Notes to the condensed consolidated financial statements


1.	Basis of preparation
	The condensed consolidated financial information (“financial information”) announcement is based on the audited financial statements of the Group for the year ended 31 December 2006 which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) 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. The financial year-end for MTN Group and its subsidiaries was changed from 31 March to 31 December in the previous period. The financial statements are therefore for the 12 months ended 31 December 2006, with the comparative results for the 9 months ended 31 December 2005.

2.	Headline earnings per ordinary share
	The calculations of basic and adjusted headline earnings per ordinary share are based on basic headline earnings of R10 628 million (December 2005: R5 984 million) and adjusted headline earnings of R10 246 million (December 2005: R5 626 million) respectively, and a weighted average of shares of 1 752 304 867 (December 2005: 1 663 208 548) ordinary shares in issue. Reconciliation between net profit attributable to the equity holders of the company and headline earnings.

	12 months ended	9 months ended
	31 December 2006	31 December 2005
	Audited	Audited
	Rm	Rm
Net profit attributable to company’s equity holders	10 610	5 866
Adjusted for:
Loss on disposal of property, plant and equipment	40	27
Profit on sale of subsidiary	—	(23)
Impairment of property, plant and equipment	(22)	114
Basic headline earnings	10 628	5 984
Adjusted for:
Reversal of deferred tax asset	(650)	(332)
Reversal of put option in respect of subsidiaries
– Fair value adjustment	120	(19)
– Finance costs	301	97
– Minority share of profits	(153)	(104)
Adjusted headline earnings	10 246	5 626
Reconciliation of headline earnings per ordinary share (cents)
Attributable earnings per share (cents)	605,4	352,7
Adjusted for:
Loss on disposal of property, plant and equipment	2,3	1,6
Profit on sale of subsidiary	—	(1,4)
Impairment of property, plant and equipment	(1,2)	6,9
Basic headline earnings per share (cents)	606,5	359,8
Effect of reversal of deferred tax asset	(37,1)	(20,0)
Effect of reversal of put option entries	15,3	(1,6)
Adjusted headline earnings per share (cents)	584,7	338,2
Contribution to adjusted headline earnings per ordinary share (cents)
South and East Africa	289,5	181,7
West and Central Africa	325,8	155,0
Middle East and North Africa	2,7	(0,9)
Head office companies	(33,3)	2,4
Adjusted headline earnings per share (cents)	584,7	338,2
Number of ordinary shares in issue:
– Weighted average (000)	1 752 305	1 663 209
– At period-end (000)	1 860 268	1 665 317

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.”


3.	Independent review by the auditors
	These condensed consolidated results have been audited by our joint auditors PricewaterhouseCoopers Inc. and SizweNtsaluba VSP, who have performed their audit in accordance with the International Standards of Auditing. A copy of their unqualified audit report is available for inspection at the registered office of the company.


		31 December 2006 Audited Rm	31 December 2005 Audited Rm
4.	Capital expenditure incurred (including software)	9 778	6 732

5.	Contingent liabilities and commitments
	Contingent liabilities	911	781
	Operating leases	837	331
	Finance leases	592	638

6.	Commitments for property, plant and equipment and intangible assets
	Contracted for	3 268	2 902
	Authorised but not contracted for	13 163	10 039

7.	Cash and cash equivalents
	Bank balances, deposits and cash	9 961	7 222
	Call borrowings	(953)	(58)
		9 008	7 164

8.	Interest-bearing liabilities
	Call borrowings	953	58
	Short-term borrowings	3 439	1 042
	Current liabilities	4 392	1 100
	Long-term liabilities	28 587	7 505
		32 979	8 605


9.	Other non-current liability
	The put options in respect of subsidiaries arise from arrangements whereby minority shareholders of two of the Group’s subsidiaries have the rights to put their remaining shareholdings in the subsidiaries to Group companies. On initial recognition, these put options were fair valued using effective interest rates as deemed appropriate by management to the extent that these put options are 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.

10.	Business combinations
	10.1 The acquisition of 100% of Investcom LLC On 4 July 2006 the Group acquired 100% of the issued share capital of Investcom LLC for a consideration of US$5,5 billion settled in cash and shares.The cost of acquisition was settled through an issue of corporate paper in the South African bond market and a US$ and ZAR-denominated bank facility. 183 210 084 MTN Group shares were issued and US$3,7 billion cash settled out of the new facilities raised above. The acquired businesses contributed revenues of R5 987 million and net profit of R792 million to the Group for the period ended 31 December 2006. If the acquisitions had occurred on 1 January 2006, the contribution to Group revenue would have been R10 328 million and the contribution to profit would have been R1 069 million. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2006, together with the consequential tax effects. The goodwill is attributable to an expanded footprint and a significantly larger population under-coverage. Low penetration levels and economies of scale provide enhanced prospects.


Details of the net assets acquired and goodwill	On acquisition date
are as follows:	Rm
Total purchase consideration	33 339
Fair value of net assets acquired	(10 173)

Goodwill	23 166

		Acquiree’s
	Fair value on	carrying amount
The assets and liabilities arising from theacquisition are as follows:	acquisition date	on acquisition date
	Rm	Rm
Cash and cash equivalents	3 175	3 175
Property, plant and equipment	3 600	3 986
Intangibles	8 140	4 156
Inventories and receivables	2 096	2 096
Payables	(3 151)	(3 151)
Borrowings	(1 085)	(1 085)
Net deferred tax assets	(1 272)	(136)

Net assets acquired	11 503	9 041
Minorities	(1 330)

Fair value of net assets acquired	10 173

Purchase consideration		23 941
Cash and cash equivalents in businesses acquired		(3 175)

Cash outflow on acquisition		20 766

10.2 The increase of MTN Uganda shareholding to 97,34%

The shareholding in MTN Uganda was increased in two tranches in July 2006 from 52,01% to 97,34%, converting the joint venture operation into a fully consolidated subsidiary of the Group.

The acquired businesses contributed revenues of R1 164 million and net profit of R223 million to the Group for the period ended 31 December 2006.

If the acquisitions had occurred on 1 January 2006, the contribution to Group revenue would have been R1 462 million and the contribution to profit would have been R179 million. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2006, together with the consequential tax effects.

The goodwill is attributable to the profitability of the acquired business.

Details of the net assets acquired and goodwill	On acquisition date
are as follows:	Rm
Total purchase consideration	1 577
Fair value of net assets acquired	(947)

Goodwill	630

		Acquiree’s
	Fair value on	carrying amount
The assets and liabilities arising from the	acquisition date	on acquisition date
acquisition are as follows:	Rm	Rm
Cash and cash equivalents	35	35
Property, plant and equipment	439	439
Intangibles	974	11
Investment in subsidiary	1	1
Inventories and receivables	71	71
Payables	(50)	(50)
Borrowings	(146)	(146)
Net deferred tax assets	(352)	(72)

Net assets acquired	972	289
Minorities	(25)

Fair value of net assets acquired	947

Purchase consideration		1 577
Cash and cash equivalents in businesses acquired		(35)

Cash outflow on acquisition		1 542

11.	Post-balance sheet events
	Subsequent to year-end the Nigerian Communications Commission confirmed that MTN Nigeria had been successful in securing a 3G licence.As an auction was not required, the minimum reserve price of US$150 million was settled.The 3G spectrum and licence are yet to be issued.

12.	Net asset value per ordinary share and net (debt)/cash equity ratios


	At	At
	31 December	31 December
	2006	2005
	Audited	Audited
Net asset value (Rand)	20,80	11,84
Net (debt)/cash equity	(58,8%)	(4,5%)