Investment in associates

Significant judgement: Existence of significant influence

The Group together with another shareholder, hold the shares in Nigeria Tower InterCo B.V., Uganda Tower InterCo B.V. and Ghana Tower InterCo B.V. The other shareholder has substantive rights that give it power over the relevant activities of these entities. However, the Group participates in the significant financial and operating decisions and consequently it has determined that it has significant influence over these entities, resulting in them being classified as associates of the Group.

Unless otherwise stated, the Group’s associates’countries of incorporation are also their principal place of operation.

The Group has the following effective interest in associates:

Summarised financial information of associates

Set out below is the summarised financial information of each associate that is material to the Group. The summarised financial information is adjusted to reflect adjustments made by the Group when applying the equity method, including fair value adjustments at acquisition and modifications for differences in accounting policy.

There are no significant contingent liabilities relating to the Group’s interests in these associates at the end of the current or prior year.

Classification of significant joint arrangements

Joint arrangements are all arrangements where two or more parties contractually agree to share control of the arrangement, which only exists when decisions about the relevant activities require unanimous consent of the parties sharing control. Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The Group exercises judgement in determining the classification of its joint arrangements. The Group’s joint arrangements provide the Group and the other parties to the agreements with rights to the net assets of the entities. The Group has joint control over these arrangements as, under the contractual arrangements, unanimous consent is required for all decisions made with regards to the relevant activities. Judgement has been applied in determining that the following entities should be classified as joint ventures of the Group:

• Irancell Telecommunication Company Services (PJSC) (49%).
• Mascom Wireless Botswana Proprietary Limited (Mascom) (53,11%).
• Middle East Internet Holding S.A.R.L (MEIH) (50%).
• Africa Internet Holding GmbH (AIH) (33,3%).
• International Digital Services Middle East Limited (iME) (50%).

Investment in joint ventures

The Group has the following effective interests in joint ventures:

The joint ventures listed above are unlisted and their countries of incorporation are also their principal place of operation unless otherwise indicated.

The Iranian economy was previously classified as hyperinflationary. Iran ceased being regarded as a hyperinflationary economy during 2015, resulting in hyperinflation accounting relating to Irancell Telecommunication Company Services (PJSC) not being applied from 1 July 2015 onward. The amounts expressed in measuring unit current at 30 June 2015 are treated as the basis for the carrying amounts of Irancell going forward.

The cumulative inflation rate over three years as at 30 June 2015 was 63,74% (31 December 2014: 102,80%).

The average adjustment factor used for 2015 was 1,09 (2014: 1,11).

All joint ventures have a year end consistent with that of the Company with the exception of Irancell Telecommunication Company Services (PJSC) that has a year end of 21 December, in line with statutory requirements in Iran.

Summarised financial information of joint ventures

Set out below is the summarised financial information of each joint venture that is material to the Group. The summarised financial information is adjusted to reflect adjustments made by the Group when applying the equity method including fair value adjustments at acquisition and modifications for differences in accounting policy.

A receivable of R8 158 million (2014: R5 640 million) from Irancell Telecommunication Company Services (PJSC) has not been received by the Group as at 31 December 2015 but is still considered recoverable, as the financial sanctions in Iran have been lifted.

During 2014, the Group acquired a 50% interest in Middle East Internet Holding S.A.R.L (MEIH), a joint venture, for EUR120 million consisting of a EUR40 million cash payment and EUR80 million contingent consideration. The net fair values of the joint venture’s assets and liabilities were provisional at the end of 2014. The net fair values of the assets and liabilities were finalised during 2015 and no material changes to the previously reported results were required. MEIH is unlisted and has a year end consistent with that of the Group.

During the year, the Group formed iME by moving EUR40 million, being the Iranian business interests previously held in MEIH to the newly formed entity. There was no resulting change in the total investment held prior to and subsequent to the restructure.

During 2014, the Group acquired a 33,3% interest in Africa Internet Holding GmbH (AIH) for EUR168 million. Millicom International Cellular SA (Millicom) initially also agreed to acquire 33,3% of the shares in AIH, but held a back-out right in terms of which it was entitled to cancel a portion of its take-up of these shares. Millicom exercised this back-out right on 8 May 2015. MTN and Rocket Internet SE, the two other shareholders in AIH, held an additional investment right which entitled them to take up these shares released under Millicom’s back-out right. MTN exercised its right to take up half of these shares on 10 July 2015. Subsequently, other agreements subject to conditions precedent were entered into between the shareholders resulting in the implementation of the back-out right and the additional investment rights not yet being effective at 31 December 2015. Consequently, MTN’s interest in AIH at year end remains 33,3%.

Events after reporting period

The Group committed a further EUR135 million investment in AIH, the ultimate parent company of Jumia. The investment forms part of a wider capital funding to AIH. The funds will enable it to leverage the significant growth of Jumia and to capitalise on the significant opportunities in Africa. This investment will increase MTN Group’s interest in the joint venture from 33,3% to 41,4%. The transaction is subject to customary closing procedures.

Summarised financial information was not presented with regards to the Group’s interest in MEIH in 2014, as the entity was in its start-up phase and preparation of financial statements at the Group reporting date was impracticable. Appropriate adjustments were made to the Group’s interest and share of results for the effects of significant transactions and events that occurred up to the reporting date.

Commercial commitments

Irancell Telecommunication Company Services (PJSC)

The investment in Irancell is subject to a number of sovereign, regulatory and commercial risks, which could result in the Group failing to realise full market value of its investment should it be required to dispose of any portion thereof. In this regard, 21% of Irancell is required to be offered to members of the Iranian public within approximately three years from the date of the licence. Such offering could have a proportional dilutory effect on the Company’s 49% shareholding, effectively reducing its shareholding by 10,3% to 38,7%. Local management together with the shareholders continue to engage the regulator on this matter.

Contingent liabilities relating to joint ventures

There are no significant contingent liabilities relating to the Group’s interests in its joint ventures.

Licences

Licences awarded to the joint ventures are set out below:

Events after reporting period

Investment in TravelLab Global AB (Travelstart)

On 22 January 2016, MTN Group made an investment amounting to US$30 million in Travelstart. Travelstart is an online travel agency focused on emerging markets. MTN Group jointly controls Travelstart, indirectly through a fund managed by its venture capital fund manager Amadeus Capital Partners.