Notes to the summary
g
roup financial statementsfor the year ended 31 December 2021

1. 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 2021 have been audited by our joint auditors PricewaterhouseCoopers Inc. and Ernst & Young 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.

2. GENERAL INFORMATION

The Group is a leading pan-African mobile operator that provides a diverse range of voice, data, digital, fintech, wholesale and enterprise services.

3. BASIS OF PREPARATION

The summary Group financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional financial statements and the requirements of the Companies Act, No. 71 of 2008 as amended 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), International Accounting Standards (IAS) 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 summary Group financial statements should be read in conjunction with the Group financial statements for the year ended 31 December 2021, 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.

4. 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.

A number of amendments to accounting pronouncements are effective from 1 January 2021, but they do not have a material effect on the Group’s summary financial statements.

5. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

5.1 MTN SA revenue recognition
 

Significant judgement

On 1 May 2020, Mobile Telephone Networks Proprietary Limited's (MTN SA) new long-form roaming agreement (Phase 2 agreement) with Cell C Limited (Cell C) became effective. In February 2021, Cell C entered into a settlement agreement specifying the repayment schedule for the long outstanding amounts.

Based on Cell C's liquidity issues, the Group has assessed that it is not probable that it will receive all 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 period under review. Revenue was only recognised on completed services based on the non-refundable consideration received.

MTN SA recorded revenue of R2 667 million from Cell C during the year ended 31 December 2021 (2020: R1 992 million). As at 31 December 2021, R448 million (2020: R525 million) of revenue in relation to satisfied performance obligations remains unrecognised.

Cell C continues to work on its recapitalisation programme which, if adequately resolved, would result in a change in the Group's accounting treatment of Cell C revenues, back to an accounting methodology of recognising revenue as performance obligations are satisfied.

5.2 Deferred tax
 

Source of estimation uncertainty

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences (as applicable) to the extent that it is probable that future taxable profits will be available against which the deferred tax assets can be used. The Group is required to make significant estimates in assessing whether future taxable profits will be available.

Future taxable profits are determined based on business plans for individual subsidiaries in the Group and the probable reversal of taxable temporary differences in future. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Such reductions are reversed when the probability of future taxable profits improves. The Group's recognised and unrecognised deferred tax assets for the current year amounted to R7 223 million (2020: R6 355 million) and R9 804 million (2020: R8 399 million1) respectively.

MTN International (Mauritius) Limited (MTN Mauritius) recognised a deferred tax asset of R5 750 million (2020: R5 290 million), mainly resulting from an assessed loss.

The Group considered the following factors in assessing whether it is probable that MTN Mauritius will have future taxable profits available against which the deferred tax asset can be used:

  • it is unlikely that the circumstances that resulted in MTN Mauritius incurring assessed losses will recur;
  • interest expense and foreign exchange exposures will reduce as MTN Mauritius repays its US$ denominated intercompany debt. The repayments are currently scheduled to occur in 2024 and 2026; and
  • technical service fees from subsidiaries are expected to increase as more services are provided centrally.

Based on current business plans and stress scenarios, the Group expects to utilise the deferred tax asset in the next eight to eleven years.

1 Deductible temporary differences and unused tax losses for which no deffered tax asset had been recognised as at 31 December 2020 have been restated to incorporate additional foreign exchange considerations present at that date.

6. 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.

On 31 May 2020, MTN Syria was classified as a disposal group held for sale and was remeasured to its fair value less cost to sell and the Group has therefore discontinued adjusting MTN Syria's net assets for hyperinflation from this date to date of deconsolidation.

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 impacts of hyperinflation disclosed for Irancell have been proportioned for the Group's shareholding.

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

 
2021
Revenue
Rm
Capital
expenditure
Rm
Sudan 542 266
South Sudan (included in other SEA) (555) (99)
(13) 167
Major joint venture - Irancell 1 099 352
   
 
2020
Revenue
Rm
Capital
expenditure
Rm
Syria (669) (139)
Sudan 3 429 507
South Sudan (included in other SEA) 165 26
2 925 394
Major joint venture - Irancell (2 312) (121)

 

 

7. SEGMENT ANALYSIS

The Group has identified reportable segments that are used by the Group Executive Committee (the 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 (SEA);
  • 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 Nigerian network services providers respectively.

The SEA, WECA, and MENA clusters comprise segment information for operations in those regions which are also network services providers in the Group. In line with the Group's strategy, segment information for the Ghana operation has been reported under the WECA cluster effective 1 January 2021 (previously included in SEAGHA, now renamed SEA). Prior year operating segment information for SEA and WECA has been restated accordingly.

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 unwind of revision of cash flows), tax, depreciation, and amortisation, and is also presented before recognising the following items:

  • impairment of goodwill and investment in joint ventures (note 8);
  • net monetary gain resulting from the application of hyperinflation;
  • share of results of associates and joint ventures after tax (note 10);
  • hyperinflation (note 6);
  • gain on disposal of investment in associate (note 18.1);
  • fair value gain on acquisition of subsidiary (note 18.5);
  • loss on deconsolidation of subsidiary (note 18.3);
  • impairment loss on Yemen property, plant and equipment (PPE) and intangible assets (note 8);
  • gain on exit in Yemen (note 18.4);
  • gain on disposal of subsidiary; and
  • impairment loss on remeasurement of non-current asset held for sale.

These exclusions have remained unchanged from the prior year, apart from the fair value gain on acquisition of subsidiary, loss on deconsolidation of subsidiary, gain on disposal of subsidiaries and impairment loss on Yemen PPE and intangible assets. Impairment losses on PPE and intangible assets are generally included in the CODM EBITDA as they are operational in nature. As the impairment of Yemen's PPE and intangible assets arises from the MENA exit strategy, it is not considered reflective of Yemen's performance for the period.

Irancell Telecommunications Company Services (PJSC) (Irancell) proportionate results are included in the segment analysis as reviewed by the CODM and excluded from reported results for revenue, CODM EBITDA and capital expenditure due to equity accounting for joint ventures. The results of Irancell in the segment analysis exclude the impact of hyperinflation accounting.

REVENUE  Network 
services 
Rm 
Mobile 
devices 
Rm 
Interconnect 
and 
roaming 
Rm 
Digital 
and 
fintech 
Rm 
Other 
Rm 
Revenue 
from 
contracts with 
customers 
Rm 
Interest 
revenue 
Rm 
Total 
revenue 
Rm 
2021 
South Africa  31 030  9 271  4 070  2 429  1 521  48 321  395  48 716 
Nigeria  50 241  107  5 594  3 216  892  60 050  –  60 050 
SEA  11 830  211  759  3 598  557  16 955  –  16 955 
Uganda  5 728  84  378  2 199  160  8 549  –  8 549 
Zambia  1 606  77  108  596  42  2 429  –  2 429 
Other SEA  4 496  50  273  803  355  5 977  –  5 977 
WECA  34 371  223  2 499  9 750  1 162  48 005  –  48 005 
Ghana  13 046  56  642  5 151  292  19 187  –  19 187 
C�te d'lvoire  6 022  47  879  1 456  499  8 903  –  8 903 
Cameroon  5 475  38  385  1 262  84  7 244  –  7 244 
Other WECA  9 828  82  593  1 881  287  12 671  –  12 671 
MENA  5 209  13  1 055  200  73  6 550  –  6 550 
Sudan  1 619  6  548  43  10  2 226  –  2 226 
Afghanistan  1 670  7  341  57  17  2 092  –  2 092 
Other MENA1  1 920  –  166  100  46  2 232  –  2 232 
Major joint venture - Irancell2  5 831  128  289  324  138  6 710  15  6 725 
Head office companies3  1 515  –  5 076  188  12 183  18 962  134  19 096 
Eliminations  (438) (1) (5 303) (206) (11 635) (17 583) (130) (17 713)
Hyperinflation impact  (229) 1  226  (5) (6) (13) –  (13)
Irancell revenue exclusion  (5 831) (128) (289) (324) (138) (6 710) (15) (6 725)
Consolidated revenue  133 529  9 825  13 976  19 170  4 747  181 247  399  181 646 
1 Syria and Yemen segment analysis has been included until the Group lost control of MTN Syria on 25 February 2021 and the Group exited Yemen on 17 November 2021. Refer to note 18.3 and note 18.4.
2 Irancell proportionate results are included in the segment analysis as reviewed by the CODM. This is, however, excluded from IFRS reported results due to equity accounting for joint ventures.
3 Head office companies consist mainly of revenue from GlobalConnect Solutions Limited (GlobalConnect), the Group’s central financing activities and management fees from segments.

 

REVENUE   Network 
services 
Rm 
Mobile 
devices 
Rm 
Interconnect 
and 
roaming 
Rm 
Digital 
and 
fintech 
Rm 
Other 
Rm 
Revenue 
from 
contracts 
with 
customers 
Rm 
Interest 
revenue 
Rm 
Total 
revenue 
Rm 
2020 - Restated1 
South Africa  29 639  8 449  3 481  2 170  1 331  45 070  403  45 473 
Nigeria  49 054  294  5 732  2 341  559  57 980  –  57 980 
SEA  11 837  212  910  3 290  540  16 789  –  16 789 
Uganda  5 570  53  437  2 135  125  8 320  –  8 320 
Zambia  1 696  105  161  570  44  2 576  –  2 576 
Other SEA  4 571  54  312  585  371  5 893  –  5 893 
WECA  31 755  303  3 330  8 408  1 076  44 872  –  44 872 
Ghana  11 648  120  749  4 487  241  17 245  –  17 245 
C�te d'lvoire  5 697  47  1 101  1 472  459  8 776  –  8 776 
Cameroon  5 118  46  459  994  69  6 686  –  6 686 
Other WECA  9 292  90  1 021  1 455  307  12 165  –  12 165 
MENA  8 568  21  1 228  477  129  10 423  –  10 423 
Sudan  2 526  11  623  119  27  3 306  –  3 306 
Afghanistan  1 882  9  354  50  15  2 310  –  2 310 
Other MENA  4 160  1  251  308  87  4 807  –  4 807 
Major joint venture - Irancell2  6 539  92  414  393  114  7 552  21  7 573 
Head office companies3  1 077  –  4 553  10  11 902  17 542  148  17 690 
Eliminations  (166) (1) (4 661) –  (11 822) (16 650) (141) (16 791)
Hyperinflation impact  2 169  11  651  66  28  2 925  –  2 925 
Irancell revenue exclusion  (6 539) (92) (414) (393) (114) (7 552) (21) (7 573)
Consolidated revenue  133 933  9 289  15 224  16 762  3 743  178 951  410  179 361 
1 2020 operating segments have been restated due to Ghana being moved from the SEA cluster (previously named SEAGHA) to the WECA cluster, Zambia being disaggregated from other SEA, Afghanistan disaggregated from other MENA and Syria aggregated to other MENA.
2 Irancell proportionate results are included in the segment analysis as reviewed by the CODM. This is, however, excluded from IFRS reported results due to equity accounting for joint ventures.
3 Head office companies consist mainly of revenue from GlobalConnect, the Group’s central financing activities, and management fees from segments.

 

   2021       2020 
Restated1
 
External versus inter-segment revenue  External 
revenue 
Rm 
Inter- 
segment 
revenue 
Rm 
Total 
revenue 
Rm 
External 
revenue 
Rm 
Inter- 
segment 
revenue 
Rm 
Total 
revenue 
Rm 
South Africa  48 223  493  48 716  45 045  428  45 473 
Nigeria  58 835  1 215  60 050  57 355  625  57 980 
SEA  16 498  457  16 955  16 237  552  16 789 
Uganda  8 223  326  8 549  7 936  384  8 320 
Zambia  2 366  63  2 429  2 519  57  2 576 
Other SEA  5 909  68  5 977  5 782  111  5 893 
WECA  46 717  1 288  48 005  43 458  1 414  44 872 
Ghana  18 659  528  19 187  16 697  548  17 245 
C�te d'lvoire  8 735  168  8 903  8 643  133  8 776 
Cameroon  7 028  216  7 244  6 440  246  6 686 
Other WECA  12 295  376  12 671  11 678  487  12 165 
MENA  5 908  642  6 550  9 781  642  10 423 
Sudan  1 748  478  2 226  2 804  502  3 306 
Afghanistan  1 928  164  2 092  2 170  140  2 310 
Other MENA2  2 232  –  2 232  4 807  0  4 807 
Major joint venture                    
– Irancell3  6 725  –  6 725  7 573  –  7 573 
Head office companies4  5 452  13 644  19 096  4 557  13 133  17 690 
Eliminations  –  (17 713) (17 713) –  (16 791) (16 791)
Hyperinflation impact  13  (26) (13) 2 928  (3) 2 925 
Irancell revenue exclusion  (6 725) –  (6 725) (7 573) –  (7 573)
Consolidated revenue  181 646  –  181 646  179 361  –  179 361 
1 2020 operating segments have been restated due to Ghana being moved from the SEA cluster (previously named SEAGHA) to the WECA cluster, Zambia being disaggregated from other SEA, Afghanistan disaggregated from other MENA and Syria aggregated to other MENA.
2 Syria and Yemen segment analysis has been included until the Group lost control of MTN Syria on 25 February 2021 and the Group exited Yemen on 17 November 2021. Refer to note 18.3 and note 18.4 respectively.
3 Irancell proportionate results are included in the segment analysis as reviewed by the CODM. This is, however, excluded from IFRS reported results due to equity accounting for joint ventures.
4 Head office companies consist mainly of revenue from GlobalConnect, the Group’s central financing activities, and management fees from segments.

 

CODM EBITDA  2021 
Rm 
2020 
Restated1
Rm 
South Africa  18 956  17 742 
Nigeria  31 852  29 506 
SEA  7 847  7 705 
Uganda  4 387  4 118 
Zambia  556  765 
Other SEA  2 904  2 822 
WECA  19 369  17 717 
Ghana  10 557  9 097 
C�te d'lvoire  3 096  3 042 
Cameroon  2 507  2 149 
Other WECA  3 209  3 429 
MENA  2 082  3 352 
Sudan  1 085  1 428 
Afghanistan  615  585 
Other MENA2  382  1 339 
Head office companies  (1 007) 1 871 
Eliminations  652  (2 570)
CODM EBITDA  79 751  75 323 
Major joint venture - Irancell3  2 446  2 818 
Hyperinflation  (2) 1 369 
Gain on disposal of investment in associates  1 212  6 129 
Loss on deconsolidation of subsidiary  (4 720) – 
Gain on exit in Yemen  15  – 
Gain on disposal of subsidiary  38  – 
Fair value gain on acquisition of subsidiary  526  – 
Impairment loss on remeasurement of non-current assets held for sale  (53) (1 510)
Impairment loss on Yemen PPE and intangible assets  (609) – 
Irancell CODM EBITDA exclusion  (2 446) (2 818)
CODM EBITDA before impairment of goodwill  76 158  81 311 
Depreciation, amortisation and impairment of goodwill and investment in joint ventures  (35 223) (36 716)
Net finance cost  (14 448) (18 233)
Net monetary gain  275  1 582 
Share of results of associates and joint ventures after tax  2 054  1 142 
Profit before tax  28 816  29 086 
1 2020 operating segments have been restated due to Ghana being moved from the SEA cluster (previously named SEAGHA) to the WECA cluster, Zambia being disaggregated from other SEA, Afghanistan disaggregated from other MENA and Syria aggregated to other MENA.
2 Syria and Yemen CODM EBITDA has been included until the Group lost control of MTN Syria on 25 February 2021 and the Group exited Yemen on 17 November 2021. Refer to note 18.3 and note 18.4 respectively.
3 Irancell proportionate results are included in the segment analysis as reviewed by the CODM. This is, however, excluded from IFRS reported results due to equity accounting for joint ventures.

 

CAPITAL EXPENDITURE INCURRED     2021 
Rm
   2020 
Restated1
Rm
South Africa  10 409  7 542 
Nigeria  14 905  12 694 
SEA  3 608  3 042 
Uganda  1 743  1 328 
Zambia  507  436 
Other SEA  1 358  1 278 
WECA  7 477  6 439 
Ghana  3 651  3 021 
Cote d'Ivoire  1 290  1 064 
Cameroon  967  950 
Other WECA  1 569  1 404 
MENA  1 015  1 642 
Sudan  504  495 
Afghanistan  378  274 
Other MENA2  133  873 
Major joint venture - Irancell3  2 237  1 865 
Head office companies  1 804  1 286 
Hyperinflation impact  167  394 
Irancell capital expenditure exclusion  (2 237) (1 865)
39 385  33 039 
1 2020 operating segments have been restated due to Ghana being moved from the SEA cluster (previously named SEAGHA) to the WECA cluster, Zambia being disaggregated from other SEA, Afghanistan disaggregated from other MENA and Syria aggregated to other MENA.
2 Syria and Yemen capital expenditure has been included until the Group lost control of MTN Syria on 25 February 2021 and the Group exited Yemen on 17 November 2021. Refer to note 18.3 and note 18.4.
3 Irancell proportionate results are included in the segment analysis as reviewed by the CODM. This is, however, excluded from IFRS reported results due to equity accounting for joint ventures.

8. IMPAIRMENT OF GOODWILL AND INVESTMENT IN JOINT VENTURE

Impairments of goodwill relating to subsidiaries and the impairment of the joint venture are disclosed below:

   2021 
Rm 
2020 
Rm 
MTN Yemen  (550) (525)
MTN Liberia  –  (308)
MTN Guinea-Bissau  –  (165)
Other  (33) – 
(583) (998)
Impairment of joint venture-MEIH  –  (67)

9. NET FINANCE COSTS

   2021 
Rm
     2020 
Rm 
Interest income on loans and receivables  396  605 
Interest income on bank deposits  802  888 
Finance income  1 198  1 493 
Interest expense on financial liabilities measured at amortised cost  (7 010) (8 816)
Net foreign exchange losses  (2 551) (4 537)
Unwind of revision of cash flows1  43  174 
Lease liability interest expense  (6 128) (6 547)
Finance costs  (15 646) (19 726)
Net finance costs recognised in profit or loss  (14 448) (18 233)
1 Refer to note 10 for details on the balance with Irancell.

10. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES AFTER TAX

  2021
Rm
  2020
Rm
2 054 1 142
Irancell 1 709 538
Others 345 604

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 2021, Iranian rial denominated receivables amounted to R1 531 million1 (2020: R1 037 million) and the Iranian rial denominated loan amounted to R1 882 million2 (2020: R1 733 million).

1 Receivables denominated in Iranian rial to the value of R1 525 million (2020: R840 million) were translated at the SANA rate, while the remaining Iranian rial amounts outstanding at year end were translated at the CBI rate.
2 The amount outstanding was translated at the CBI rate.

11. EARNINGS PER ORDINARY SHARE

Number of ordinary shares   2021 2020
Number of ordinary shares in issue
At end of the year (excluding MTN Zakhele Futhi and treasury shares) 1 803 226 302 1 798 990 980
Weighted average number of shares 1 801 959 524 1 798 503 457
Add: Dilutive shares
– Share options – MTN Zakhele Futhi 24 698 778 11 045 701
– Share schemes 22 509 453 8 443 911
Shares for dilutive earnings per share 1 849 167 755 1 817 993 069

Treasury shares
Treasury shares of 4 208 078 (2020: 8 443 400) are held by the Group and 76 835 378 (2020: 76 835 378) are held by MTN Zakhele Futhi (RF) Limited (MTN Zakhele Futhi).

Headline earnings
Headline earnings is calculated in accordance with Circular 1/2021 Headline Earnings as issued by SAICA as amended from time to time and as required by the JSE Limited.

   2021 
Rm 
      2020 
Rm 
Reconciliation between net profit attributable to the equity holders of the Company and headline earnings: 
Profit attributable to equity holders of the Company  13 750  17 022 
Net profit on disposal of property, plant and equipment and intangible assets  (99) (24)
– Subsidiaries (IAS 16) (79) (22)
– Joint ventures (IAS 28) (20) (2)
Impairment of goodwill and investments in joint ventures (IAS 36) 583  1 065 
Net impairment loss on property, plant and equipment, right-of-use assets and intangibles (IAS 36) 545  42 
Impairment loss on remeasurement of non-current asset held for sale (IFRS 5) 53  1 510 
– Subsidiary  53  1 113 
– Associate  –  397 
Gain on disposal of investment in associate (IAS 28) (1 212) (6 129)
Gain on exit in Yemen (IFRS 10) (15) – 
Gain on disposal of a subsidiary (IFRS 10)1  (38) – 
Fair value gain on acquisition of subsidiary (IFRS 10) (526) – 
Loss on derecognition of subsidiary (IFRS 10) 4 720 
Total non-controlling interest and tax effect of adjustments  20  (13)
Headline earnings  17 781  13 473 
Earnings per share (cents)
– Basic  763  946 
– Basic headline  987  749 
Diluted earnings per share (cents)
– Diluted  744  936 
– Diluted headline  962  741 
1 In August 2021 the Group disposed of its 70% shareholding in MTN Business Solutions Namibia Proprietary Limited for R1 million and realised a net gain of R38 million included in other income in the summary Group income statement.

12. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

12.1 Financial assets and financial liabilities at amortised cost

The carrying value of current receivables and liabilities measured at amortised cost approximates their fair value.

 

Listed long-term borrowings

The Group has listed long-term fixed interest rate senior unsecured notes in issue which were issued in prior years, with a carrying amount of R20 135 million at 31 December 2021 (2020: R25 987 million) and a fair value of R21 425 million (2020: R27 691 million). The notes are listed on the Irish bond market and the fair values of these instruments are determined by reference to quoted prices in this market. The market for these bonds is not considered to be liquid and consequently the fair value measurement is categorised within level 2 of the fair value hierarchy.

 

12.2 Financial instruments measured at fair value

IHS Group listed equity investment

 

The fair values of financial instruments measured at fair value are determined as follows:

Included in investments in the statement of financial position is an equity investment in IHS Group at fair value of R19 144 million (2020: R27 197 million). The fair value of the investment is determined by reference to published price quotations on the New York Stock Exchange. The share price of IHS Group was US$14.10 on the last trading day of the year. The fair value of this investment is categorised within level 1 of the fair value hierarchy in comparison to the categorisation within level 3 as at 31 December 2020. This change resulted from the entity's listing on 14 October 2021, where the Groups interest was diluted from 28.98% to 25.96%.

A fair value decrease of R10 393 million (2020: R1 151 million) translated at the closing rate has been recognised. On 7 March 2022, the IHS Group share price was US$10.11, equating to a reduction in the fair value of R5 901 million subsequent to 31 December 2021.

As at 31 December 2020, the fair value was determined using models considered to be appropriate by management, due to the absence of transactions between market participants. The fair value was calculated using an earnings multiple technique and was based on unobservable market inputs including international tower industry earnings multiples of between 10x to 13x applied to Group management's estimates of earnings, less estimated net debt of R23 330 million. In addition, the Group had applied a combined liquidity and macro discount of 30%.

 

12.3 Financial instruments measured at fair value

Reconciliation of level 3 financial assets

 

The table below sets out the reconciliation of financial assets that are measured at fair value based on inputs that are not based on observable market data (level 3):

Insurance cell captives  Rm 
Balance at 1 January 2020  1 812 
Contributions paid to insurance cell captives  605 
Claims received by insurance cell captives  (869)
Loss recognised in profit or loss  (410)
Balance at 1 January 2021  1 138 
Contributions paid to insurance cell captives  583 
Claims received by insurance cell captives  (910)
Gain recognised in profit or loss  483 
Balance at 31 December 2021  1 294 

Investments  Rm 
Balance at 1 January 2020  27 158 
Acquisitions  158 
Loss on equity investments at fair value through other comprehensive income  (1 575)
Foreign exchange movements  1 829 
Balance at 1 January 2021  27 570 
Gain on equity investments at fair value through other comprehensive income  3 890 
Foreign exchange movements  432 
Change in fair value hierarchy  (31 528)
Balance at 31 December 2021  364 
12.4 Capital management

Management regularly monitors and reviews covenant ratios. In terms 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. For the year ended 31 December 2020, MTN Zambia breached its debt service cover ratio covenant and MTN Cameroon defaulted in respect of repayment provisions, both of which were subsequently remedied by a waiver from the affected lenders. MTN Cameroon successfully concluded the restructuring of their debt by 31 December 2020. For the year ended 31 December 2021, MTN Cameroon breached a loan requirement to recapitalise in accordance with the OHADA Uniform Act on Commercial Companies. This breach related to an outstanding loan balance of R849 million. The process of equity recapitalisation is currently underway and on 4 January 2022, the lenders granted MTN Cameroon a waiver of this requirement, thereby remedying the breach. The Group has complied with all other external loan covenants during the current financial year.

   

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

2021  
Rm  
  2020
Rm
34 535 29 408
– Contracted 12 725 6 814
– Not contracted 21 810 22 594

14. INTEREST-BEARING LIABILITIES

2021   
Rm   
2020
Rm
  80 902     96 249
Non-current borrowings   65 484     78 457
Current liabilities   15 418     17 792
Bank overdrafts   469     354
Current borrowings   14 949     17 438
Non-current borrowings   65 484     78 457

15. ISSUE AND REPAYMENT OF DEBT SECURITIES

Raised
2021
Rm
Repaid1 
2021  
Rm  
  Raised
2020
Rm
  Repaid
2020
Rm
Mobile Telephone Networks Holdings Limited 5 350 11 128 12 250 14 512
Loan facilities 700 9 028 5 550 9 458
General banking facilities – – 2 500 2 500
Domestic medium term programme 4 650 2 100 4 200 2 554
MTN Mauritius – 2 202 – 1 913
Loan facilities – 2 202 – 1 913
MTN (Mauritius) Investments Limited – 7 550 – –
United States dollar senior unsecured notes – 7 550 – –
Scancom PLC (MTN Ghana)2 410 1 104 1 583 638
Term loan – 285 1 290 330
Revolving credit facility 410 819 293 308
MTN Côte d'lvoire S.A. (MTN Cote d'voire)2 5 1 035 295 1 014
Syndicated term loan 5 1 035 295 1 014
MTN Nigeria Communications Plc (MTN Nigeria) 15 178 18 239 6 182 1 796
Term loans 5 494 12 402 1 841 1 022
Bond and commercial paper 3,4 9 684 5 837 4 341 774
Other 2 811 2 695 2 241 2 782
Total 23 754 43 953 22 551 22 655
1 The current year saw a substantial increase in borrowing repayments in line with the Group's strategy to accelerate the deleveraging of the Holdcoˆ balance sheet, reducing exposure to United States dollar debt and improving the funding mix at a Holdco level.
2 Debt securities related to MTN Ghana and MTN Cote d'Ivoire were included in other in 2020. These have been disaggregated in 2021.
3 On 22 March 2021, MTN Nigeria issued commercial paper with a face value of NGN19.8 billion (R737 million) for 181 days and NGN53.7 billion (R2 billion) for 269 days.
4 On 5 May 2021, MTN Nigeria issued local bond series I with a face value of NGN110 billion (R3 857 million) with a seven year tenor and series II on 4 November 2021 with a face value of NGN90 billion (R3 322 million) with a 10-year tenor.
^ Holdco comprises of the Group excluding operating segments per note 7 and GlobalConnect.

16. CONTINGENT LIABILITIES

2021
Rm
2020
Rm
2 878 3 831
Uncertain tax exposures 1 622 1 796
Legal and regulatory matters 1 256 2 035

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 2021, 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.

17. EXCHANGE RATES TO SOUTH AFRICAN RAND

Closing rates Average rates
2021 2020 2021 2020
Foreign currency to South African rand:
United States dollar US$ 15.94 14.68 14.82 16.50
South African rand to foreign currency:
Nigerian naira NGN 26.61 27.28 27.54 23.24
Iranian rial1,2 IRR 15 391.55 17 458.88 15 425.94 10 117.96
Ghanaian cedi GHS 0.40 0.40 0.40 0.35
Cameroon Communauté Financière Africaine franc XAF 36.15 36.42 37.37 34.69
Côte d'lvoire Communauté Financière Africaine franc CFA 36.14 36.47 37.36 34.76
Ugandan shilling UGX 222.99 249.19 241.06 225.45
Syrian pound2 SYP 157.59 85.57 147.69 50.53
Sudanese pound2 SDG 27.47 3.76 25.07 3.32
1 SANA rate.
2 The financial results, positions and cash flows of foreign operations trading in hyperinflationary economies are translated as set out in note 6.

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 R579 million (2020: R4 453 million increase) for the year.

Net investment hedges

The Group hedges a designated portion of its dollar net assets in MTN Dubai for foreign currency exposure arising between the US$ and ZAR as part of the Group's risk management objectives. The Group designated external borrowings denominated in US$ held by MTN (Mauritius) Investments Limited with a value of R21.4 billion (2020: of R27.7 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 foreign exchange 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.

18. CHANGES IN SHAREHOLDING

18.1 Disposal of Belgacom International Carrier Services SA (BICS)

On 5 August 2020, the Group classified its shareholding in BICS as a non-current asset held for sale following discussions regarding a potential sale. An impairment loss of R397 million was recognised in profit or loss in 2020 to write down the carrying amount of the non-current asset held for sale to its fair value less costs to sell.

 

During the current year, the Group concluded an agreement to sell its 20% shareholding in BICS. The transaction closed 24 February 2021 and the Group received net cash proceeds of EUR99.1 million (R1.8 billion1) and realised a profit of R1.2 billion, mainly comprising of reclassified FCTR gains. The reclassified FCTR gains form part of earnings per share but have no impact on headline earnings per share, equity and cash flows.

The Group recognised revenue to the amount of R267 million (2020: R1 447 million) from transactions with BICS and incurred expenses to the amount of R95 million (2020: R368 million) for interconnect, roaming and other services received from the associate.

18.2 Initial public offering of MTN Uganda

The Group disposed of 2 902 003 800 shares in MTN Uganda to the public as part of an initial public offering following which MTN Uganda listed on the Uganda Securities Exchange. This took the Group's shareholding from 96.00% to 83.05%. Proceeds generated from the sale of shares, net of transaction costs, amounted to UGX522.9 billion (R2.3 billion1) which has been included in cash flows from financing activities. The share allocation was finalised on 6 December 2021 and resulted in a net gain of R1.8 billion that was recognised in equity as a transaction with non-controlling interests.

1 Translated at the effective date of the sale. Cash proceeds per the statement of cash flows are translated at the spot rate on the date of receipt of the proceeds.
18.3 Loss of control of MTN Syria

As at 31 December 2020, MTN Syria's assets and liabilities were presented as held for sale due to the Group concluding that a sale to Teleinvest Limited (Teleinvest) (the non-controlling shareholder in MTN Syria) was considered to be highly probable. An impairment loss of R53 million (2020: R1 113 million) was recognised in profit or loss for the year due to writing down the carrying amount of the disposal group to its fair value less costs to sell.

 

On 25 February 2021, the Administrative Court of Damascus placed MTN Syria under judicial guardianship, appointing the chairman of TeleInvest as the judicial guardian with the responsibility for managing MTN Syria's day-to-day operations. The appointment of the judicial guardian significantly reduced the Group's ability to direct relevant activities in MTN Syria and therefore the Group lost control over MTN Syria on this date. MTN Syria was presented as part of the MENA cluster in the segment information (note 7) up to the date control was lost.

On loss of control the Group recognised its 75% shareholding in MTN Syria as a financial instrument at fair value. Given the appointment of the judicial guardian and the related shift of power from the majority shareholder to the judicial guardian, the fair value of the shares was determined to be negligible. Subsequently, on 12 August 2021 the Group exited Syria through abandonment of the operation.

Included in the 2021 Group results is R308 million (2020: R2 295 million) revenue representing 0.2% (2020: 1.3%) of the Group's total revenue and R105 million (2020: R574 million) CODM EBITDA1 representing 0.1% (2020: 0.8%) of the Group's CODM EBITDA1 relating to MTN Syria up to the date control was lost. These amounts exclude the impact of hyperinflation.

1 CODM EBITDA is defined in note 7.

The carrying amounts of the assets and liabilities as at the date of loss of control were:

Rm 
Property, plant and equipment  1 095 
Right-of-use assets  133 
Intangible assets  381 
Trade receivables and other current assets  508 
Cash and cash equivalents  228 
Total assets  2 345 
Deferred tax and other non-current liabilities  387 
Current liabilities  694 
Total liabilities  1 081 
Net carrying amount of assets  (1 264)
Non-controlling interests derecognised  240 
Reclassification of foreign currency translation reserve including hyperinflation  (3 696)
Fair value of remaining interest held in MTN Syria  – 
Loss on deconsolidation of subsidiary  (4 720)
Cash and cash equivalents in MTN Syria  228 
Cash derecognised on loss of control  228 

18.4 Exit in Yemen

During 2021, the Group initiated a process to exit Yemen, in accordance with its MENA exit strategy. The Group did not expect to recover any of its investment in MTN Yemen through ongoing operations until the date of exit and therefore the recoverable amount of the cash-generating unit was considered to be negligible.

 

The Group recognised the following impairment losses during 2021:

Rm
1 159
Impairment of goodwill 550
Impairment of property, plant and equipment 453
Impairment of intangible assets 60
Impairment of right-of-use assets 96

Effective 17 November 2021, the Group exited Yemen (including MTN Yemen and associated companies) by way of a transfer of its shareholding in Investcom Telecommunications Yemen Limited (MTN Yemen's direct holding company) to Emerald International Investment LCC (Emerald) for 1 United Arab Emirates dirham. Emerald is a subsidiary of Zubair Investment Center LLC, an affiliate of Zubair Corporation LLC, which is the minority shareholder in MTN Yemen. The decision to exit Yemen was driven by a need to simplify the portfolio, reduce risk and focus on executing a pan-African strategy.

The carrying amounts of the assets and liabilities as at the date of exit were:

Rm 
Property, plant and equipment  141 
Right-of-use assets  30 
Intangible assets  20 
Trade receivables and other current assets  1 108 
Restricted cash  35 
Cash and cash equivalents  900 
Total assets  2 234 
Deferred tax and other non-current liabilities  75 
Taxation liabilities  524 
Current liabilities  1 461 
Total liabilities  2 060 
Net carrying amount of assets  (174)
Non-controlling interests derecognised  6 
Total share transfer consideration – cash  * 
Reclassification of foreign currency translation reserve  183 
Gain on exit of subsidiary1  15 
Net cash: 
Cash received  * 
Less: Cash and cash equivalents in MTN Yemen andassociated entities  900 
Net cash deconsolidated  900 
1 Included in other income in the Group income statement.
* Amounts less than R1 million.

Included in the 2021 Group results is R1 924 million (2020: R2 512 million) revenue representing 1.1% (2020: 1.4%) of the Group's total revenue and R277 million (2020: R764 million) CODM EBITDA1 representing 0.3% (2020: 0.9%) of the Group's CODM EBITDA relating to MTN Yemen up to the date of exit.

1 CODM EBITDA is defined in note 7.
18.5 aYo Holdings Limited (aYo)

Acquisition of subsidiary

 

aYo is a micro-insurance fintech firm. On 30 June 2021, the Group subscribed for additional shares in aYo for R1 thousand. As a result, the Group's equity interest in aYo increased from 50% to 75%, resulting in the Group obtaining control of aYo. Taking control of aYo will allow the Group to grow its micro-insurance business.

Identifiable assets acquired and liabilities assumed at acquisition are as follows:

Fair value 
Rm 
Property, plant and equipment  12 
Right-of-use assets  3 
Intangible assets  24 
Deferred tax assets  1 
Trade receivables and other current assets  89 
Cash and cash equivalents  68 
Total assets  197 
Lease liabilities – non-current  2 
Borrowings – current  203 
Trade payables and other current liabilities  57 
Total liabilities  262 
Net identifiable liabilities acquired  (65)

Goodwill arising from acquisition has been recognised as follows:

Rm 
Total consideration transferred *
Non-controlling interests, based on their proportionate share of recognised amounts of assets and liabilities in aYo (18)
Fair value of existing interest in aYo1 526 
Fair value of identifiable net assets 65 
Goodwill 573 
1 Included in other income in the Group income statement.
* Amounts less than R1 million.

Remeasurement of the Group's existing 50% interest in aYo resulted in a R526 million gain. The goodwill is attributable to the previously unrecognised costs of researching the market approach, product innovation, developing distribution channels and developing a business model for a successful micro-insurance business and the anticipated high revenue growth of the entity. None of the goodwill is expected to be deductible for tax purposes.

Following aYo's acquisition on 30 June 2021, the acquired business contributed revenue and loss after tax of R47 million and R86 million respectively to the Group for the year ended 31 December 2021. Had the acquisition occurred on 1 January 2021, the Group's consolidated revenue and consolidated profit after tax for the period ended 31 December 2021 would have been R181 703 million and R16 870 million respectively.

The fair value of the Group's existing 50% interest in aYo was determined using a model considered to be appropriate by management, due to the absence of transactions between market participants. The fair value was calculated using cash flow projections for the next eight years. Cash flows beyond this were extrapolated at an estimated growth rate of 2.3%. The cash flows were discounted at 17%, which reflects both the time value of money and other specific risks related to aYo. Due to the significant unobservable inputs included in this fair value measurement, it has been classified as level 3 of the fair value hierarchy.

Transaction with non-controlling interest

Effective 1 September 2021, the Group subscribed for an additional 25% interest in aYo. As a result, the Group's equity interest in aYo increased from 75% to 100% on this date. As the Group already controlled aYo prior to the increase in ownership interest to 100%, the acquisition of the additional shares has been accounted for as an equity transaction at a purchase consideration of US$17 million (R255 million1).

1 Translated at the effective date of acquisition. Acquisition cash outflows per the statement of cash flows are translated at the spot rate on the date of payment.

19. NON-CURRENT ASSETS HELD FOR SALE

MTN SA initiated a competitive bid process for a transaction in which it would sell its tower infrastructure, passive assets and power assets; cede related agreements including land lease agreements (on which the towers are constructed) to a tower company; and lease back space on the towers which it would sell. On 16 November 2021, MTN SA and IHS Group signed the related agreements, subject to certain conditions including approvals from Reserve Bank and the Competition Commission.

As the transaction is expected to be effective within the next twelve months, the disposal group was classified as held for sale on 16 November 2021.

The carrying amounts of assets and liabilities that have been reclassified to non-current assets held for sale are as follows:

Rm
Property, plant and equipment 3 578
Right-of-use assets 3 701
Intangible assets 12
Non-current assets held for sale 7 291
Lease liabilities 4 402
Liabilities directly associated with non-current assets held for sale 4 402

20. BREACH OF FIDUCIARY RESPONSIBILITIES

Management proactively reported a breach of fiduciary responsibilities by a prescribed officer to the auditors on 13 December 2021, who entered into an agreement on behalf of a subsidiary of the Group outside of the requisite authority and internal processes and policies. The reportable irregularity was reported to the Independent Regulatory Board for Auditors (IRBA) in line with reporting obligations of the joint auditors. The subsidiary and the Group Boards took specific remedial actions to address the breach and prevent losses. The joint auditors subsequently reported to the IRBA that the reportable irregularity is no longer continuing.

21. EVENTS AFTER REPORTING PERIOD

21.1 Disposal of MTN Nigeria shares
 

On 31 January 2022, the Group disposed of 661.25 million shares in MTN Nigeria following a secondary offer. This took the Group's shareholding from 78.83% to 75.58%. Proceeds generated from the sale of shares, net of taxes and transaction costs amounted to approximately NGN97.6 billion (approximately R3.6 billion translated at the effective date). This resulted in a net gain of approximately R3.2 billion that will be recognised in equity as a transaction with non-controlling interest.

21.2 MTN Nigeria 5G Licence
 

On 13 December 2021, MTN Nigeria emerged as the winner of one of the two 100MHz lots in the 3.5GHz spectrum band auction and secured the 3.5-3.6GHz band. The initial deposit of NGN8.2 billion (R314 million1) was paid on 23 November 2021 as part of MTN Nigeria's intention to participate in the bid which was accounted for as a prepayment. Subsequently, MTN Nigeria paid NGN104.5 billion (R3.9 billion1) of the bid price and NGN6.5 billion (R244 million1) additional fees on 27 January 2022 and is awaiting issue of the related spectrum license.