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”) was prepared in accordance with International Financial Reporting Standards (“IFRS”) IAS 34 – Interim Financial Reporting and in compliance with the Listings 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 2009, as described in the annual financial statements. During the period under review, the Group adopted all the IFRS and interpretations being effective and deemed applicable to the Group. None of these standards and interpretations had a material impact on the results.

5.	Headline earnings per ordinary share
	The calculations of basic and adjusted headline earnings per ordinary share are based on basic headline earnings of R7 953 million ( 2009: R7 739 million) and adjusted headline earnings of R8 072 million (2009: R6 776 million) respectively, and a weighted average number of ordinary shares in issue of 1 840 551 (2009: 1 862 519).

Reconciliation between net profit attributable to the equity holders of the company and headline earnings.

	Six months	Six months	Financial year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	Reviewed	Reviewed	Audited
	Rm	Rm	Rm
Net profit attributable to company's equity holders	8 094	7 630	14 650
Adjusted for:
(Profit)/loss on disposal of non-current assets	(48)	109	71
Reversal of impairment of property, plant and equipment and non-current assets	(92)	—	148
Basic headline earnings	7 954	7 739	14 869
Adjustment:
Reversal of put option in respect of subsidiary:
– Fair value adjustment	(114)	(553)	(537)
– Finance costs	242	(585)	537
– Foreign exchange loss/(gain)	98	293	(701)
– Non-controlling shareholders share of profit	(108)	(118)	(205)
Adjusted headline earnings	8 072	6 776	13 963
Reconciliation of headline earnings per ordinary share (cents)
Attributable earnings per share (cents)	439,7	409,7	791,4
Adjusted for:
(Profit)/loss on disposal of non-current assets	(2,6)	0,3	3,8
(Reversal of impairment)/impairment of property, plant and equipment and non-current assets	(5,0)	5,5	8,0
Basic headline earnings per share (cents)	432,1	415,5	803,2
Reversal of put option in respect of subsidiary	6,5	(51,7)	(48,9)
Basic headline earnings per share (cents)
Reversal of the subsequent utilisation of deferred tax asset
Reversal of put option in respect of subsidiary
Adjusted headline earnings per share (cents)	438,6	363,8	754,3
Number of ordinary shares in issue:
– Weighted average (’000)	1 840 551	1 862 519	1 851 260
– At period end (’000)	1 840 616	1 839 868	1 840 536

Adjusted headline earnings adjustments

Put option in respect of subsidiary

IFRS requires the Group to account for a written put option held by a non-controlling shareholder of one of the Group subsidiaries, which provides them with the right to require the subsidiary to acquire its shareholdings at fair value. Prior to the implementation of IFRS the shareholding was treated as a non-controlling shareholder in the subsidiary as all risks and rewards associated with these shares, including dividends, currently accrue to the non-controlling 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 profit or loss;

	(c)	the non-controlling shareholder holding the put option no longer be regarded as a non-controlling 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 that are outstanding, have the same rights as any other shares, and should therefore, be accounted for as a derivative rather than creating an exception to the accounting required under IAS 39.

		Six months	Six months	Financial year
		ended	ended	ended
		30 June	30 June	31 December
		2010	2009	2009
		Reviewed	Reviewed	Audited
		Rm	Rm	Rm
6.	Capital expenditure incurred	8 496	15 504	31 248
7.	Contingent liabilities and commitments
	Contingent liabilities – upgrade incentives	930	250	1 209
	Operating leases – non-cancellable	579	756	832
	Finance leases	328	520	348
	Other	664	633	749
8.	Commitments for property, plant and equipment and intangible assets
	– Contracted for	6 124	23 260	6 780
	– Authorised but not contracted for	8 979	3 625	16 819
9.	Cash and cash equivalents
	Bank balances deposits and cash	30 149	19 503	23 999
	Call borrowings	(1 067)	(587)	(1 353)
		29 082	18 916	22 646
10.	Interest-bearing liabilities
	Call borrowings	1 067	587	1 353
	Short-term borrowings	11 367	9 551	14 498
	Current liabilities	12 434	10 138	15 851
	Long-term liabilities	23 536	25 537	21 066
		35 970	35 675	36 917

	11.	Other non-current liability
		The put option in respect of the subsidiary arises from an arrangement whereby the non-controlling 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 profit and loss.
	12.	Post balance sheet events
		The directors are not aware of any matter or circumstance arising since the end of the reporting period, not otherwise dealt with herein, which significantly affects the financial position of the Group or the results of its operations or cash flows for the period ended.