Directors’ report

for the year ended 31 December 2011

The directors’ report forms part of the audited financial statements of the Company and the Group for the year ended 31 December 2011.

Nature of business

MTN Group Limited, incorporated on 23 November 1994, carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures and associated companies. The Group is listed on the JSE Limited.

Details of the Company’s registered address are set out on page 223 of the integrated business report.

Integrated business report

The board acknowledges its responsibility for the integrity of this integrated business report. Guidelines as provided by King III have been adopted in preparation of this integrated business report.

International Financial Reporting Standards (IFRS)

The Group and Company financial statements were prepared in accordance with IFRS.

Financial results

The Group recorded a profit after tax for the year ended 31 December 2011 of R23 787 million (2010: R16 827 million).

Full details of the financial results of the Group and Company are set out on pages 92 to 207 of these financial statements and accompanying notes for the year ended
31 December 2011.

Details on the capital expenditure by the business are set out on pages 104 of the integrated business report.

Year under review

The detailed reviews and the activities of the Group are contained in the reports of the chairman, the Group president and chief executive officer (CEO), and the Group chief financial officer (CFO) and are set out on pages 24 to 31 of the integrated business report.

Subsidiary companies

Details of entities in which the Group has a direct or indirect interest are set out in Annexure 1 of the integrated business report on pages 208.

All Group subsidiaries have a year end consistent with that of the Company, with the exception of Irancell Telecommunications Services Company (Private Joint Stock) (MTN Irancell), which has a year end of 21 December, due to statutory requirements in Iran.

Distribution to shareholders

Final dividend

A final dividend of 476 cents per share (2010: 349 cents per share) amounting to R8 940 million (excluding treasury shares) (2010: R6 577 million) in respect of the financial year ended 31 December 2011 was declared on 6 March 2012, payable to shareholders registered on 23 March 2012.

Before declaring the final dividend, the board:

	applied the solvency and liquidity test on the Company; and
	reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after payment of the final dividend.

The final dividend will be paid within 120 days of the board’s performance of the solvency and liquidity test.

Interim dividend

An interim dividend of 273 cents per share (2010: 151 cents per share) amounting to R5 145 million (2010: R2 779 million) in respect of the half year period ended 30 June 2011 was declared on Thursday, 18 August 2011, paid to shareholders registered on Monday, 16 September 2011.

Dividend payment policy adjustment

Due to the Group’s strong financial position, the board approved an increase in the dividend payment policy. The dividend payment policy was increased to 70% of annual adjusted headline earnings per share (EPS). The interim dividend was based on 30% of the prior year’s adjusted headline EPS.

The payments of future dividends will depend on the board’s ongoing assessment of the Group’s earnings, financial position, cash needs, future earnings prospects and other factors.

Shareholders on the South African register who dematerialised their ordinary shares receive payment of their dividends electronically, as provided for by STRATE. For those shareholders who have not yet dematerialised their shareholding in the Company in certificated form, the Company operates an electronic funds transmission service, whereby dividends may be electronically transferred to shareholders’ bank accounts. These shareholders are encouraged to mandate this method of payment for all future dividends, by approaching our share registrar, Computershare Investor Services Proprietary Limited, whose contact details are set out on page 230 of the notice of the annual general meeting.

Share capital

Authorised share capital

There was no change in the authorised share capital of the Company during the year under review. The Company’s authorised ordinary share capital of MTN Group is 2,5 billion shares of 0,01 cent each.

Issued share capital

The issued share capital of the Company is R188 481 (2010: R188 451) comprising 1 884 811 569 (2010: 1 884 510 117) ordinary shares of 0,01 cent each.

The issued share capital of the Company was increased during the year by the allotment and issue of shares to employees who exercised share options in terms of the MTN Group Limited share option scheme. The allotments were as follows:

Options exercised and allotted

Details on the MTN Zakhele Scheme are set out in note 47.

Details of participation in the MTN Zakhele Scheme by MTN directors, directors of major subsidiaries and the company secretary are set out on page 73 of the integrated business report.

Control of unissued share capital

The unissued ordinary shares are the subject of a general authority granted to the directors in terms of section 38 of the Companies Act. As this general authority remains valid only until the next annual general meeting, which is to be held on 29 May 2012, members will be asked at that meeting to consider an ordinary resolution placing the said unissued ordinary shares, up to a maximum of 10% of the Company’s issued share capital, under the control of the directors until the next annual general meeting.

Acquisition of the Company’s own shares

At the last annual general meeting held on 22 June 2011, shareholders gave the Company or any of its subsidiaries a general approval in terms of section 48 of the Companies Act, by way of special resolution, for the acquisition of its own shares. As this general approval remains valid only until the next annual general meeting, which is to be held on 29 May 2012, members will be asked at that meeting to consider a special resolution to renew this general approval until the next annual general meeting, subject to a maximum extension of 15 months.

During the year under review a subsidiary of the Group acquired 6 764 412 shares in the Company at an average share price of R137,50, including costs.

Further details of the authorised and issued shares are set out in note 20.

Shareholders’ interests

Details of shareholders’ interest and a shareholder spread analysis are set out on pages 206 and 207 of the integrated business report.

Share price performance

Details of the share price performance of the Company is disclosed on page 228 of the integrated business report.

Directorate

The composition and profiles of the board of directors of the Company are set out on page 64 and the information on the board and board committees, its activities, meetings and attendance is set out in the corporate governance statement appearing on page 54 of the integrated business report.

Details of directors’ remuneration and shareholding are set out in the remuneration report on pages 64 and 73 of the integrated business report.

Company secretary

The details of the company secretary are set on page 52 of the integrated business report.

Directors

Retirement by rotation of directors

In accordance with the Company’s memorandum of incorporation (MOI) AF van Biljon, A Harper, NP Mageza and MLD Marole retire by rotation at the forthcoming annual general meeting. The retiring directors, being eligible, offer themselves for re-election.

The profiles of the directors retiring by rotation and seeking re-election are set out on page 216 of the integrated business report.

Resignations and appointments

During the year under review the following resignations were received:

	DDB Band tendered his resignation effective 11 March 2011, in order to reduce his directorship; and
	PF Nhleko tendered his resignation effective 31 March 2011, following the expiry of the term of contract.

PF Nhleko’s resignation as a director coincided with the termination of his contract of employment as Group president and CEO.
RS Dabengwa succeeded PF Nhleko as Group president and CEO, with effect from 1 April 2011.

Interests of directors and officers

Details of the interests of directors and officers are provided in the remuneration report on page 72 of the integrated business report.

Directors’ and prescribed officers’ shareholdings and dealings

Details of the directors’ and prescribed officers’ shareholdings and dealings are provided in the remuneration report on page 73 of the integrated business report.

Employee share schemes

Details of the Group’s share schemes are provided in note 47.

Material resolutions

During the year there were no material resolutions in the Company or its subsidiary companies.

Mergers and acquisitions

Details of the MTN Group’s acquisitions and disposals are disclosed in note 44.

Property, plant and equipment

Ghana Tower InterCo BV (TowerCo Ghana)

As part of the Group strategy to embark on infrastructure sharing, the Group, in 2010, entered into an agreement with American Tower Corporation (ATC) for the establishment of a joint initiative in Ghana (TowerCo Ghana). ATC is a leading owner, operator and developer of wireless and broadcast communications sites. TowerCo Ghana is managed by ATC, ATC holds a 51% share and the Group owns a 49% share. The transaction involved the sale of 1 856 of MTN Ghana’s existing sites to TowerCo Ghana for an agreed purchase price of USD498 million. The transaction required ATC to pay up to approximately USD219 million for its 51% stake in the holding company.

Uganda Tower InterCo BV (TowerCo Uganda)

On 9 December 2011, the Group announced that it had entered into an agreement for the establishment of a joint initiative in Uganda (TowerCo Uganda). TowerCo Uganda is managed by ATC, ATC holds a 51% share and the Group owns a 49% share. The transaction involves the sale of approximately 997 of MTN Uganda’s existing sites to TowerCo Uganda for an agreed purchase price of USD175 million. This requires ATC to pay up to approximately USD89 million for its 51% stake in the holding company. ATC and MTN Uganda expect to close the transaction during the first half of 2012, subject to customary closing conditions.

Events after the reporting period

Potential litigation by Turkcell Iletism Hizmetlera AS (Turkcell)

On 2 February 2012, Turkcell, the largest mobile phone operator in Turkey, indicated its intention to bring a legal claim against the Group and its Iranian joint venture, Irancell Telecommunications Services Company Proprietary Limited, of which the Group holds 49%. The claim, which Turkcell intends to bring before a United States (US) court, is based on allegations that the Group violated certain US laws in its effort to obtain Iran’s second GSM licence.

The Group’s board, on legal advice, believes that the Turkcell claim lacks legal merit and that a US court would not have jurisdiction to hear the claim.

American depository receipt facility

A sponsored American depository receipt facility has been established. This facility is sponsored by the Bank of New York and details of the administrators are reflected
on page 230 of the integrated business report.

Borrowing powers

In terms of the articles of association of the Company, the borrowing powers of the Company are unlimited, however, all borrowings by the Group are subject to limitations expressed in the treasury policy of the Group. The details of borrowings are disclosed in note 22.

Going concern

The directors have reviewed the Group’s budget and cash flow forecast for the year to 31 December 2012. On the basis of this review, and in the light of the current financial position and existing borrowing facilities, the directors are satisfied that the Group has access to adequate resources to continue in operational existence for the foreseeable future and is a going concern and has continued to adopt the going concern basis in preparing the financial statements.

Audit committee

The report of the audit committee appears on page 86 of the integrated business report.

Auditors

PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc. will continue in office as joint auditors in accordance with section 90 of the Companies Act. The audit committee reviewed the independence of the auditors during the period under review and satisfied itself that the auditors were independent of the Group.