Notes to the summary

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roup financial statementsfor the year ended 31 December 2021

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.

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

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.

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.

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:

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.

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

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).

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.

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.

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.

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:

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.