Directors’ report

for the year ended 31 December 2007

The directors have pleasure in submitting their report on the annual financial statements of the Group for the year ended 31 December 2007.

Nature of business

MTN Group Limited (the “Group” or the “Company”) carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures and associate companies.

Review of financial results and activities

Review of financial results and the activities of the MTN Group are contained in the reports of the chairman, the Group president and CEO, the Group finance director, the Group chief operating officer and the annual financial statements.

Subsidiary companies

Details of entities in which MTN Group Limited has a direct or indirect interest are set out in Annexures 1 and 2 of the annual financial statements.

Mergers and acquisitions

No material acquisitions or disposals occurred during the year under review.

Material resolutions

Details of special resolutions and other resolutions of a significant nature passed by the Company and its subsidiaries during the year under review requiring disclosure in terms of the Listings Requirements of the JSE are:

1. To approve an authority for the Company and/or subsidiary of the Company, to acquire shares in the Company;
2. MTN Nigeria Communications Limited passed special resolutions on 8 November 2007 relating to:

• Amendment to the memorandum and articles of association of the company to reflect the restructure of the authorised share capital;
• Amendment of the provision with respect to the voting rights of preference shareholders on a resolution
  (i) Varying the rights attaching to the preference shares or (ii) the winding up of the company;
• Amendment to the articles of association by the introduction of a new article (Article 59) to reflect the terms of the preference shares issued by the company.

Directorate and Group secretary

During the financial year under review, there were no changes to the MTN Group board of directors.

In accordance with the articles of association of the Company one third of the board is required to retire by rotation at each annual general meeting. Retiring directors are those who have been in office for the longest period since their last re-election and directors who have been appointed between annual general meetings.

Profiles of the directors seeking re-election are contained in the notice of the annual general meeting which forms part of the annual financial statements.

The directors retiring by rotation in terms of the articles of association at the forthcoming annual general meeting are Ms KP Kalyan, Messrs RD Nisbet, JHN Strydom and Sheikh AH Sharbatly. The profiles for directors retiring by rotation can be viewed on the notice to shareholders.

The composition and profiles of the board of directors of the MTN Group appear here.

The Group secretary is Ms SB Mtshali, whose business and postal addresses are:

Interests of directors and officers

During the year under review, no contracts were entered into in which directors and officers of the Company had an interest which significantly affected the business of the Group. The directors had no interest in any third party or company responsible for managing any of the business activities of the Group. The emoluments and perquisites of executive directors are determined by the Group nominations, remuneration, human resources and corporate governance committee and approved by the board. No long-term service contracts exist between executive directors and the Company, with the exception of the contract of service between the Group president and CEO and the Company, which commenced on 1 July 2002 and terminated on 30 June 2007. Shareholders have, however, approved the renewal of the Group president and CEO’s contract at the annual general meeting held on 13 June 2007 and the new contract will expire on 30 June 2010.

Share capital

Authorised share capital

There was no change in the authorised share capital of the Company during the period under review. The authorised ordinary share capital of the MTN Group is 2,5 billion shares of 0,01 cents each. The following are the movements in the issued ordinary share capital from the beginning of the financial year to the date of this report:

Issued share capital

The issued share capital of the Company was increased during the year by the allotment and issue of shares to employees who exercised share options in terms of the MTN Group Limited Share Option Scheme. The allotments were as follows:

Accordingly, at 31 December 2007, the issued share capital of the Company was R186 480 (December 2006: R186 027) comprising 1 864 797 807 (December 2006: 1 860 268 283) ordinary shares of 0,01 cent each. No treasury shares were held at the date of this report.

Control of unissued share capital

The unissued ordinary shares are the subject of a general authority granted to the directors in terms of section 221 of the Companies Act, 1973 (Act No 61 of 1973) (“the Companies Act”). As this general authority remains valid only until the next annual general meeting, which is to be held on 19 June 2008, members will be asked at that meeting to consider an ordinary resolution placing the said unissued ordinary shares up to a maximum of 10% of the Company’s issued share capital under the control of the directors until the next annual general meeting.

Further details of the authorised and issued shares as well as the share premium for the year ended 31 December 2007 appear in note 17 to the MTN Group annual financial statements.

Acquisition of the Company’s own shares

At the last annual general meeting held on 13 June 2007, shareholders gave the Company or any of its subsidiaries, a general approval in terms of sections 85 and 89 of the Companies Act, by way of special resolution, for the acquisition of its own shares. As this general approval remains valid only until the next annual general meeting, which is to be held on 19 June 2008, members will be asked at that meeting to consider a special resolution to renew this general approval until the next annual general meeting.

Distribution to shareholders

A dividend of 136 cents per share (December 2006: 90 cents per share) amounting to R2,536 million (December 2006: R1,675 million) in respect of the financial year ended 31 December 2007 was declared on Tuesday, 18 March 2008, payable to shareholders registered on Friday, 11 April 2008. The payments of future dividends will depend on the board’s ongoing assessment of the MTN Group’s earnings, financial position, including its cash need, future earnings prospects and other factors.

Shareholders on the South African register who dematerialised their ordinary shares receive payment of their dividends electronically, as provided for by STRATE. For those shareholders who have not yet dematerialised their shareholding in the Company in certificated form, the Company operates an electronic funds transmission service, whereby dividends may be electronically transferred to shareholders’ bank accounts. These shareholders are encouraged to mandate this method of payment for all future dividends.

Results of operations

The financial statements set out fully the financial position, results of operations and cash flows of the Group. Note 1 to the financial statements provides an analysis of the financial results by geographic segment.

Shareholders’ interests

Major shareholders

The following information was extracted from the Company’s share register at 31 December 2007:

Disclosures in accordance with section 140A (8) (a) of the Companies Act and paragraph 8.63 of the JSE Listings Requirements

According to information received by the directors, the following shareholders held shares in excess of 5% of the issued ordinary share capital of the Company:

* Further details of the Newshelf 664 shareholding are provided below.

Certain of these shareholdings are partially or wholly included in the nominee companies mentioned above. Apart from this, the Company is not aware of any other party who has a shareholding of 5% or more in the Company.

The MTN Group share option and share appreciation rights schemes

The Company operates share option and share appreciation rights schemes (jointly referred to as “the schemes”) and eligible employees, including executive directors, are able to participate in accordance with the schemes’ rules. The schemes are designed to retain and recognise the contributions of executive directors and eligible staff and to provide additional incentives to contribute to the Company’s continuing growth.

In terms of the Company’s share option scheme, the total number of shares which may be allocated for the purposes of the scheme shall not exceed 5% of the total issued ordinary share capital of the Company from time to time, being 81 799 691 shares approved by shareholders in 2001.

MTN Group Limited Share Option Scheme (“the option scheme”)

The following information is provided in accordance with the provisions of the Option Scheme:

The vesting periods under the schemes are: 20%, 20%, 30% and 30% on the anniversary of the second, third, fourth and fifth years respectively, after the grant date. The strike price is determined as the closing market price for MTN Group Limited shares on the day prior to date of issue.

If the options or appreciation rights remain unexercised after a period of 10 years from the date of grant, they expire. Furthermore, options or appreciation rights are forfeited if the employee leaves the Group before they vest.

Details of the share options outstanding at year-end are:

The market weighted average share price on the dates that share options were exercised during the year was R118,10.

The options outstanding at the end of the year have a weighted average remaining contractual life of six years (December 2006: seven years). During the year ended 31 December 2007, no options were granted. These fair values were calculated using the stochastic model. The inputs into the model were:

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous seven years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The expected dividend yield was determined based on historical data.

Options exercised during the year yielded the following proceeds, after transaction costs:

*Amount less than R1 million.

Share options outstanding at the end of the year have the following terms:

MTN Group Share Appreciation Rights Scheme (“the rights scheme”)

The nominations, remuneration, human resources and corporate governance committee on 31 May 2006, considered and approved a share appreciation rights scheme to supersede the existing share option scheme, which was subsequently adopted by the board of directors.

Share appreciation rights have been granted for qualifying employees of MTN Group Limited. The exercise price of the granted appreciation rights range between R56,83 and R98,50 and represents closing market prices of the MTN Group Limited shares at the date of grant. The appreciation rights are equity settled and exercisable in accordance with the vesting periods outlined below. All rights lapse after a period of 10 years.

Details of grants made during the year and share appreciation rights in issue at year‑end are outlined below:

Rights in issue at year-end

The weighted strike price of options granted during the year is R96. 413 588 share appreciation rights (20006: nil) with a strike price of R56,83 were exercisable at year-end.

The weighted average remaining contractual life in respect of the share appreciation rights outstanding at year-end, approximate 8,77 years (2006: 9,71 years).

A valuation has been prepared using the stochastic model to determine the fair value of the share appreciation rights and the expense to be recognised during the year.

The inputs into the stocahstic model were as follows:

Expected volatility was determined by calculating the historical volatility of MTN Group Limited’s share price over the previous seven years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The expected dividend yield was determined based on historical data.

Shareholders are advised that an ordinary resolution (ordinary resolution number 5) was passed at the annual general meeting held on 13 June 2007, in terms of which the board of directors and the trustees of the MTN Group Share Trust were authorised to accelerate the vesting periods in exceptional circumstances, provided always that the changes do not allow a participant to exercise 100% of the share appreciation rights granted to him/her prior to the expiry of three years from the date of grant. In this regard, shareholders are referred to the table below to note the vesting dates in respect of the Group president and CEO’s share appreciation rights allocated on 21 November 2006 and 2 April 2007 which have been accelerated to align the vesting dates with his service contract.

Equity compensation benefits for executive directors and directors of major subsidiaries

MTN Group Limited share option and share appreciation rights schemes for the year ended 31 December 2007.

MTN Group Limited share option and share appreciation rights schemes for the year ended 31 December 2006

Directors’ shareholdings

The interests of the directors and alternate directors in the ordinary shares of the Company were as follows:

Directors’ share dealings

Shares traded by directors for the year ended 31 December 2007

The trades reflected above were in respect of shares exercised under the MTN Group Limited Share Appreciation Rights scheme ("SARs") and share option scheme.

Shareholders are referred to the Integrated Business Report for the year ended 31 December 2006, in which it was disclosed that Mr PF Nhleko entered into a forward purchase contract with a commercial bank on 24 May 2006 whereby 4 150 000 MTN Group shares would be acquired at a forward price of R63,97 per share on an 18‑month term basis.

On 3 April 2007, Mr PF Nhleko entered into a zero cost collar on 935 000 of the 4 150 000 forward purchased MTN shares. The put option was purchased at a strike price of R98,27 per share and the call option sold at a strike price of R113,69 in respect of the 935 000 forward purchased MTN shares. The expiry date thereof was 26 November 2007.

The transactions were contractually up for renewal at the end of November 2007 and on 29 November 2007 the transaction was restructured. The put option was purchased at a strike price of R131,87 per share and the call option sold at a strike price of R171,97 in respect of the full 4 150 000 forward purchased MTN shares.

Furthermore, Mr PF Nhleko entered into another separate and independent 15‑month term contract with a commercial bank on 28 December 2007 to acquire 15 893 822 shares at a call strike price of R133,21 per share and sold calls at R195 per share. This trade was financed through a forward sale of 2 610 000 shares at R149,63 per share.

Directors’ interests in the MTN Group held through Newshelf 664 (Proprietary) Limited (“Newshelf 664”)

Newshelf 664 (Proprietary) Limited (“Newshelf 664”) owns 243,5 million MTN Group shares (equivalent to 13,06% (December 2006: 16,6%) of the issued capital of the MTN Group). Newshelf 664 exercises the voting rights in respect of such shares. These shares were acquired from Transnet Limited (“Transnet”) at an average price of R13,90 per share between December 2002 and March 2003.

Newshelf 664’s ordinary shares are held by the Alpine Trust (“the Trust”) for the benefit of eligible permanent staff employed by MTN Group Limited and its South African subsidiaries as well as eligible senior staff members of its African operations. This is expected to benefit approximately 2 300 eligible employees. Such benefits vest over the six year funding period commencing in 2003 but will only be distributed when all obligations of Newshelf 664, including all debt and equity related funding obligations to certain financing institutions, have been met, and thereafter in accordance with the terms of the trust deed. This is anticipated to occur after 31 December 2008.

The Trust’s main objective is the advancement of black economic empowerment. In this regard, the Trust aims, inter alia, to allocate 75% of participation ratios to beneficiaries who are empowerment participants.

The Trust has six trustees, two of whom are directors of the MTN Group, namely PF Nhleko and RS Dabengwa. Ms I Charnley, also an executive of the MTN Group until June 2007, has retained her position as a trustee. The other trustees, being W Lucas-Bull, PM Jenkins (Chairperson) and Z Sithole, are independent. Furthermore, all the directors of Newshelf 664 have been appointed by the Trust, such directors being PF Nhleko, I Charnley, RD Nisbet and RS Dabengwa (jointly, “the Newshelf 664 Directors”). The Newshelf 664 Directors are also included among the eligible MTN employees who are beneficiaries of the Trust. Consequently, the interests of the Newshelf 664 Directors in respect of the MTN Group shares held by Newshelf 664 are:

• As a result of being trustees of the Trust, PF Nhleko and RS Dabengwa, together with the other trustees, have an indirect, non-beneficial interest in the MTN Group shares which are currently held by Newshelf 664.
• As a result of being directors of Newshelf 664, the Newshelf 664 Directors have an indirect, beneficial interest in respect of the voting rights pertaining to the MTN Group shares which are currently held by Newshelf 664.
• As a result of being beneficiaries of the Trust, the Newshelf 664 Directors have an indirect, beneficial interest in the MTN Group shares which are currently held by Newshelf 664. This beneficial interest is in the form of rights to participate in a predetermined ratio (“the participation ratio”) in the net assets of the Trust which result from the distribution by Newshelf 664 of the remaining amount and/or assets (if any) which may arise once all of Newshelf 664’s obligations have been met, including settlement of all funding. Certain of the financial institutions who funded the acquisition of the MTN Group shares also participate in the growth in value of the MTN Group Limited shares. The participation ratios of each of the Newshelf 664 Directors, who are currently also executive directors of MTN Group Limited are:
  
  

  – PF Nhleko	7,9270% (2006: 7,9270%)
  – RS Dabengwa	5,5869% (2006: 5,5869%)
  – RD Nisbet	5,5869% (2006: 5,5869%)

  
  

Subject to the terms and conditions of the trust deed, the rights to participate will vest in the above persons in equal tranches of approximately 16,67% per annum for six years on the condition that, in the event that any such person is not in the employment of the MTN Group at the end of the six-year period (by reason of voluntary termination or dismissal), he or she will only be entitled to that percentage of the rights to participate which will have vested prior to such director leaving the employment of the MTN Group.

In addition, the Newshelf 664 Directors have exercised an option to participate in 0,23% of the economic benefits attaching to the “B” class redeemable preference shares and the “B” class participating preference shares held by the Public Investment Corporation (“PIC”), as funders to Newshelf 664, for which option the Newshelf 664 Directors jointly paid an amount of R5 million. The capital acquisition consideration paid by each Newshelf 664 Director was:

The Newshelf 664 Directors thus have an indirect beneficial interest in the MTN Group Limited shares acquired by Newshelf 664 to the extent that the proceeds of such shares (dividends and capital) are required to service and settle the preference share funding provided by the PIC, but only to the extent of the proportion that their funding of the preference shares bears to the total PIC funding.

Directors' emoluments and related payments for the year ended 31 December 2007

* The director's emoluments have been provided for but have not been paid as yet.
**The fees have been paid in euro but have been converted to rand for consistency.
+ Fees are paid to M1 Limited.

Directors’ emoluments and related payments for the year ended 31 December 2006