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A statement from our chairman
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| Cyril Ramaphosa |
Recording good progress
2012 was a good year for MTN. The Group delivered to its customers through a more extensive and quality competitive offering, and to its shareholders through solid financial returns. To its numerous other stakeholders, MTN remained a reliable partner and contributor, championing positive change.
The Group increased headline earnings per share by 1,9% to 1 089,1 cents and declared a final dividend of 503 cents per share, up from 476 cents in 2011, bringing the total dividend to 824 cents per share.
As this is my last letter to you as chairman - I am retiring at the annual general meeting in May - I consider it an appropriate opportunity to share with you a few statistics to show just how much the Group has grown since 2001, the year I was first appointed to the board. Since then, MTN has grown its market capitalisation to more than R335 billion from R21.8 billion and subscriber numbers have increased to approximately 190 million from 3.9 million. In this time, the Group's cumulative capital expenditure has exceeded R171 billion and it has paid taxes, levies and licence fees of more than R129 billion.
It has indeed been an honour to be part of this homegrown African success story. MTN is a Group that has gained the admiration of several keen observers and indeed other operators throughout the telecoms world. MTN has recorded some extraordinary achievements and overcome considerable challenges to now call itself a leading emerging markets mobile operator in 22 countries across Africa and the Middle East, employing almost 27 000 people.
But now, back to 2012. Recognising the pace of change in the telecoms industry and the need to ensure increasing relevance, MTN management and the board of directors worked together in the year to hone the Group's mission, vision and strategy. The previous strategy had served us well, as we successfully entered markets where many others had feared to tread. We are now pursuing opportunities beyond merely providing voice services, and are focusing on evolving the Group's ICT offering.
In further elaboration of this, in his report for the year, the Group president and CEO spells out the changes being made to MTN's strategy to ensure the delivery of a bold, new Digital World to more and more people.
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Enhancing governance
The board, which is accountable for the governance and sustainable performance of the Group, is committed to good corporate governance and continues to make significant progress in this regard. In an environment of increasing regulatory and legislative compliance requirements, we regularly review the board's governance structures and processes. This is aimed at enhancing the board's effectiveness and ensuring that it is aligned with sound business practices.
In 2012, the board adopted more King lll recommendations as well as the latest JSE Listings Requirements and continued to implement changes required by the new Companies Act, including the establishment of a social and ethics committee. To keep up to date with changing legislation and governance principles, we reviewed and approved the board charter as well as the terms of reference of the board committees.
While the process to appoint directors has, in the past, been conducted in a formal and transparent manner, there has never been a formal policy in place. However, in 2012, the board adopted a policy on the appointment of directors and the Group secretary. We also appointed a new independent non-executive director - Fani Titi - with effect from 1 July 2012. With his extensive experience in a wide range of capacities, we know that Fani's contribution will be valuable and we welcome him.
Focusing on ethics
A major focus of the board in the year was on ethics, and strengthening our policies and procedures throughout MTN. The new social and ethics committee held its inaugural meeting in February 2012, and at this meeting and subsequent ones through the year it has been considering the Group's code of ethics. It also convened an ethics task team to review and further embed ethical values as well as ensure that employees practise ethical behaviour.
Key elements of the Group's ethics management process will be formerly introduced in the year ahead. It is fair to say that, like many other major corporations, MTN recognises that there is room for it to do more to enhance the ethics management process throughout the Group's 22 operations.
Closely linked to ethics is accountability, which the Group has identified in our culture change programme as one of four vital behaviours required for the organisation to successfully execute its revised strategy and remain sustainable.
As part of our commitment to ethics, human rights are fundamental in the culture of MTN. We are sensitive to concerns about human rights in relation to the implementation of interception capabilities. Protecting customer privacy is important to us and we work to prevent any illegal use or abuse of customer confidentiality. Throughout the industry worldwide, legal interception is a requirement of operating licences in many countries. This is the case in the majority of the countries in which we operate and in all countries where we operate there is legislation to enable law enforcement agents to obtain information.
Like all operators, MTN has no ability to control or manage how information obtained through legal means by relevant authorities is used. We continue to work proactively with other parties, including global operators and industry bodies, to find solutions to this issue, which were again discussed at the recent Mobile World Congress in Barcelona.
Defending our record
Just as we were stepping up our ethics policy, systems and processes, allegations of breaches of ethical conduct were made against the Group. Having set out the allegations in January 2012, on 28 March 2012, Turkcell Iletisim Hitzmetleri AS (Turkcell) filed a legal action against MTN Group and MTN International (Mauritius) Pty Ltd in the United States District Court in Washington, DC.
Turkcell has alleged that MTN violated the US Alien Tort Statute by conspiring to oust Turkcell from the Irancell consortium by: bribing an Iranian official and a South African official; encouraging the South African government to support Iran's nuclear development programme at meetings of the International Atomic Energy Agency; promising to influence the South African government to provide military equipment to Iran; and bribing its Iranian partners through sham loan agreements. Turkcell has sought damages of $4.2 billion. On 2 July 2012, MTN moved to dismiss the case on the basis that it lacks legal merit. MTN expects the court will decide the motion in its favour later this year.
Given the seriousness of the allegations, the MTN board felt they merited an authoritative and independent investigation and on 1 February 2012, appointed a special committee to do just that. Lord Leonard Hoffmann, an international jurist of unquestionable legal authority and independence, was selected to chair the special committee. Following a year-long investigation, that involved a detailed review of the evidence, Lord Hoffmann determined that the allegations were without foundation. He concluded that he found nothing in the conduct of MTN over this period that put at question MTN's integrity or propriety.
The board was particularly pleased to note Lord Hoffmann's findings that the allegations against MTN's former Group president and CEO Phuthuma Nhleko and MTN's former commercial director Irene Charnley were false. Allegations of complicity against me, the chairman, and the Group president and CEO Sifiso Dabengwa were similarly found to be without substance. The board is grateful to Lord Hoffmann, and independent non-executive directors Peter Mageza and Jeff van Rooyen for their work, and the scope and detail of their conclusions.
This was a testing time for the Group, but we now have the opportunity to state our case firmly and clearly, and build for the future. MTN is one of Africa's great success stories - a great company founded on innovation, courage and values of honesty and ethical business dealings. I am proud of what we bring to the communities and markets in which we work, and what MTN does to improve lives. We can now put these events behind us, and move forward.
Remaining compliant with sanctions
MTN continues to work closely with all relevant authorities to manage US sanctions against Iran and Syria, and retains international legal advisers to assist the Group in remaining compliant with all applicable sanctions.
Overcoming challenges
Continuing to comply with sanctions constituted just one of the challenges we faced in 2012. Among others were the continued global economic malaise linked to the debt crisis in Europe, as well as political and social volatility in a number of MTN markets. Specifically, we had to contend with the crisis in Syria, troubles in northern Nigeria, labour unrest in South Africa, ongoing fighting in Afghanistan and the continuing standoff between Iran and the West, to name but a few.
Other challenges our operations face on a day-to-day basis are clearly spelled out in the president and CEO's report, but suffice to say that the safety of our people is paramount and we continue to implement various risk management strategies to mitigate safety and security risks.
Looking ahead and appreciation
As we embark on a new year, it is worth reminding ourselves of the strengths of MTN's investment case. Among these are our large subscriber base and solid brand; our robust balance sheet and significant network infrastructure; our strong sales and distribution network as well as our micro-billing capabilities.
Our proven track record of operating in challenging markets and our established internet service provider businesses are other important attributes. Crucially, the resilience and inventiveness of our people are key to our ability to rise up to the challenges ahead. I thank them for their continued dedication to the task at hand.
I would like to thank my fellow board members for their wise counsel over the years, as well as the executives of MTN for their dedication and hard work and for making me welcome at MTN. In my years as chairman, I have travelled to many MTN operations across Africa and the Middle East, and the positive MTN attitude is evident everywhere I go: I feel we are all part of the MTN family.
I would also like to thank MTN's many partners, shareholders and regulators in various jurisdictions who have worked alongside us in growing the Group to where it is today. On behalf of the board, I invite all shareholders to attend the Group's annual general meeting on 28 May 2013, not only to vote, but also to use this meeting as an opportunity to interact with the members of the board and the management team. I also encourage you to visit our company website where a wealth of information is available.
MTN is well positioned to continue to grow sustainably: increasing subscriber numbers and profitability and contributing to economic development. Telecoms is certainly the way of the future and we have a responsibility to all our stakeholders to operate in an ethical and sustainable way in continuing to generate returns to our shareholders.
I believe MTN is in good hands and that the appointment of my successor is progressing responsibly. I wish the Group, the board and all MTN employees the best for the future. I will be watching your progress with great interest and affection.
Cyril Ramaphosa
Chairman
28 March 2013
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