Chairman’s statement

Cyril Ramaphosa Chairman

Recognising the challenges of change

The Greek philosopher Heraclitus is credited with saying that the only constant is change. At MTN we have seen remarkable change in the past decade and even in the past year. Emerging economies across Africa and the Middle East have grown rapidly, providing an opportunity to reap attractive returns for those willing to invest in what traditionally have been considered high-risk markets. Several countries in the region have experienced political and social volatility, most notably since the start of the Arab Spring in 2010. The increased ease of communication can be credited, at least in part, for both the rate of economic development and the political change we have seen. Mobile telephony in particular has been an empowering and liberating force throughout the emerging world.

At a sustainable energy conference in January, UN Secretary-General Ban Ki-moon put it plainly: “…The phenomenal spread of mobile phone technology… has touched every corner of the world and empowered billions of people – a direct result of innovation, investment and government support.”

It is fair to say that MTN has played a fundamental role in the economic and social development in the countries in which it operates. It, too, has benefited from its investments. Its ambition is to speed up the progress of the emerging world by enriching the lives of its people. The Company is committed to furthering this journey by expanding its offering beyond just voice to more sophisticated services. Numerous studies show that the effects of mobile telephony on economic growth are already significantly stronger in developing countries than in developed markets: just imagine what the impact will be of greater wireless internet access, not to mention services such as mobile banking, all driving development.

Apart from the effect on society, MTN’s strategy to pursue investments in emerging markets has provided considerable value for the Company. With a market capitalisation of R271 billion at the end of 2011, MTN is the largest primary listed company on the JSE, a key indicator of its success.

Ensuring sound governance

For MTN, sound governance and a strict code of conduct are fundamental to the way we do business. Because of the different dynamics across MTN’s 21 markets, most risks are managed in-country through dedicated local stakeholder teams under the best practice guidance of the Group.

MTN has as its core value the imperative to respect the human and privacy rights of people in all the markets in which we operate. These rights are entrenched in the terms of reference of the board’s newly formed social and ethics committee and defined as the 10 principles set out in the UN Global Compact Principles. We oppose abuse of these rights by any party, including governments, and work hard to ensure that our businesses do not contribute to such abuse. South Africa has human rights enshrined as a fundamental principle within its constitution. Given the country’s own recent history and our struggle against suppression and discrimination, we are very conscious of our moral obligations.

Following our announcement on 2 February 2012 of a potential claim by Turkcell and allegations made against MTN, the Group board has proactively responded by setting up the independent Hoffmann Committee. The committee has already started its work. Lord Hoffmann is a former senior British judge, with the highest reputation for independence. His full and detailed investigation will provide the board with deeper understanding of the matter.

MTN will address the recommendations made by the Committee at the end of that process.

Engaging transparently

Engagement is important, especially as telecommunications is a regulated industry. MTN works to ensure transparency with government bodies and regulators, enabling a balance between the commercial and social success of the industry and the vital infrastructure it provides.

Local ownership is essential to the commercial interests of MTN companies by ensuring local insight and understanding, but is also valuable in fostering local economic participation and empowerment.

In 2011, the Group continued its ongoing engagement with its many stakeholders, furthering real partnerships with key suppliers and other business associates, and developing its employees to ensure that they can advance their careers. MTN also worked harder to understand people’s needs and to better deliver on them, considering existing as well as potential customers. The Group accelerated its efforts to engage with regulators on the requirements for more inclusive mobile communications that help bridge the digital divide. Access to sufficient radio spectrum is vital to continued growth.

Personally, I found the meetings fellow director Alan van Biljon and I held with large investors very useful, giving us an opportunity to hear shareholders’ views first hand. It mirrored efforts throughout the Group for more interaction with stakeholders.

Accomplishing much in 2011

In 2011, MTN accomplished a great deal. The Group achieved a sound operational performance under challenging conditions. Recognising the strength of the balance sheet and the continued healthy cash flows, the board decided to increase the dividend payout policy to 70% of annual adjusted headline earnings per share, up from 55% a year before and 25% the year before that.

The Group also took further steps in its journey to produce a more integrated business report that provides meaningful information about all aspects of MTN’s performance and position.

Appreciation

I would like to thank the board and management team for their contribution in 2011. During the year, we said goodbye to Phuthuma Nhleko as Group president and CEO and to independent non-executive director Doug Band. Sifiso Dabengwa was welcomed as incoming Group president and CEO. He takes over as a new era of telecommunications is beginning, requiring an evolution of the business to changing customer demands while maintaining an appropriate cost base.

Following the decision last year not to form a formalised subsidiary company board for the international operations, Phuthuma Nhleko will not be rejoining the MTN Group board.

Looking forward

I have no doubt the year ahead will bring new opportunities, which will no doubt come with new challenges. While the economic and political outlook is quite cautious, I am confident that MTN will continue to strive towards overcoming the obstacles while increasing returns to shareholders.

Cyril Ramaphosa
Chairman

March 2012