Notes to the condensed consolidated financial statements

for the year ended 31 December 2009

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 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 financial year end information is based on the audited financial statements of the Group for the year ended 31 December 2009 which have been prepared in accordance with International Financial Reporting Standards (“IFRS’s”) 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 2008, as described in the annual financial statements for the year ended 31 December 2008. During the year under review, the Group adopted all the IFRS and interpretations being effective and deemed applicable to the Group. None of these had a material impact apart from IAS 1 (Revised) which resulted in a seperate condensed consolidated statement of comprehensive income being included as part of the primary financial statements of the Group. The necessary changes were also made to the condensed consolidated statement of changes in equity as a result.

5.	Headline earnings per ordinary share
	The calculations of basic and adjusted headline earnings per ordinary share are based on basic headline earnings of R14 869 million (2008: R15 603 million) and adjusted headline earnings of R13 963 million (2008: R16 870 million) respectively, and a weighted average number of ordinary shares in issue of 1 851 260 (2008: 1 865 299).

	31 December 2009 Audited Rm	31 December 2008 Audited Rm
	Net**	Net**
Net profit attributable to Company's equity holders	14 650	15 315
Adjusted for:
Loss on disposal of non current asset	71	111
Impairment of PPE and NCA	148	177

Basic headline earnings	14 869	15 603
Adjustment:
Reversal of the subsequent utilisation of deferred tax asset	—	441
Reversal of put option in respect of subsidiary:
– Fair value adjustment	(537)	74
– Finance costs	537	344
– Forex	(701)	569
– Minority share of profits	(205)	(162)
Adjusted headline earnings	13 963	16 870
Reconciliation of headline earnings per ordinary share (cents)
Attributable earnings per share (cents)	791,4	821,0
Adjusted for:
Loss on disposal of non current asset	3,8	6,0
Impairment of PPE and NCA	8,0	9,5

Basic headline earnings per share (cents)	803,2	836,5
Reversal of the subsequent utilisation of deferred tax asset	—	23,6
Reversal of put option in respect of subsidiary	(48,9)	44,3
Adjusted headline earnings per share (cents)	754,3	904,4
Number of ordinary shares in issue:
– Weighted average (‘000)	1 851 260	1 865 299
– At period end (‘000)	1 840 536	1 868 010

**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 Rnil ( 2008: R542 million) (Rnil excluding minorities (2008: R441 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 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;
(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.

		31 December 2009 Audited Rm	31 December 2008 Audited Rm
6.	Capital expenditure incurred	31 248	28 263
7.	Contingent liabilities and commitments
	Contingent liabilities – upgrade incentives	1 209	504
	Operating leases – non cancellable	832	801
	Finance leases	348	554
	Other	749	541
8.	Commitments for property, plant and equipment and intangible assets
	– Contracted for	6 780	11 410
	– Authorised but not contracted for	16 819	26 257
9.	Cash and cash equivalents
	Bank balances, deposits and cash	23 999	26 961
	Call borrowings	(1 353)	(1 365)
		22 646	25 596
10.	Interest-bearing liabilities
	Call borrowings	1 353	1 365
	Short-term borrowings	14 498	11 125
	Current liabilities	15 851	12 490
	Long-term liabilities	21 066	29 100
		36 917	41 590


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 profit or loss.

12.	Business combinations
	Acquisitions
	During the year under review, certain subsidiaries of the Group acquired the following entities:
(a)	An additional 59% in iTalk Cellular (Proprietary) Limited, a cellular service provider, was acquired in January 2009
(b)	100% of Verizon South Arica (Proprietary) Limited, an internet service provider, was acquired in February 2009 These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the acquiree to reflect the additional depreciation and amortisation that would have been charged assuming that the fair value adjustments to property, plant and equipment and intangible assets had been applied from acquisition date, together with the consequential tax effects.


	Carrying amount	Total
	on acquisition date	fair value
	Rm	Rm
The assets and liabilities arising from the acquisitions are as follows:
Property, plant and equipment	106	106
Other non-current assets	95	95
Investments	1	1
Cash and cash equivalents	95	95
Net working capital	42	42
Long term borrowings	(118)	(118)
Taxation	7	7
Deferred Taxation	(80)	(80)
Customer relationships	284	284
Other liabilities	(56)	(56)
Net asset value	376	376
Purchase consideration		2 126
Fair value of net assets acquired		376
Goodwill		1 750

13.	The acquisition of 100% of Newshelf 664 (Proprietary) Limited
	MTN acquired the entire issued ordinary share capital of Newshelf 664 (Proprietary) Limited (“Newshelf”) from the PIC. The Newshelf acquisition was affected by way of a specific issue of shares to the PIC and the specific repurchase by MTN of 243.5 million MTN shares held by Newshelf. The transaction was concluded in April 2009. MTN acquired the Newshelf shares at an effective discount to market value and intends to apply a significant portion of this effective discount to future participants in a BEE transaction as an incentive to invest in that transaction. The board remains fully committed to implement a BEE transaction as soon as conditions become conducive.
14.	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 year ended.