Directors' report

for the year ended 31 December 2012

Nature of business

MTN Group Limited (the Company) incorporated in the Republic of South Africa 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. The Company’s registered address is 216 14th Avenue, Fairland, Roodepoort, Gauteng 2195.

Integrated report

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

Accounting practices

The Group and Company annual financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and comply with the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements and the requirements of the Companies Act.

Financial results

The Group recorded a profit after tax for the year ended 31 December 2012 of R24 068 million (2011: R23 787 million).

Full details of the financial results of the Group and Company are set out on pages 114 to 211 of these annual financial statements and accompanying notes for the year ended 31 December 2012.

Capital expenditure

Capital expenditure for the year ended 31 December 2012 totalled R30 101 million (2011: R17 717 million) which comprised the following:

Related party transactions

Details of related party transactions are set out on pages 178 and 179 of these annual financial statements.

Year under review

The detailed reviews and the activities of the Group are contained in the reports of the Group president and chief executive officer, and the Group chief financial officer as set out on pages 32 to 39 of the integrated report.

Borrowing powers

In terms of the memorandum of incorporation, the borrowing powers of the Company are unlimited, however all borrowings by the MTN Group are subject to limitations set out in the treasury policy of the Group. The details of borrowings are disclosed in note 25.

Going concern

The directors have reviewed the Group’s budget and cash flow forecast for the year to 31 December 2013. On the basis of this review, and in light of the current financial position and existing borrowing facilities, the directors are satisfied that the Group and Company have access to adequate resources to continue in operational existence for the foreseeable future and are going concerns and have continued to adopt the going concern basis in preparing the annual financial statements.

Subsidiary companies and joint ventures

Details of entities in which MTN Group has a direct or indirect interest are set out in Annexure 1 of the integrated report on pages 212 and 213.

All Group subsidiaries have a year end consistent with that of the Company with the exception of Irancell Telecommunication Company Services (PJSC) (MTN Irancell), a joint venture of the Group that has a year end of 20 December, in line with statutory requirements in Iran.

Distribution to shareholders

Final dividend

Notice is hereby given that a gross final dividend of 503 cents per share for the period to 31 December 2012 has been declared payable to MTN shareholders. The number of ordinary shares in issue at the date of this declaration is 1 883 484 324 (including 22 337 752 treasury shares).

The dividend will be subject to a maximum local dividend tax rate of 15% which will result in a net dividend of 427,55 cents per share to those shareholders that bear the maximum rate of dividend withholding tax of 75,45 cents per share.

MTN Group Limited’s tax reference number is 9692/942/71/8. In compliance with the requirements of STRATE, the electronic settlement and custody system used by the JSE Limited, the salient dates relating to the payment of the dividend are as follows:

No share certificates may be dematerialised or rematerialised between Friday, 22 March 2013 and Thursday, 28 March 2013, both days inclusive. On Tuesday, 2 April 2013, the dividend will be transferred electronically to the bank accounts of certificated shareholders who make use of this facility.

In respect of those who do not use this facility, cheques dated Tuesday, 2 April 2013 will be posted on or about that date. Shareholders who hold dematerialised shares will have their accounts held by the Central Securities Depository Participant or broker credited on Tuesday, 2 April 2013.

The MTN Board confirms that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution.

Interim dividend

A gross interim dividend of 321 cents per share (2011: 273 cents per share) amounting to R5 979 million (2011: R5 145 million) in respect of the half year period ended 30 June 2012 was declared on 7 August 2012 and paid to shareholders on 3 September 2012.

Before declaring the interim dividend, the board:

• applied the solvency and liquidity test on the Company; and
• reasonably concluded that the Company would satisfy the solvency and liquidity test immediately after payment of the interim dividend.

The payments of future dividends will depend on the board’s ongoing assessment of MTN 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 the Company’s share registrar, Computershare Investor Services Proprietary Limited, whose contact details are set out on page 224 of the notice of the AGM.

Share capital

Authorised share capital

There was no change in the authorised share capital of the Company during the year under review. The 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 348 (2011: R188 481) comprising 1 883 484 324 (2011: 1 884 811 569) ordinary shares of 0,01 cent each.

The issued share capital of the Company was decreased during the year by the cancellation of shares issued to MTN Zakhele, offset by the allotment and issue of shares to employees who exercised share options in terms of the MTN Group Limited share option scheme. Details of these allotments are set out on page 159 of the annual financial statements.

MTN Zakhele Scheme

Details of the MTN Zakhele Scheme are set out in note 23.

Details of participation in the MTN Zakhele Scheme by directors of the Company, directors of major subsidiaries and the company secretary are set out on page 95 of the integrated 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 AGM, shareholders 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 AGM.

Acquisition of the Company’s own shares

At the last AGM held on 29 May 2012, 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 AGM is held on 28 May 2013, shareholders will be asked at that meeting to consider a special resolution to renew this general authority until the next AGM, subject to a maximum extension of 15 months.

During the year under review a subsidiary of the Group acquired 15 573 340 (2011: 6 764 412) shares in the Company at an average share price of R134,07 (2011: R137,50), including costs.

Further details of the authorised and issued shares are set out in note 23.

Shareholders’ interest

Details of shareholders’ interest and a shareholder spread analysis are set out on page 211 of the integrated report

Share price performance

Details of the share price performance of the Company are set out on page 235 of the integrated report.

Directorate

The composition and profiles of the board of directors of the Company are set out on page 22 and the information on the board and board committees, its activities, appointment policy, meetings and attendance are set out in the corporate governance statement appearing on page 73 of the integrated report.

Details of directors’ remuneration and shareholding are set out in the remuneration report on pages 87 to 95 of the integrated report.

Retirement by rotation of directors

In accordance with the Company's memorandum of incorporation (MOI) MC Ramaphosa (chairman), RS Dabengwa, NI Patel and AT Mikati retire by rotation at the forthcoming AGM. The retiring directors, being eligible, offer themselves for re-election with the exception of MC Ramaphosa, who will be retiring at the next AGM. Following a review of his business related commitments, MC Ramaphosa has informed the Company that he wishes to relinquish his position as non-executive director and chairman of the Company.

In accordance with the policy adopted by the board and the MOI of the Company, directors who have been in office for an aggregate period in excess of nine years, are required to retire at the next AGM and at each GM thereafter. Accordingly, AF van Biljon and JHN Strydom (non-executive directors), who have served on the board for an aggregate period of nine years, retire at the forthcoming AGM and are eligible and offer themselves for re-election following an evaluation of their independence.

The profiles of the directors retiring by rotation and seeking re-election are set out on page 217 of the integrated report.

Resignations and appointments

During the year under review, F Titi was appointed to the board as an independent non-executive director, with effect from 1 July 2012. His appointment is subject to shareholder approval at the next AGM to be held on 28 May 2013.

There were no resignations other than those mentioned above.

Interests of directors and prescribed officers

Details of the interests of directors and prescribed officers are provided in the remuneration report on page 95 of the integrated 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 95 of the integrated report.

Employee share schemes

Details of the Group’s share schemes are provided on pages 84 and 85 of the remuneration report and in note 44.

Material resolutions

There were no material resolutions passed in the Company or its subsidiaries during the year under review.

Mergers and acquisitions

Details of the Group’s acquisitions and disposals are disclosed in note 42.

Events after the reporting period

Details of events after the reporting period are set out in note 40 of these annual financial statements.

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 238 of the integrated report.

AGM

The AGM will be held at 14:30 on 28 May 2013. refer to page 216 of the integrated report for further details of the ordinary and special business for consideration at the meeting.

Internal financial controls

During the year under review, the board, through the audit committee, assessed the results of the formal documented review of the Company’s system of internal controls and risk management, including the design, implementation and effectiveness of the internal financial controls conducted by internal audit and considered information and explanations given by management and discussions with the external auditors on the results of the audit. Although the audit identified certain weaknesses in financial controls, whether in design, implementation or execution, the board does not consider these control weaknesses (individually or in combination with other weaknesses) to have resulted in actual material financial loss, fraud or material errors. Based on the above results nothing has come to the attention of the board that caused it to believe that the Company’s system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements. The board’s opinion is supported by the audit committee.

Audit committee

The report of the audit committee appears on page 108 of the integrated report.

Auditors

PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc. will continue in office as joint auditors in accordance with section 90 of the Companies Act. Suren Sooklal will be the registered audit partner who will be undertaking the audit for PricewaterhouseCoopers Inc. Suleman Lockhat will be the registered audit partner who will be undertaking the audit for SizweNtsalubaGobodo Inc. 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.