MTN

INDEPENDENT AUDIT

The summary group financial statements have been derived from the audited group financial statements. The directors of the company take full responsibility for the preparation of the summary group financial statements and that the financial information has been correctly derived and are consistent in all material respects with the underlying audited group financial statements. The summary group financial statements for the year ended 31 December 2020 have been audited by our joint auditors PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Grant Thornton Inc., who have expressed an unmodified opinion thereon. The auditors also expressed an unmodified opinion on the group financial statements from which the summary group financial statements were derived. A copy of the auditors’ report on the group financial statements is available for inspection at the company’s registered office or can be downloaded from the company’s website: www.mtn.com/investors/financial-reporting/annual-results, together with the financial statements identified in the auditors’ report.

GENERAL INFORMATION

MTN Group Limited (the company) carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures, associates and related investments.

BASIS OF PREPARATION

The summary group financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary financial statements and the requirements of the Companies Act, 71 of 2008 applicable to summary financial statements. The summary financial statements were prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee (APC) and the Financial Pronouncements as issued by the Financial Reporting Standard Council (FRSC), and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the group financial statements from which the summary group financial statements were derived, are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous group financial statements, unless otherwise stated.

The summary group financial statements should be read in conjunction with the group financial statements for the year ended 31 December 2020, which have been prepared in accordance with IFRS. A copy of the full set of the audited group financial statements is available for inspection from the Company Secretary at the registered office of the company or can be downloaded from the company’s website: www.mtn.com/investors/ financial-reporting/annual-results.

PRINCIPAL ACCOUNTING POLICIES

The accounting policies applied in the preparation of the group financial statements from which the summary group financial statements are derived, are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated Annual Financial Statements except as described below.

The Group changed its accounting policy with regards to the method applied in determining the amount of foreign currency translation reserves to be reclassified to profit or loss on disposal of a foreign operation during the current financial year. Refer to note 23 for details.

A number of amendments to accounting pronouncements are effective from 1 January 2020, but they do not have a material effect on the Group’s summary financial statements.

IMPACT OF THE COVID-19 PANDEMIC

On 11 March 2020, the World Health Organisation officially declared the novel coronavirus, COVID-19, a pandemic. Governments across the world have taken extreme measures to curb the spread of the virus by introducing various forms of social distancing, lockdown regimes and forms of monetary and fiscal stimulus. These measures impacted the financial position of individuals, small and medium-sized businesses as well as corporates to varying degrees, thereby significantly impacting economies across the Group’s footprint.

The effects of COVID-19, and other macro developments, have also increased financial risks such as exchange rate volatility, economic growth and capital flows in the Group’s markets. During the past year, credit ratings agencies have downgraded sovereign credit ratings in two of the Group’s largest markets, South Africa and Nigeria. The Group continues to monitor these developments, assess the implications and manage its responses in order to mitigate the related risks.

Amid the nearer-term risks and uncertainties of the impact of COVID-19 on markets, the Group remains focused on preservation of cash and maintaining a healthy liquidity position and strengthening its operational and financial position. In this regard it has implemented cost control measures, focusing on critical expenses and enhanced oversight of expenditure that support margin management and liquidity across the business.

With the effects of COVID-19 being felt around the globe, there is also an impact on the telecommunications sector. The restrictions placed on movement resulted in people spending more time at home for work and leisure which resulted in the use of higher amounts of data. This has been the impact in all our regions whereby revenue has increased in local currency.

For the year ended 31 December 2020, there has been direct and indirect financial effects caused by the COVID-19 pandemic. We highlight the following relevant disclosures provided in the notes to the Annual Financial Statements which include the effects of the pandemic:

• During the past year, the Group has continued to provide telecommunication services across its footprint as an essential service. The Group’s various revenue streams per operation are disclosed in the operating segments (refer to note 8). There has been revenue growth in network services resulting from strong growth in data revenue, digital and fintech services and interconnect. Conversely, revenue from sale of devices and roaming services have slowed due to the economic strain placed on our customers and the lockdown regimes. The resilience of the national networks, the headroom available on the networks and the allocation of temporary additional spectrum enabled the Group to meet the surge in data volume driven by work from home protocols and social distancing.
• The Group’s capital expenditure (capex) focus is to ensure the resilience and capacity of its networks, which have been maintained despite disruptions in the supply chain and challenges in rolling out coverage under lockdown rules and the Group’s emphasis on liquidity for the period. As lockdown regulations lifted in our markets towards the end of the year, the Group was able to resume a more regular rollout of network investment as restrictions on movement and logistical bottlenecks have eased. This enabled increased headroom in our networks, notably in South Africa and Nigeria among our larger markets.
• Liquidity management remained a focus during this period. As at 31 December 2020 the Group had access to undrawn borrowings of R33,3 billion (December 2019: R33,8 billion) as disclosed in note 13.4. Holdco¹ cash balances including restricted cash and current investments was R20,6 billion as at 31 December 2020. Year to date we have successfully
  fast-tracked and closed R18,2 billion in funding to mitigate refinance risk around upcoming maturities. The Group also concluded the sale of its Ghana InterCo and Uganda InterCo tower investments for a consideration of R8,8 billion and continued to pay its final dividend in respect of its 2019 financial year in April 2020.
• The financial impact of the crisis has put pressure on post-paid customers and the Group’s enterprise business unit. The following table reflects the movements for the period related to credit risk:

• The Group’s exposure and management of credit risk relating to its customers as well as its exposure relating to cash and cash equivalents and Mobile Money (MoMo) deposits placed with banks are provided in note 13. The Group has assessed the potential impairment on cash balances and MoMo deposits due to the negative impact of the pandemic on financial institutions. The nature of the bank balances and MoMo deposits are largely short term in nature comprising mainly of current accounts and call deposits. Given the significant actions taken by central banks to improve liquidity through monetary and fiscal interventions, the Group’s expected credit losses (ECLs) on cash balances and MoMo deposits remained immaterial.
• Significant movements in currencies expose the Group to foreign currency gains and losses and also impact the Group’s translation of its results into its rand presentation currency. The Group recognised net foreign exchange losses of R4,5 billion (December 2019: R2,4 billion loss). In addition, the Group recognised a foreign currency translation gain in the statement of comprehensive income on converting the net assets of its foreign operations. The Group’s foreign exchange gains and losses recognised in the income statement are provided in note 10 and the income statement sensitivity to exchange rates is provided in note 13.5.2. Exchange rates used in the conversion of the Group’s results are provided in note 18.
• The severe impact of the pandemic on oil producing economies such as Nigeria resulted in pressure on the availability of foreign currency and limited the Group’s ability to repatriate dividends. The Group continued to manage sensitivities of variability in cash flows on its debt gearing at a head office level. Holding company debt gearing levels increased during the period as dividend flows were restricted and the amounts in transit have been disclosed as restricted cash.
• The carrying values in a number of the Group’s smaller operations and an investment in a joint venture exceeded their recoverable amounts during 2020, which resulted in impairments recognised against the goodwill of MTN Yemen, MTN Liberia and MTN Guinea-Bissau and an impairment in an investment in joint venture – Middle East Internet Holding S.A.R.L (MEIH). Further details of the entities are provided in the note relating to impairment of goodwill (note 9.2) and investment in joint venture (note 9.1).
• The Group’s valuation of its investment in IHS Holdings Limited (IHS) is based on international tower industry multiples relevant at 31 December 2020. In February 2020, IHS completed the acquisitions of approximately 1 600 towers from Zain in Kuwait and approximately 2 300 towers from Cell Site Solutions in Brazil, Peru and Columbia. For the current year, IHS continued to operate under COVID-19 conditions and grew operationally in all markets. However, the macroeconomic environment, particularly in Nigeria, is impacted by the drop in oil prices and devaluation of the Nigerian naira following the effects of COVID-19. Given the market conditions, a combined liquidity and macro discount of 30% (2019: liquidity discount of 10%) has been applied. The fair value was calculated based on unobservable market inputs including tower industry earnings multiples which dropped to between 10x to 13x (December 2019: 10x to 14x). The sensitivities to the fair value estimations are provided in note 13.2.
• There have been no major impacts on leases and their related accounting impacts as a result of COVID-19. With telecommunications being treated as an essential service in most economies, our operations have continued to provide services to customers. The Group has not been granted rent concessions or COVID-19 related amendments to lease arrangements. Similarly, the increase in teleworking has resulted in an increased demand for network capacity to accommodate traffic.
• The Group is not only focused on managing the risks brought about by COVID-19, but also on the opportunities it creates in the accelerated digitalisation it has brought about. The Group is well positioned to benefit from this evolution, especially given its focus on growth in data, digital and financial services businesses in the execution of its strategy.
• The Group provided ongoing support through the MTN Global Staff Emergency Fund for employees and Y’ello Hope packages for our customers, communities and other stakeholders. The extensive interventions that have been implemented are expected to continue to safeguard the sustainability of the business, its people and its customers in the prevailing challenging environment. The Group provided government relief funds, personal protective equipment, healthcare support and contributions to food security initiatives through its foundations. Across the footprint numerous websites have been zero-rated to provide access to education portals to enable on-going learning and health related information. In countries like South Africa and Ghana, the Group has also supported contact tracing initiatives to fight the spread of COVID-19.
• On 27 January 2021, MTN announced that it will be donating US$25 million to support the African Union’s COVID-19 vaccination programme. The donation will help secure COVID-19 vaccines for health workers across the continent. MTN will recognise an expense and related cash outflow for the donation in the 2021 financial year.
• Details of other events after the reporting period are set out in relevant notes within these annual financial statements.

On 1 May 2020, MTN SA’s new long-form roaming agreement (Phase 2 agreement) with Cell C became effective.

Based on Cell C’s liquidity issues, the Group has assessed that it is not probable that it will receive the consideration to which it is entitled under the Phase 2 agreement, and therefore the agreement does not meet the definition of a contract for revenue recognition purposes in terms of IFRS 15 Revenue from Contracts with Customers (IFRS 15). As a result, MTN SA did not recognise all revenue accrued on satisfied performance obligations during the year. Revenue was only recognised on completed services based on the non-refundable consideration received.

MTN SA recorded revenue of R1 992 million from Cell C during the year ended 31 December 2020. As at 31 December 2020, R525 million of revenue in relation to satisfied performance obligations remains unrecognised.

Cell C continues to work on its recapitalisation and liquidity challenges. When Cell C has been adequately recapitalised and starts paying significantly all the amounts due to MTN, there will be a change in the Group’s accounting treatment of Cell C roaming revenues back to an accounting methodology of recognising revenue as performance obligations are satisfied.

HYPERINFLATION

The financial statements (including comparative amounts) of the Group entities whose functional currencies are the currencies of hyperinflationary economies are adjusted in terms of the measuring unit current at the end of the reporting period.

The Group has classified the economies of Syria, South Sudan, Sudan and Iran as hyperinflationary effective 2014, 2016, 2018 and 2020 respectively.

In May 2020, MTN Syria was classified as a disposal Group held for sale (note 21) and was remeasured to its fair value less costs to sell and the Group has therefore discontinued adjusting MTN Syria’s net assets for hyperinflation from this date onwards.

The economy of Iran was assessed to be hyperinflationary effective 1 January 2020, and hyperinflation accounting was applied for the current financial year. Upon first application of hyperinflation, prior period gains of R3 677 million were recognised directly in equity.

The impact of hyperinflation on the segment analysis is as follows:

SEGMENT ANALYSIS

The Group has identified reportable segments that are used by the Group Executive Committee Chief Operating Decision Maker (CODM) to make key operating decisions, allocate resources and assess performance. The reportable segments are largely grouped according to their geographic locations and reporting lines to the CODM.

The Group’s underlying operations are clustered as follows:

• South Africa;
• Nigeria;
• South and East Africa and Ghana (SEAGHA);
• West and Central Africa (WECA); and
• Middle East and North Africa (MENA).

South Africa and Nigeria comprise the segment information for the South African and Nigeria-based cellular network services providers respectively.

The SEAGHA, WECA and MENA clusters comprise segment information for operations in those regions which are also cellular network services providers in the Group. Subsequent to year-end, the Group redefined its reporting segments from SEAGHA to SEA with Ghana being included in WECA.

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

A key performance measure of reporting profit for the Group is CODM EBITDA. CODM EBITDA is defined as earnings before finance income and finance costs (which includes gains or losses on foreign exchange transactions and a loss on revision of cash flows from a joint venture), tax, depreciation and amortisation, and is also presented before recognising the following items:

• impairment of joint venture and goodwill (note 9);
• net monetary gain resulting from the application of hyperinflation;
• share of results of associates and joint ventures after tax (note 11);
• hyperinflation (note 7);
• tower sale profits;
• gain on disposal/dilution of investment in associate and joint venture (note 19);
• gain on disposal of subsidiary; and
• impairment loss on remeasurement of non-current assets held for sale (note 21).

These exclusions have remained unchanged from the prior year, apart from impairment loss on remeasurement of the non-current assets held for sale.

Irancell proportionate results are included in the segment analysis as reviewed by the CODM and excluded from reported results for revenue, CODM EBITDA and capex due to equity accounting for joint ventures. The results of Irancell in the segment analysis exclude the impact of hyperinflation accounting.

The poor economic environment combined with further impacts of the COVID-19 pandemic in a number of the Group’s operations in the WECA and MENA regions resulted in suppressed revenue growth and lower operating margins being experienced, which decreased forecasted cash flows at 31 December 2020. In addition, sovereign risk premiums have increased significantly for MTN Guinea- Bissau and MTN Yemen given the macroeconomic environment in these countries. This necessitated impairment reviews being performed on the Group’s operations in Guinea-Bissau, Liberia and Yemen where the carrying amounts of these cash generating units (CGUs), were compared to their respective recoverable amounts. The recoverable amounts were determined through value-in-use calculations where future cash flows were estimated and discounted at the weighted average cost of capital discount rates. The discount rates and the perpetuity growth rates used in the value-in-use calculations of the operations impacted by impairment are as follows:

An impairment charge amounting to R525 million was recognised against the goodwill of MTN Yemen. The operational and economic outlook in MTN Yemen remains negative due to political instability and subdued economic conditions. This has an impact across all industries in-country. As at 31 December 2020, the carrying value of this CGU exceeded its recoverable amount, necessitating an impairment. The remaining goodwill balance for MTN Yemen at 31 December 2020 amounts to R564 million, after recognising the impairment charge.

An impairment charge amounting to R308 million was recognised against the goodwill of MTN Liberia. The operational and economic outlook in MTN Liberia remains negative due to the government struggling with its budget deficit and rising inflation rates. This has an impact across all industries in-country. As at 31 December 2020, the carrying value of this CGU exceeded its recoverable amount, necessitating an impairment. The goodwill balance for MTN Liberia at 31 December 2020 amounts to R124 million, after recognising the impairment charge.

An impairment charge amounting to R165 million was recognised against the goodwill of MTN Guinea-Bissau. The operational and economic outlook in MTN Guinea-Bissau remains uncertain due to political instability and volatile agricultural prices, which has resulted in more conservative budgets being planned. As at 31 December 2020, the carrying value of this CGU exceeded its recoverable amount, necessitating an impairment. The goodwill balance for MTN Guinea-Bissau at 31 December 2020 amounts to R265 million, after recognising the impairment charge.

No impairment was required on goodwill balances as at 31 December 2019.

NET FINANCE COSTS

SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES AFTER TAX

Irancell loan and receivable

On 20 September 2019, the US Treasury Department's Office of Foreign Assets Control (OFAC) designated the Central Bank of Iran (CBI) as being subject to sanctions. Sanctions imposed on the CBI creates a secondary sanctions risk for MTN entities if the CBI allocates foreign currency to an MTN entity for the purpose of repatriating the receivable and/or loan. As at 31 December 2020, Iranian rial denominated receivables amounted to R1 037 million¹ (2019: R1 237 million) and the Iranian rial denominated loan amounted to R1 733 million² (2019: R1 516 million).

Treasury shares
Treasury shares of 8 443 400 (2019: 9 426 634) are held by the Group and 76 835 378 (2019: 76 835 378) are held by MTN Zakhele Futhi (RF) Limited (MTN Zakhele Futhi).

Headline earnings
Headline earnings is calculated in accordance with Circular 1/2019 Headline Earnings as issued by SAICA as amended from time to time and as required by the JSE Limited.

¹ Restated for change in accounting policy, refer to note 23 for details of restatements.

Capital management
Management regularly monitors compliance with its financial covenants. In terms of most of the banking facilities, the Group is required to comply with financial covenants. These financial covenants differ based on the contractual terms of each facility and incorporate both IFRS and non-IFRS financial measures. With the exception of MTN Zambia and MTN Côte d’Ivoire, the Group has complied with its financial covenants during the current and prior year. For the year ended 31 December 2020, MTN Zambia breached its debt service cover ratio covenant. As a result, the full related borrowings of R820 million have been classified as current as at 31 December 2020 within the Group statement of financial position. On 9 March 2021, the lenders granted MTN Zambia a waiver of the debt service cover ratio breach, thereby remedying the breach. For the year ended 31 December 2019, MTN Côte d’Ivoire breached its net debt: EBITDA covenant. As a result, the full related borrowings of R3 559 million were classified as current as at 31 December 2019 within the Group statement of financial position. As at 31 December 2019, the Group had met interest-related covenants, and these have improved further in the current period. Holdco leverage has increased since December 2019 due to the weakening of the rand on US dollar denominated borrowings and cash upstreaming challenges from MTN Nigeria due to limited availability of foreign currency.

MTN Cameroon, with the support of MTN Group, had been in discussions with its lender since the beginning of 2020 to restructure a syndicated revolving credit facility of CFA 30 billion (US$56 million) initially maturing on 8 June 2020. Due to not having concluded the restructuring by the maturity date, MTN Cameroon was in technical default in respect of the repayment provisions. This default was subsequently remedied by a waiver from affected lenders. MTN Cameroon successfully concluded the restructuring by 31 December 2020. The maturity date of the CFA 30 billion syndicated revolving credit facility was extended to 8 December 2021 and another of MTN Cameroon’s syndicated revolving credit facilities of CFA 32,5 billion (US$61 million) initially due on 15 December 2021 was extended to 16 May 2023. Under the amended facility agreements, MTN Cameroon will repay each of the facilities through equal monthly repayments.

AUTHORISED COMMITMENTS FOR THE ACQUISITION OF PROPERTY, PLANT, EQUIPMENT AND SOFTWARE

INTEREST-BEARING LIABILITIES

ISSUE AND REPAYMENT OF DEBT AND EQUITY SECURITIES

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

CONTINGENT LIABILITIES

Uncertain tax exposures

The Group operates in numerous tax jurisdictions and the Group’s interpretation and application of the various tax rules applied in direct and indirect tax filings may result in disputes between the Group and the relevant tax authority. The outcome of such disputes may not be favourable to the Group. At 31 December 2020, there were a number of tax disputes ongoing in various of the Group’s operating entities. The most significant matter relates to a transfer pricing dispute which the Group is contesting with the South African Revenue Service that relates to the 2009 to 2012 tax years. Based on internal and external legal and technical advice obtained, the Group remains confident that it has a robust legal case to contest the exposure.

Legal and regulatory matters

The Group is involved in various legal and regulatory matters, the outcome of which may not be favourable to the Group and none of which are considered individually material.

The Group has applied its judgement and has recognised liabilities based on whether additional amounts will be payable and has included contingent liabilities where economic outflows are considered possible but not probable.

EXCHANGE RATES TO SOUTH AFRICAN RAND

The Group’s functional and presentation currency is rand. The weakening of the closing rate of the rand against the functional currencies of the Group’s largest operations contributed to the increase in consolidated assets and liabilities and the resulting foreign currency translation reserve increase of R4 453 million (2019: R4 415 million reduction) for the year.

Net investment hedges

The Group hedges a designated portion of its dollar net assets in MTN Dubai for forex exposure arising between the US$ and ZAR as part of the Group’s risk management objectives. The Group designated external borrowings (Eurobonds) denominated in US$ held by MTN (Mauritius) Investments Limited with a value of R27,7 billion (2019: R25,8 billion). For the period of the hedge relationship, foreign exchange movements on these hedging instruments are recognised in other comprehensive income as part of the foreign currency translation reserve (FCTR), offsetting the exchange differences recognised in other comprehensive income, arising on translation of the designated dollar net assets of MTN Dubai to ZAR. The cumulative forex movement recognised in other comprehensive income will only be reclassified to profit or loss upon loss of control of MTN Dubai. There was no hedge ineffectiveness recognised in profit or loss during the current or prior year.

DISPOSAL OF UGANDA TOWER INTERCO B.V. AND GHANA TOWER INTERCO B.V.

On 31 December 2019 the Group concluded an agreement to dispose of its 49% equity holdings in Ghana InterCo and Uganda InterCo to AT Sher Netherlands Cooperatief U.A. (ATC). The Uganda InterCo transaction closed on 21 February 2020 for cash proceeds of $140 million (R2,2 billion¹) and realised a profit of R1,3 billion, inclusive of FCTR gains of R112 million reclassified to profit or loss on disposal. The Ghana Interco transaction closed on 18 March 2020 for cash proceeds of US$384 million (R6,6 billion¹) and realised a profit of R4,8 billion, after inclusion of FCTR losses of R1,8 billion reclassified to profit or loss on disposal.

DISPOSAL OF 8% SHAREHOLDING IN MTN ZAMBIA

On 7 October 2020 the Group disposed of 8% shareholding in MTN Zambia taking the Group’s effective shareholding for accounting purposes from 97,8% to 89,8%. The proceeds from the disposal amounted to ZMK287 million (R238 million) and realised a net gain of R180 million recognised in equity as a transaction with non-controlling interests.

NON-CURRENT ASSETS HELD FOR SALE

MTN Syria

In May 2020, the Group committed to a plan to sell MTN Syria to Teleinvest Limited (TeleInvest), which is the 25%
non-controlling shareholder in MTN Syria. Accordingly, as at 31 December 2020, MTN Syria’s assets and liabilities have been presented as held for sale due to the Group concluding that the sale was considered to be highly probable. At 31 December 2020, the Group expected the sale to be concluded within 2021. An impairment loss of R1,1 billion was recognised in profit or loss for the period due to writing down the carrying amount of the disposal group to its fair value less costs to sell. MTN Syria was presented as part of the MENA cluster in the segment information (note 8).

Subsequent to the end of the reporting period, on 25 February 2021, the appointment of the judicial guardian has significantly reduced the Group’s power to direct MTN Syria’s relevant activities and therefore, its control over MTN Syria. The Group is still in the process of understanding its rights and obligations under the judicial arrangement but to the extent that control is concluded to have been lost, the Group will derecognise its 75% equity interest in and loans receivable from MTN Syria, amounting to R955 million at 31 December 2020. In addition, the Group will reclassify accumulated foreign currency translation losses of R5,1 billion to profit or loss in line with the accounting policy. On loss of control, the Group will measure its equity interest in and loans receivable from MTN Syria at fair value.

Included in the 2020 Group results is R2 295 million revenue (1,3% of the Group’s total revenue) and R574 million CODM EBITDA¹ (0,8% of Group’s total CODM EBITDA) relating to MTN Syria. These amounts exclude the impact of hyperinflation.

Belgacom International Carrier Services (BICS)

The Group has been in discussions regarding a potential sale of its shareholding in BICS for some time as the investment in associate was not considered a strategic investment. BICS was accordingly classified as a non-current asset held for sale on 5 August 2020. An impairment loss of R397 million after writing down the carrying amount of the non-current asset held for sale to its fair value less costs to sell has been recognised in profit or loss.

Following year-end, the Group concluded an agreement to sell, and fully exited, its 20% investment in BICS. The transaction closed in February 2021 and the Group received net cash proceeds of EUR99,1 million (R1,8 billion²) and realised a profit of approximately R1,2 billion, mainly comprising of reclassified FCTR gains which will form part of EPS, with no impact on HEPS, equity and cash flows.

The carrying amounts of assets and liabilities that have been reclassified to noncurrent assets held for sale were:

On 21 February 2021, the Central Bank of Sudan devalued the official Sudanese exchange rate to US$ 1: SDG 375,08, which translates to an exchange rate of approximately ZAR 1: SDG 25,57. The devaluation brought the official rates in line with parallel market rates and is an effort to eliminate parallel market activity.

As Sudan is a hyperinflationary economy, the Group translates MTN Sudan’s results at the closing exchange rate. The devaluation of the Sudanese Pound will result in lower earnings consolidated from MTN Sudan based on the closing rate, a reduction in net assets consolidated and a resulting lower equity in the form of higher foreign currency translation losses.

The Group implemented a voluntary accounting policy change relating to the release of FCTR.

In the first quarter of 2019, the Group announced that it will be optimising its portfolio through an asset realisation programme aimed at simplifying the Group, reducing risk and improving shareholder returns and in March 2020 the Group announced that this programme has been further expanded. The strategic intent to dispose of certain investments in subsidiaries and associates over the medium term has resulted in a review of the most appropriate approach in accounting for these disposals.

IAS 21 The Effects of Changes in Foreign Exchange Rates (IAS 21) requires that on the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in the FCTR in equity, shall be reclassified from equity to profit or loss as a reclassification adjustment when the gain or loss on disposal is recognised. Two accepted methods exist for recycling FCTR where the investments are held by an intermediate parent with a different functional currency than the entity disposed of and the ultimate parent. These methods that are referred to as part of the basis for conclusions (BC 35 – BC 39) in IFRIC 16 Hedges of a Net Investment in a Foreign Operation are as follows:

• Step-by-step method – FCTR is recycled based on the appreciation or devaluation in the functional currency of the investment disposed of against the functional currency of the intermediate parent and translated into the functional currency of the ultimate parent.
• Direct method – FCTR is recycled based on the appreciation or devaluation in the functional currency of the investment disposed of against the functional currency of the ultimate reporting entity.

The Group has historically applied the step-by-step method on disposals to date. The functional currencies of some of the Group’s intermediate holding companies are US dollar and, as a result, the FCTR reclassified on the step-by-step approach is determined based on the appreciation or devaluation of the currencies of the entities disposed of against the US dollar and translated into the functional currency of the ultimate parent. As the Group’s functional and presentation currency is ZAR and the FCTR is based on the appreciation or devaluation of the ZAR against the equity of the underlying operations in the Group, the direct method provides a more reliable and relevant view of the gain or loss realised in the context of the Group’s ZAR functional currency. The Group has accordingly changed its accounting policy on the reclassification of FCTR on disposal of foreign operations held by an intermediate parent where the functional currency of the foreign operation and intermediate parent is different to that of the ultimate parent from the step-by-step method to the direct method.

This change in accounting policy impacted the FCTR gains and losses reclassified to profit or loss in the current year on disposal of the Group’s investments in associates, Ghana InterCo and Uganda InterCo, and in the prior years on disposal of the Group’s interests in foreign operations, as disclosed below:

Impacts on the financial statements

The impact of the change in policy on earnings per share is a 46 cents increase (2019: 7 cents increase) and diluted earnings a 46 cents increase (2019: 7 cents increase). The change in accounting policy had no impact on headline earnings or cash flows in the current or prior comparative year.