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Financial review
continued
The increase in total costs was mainly as a result of
foreign-denominated expenses following the
depreciation of local currencies against the US
dollar, particularly in MTN Nigeria where costs
increased 15,1%*. MTN South Africa costs were
5,4% higher as a result of the higher subsidies on
devices mainly in the first half of the year as well as
costs associated with aggressive network rollout
and increased staff costs.
Total direct network operating costs increased
34,7%* and contributed 25% to total costs. This was
due to the increase in the number of sites rolled out
as well as the US dollar-linked tower leasing costs
incurred in Nigeria. Device costs increased by
15,2%* and contributed 13% to total costs mainly
driven by South Africa’s increase in device sales.
Interconnect and roaming costs increased 5,2%*
and contributed 14% to total costs, while staff costs
increased 11,8%* and contributed 10% to total
Group costs. Selling, distribution and marketing
costs increased by 6,5%* and contributed 20% to
total Group costs. This was due to an increase in
digital services revenue share agreements entered
into with content providers and increased marketing
spend in South Africa. Government and regulatory
costs declined 6,9%* and contributed 5% to total
Group costs, while other operating costs increased
41,8%* and contributed 14% to total Group costs.
Other operating expenses include the impairment
of property, plant and equipment in South Sudan of
R2 679 million* and professional fees incurred at a
head office level mainly related to the negotiation of
the settlement of the Nigerian fine.
EBITDA
Group EBITDA decreased by 13,2% to
R51 981 million while EBITDA on an organic basis
declined by 18,5%*.
Organic EBITDA was negatively impacted by once-
off costs, foreign-denominated expenses in MTN
Nigeria and device costs in MTN South Africa. Total
Group EBITDA was supported by MTN Ghana
(up 21,8%*), MTN Syria (up more than 100%*) and
MTN Sudan (up 9,6%*). This was attributable to
positive revenue growth and good cost optimisation.
Excluding the impact of the Nigerian fine, tower
profits MTN Zakhele Futhi share-based expense
and hyperinflation, the Group recorded a
5,5 percentage point (pp) decline in its EBITDA
margin to 35,4%.
Depreciation and amortisation
Depreciation increased by 7,0% (8,2%*) to
R20 483 million, impacted by the aggressive capex
programme in 2015. Amortisation costs increased
by 27,5% (31,7%*) to R4 684 million, driven by
higher spend on software in previous years.
Impairment of goodwill consisted of impairments in
Guinea-Conakry (R402 million**) and Afrihost
(R202 million**) and MTN Syria (R269 million**).
Net finance costs
Net finance costs amounted to R9 679 million
compared to R3 005 million in the previous year. This
was mainly due to an increase in net foreign
exchange losses to R5 990million fromR1 409million
in the prior period and an increase in net interest
paid to R3 689 million from R1 596 million paid in the
previous period. The increase in the net interest
expense is due to the higher net debt of
R51 902 million** compared to R31 635 million**
reported in the previous period.
Net foreign exchange losses include:
•
forex losses in Mauritius of R2 102 million mainly
due to the foreign-denominated Iran receivables;
•
forex losses in Nigeria of R1 786 million incurred
on US dollar-denominated third-party borrowings
and payables;
•
forex losses of R819 million in Sudan on foreign
denominated third-party funding and payables;
and
•
forex losses of R626 million in South Sudan as a
result of US dollar-denominated third-party trade
payables.
MTN Group Limited
Integrated Report 2016
42