Notes to the summarised consolidated financial results

The summarised consolidated financial results have been extracted from the audited consolidated annual financial statements, but are not themselves audited. The directors of the Company take full responsibility for the preparation of the summarised consolidated financial results and that the financial information has been correctly extracted from the underlying audited consolidated annual financial statements.

The consolidated annual financial statements have been audited by our joint auditors PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc., who have performed their audit in accordance with International Standards on Auditing. A copy of their unqualified audit report is available for inspection at the registered office of the Company.

MTN Group Limited (the Company) carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures and associate companies.

The summarised consolidated financial results are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, financial pronouncements as issued by the Financial Reporting Standards Council (FRSC), and must also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. These summarised financial results should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRS. A copy of the full set of consolidated annual financial statements is available for inspection from the Company secretary at the registered office of the Company.

The Group has adopted all the new, revised or amended accounting pronouncements as issued by the IASB which were effective for the Group from 1 January 2013.

The principal accounting policies and methods of computation applied are in accordance with financial reporting standards (IFRS) and are consistent in all material respects with those applied in the previous year except as set out below.

IFRS 10 Consolidated Financial Statements

The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

The Group concluded that the adoption of IFRS 10 did not result in any material change in the consolidated status of its subsidiaries.

IFRS 11 Joint Arrangements

IFRS 11 requires equity accounting of joint ventures and eliminates the proportionate consolidation option of accounting. Previously, the Group proportionately consolidated all joint ventures which entailed that it included its share of the assets, liabilities, income and expenses of jointly controlled entities on a line-by-line basis in its financial statements.

Under the equity method, the investments in joint ventures is initially recognised at cost and the carrying amount is increased or decreased to recognise the Group’s share of the profit or loss and movements in other comprehensive income of joint ventures after the date of acquisition. The Group’s share of the profit or loss of joint ventures is recognised in a single line item in profit or loss under the equity method.

The Group has applied the new policy for investments in joint ventures in accordance with the transition provisions of IFRS 11. The change in accounting policy has been applied as from 1 January 2012. The Group recognised its investment in joint ventures at the beginning of the earliest period presented (1 January 2012), as the total of the carrying amounts of the assets and liabilities previously proportionately consolidated by the Group. This is the deemed cost of the Group’s investments in its joint ventures for purposes of applying equity accounting.

The change from proportionate consolidation to equity accounting resulted in a change in individual asset, liability, income, expense and cash flow line items with no impact on equity or profit attributable to equity holders. The impact of the application of IFRS 11 on the Group’s financial results is disclosed in note 17.

The Group has identified reportable segments that are used by the Group executive committee (Chief Operating Decision Maker) to make key operating decisions, allocate resources and assess performance. The reportable segments are geographically differentiated regions and grouped by their relative size.

Operating results are reported and reviewed regularly by the Group executive committee and include items directly attributable to a segment as well as those that can be attributed on a reasonable basis, whether from external transactions or from transactions with other Group segments.

EBITDA is used as a measure of reporting profit or loss of each segment.

During the year under review, the following entities raised and repaid significant debt instruments:

In accordance with the Domestic Medium Term Note Programme established by MTN Holdings Proprietary Limited, the Group issued R3,9 billion (2012: R5,6 billion) of Senior Unsecured Zero Coupon Notes. R6,0 billion (2012: R4,6 billion) of the Domestic Medium Term Note Programme has been repaid.

There were no share buy-back transactions during the year. During 2012 MTN Holdings Proprietary Limited, a wholly owned subsidiary of the Group, acquired
15 573 340 shares in the ordinary share capital of the Company for an amount of R2,1 billion with the cumulative amount of R3,0 billion spent in respect of the share buy-back at the reporting date (inclusive of transaction costs). The shares so acquired are fully paid up and are held as treasury shares.

The Group entered into a transaction with IHS Holding Limited (IHS) in which IHS will acquire 558 mobile network towers from MTN Rwandacell Limited and 704 towers from MTN (Zambia) Limited. IHS is a 100% shareholder of the tower companies set up in each country to manage the towers and other passive infrastructure. MTN Rwandacell Limited and MTN (Zambia) Limited will be the anchor tenants on commercial terms of the towers for an initial term of 10 years.

Each transaction is expected to close independently during the first half of 2014, subject to customary closing conditions.

In 2013, MTN Côte d’Ivoire S.A. and Mobile Telephone Networks Cameroon Limited concluded transactions with IHS in which IHS acquired 911 mobile network towers from MTN Côte d’Ivoire S.A. for US$141 million and 820 towers from Mobile Telephone Networks Cameroon Limited for US$143 million. IHS is a 100% shareholder of the tower companies set up in each country to manage the towers and other passive infrastructure. MTN Côte d’Ivoire S.A. and Mobile Telephone Networks Cameroon Limited will be the anchor tenants on commercial terms of the towers for an initial term of 10 years.

Acquisition of Africa Internet Holding and Middle East Internet Holding

The Group has agreed to acquire 33,3% of Africa Internet Holding (AIH), a joint venture between Rocket Internet and Millicom International Cellular, to develop internet businesses in Africa. The Group, Millicom International Cellular and Rocket Internet will each become 33,3% shareholders in AIH.

The Group and Rocket Internet have also agreed to create a joint venture, Middle East Internet Holding (MEIH), to develop internet businesses in the Middle East, with the Group and Rocket Internet becoming 50% shareholders in MEIH.

The Group expects to invest approximately EUR300 million over the next two to four years into AIH and MEIH.

The investments are subject to regulatory approval, and the two transactions are expected to close during the first and second quarter of 2014 respectively.

The International Finance Corporation (IFC) exercised its put option and sold its non-controlling interest of 9,1% in MTN Afghanistan to MTN (Dubai) Limited for
R248 million, resulting in 100% shareholding.