Notes to the condensed consolidated financial statements


1.	Basis of preparation
	The condensed financial information (“financial information”) announcement is based on the audited financial statements of the Group for the year ended 31 December 2007 which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) International Accounting Standard 34, the Listing Requirements of the JSE Limited and the South Africa Companies Act 61 of 1973 as amended, on a consistent basis with that of the prior period.

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 886 million (December 2006: R10 628 million) and adjusted headline earnings of R12 693 million (December 2006: R10 246 million) respectively, and a weighted average of 1 861 454 696 (December 2006: 1 752 304 867) ordinary shares in issue. Reconciliation between net profit attributable to the equity holders of the Company and headline earnings.


	12 months ended 31 December 2007 Audited Rm	12 months ended 31 December 2006 Audited Rm
Net profit attributable to equity holders of the Company	10 608	10 610
Adjusted for:
Loss on disposal of property, plant and equipment	61	40
Impairment/(reversal of impairment) of property, plant and equipment	173	(22)
Other impairments	44	—
Basic headline earnings	10 886	10 628
Adjusted for:
Reversal of deferred tax asset	(223)	(650)
Reversal of the subsequent utilisation of deferred tax asset	1 664	—
Reversal of put option in respect of subsidiary
– Fair value adjustment	262	120
– Finance costs	210	301
– Minority share of profits	(106)	(153)
Adjusted headline earnings	12 693	10 246
Reconciliation of headline earnings per ordinary share (cents)
Attributable earnings per share (cents)	569,9	605,4
Adjusted for:
Loss on disposal of property, plant and equipment	3,3	2,3
Impairment/(reversal of impairment) of property, plant and equipment	9,3	(1,2)
Other impairments	2,4	—
Basic headline earnings per share (cents)	584,8	606,5
Reversal of deferred tax asset	(12,0)	(37,1)
Reversal of the subsequent utilisation of deferred tax asset	89,4	—
Reversal of put option in respect of subsidiary	19,7	15,3
Adjusted headline earnings per share (cents)	681,9	584,7
Contribution to adjusted headline earnings per ordinary share (cents)
South and East Africa	329,2	289,5
West and Central Africa	410,6	325,8
Middle East and North Africa	22,2	2,7
Head office companies	(80,1)	(33,3)
	681,9	584,7
Number of ordinary shares in issue:
– Weighted average (000)	1 861 455	1 752 305
– At period end (000)	1 864 798	1 860 268

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. As previously disclosed, although the Group has complied with the requirements of IAS 12 in this regard, no cognisance was 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 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 that period.

A deferred tax credit of R223 million (December 2006: R650 million) excluding minority interests relating to deductible temporary differences has been recognised for the period ended 31 December 2007 in terms of IAS 12 – Income Taxes.

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 has resulted in the commencement of the reversal of the deferred tax asset shown as an adjustment of R1,9 billion (R1,7 billion excluding minorities) to the adjusted headline earnings figure.

Put option in respect of subsidiaries

The implementation of 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;
(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;
(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 on Auditing. A copy of their unqualified audit report is available for inspection at the registered office of the Company.

		12 months 31 December 2007 Audited Rm	12 months 31 December 2006 Audited Rm
4.	Capital expenditure incurred	15 536	9 778

5.	Contingent liabilities and commitments
	Contingent liabilities	955	911
	Operating leases	955	837
	Finance leases	581	592
	Other	373	506

6.	Commitments for property, plant and equipment and intangible assets
	Contracted for	8 671	3 268
	Authorised but not contracted for	21 910	13 163

7.	Cash and cash equivalents
	Bank balances, deposits and cash	16 868	9 961
	Call borrowings	(1 322)	(953)
		15 546	9 008
8.	Interest-bearing liabilities
	Call borrowings	1 322	953
	Short-term borrowings	9 328	3 439
	Current liabilities	10 650	4 392
	Long-term liabilities	23 007	28 587
		33 657	32 979


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 the put options are not exercisable at a fixed strike price, fair value will be determined on an annual basis with movements in fair value being recorded in profit and loss.

10.	Business combinations
(c)	The acquisition of additional shares in MTN Rwanda In November 2007 the shareholding in MTN Rwanda, a telecommunications company incorporated in Rwanda, was increased from 40% to 55%, for US$ 40,5 million, converting the joint venture operation into a fully consolidated subsidiary of the Group. In November 2007 the shareholding in MTN Rwanda, a telecommunications company incorporated in Rwanda, was increased from 40% to 55%, for US$ 40,5 million, converting the joint venture operation into a fully consolidated subsidiary of the Group. These amounts have been calculated using the Group’s accounting policies. Goodwill is attributable to the synergies expected to arise after the Group gaining control of MTN Rwanda. Details of the net assets acquired and goodwill as at acquisition are as follows:


		November 2007
		Rm
Total purchase consideration		272
Fair value of net assets acquired		(58)

Goodwill		214
The assets and liabilities arising from the acquisition are as follows:

		Acquiree’s
	Fair value on	carrying amount
	on acquisition date	on acquisition date
	Rm	Rm

Cash and cash equivalents	223	223
Property, plant and equipment	254	254
Intangibles	2	2
Inventories and receivables	4	4
Payables	84	84
Borrowings	(139)	(139)
Net deferred tax assets	(39)	(39)

Net assets acquired	389	389
Minorities	(175)

Net assets already owned	(156)

Fair value of net assets acquired	58

Cash and cash equivalent in subsidiary acquired		134
Purchase consideration		(272)

Cash outflow on acquisition		(138)

11.

Post-balance sheet events

Broadening of the Nigerian shareholder base of MTN Nigeria

Subsequent to year-end, Nigerian individuals and key institutions have acquired a 9,45% interest in MTN Nigeria from MTN, acting through its wholly owned subsidiary, MTN International (Mauritius) Limited, and other shareholders in MTN Nigeria, pursuant to a private placement.

The main rationale for the transaction is to achieve MTN’s stated intention of broadening the ownership of MTN Nigeria among Nigerian citizens and institutions and to reaffirm MTN’s commitment of enabling greater Nigerian representation in MTN Nigeria.

MTN disposed of an overall equity interest of 5,96% in MTN Nigeria as part of the private placement for a consideration of US$594,50 million, thereby reducing its interest in MTN Nigeria to 76,08%.
The allocation date for the private placement was 8 February 2008 and share transfers have been effected on
18 February 2008.

Change in tax rate

On 20 February 2008 the South African Minister of Finance announced a change in the corporate tax rate from 29% to 28%. This change is effective for financial years ending on any date between 1 April 2008 and 31 March 2009.