Notes to the condensed consolidated financial statements


1.	Independent review by the auditors
	These condensed consolidated results have been reviewed by our joint auditors PricewaterhouseCoopers Inc. and SizweNtsaluba VSP, who have performed their review in accordance with the International Standard on Review Engagements 2410. A copy of their unqualified review report is available for inspection at the registered office of the company.

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

3.	Basis of preparation
	The condensed consolidated interim financial information (“interim financial information”) announcement was prepared in accordance with International Financial Reporting Standards (“IFRS”) IAS 34 – Interim Financial Reporting and in compliance with the Listing Requirements of the JSE Limited and the South African Companies Act (1973), on a consistent basis with that of the prior period.

4.	Accounting policies
	The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2007, as described in the annual financial statements for the year ended 31 December 2007.

5.	Headline earnings per ordinary share
	The calculations of basic and adjusted headline earnings per ordinary share are based on basic headline earnings of R6 328 million (June 2007: R5 660 million) and adjusted headline earnings of R7 618 million (June 2007: R6 040 million) respectively, and a weighted average number of ordinary shares in issue of 1 864 911 (June 2007: 1 860 430).

	Six months ended	Six months ended	Six months ended
	30 June 2008	30 June 2007	31 December 2007
	Reviewed	Reviewed	Audited
	Rm	Rm	Rm
	Net**	Net**	Net**
Net profit attributable to equity holders of the company	6 240	5 555	10 608
Adjusted for:
(Profit)/loss on disposal of property, plant and equipment	(1)	32	61
Impairment of property, plant and equipment	89	73	173
Other impairments	—	—	44
Basic headline earnings	6 328
Adjustment:
Reversal of deferred tax asset	—	(223)	(223)
Reversal of the subsequent utilisation of deferred tax asset	425	436	1 664
Reversal of put option in respect of subsidiary
– Fair value adjustment	520	132	262
– Finance costs	404	111	210
– Minority share of profits	(59)	(76)	(106)
Adjusted headline earnings	7 618	6 040	12 693
Reconciliation of headline earnings per ordinary share (cents)
Attributable earnings per share (cents)	334,6	298,6	569,9
Adjusted for:
(Profit)/loss on disposal of property, plant and equipment	(0,1)	1,7	3,3
Impairment of property, plant and equipment	4,8	3,9	9,3
Other impairments	—	—	2,4
Basic headline earnings per share (cents)	339,3	304,2	584,8
Reversal of deferred tax asset	—	(12,0)	(12,0)
Reversal of the subsequent utilisation of deferred tax asset	22,8	23,5	89,4
Reversal of put option in respect of subsidiary	46,4	9,0	19,7
Adjusted headline earnings per share (cents)	408,5	324,7	681,9
Contribution to adjusted headline earnings per ordinary share (cents)
South and East Africa	165,9	144,0	329,2
West and Central Africa	261,0	217,3	410,6
Middle East and North Africa	25,5	1,7	22,2
Head office companies	(43,9)	(38,3)	(80,1)
	408,5	324,7	681,9
Number of ordinary shares in issue:
– Weighted average (000)	1 864 911	1 860 430	1 861 455
– At period end (000)	1 865 354	1 861 208	1 864 798

** Amounts are stated after taking into account minority interests.

Adjusted headline earnings adjustments

Deferred tax asset
The Group’s subsidiary in Nigeria had been granted a five-year tax holiday under “pioneer status” legislation. On 31 March 2007 MTN Nigeria exited “pioneer status”, and from 1 April 2007 became subject to income tax in Nigeria. A deferred tax asset of R2,5 billion was created during “pioneer status” in respect of capital allowances on capital assets that are only claimable after the company comes out of “pioneer status”. The above resulted in the commencement of the reversal of the deferred tax asset shown as an adjustment of R542 million (June 2007: R515 million) (R425 million excluding minorities (June 2007: R436 million) to the adjusted headline earnings figure.

As previously disclosed, although the Group has complied with the requirements of IAS 12 in this regard, the Board of Directors has reservations about the appropriateness of this treatment in view of the fact that no cognisance may be taken in determining the value of such deferred tax assets for uncertainties arising out of the effects of the time value of money or future foreign exchange movements. The Board therefore resolved to report adjusted headline earnings (negating the effect of the deferred tax asset) in addition to basic headline earnings, to more fully reflect the Group’s results for the period.

Put option in respect of subsidiary
“IFRS requires the Group to account for a written put option held by a minority shareholder of one of the Group subsidiaries, which provides them with the right to require the subsidiary to acquire their shareholdings at fair value. Prior to the implementation of IFRS the shareholding was treated as a minority shareholder in the subsidiary as all risks and rewards associated with these shares, including dividends, currently accrue to the minority shareholders.

IAS 32 requires that in the circumstances described in the previous paragraph:
(a)	the present value of the future redemption amount be reclassified from equity to financial liabilities and that financial liability so reclassified subsequently be measured in accordance with IAS 39;
(b)	in accordance with IAS 39, all subsequent changes in the fair value of the liability together with the related interest charges arising from present valuing the future liability be recognised in the income statement; and
(c)	the minority shareholder holding the put option no longer be regarded as a minority shareholder but rather as a creditor from the date of receiving the put option.
Although the Group has complied with the requirements of IAS 32 and IAS 39 as outlined above, the Board of Directors has reservations about the appropriateness of this treatment in view of the fact that:
(a)	the recording of a liability for the present value of the future strike price of the written put option results in the recording of a liability that is inconsistent with the framework, as there is no present obligation for the future strike price;
(b)	the shares considered to be subject to the contracts are issued and fully paid up, have the same rights as any other issued and fully paid up shares and should be treated as such; and
(c)	the written put option meets the definition of a derivative and should therefore be accounted for as a derivative in which case the liability and the related fair value adjustments recorded through the income statement would not be required.”

30 June

30 June

31 December

2008

2008

2007

Reviewed

Reviewed

6.	Capital expenditure incurred

10 311

6 256

15 348

7.	Contingent liabilities and commitments

Contingent liabilities

1 013

610

957

Operating leases

917

1 490

955

Finance leases

1 393

608

581

Other

—

373

8.	Commitments for property, plant and equipment and intangible assets

– Contracted for

12 686

7 022

8 671

– Authorised but not contracted for

11 816

8 446

21 910

9.	Cash and cash equivalents

Bank balances, deposits and cash

27 058

12 744

16 868

Call borrowings

(1 054)

(1 448)

10.

Interest-bearing liabilities

Call borrowings

1 054

1 448

1 322

Short-term borrowings

10 196

8 475

9 328

Current liabilities

11 250

9 923

10 650

Long-term liabilities

29 313

24 531

23 007

40 563

34 454

33 657

11.	Other non-current liability
	The put option in respect of the subsidiary arises from an arrangement whereby the minority shareholders of the Group’s subsidiary have the right to put their remaining shareholding in the subsidiary to Group companies. On initial recognition, the put option was fair valued using effective interest rates as deemed appropriate by management. To the extent that the put option is not exercisable at a fixed strike price the fair value will be determined on an annual basis with movements in fair value being recorded in the income statement. In January 2008, the MTN Cote d’Ivoire put option, amounting to R474 million, was cancelled. Upon cancellation the outstanding balance was transferred to equity. There was no effect on profit and loss.
12.	The disposal of 5,96% of MTN Nigeria Communications Limited
	In February 2008, the legal shareholding in MTN Nigeria Communications Limited, a telecommunications company incorporated in Nigeria, was reduced from 82,04% to 76,08%, for ZAR4 660 million. The transaction did not result in loss of control.

		Carrying value on
		disposal date
		Rm
	The assets and liabilities sold are:
	Cash and cash equivalents	282
	Property, plant and equipment	1 065
	Intangibles	187
	Investment in subsidiary	2
	Net deferred tax assets	7
	Non-current prepayments	3
	Inventories and receivables	129
	Payables	(439)
	Other non-current liabilities	(3)
	Borrowings	(326)
	Net assets disposed of	907
	Consideration received	4 660
	Net assets disposed of	907
	Profit on disposal included in equity on consolidation	3 753

13.	Comparative amounts
	During the period under review certain operating expenses and cost allocations from head office companies in respect of the prior year were reclassified to ensure consistency with the current year classification. These reclassifications were done to achieve better comparability.