Notes to the condensed consolidated financial statements


1.	Independent audit 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.

2.	General information
	MTN 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 financial year end information is based on the audited financial statements of the Group for the year ended 31 December 2008 which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) IAS 34 – Interim Financial Reporting, the Listing Requirements of the JSE Limited and the South African Companies Act 61 of 1973, as amended 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 2008, as described in the annual financial statements for the year ended 31 December 2008.

5.	Headline earnings per ordinary share
	The calculations of basic and adjusted headline earnings per ordinary share are based on basic headline earnings of R15 603 million ( 2007: R10 886 million) and adjusted headline earnings of R16 870 million (2007: R12 693 million) respectively, and a weighted average number of ordinary shares in issue of 1 865 298 632 (2007: 1 861 454 696).


	12 months ended 31 December 2008 Audited Rm	12 months ended 31 December 2007 Audited Rm
	*Net***	Net**
Net profit attributable to Company's equity holders	15 315	10608
Adjusted for:
Loss on disposal of property, plant and equipment	111	61
Impairment of property, plant and equipment	177	173
Other impairments	-	44
Basic headline earnings	15 603	10 886
Adjusted for:
Reversal of deferred tax asset	-	(223)
Reversal of the subsequent utilisation of deferred tax asset	441	1 664
Reversal of put option in respect of subsidiary
– Fair value adjustment	74	262
– Finance costs	914	210
– Minority share of profits	(162)	(106)
Adjusted headline earnings	16 870	12 693
Reconciliation of headline earnings per ordinary share (cents)
Attributable earnings per share (cents)	821,0	569,9
Adjusted for:
Loss on disposal of property, plant and equipment	6,0	3,3
Impairment of property, plant and equipment	9,5	9,3
Other impairments	-	2,4
Basic headline earnings per share (cents)	836,5	584,8
Adjusted for:
Reversal of deferred tax asset	-	(12,0)
Reversal of the subsequent utilisation of deferred tax asset	23,6	89,4
Reversal of put option in respect of subsidiary	44,3	19,7
Adjusted headline earnings per share (cents)	904,4	681,9
Contribution to adjusted headline earnings per ordinary share (cents)
South and East Africa	385,7	329,2
West and Central Africa	517,6	410,6
Middle East and North Africa	77,0	22,2
Head office companies	(75,9)	(80,1)
	904,4	681,9
Number of ordinary shares in issue:
– Weighted average (000)	1 865 299	1 861 455
– At period end (000)	1 868 010	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 (2007: R1 968 million) R441 million excluding minorities (2007: R1 664 million) to the adjusted headline earnings figure. The remaining pioneer deferred tax asset was fully utilised during 2008.

As previously disclosed, although the Group has complied with the requirements of IAS 12 in this regard, the Board 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 realistically 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 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.

		12 months ended 31 December 2008 Audited Rm	12 months ended 31 December 2007 Audited Rm
6.	Capital expenditure incurred	28 263	15 348
7.	Contingent liabilities and commitments
	Contingent liabilities	504	957
	Operating leases	801	955
	Finance leases	554	581
	Other	541	373
8.	Commitments for property, plant and equipment and intangible assets
	Contracted for	11 410	8 671
	Authorised but not contracted for	26 257	21 910
9.	Cash and cash equivalents
	Bank balances, deposits and cash	26 961	16 868
	Call borrowings	(1 365)	(1 322)
		25 596	15 546
10.	Interest-bearing liabilities
	Call borrowings	1 365	1 322
	Short-term borrowings	11 125	9 328
	Current liabilities	12 490	10 650
	Long-term liabilities	29 100	23 007
		41 590	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 in the income statement.

12.	Business combinations
	During the year under review, certain subsidiaries of the group acquired the following entities:
(a)	Afnet, a local internet service provider, was acquired by MTN Cote d‘Ivoire on 8 May 2008 for an initial purchase consideration of Euro 10,2 million to be followed by an additional maximum amount of Euro 9,6 million. To date only the first part of the purchase consideration has been settled in cash as the remaining portion is deemed to be contingent on certain contractual requirements being met.
(b)	Arobase Telecom SA, a local fixed line operator, was acquired by MTN Cote d‘Ivoire on 23 September 2008 for an initial purchase consideration of Euro 7,7 million to be followed by an additional amount of Euro 3,3 million. To date, only the first part of the purchase consideration has been settled cash as the remaining portion is deemed to be contingent on certain contractual requirements being met
(c)	Otenet and Infotel, were acquired by MTN Cyprus with effect from November 2008 for a total purchase consideration of Euro 6,6 million and USD 18 million respectively. The Group has elected, under IFRS 3, to finalise asset and liability fair values allocated to each cash generating unit, and therefore the relocated goodwill, within 12 months subsequent to the acquisition date


	Carrying amount
	on acquisition date	Total fair value
	Rm	Rm
The assets and liabilities arising from the acquisitions are as follows:
Property, plant and equipment	300	300
Trade and other receivables	34	34
Other current assets	4	4
Cash and cash equivalents	7	7
Long term borrowings	(267)	(267)
Trade and other payables	(213)	(213)
Unearned income	(14)	(14)
Tax	(13)	(13)
Other liabilities	(7)	(7)
Net asset value (a and b)	(169)	(169)
Purchase consideration (a and b)	233
Fair value of net assets acquired	169
Goodwill (a and b)	402
Purchase consideration (c)	260
Goodwill	662

13.	Post balance sheet events
	Subsequent to year end MTN Holdings acquired 100% of Verizon South Africa (Pty) Ltd and the remaining 59% in ITalk (Pty) Ltd.