounted to R464 million (December 2016: R4 254 million;
June 2016: R2 502 million). The initial term is 10 years (extended to 15 years in 2016), followed by four times
five-year renewal periods.
20. EVENTS AFTER REPORTING PERIOD
Bonds issued and repaid
Subsequent to the end of the reporting period the Group issued two variable rate bonds totalling R2,5 billion
under its domestic medium term note (DMTN) programme. Both bonds were issued on 13 July 2017, R1,5 billion
bearing interest at three-month JIBAR plus 1,8% maturing on 13 July 2020; and R1 billion bearing interest
at three-month JIBAR plus 2% maturing on 13 July 2022.
On the same date, notes previously issued under the DMTN programme amounting to R1,25 billion matured
and were settled.
Dividends declared
Dividends declared at the board meeting held on 2 August 2017 amounted to 250 cents per share.
ADMINISTRATION
Registration number: 1994/009584/06
ISIN: ZAE000042164
Share code: MTN
Board of directors
PF Nhleko**
RA Shuter#*
RT Mupita*
PB Hanratty$***
A Harper#***
KP Kalyan***
S Kheradpir††***
NP Mageza***
MLD Marole***
AT Mikati†**
SP Miller^***
KC Ramon***
NL Sowazi***
AF van Biljon***
J van Rooyen***
†† American
† Lebanese
# British
$ Irish
^ Belgian
* Executive
** Non-executive
*** 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
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
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
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: 03/08/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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