Annual finanacial statements - Contents

Notes to the Group financial statements

for the nine months ended 31 December 2005

		1 April 2004 Rm	Charged to income statement Rm	Exchange differences Rm	31 March 2005 Rm	Additions – business combinations Rm	Charged to income statement Rm	Exchange differences Rm	31 December 2005 Rm
14.	DEFERRED INCOME TAXES
	Movement

	Deferred income tax liabilities
	Tax allowances over book depreciation	(890)	31	(6)	(865)	—	(156)	2	(1 019)
	Other temporary differences	(68)	192	—	124	—	23	—	147
	Revaluation of at acquisition assets	—	—	—	—	(133)	—	8	(125)
	Working capital allowances	203	(158)	—	45	—	99	—	144

		(755)	65	(6)	(696)	(133)	(34)	10	(853)

	Deferred income tax assets
	Provisions and other temporary differences	51	69	—	120	136	(12)	(11)	233
	Accelerated tax depreciation	—	10	—	10	—	3	(3)	10
	Tax loss carried forward	—	—	—	—	26	(26)	—	—
	MTN Nigeria deferred tax asset	334	354	—	688	—	427	28	1 143

		385	433	—	818	162	392	14	1 386

		(370)	498	(6)	122	29	358	24	533

The Group’s subsidiary in Nigeria has been granted a five-year company income tax holiday from date of approval. Furthermore, capital allowances arising on capital expenditure incurred during this five-year period may be carried forward and claimed as deductions against taxable income from the sixth year of operations onwards. A deferred tax credit of R332 million (March 2005: R265 million), after excluding minority interests, relating to these deductible temporary differences, has been recognised for the period ended 31 December 2005 in terms of IAS 12: Income Taxes. A deferred tax asset is raised where it is probable that future profits will be generated in order to utilise the deductible temporary differences.

As previously disclosed, although the Group has complied with the requirements of IAS 12 in this regard, the board of directors has reservations about the appropriateness of this treatment in view of the fact that no cognisance may be taken in determining the value of such deferred tax asset for uncertainties arising from the effects of the time value of money or future foreign exchange movements. The board therefore resolved to report adjusted headline earnings (negating the effect of the deferred tax asset) in addition to basic headline earnings, to more appropriately reflect the Group’s results for the period.

		December 2005 Rm	March 2005 Rm
15.	INVENTORIES
	Finished goods (handsets, SIM cards and accessories) – at cost**	706	669
	Consumable stores and maintenance spares – at cost**	11	20
	Less: Provision for inventories	(93)	(40)

		624	649

	Beginning of period Rm	Additions Rm	Utilised Rm	Unused Rm	Exchange differences Rm	End of period Rm
Provision movement
9 months ended
31 December 2005
Movement in provision of inventories	(40)	(60)	5	2	*	(93)

12 months ended
31 March 2005
Movement in provision of inventories	(35)	(53)	—	48	*	(40)

* Amounts less than R1 million

** Included in inventory are amounts of R71,8 million (March 2005: R123,8 million) encumbered by borrowings relating to MTN Nigeria (note 19).

		December 2005 Rm	March 2005 Rm
16.	RECEIVABLES AND PREPAYMENTS
	Trade receivables	4 898	3 591
	Less: Provision for impairment of trade receivables	(874)	(876)

	Trade receivables – net	4 024	2 715
	Sundry debtors and prepayments**	1 463	738

		5 478	3 453

** Sundry debtors and prepayments include prepayments for BTS sites and other property leases, advances to suppliers and short-term loans.

The fair value of trade and other receivables approximate their book values as shown above.

Included in receivables and prepayments are amounts of R648,7 million (March 2005: R630,6 million) encumbered by borrowings relating to MTN Nigeria (note 19).

	Beginning of period Rm	Additions– business combinations Rm	Additions Rm	Unused Rm	Utilised Rm	Exchange differences Rm	End of period Rm
Impairment movement
9 months ended
31 December 2005
Movement in provision of trade
receivables	(876)	(94)	(12)	108	23	(23)	(874)

12 months ended
31 March 2005
Movement in provision of trade
receivables	(572)	—	(304)	—	—	*	(876)

There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers, internationally dispersed.

*Amounts less than R1 million

		December 2005 Rm	March 2005 Rm
17.	ORDINARY SHARES AND SHARE PREMIUM
	Ordinary share capital
	Authorised share capital
	2 500 000 000 ordinary shares of 0,01 cent each	*	*

	Issued and fully paid-up share capital
	1 665 317 425 (March 2005: 1 662 496 630) ordinary shares of 0,01 cent each	*	*

	Share premium
	Balance at the beginning of the year	14 239	14 184
	Arising on the issue of shares during the year (net of share issue expenses)	33	55

	Balance at the end of the year	14 272	14 239

	Treasury shares
	Balance at the beginning of the year	—	(6)
	Reduction in treasury shares	—	6

	Balance at the end of the year	—	—

	Total ordinary shares and share premium	14 272	14 239

	MTN Group Share Option Scheme The exercise of options and resulting share trades can be viewed under (“directors’ share dealings”) on page 140 of the directors’ report. All disclosures as required by IFRS 2: Share-based Payments have been included on pages 130 to 133 of the directors’ report.

	*Amounts less than R1 million

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		December 2005 Rm	March 2005 Rm
18.	OTHER RESERVES
	Non-distributable reserves
	Balance at the beginning of the period	(12 873)	(12 906)
	As previously reported	—	(13 403)
	Transition to IFRS (note 44)	—	1 534
	Early adoption of IAS 21 (note 40)	—	(1 037)
	Movement in contingency reserve	5	—
	Purchase/sale of non-controlling interests	(1 302)	(12)
	Transfer from distributable reserves	2	1
	Share-based payment reserve	17	17
	Shareholder loan revaluation reserve	79	19
	Foreign currency translation differences of foreign subsidiaries and joint ventures	21	8

	Balance at the end of the period	(14 051)	(12 873)

	Consisting of:
	Contingency reserve (as required by insurance regulations)	20	15
	Statutory reserve (as required by Rwandan legislation)	9	7
	Purchase/sale of non-controlling interests	(13 220)	(11 918)
	Shareholder loan revaluation reserve	(939)	(1 018)
	Share-based payment reserve	41	24
	Translation difference of foreign subsidiaries	38	17

		(14 051)	(12 873)

	A statutory contingency reserve has been created in terms of the Short-term Insurance Act, 1988. Transfers to the contingency reserve are treated as appropriations of income, and the balance of the reserve is disclosed in the balance sheet as a non-distributable reserve, forming part of shareholders’ funds. On dissolution of the special purpose entities to which these reserves relate, they will become available for distribution.

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		December 2005 Rm	March 2005 Rm
19.	BORROWINGS
	UNSECURED
	MTN Service Provider
	Various composite short-term facilities, bearing interest at rates determined by the nature of each specific drawdown instrument, but essentially linked to the BA rate. Interest rates over the year varied between 14% and 14,5% per annum (March 2005: between 7% and 10% per annum).	3	14

	MTN Swaziland
	Standard Bank Swaziland Limited
	The loan attracts a floating interest rate of prime less 0,25% per annum (effective rate of 10,19% per annum) (March 2005: 10,04% per annum) and will be repaid by April 2006.	3	3

	MTN Mauritius
	Syndicated revolving loan
	Facility arranged by Standard Bank London Limited and Sumitomo Mitsui Banking Corporation Europe Limited of USD250 million, bearing interest at LIBOR plus 0,85% per annum (effective rate of 4,3% per annum) (March 2005: 3,04% per annum). This loan is repayable in one final payment by March 2007. MTN Holdings and other MTN Group entities have provided cross-guarantees for this loan facility.	347	187

	Facility arranged by Standard Finance (Isle of Man) of USD90 million bearing interest at LIBOR plus 0,4% at an effective interest rate of 4,6%. This loan is repayable in one final payment in November 2006. MTN Holdings and other MTN Group entities have provided cross-guarantees for this loan facility.	569	—

	MTN Group Management Services
	Various composite short-term facilities, bearing interest at rates determined by the nature of each specific drawdown instrument, but essentially linked to the BA rate. Interest rates varied between 7% and 10% per annum.	—	36
	Bank overdraft facilities	20	—

	MTN Network Operator
	Various unsecured composite facilities
	Various unsecured composite facilities bearing interest at rates determined by the nature of specific drawdown instruments, payable on demand. Rates are essentially linked to the BA rate, ranging between 8,5% and 14% per annum, payable within 365 days.	582	11

	MTN Mobile Money Holdings
	Bank overdraft facilities	16	—

	MTN Cameroon Syndicated Medium Term Loan of Communaute Financiere Africaine franc CFA35 billion. Repayments are deferred for one year, with the first repayment of CFA2,8 billion due on 15 March 2006. The balance is repayable in eight payments of CFA4,025 billion per semester starting on 30 September 2006. The annual interest rate is fixed at 7,35% per annum.	389	417

	MTN Uganda SIDA Bond Commercial paper issue of Uganda Shilling (UGS) 12,5 billion facility guaranteed by SIDA, bearing interest at the 182-day Ugandan treasury bill rate plus 1% per annum (effective rate of 11,34% per annum) (March 2005: effective rate of 11,34% per annum). This loan is made up of 3 tranches and is repayable semi annually with tranche 1 maturing in September 2005 and tranches 2 and 3 in December 2005.	—	3

	Citibank Uganda Short-term facility with Citibank Uganda Limited. The facility is utilised through the issue of a UGS8,5 billion promissory note. Interest is payable monthly in arrears at an effective money market rate of 8% per annum (March 2005: 9,5% per annum).	15	15

	Stanbic Bank Promissory Note Short-term facility of UGS11 billion utilised through the issue of promissory notes to the value of UGS10,5 billion. Interest is payable monthly in arrears at an effective money market rate of 8% per annum (March 2005: 9,5% per annum) on the facility.	19	16

	Standard Chartered Bank Facility of USD5 million through the issue of promissory notes to the value of UGS7 million with Standard Chartered Uganda Limited bearing interest at an effective rate of 8% per annum (March 2005: 9,5% per annum). This loan is repaid monthly with the option of a roll-over.	13	4

	Barclays Bank Facility of USD5 million with Barclays Bank Uganda Limited through the issue of promissory notes to the value of UGS 9 million bearing interest at an effective rate of 8% per annum (March 2005: 9,5% per annum). This loan is repaid monthly with the option of a roll-over.	16	4

	MTN Côte d’Ivoire Principal project loan Loan from West African Development Bank of XOF3,5 million bearing interest at 9% per annum and repayable quarterly from January 2002 to January 2006.	3	—

	Loan from West African Development Bank of XOF4 million bearing interest at 9% per annum and repayable quarterly from July 2004 to July 2008.	15	—

	Loan from Banque Internationale de I’Afrque de I’Ouest of XOF2 million bearing interest at 9,5% per annum and repayable monthly from May 2005 to May 2007.	5	—

	Loan from Eco Bank of XOF3 million bearing interest at 11% per annum and repayable quarterly from December 2001 to December 2006.	3	—

	Loan from Eco Bank of XOF1 million bearing interest at 12% per annum and repayable quarterly from December 2001 to December 2006.	1	—

	Loan from Eco Bank of XOF5 million bearing interest at 6,8% per annum and repayable monthly from January 2006 to June 2007.	25	—

	Bank overdraft facilities	20	—

	Various short-term facilities from Eco Bank and Versus with effective interest rates ranging from 9% to 10,75%	157	—

	Total unsecured	2 221	710

	SECURED
	MTN Holdings Rand Merchant Bank Facility bearing interest at 13,17% (March 2005: 13,92%) per annum payable bi-annually with capital repayable on 31 January 2006. The loan is secured by a cession of the life endowment policies of key personnel.	24	24

	14th Avenue finance lease – Phase 1 Finance lease obligation capitalised at an effective interest rate of 11,8% (March 2005: 11,8 %) per annum. The lease term is 10 years with six years to run, with renewal options of 20 years in total, and instalments payable monthly. The book value of the underlying property is R259 million (March 2005: R271 million) (notes 8, 31). The obligation is secured by the underlying property.	300	308

	14th Avenue finance lease – Phase 2 Finance lease obligation capitalised at an effective interest rate of 7,464% per annum. The lease term is 20 years with 19 remaining years to run, with renewal options of 20 years in total, and instalments payable monthly. The book value of the underlying property is R331 million (notes 8, 31). The obligation is secured by the underlying property.	335	—

	MTN Uganda Development Finance Company of Uganda Facility of UGS453 million bearing interest at prime less 1% per annum (effective rate of 15,5% per annum) (March 2005: 15,5% per annum) based on weighted average of bank prime and repayable quarterly from December 2000 to September 2005.	—	*

	Swedfund International Subordinated loan of UGS3 billion bearing no interest and repayable by September 2007. The repayment value will be based on the equity and net operating profit for the three years ending 31 March 2008. Lenders are entitled to a remuneration fee prorata to dividends declared to ordinary shareholders. The inherent interest rate applicable to this facility, having considered the estimated repayment instalment, equates to 9,8% per annum (March 2005: 11,5% per annum).	10	11

	Nordic Development Fund Subordinated loan of UGS3 billion bearing no interest and repayable in September 2007. The repayment value will be based on the equity and net operating profit for the three years ending 31 March 2008. Lenders are entitled to a remuneration fee prorata to dividends declared to ordinary shareholders. The inherent interest rate applicable to this facility, having considered the estimated repayment instalment, equates to 9,8% per annum (March 2005: 11,5% per annum).	10	11

	Standard Bank London/LB KIIEL Loan Facility of USD17 million bearing interest at LIBOR plus 1,25% (effective rate of 5,26% per annum) (March 2005: 3,9% per annum). Facility repayable semi annually over four years commencing May 2003. All of the above MTN Uganda loans participate in the inter-creditor security package comprising of an assignment of the MTN Uganda telecommunication licence, and debentures and by means of a first and second fixed charge in favour of the inter-creditor agent, Stanbic Bank Uganda Limited, over all property, plant and equipment (notes 8,10).	8	16

	MTN Swaziland Swazi Industrial Development Corporation Facility bore interest at prime plus 2% per annum, effective interest rate of 11,7% per annum (March 2005: 11,7% per annum), repayable monthly from May 2002 to April 2006 and secured by first notarial general covering bond over specific network assets and inventories (note 8).	—	1

	*Amounts less than R1 million

	MTN Nigeria IFC facilities The facilities include a USD50 million standby guarantee facility from the International Finance Corporation (to be utilised in the event of a shortfall at each of the 2006 and 2008 rollover dates) and two loans of USD35 million each, repayable bi-annually from September 2006 to November 2010. Pricing is linked to LIBOR (effective interest rate of 7,88% per annum) (March 2005: 6,96% per annum).	256	242

	Local facility USD250 million (March 2005: USD250 million) naira equivalent commercial paper instrument reducing to 75% and 50% of the initial loan value in November 2006 and November 2008 respectively. The facility matures in November 2010. Pricing is linked to NIBOR (effective interest rate of 14,29% per annum) (March 2005: 18,43% per annum).	1 653	1 517

	DFI term loan A loan of USD20 million from a combined DEG/FMO facility repayable biannually from September 2006, maturing in March 2010. The interest rate is linked to LIBOR (effective interest rate of 8,26% per annum) (March 2005: 6,51% per annum). On 16 November 2004, an additional loan of USD20 million was obtained, repayable bi-annually from September 2006, maturing in March 2010. The interest rate is linked to LIBOR (effective interest rate of 7,76% per annum) (March 2005: effective interest rate of 5,99% per annum).	171	158

	SCMB facility USD 40 million facility from a combined Export Credit Insurance Corporation of South Africa (ECICSA)/ Standard Corporate Merchant Bank (SCMB) repayable in six equal instalments from September 2005 until March 2008. The interest rate is linked to LIBOR (effective interest rate of 8,26% per annum) (March 2005: effective interest rate of 5,7% per annum).	205	237

	Local facility USD 120 million (March 2005: nil) naira equivalent 90 days commercial paper instrument reducing to 50% of the initial loan value in November 2007. The facility matures in November 2009. Pricing is linked to NIBOR (effective interest rate of 13,55% per annum) (March 2005: nil).	740	—

	All of the above MTN Nigeria loans are secured by a fixed charge over the company’s moveable assets, service licence, ordinary share deposit accounts and a floating charge over the undertaking and its assets, property and receivables. The proceeds of the insurance policies are secured in favour of the security trustee (notes 8, 10 ,15 and 16). MTN Mauritius has also provided its shares in MTN Nigeria as security for these loans.

	MTN Rwanda Syndicated loan from four local banks totalling RWF2,1 million (March 2005: RWF2,9 million bearing interest at an effective rate of 15% per annum (March 2005: 16% per annum), repayable over 39 months effective from April 2003. The loan is secured by a floating charge over MTN Rwanda’s fixed assets of R81 million (March 2005: R130 million) and by subordination of the shareholders’ loan (note 8).	2	5

	MTN Côte d’Ivoire Loan from Eco Bank of XOF10 million bearing interest at 8,5% per annum and repayable six monthly from June 2002 to June 2007.	17	—

	Loan from Bank of Africa of XOF7,5 million bearing interest at 9,5% per annum and repayable monthly from July 2003 to March 2007.	16	—

	Loan from Standard Chartered Bank of XOF4,3 million bearing interest at 9% per annum and repayable monthly from October 2005 to October 2006.	18	—

	All the above loans are secured by the network equipment with a book value of R270 million (note 8).

	MTN Congo Brazzaville and MTN Zambia – loans	3	—

	MTN Network Operator Standard Corporate Merchant Bank Term loan arranged by SCMB, bearing interest at six months JIBAR plus 0,6% per annum (effective rate of 7,88% per annum). Loan matures on 30 October 2006. MTN Holdings and other MTN Group entities have provided cross guarantees for this loan facility.	100	—

	Standard Corporate Merchant Bank Advance from SCMB as part of 366 day committed facility for a period of one month bearing interest at 7,464%. Repayable in January 2006. MTN Holdings and other MTN Group entities have provided cross-guarantees for this loan facility.	2 366	—

	ABSA facility Loan of R180 million bearing interest at the three month JIBAR rate plus 45 basis points (effective rate of 7,62% per annum) and repayable quarterly from March 2006 to December 2006.	180	—

	Total secured borrowings	6 384	2 530

	Total borrowings	8 605	3 240

		December 2005 Rm	March 2005 Rm
19.	BORROWINGS
	The maturities of the above loans and overdrafts are as follows:
	Payable within one year or on demand	1 100	221
	Short-term borrowings	1 042	171
	Bank overdrafts	58	50
	More than one year but not exceeding two years	4 696	881
	More than two years but not exceeding five years	2 585	1 190
	More than five years	224	948

		8 605	3 240

	Less: Borrowings and bank overdrafts included within current liabilities	(1 100)	(221)

	Amounts included in non-current liabilities	7 505	3 019

	Unless otherwise stated, all loans approximate their fair values.
	The Group has the following undrawn facilities:
	Floating rate	2 054	2 274
	Fixed rate	352	—

		2 406	2 274

	The facilities expiring within one year are annual facilities subject to review at various dates during 2006.
	The carrying amount of the Group’s borrowings are denominated in the following currencies:
	South African rand	3 887	393
	US dollar	1 600	840
	Nigerian naira	2 363	1 517
	Uganda shilling	80	64
	Rwanda franc	2	5
	Congo Brazzaville communaute financiere	2	—
	Swaziland emalangeni	3	4
	Cameroon communaute financiere africaine	389	417
	Côte d’Ivoire communaute financiere	278	—
	Zambian kwacha	1	—

		8 605	3 240

	Further details of the Group’s finance lease commitments are provided in note 32 to the financial statements.

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		December 2005 Rm	March 2005 Rm
20.	OTHER NON-CURRENT LIABILITIES
	Long-term deposits received from customers	3	—
	Put options in respect of subsidiaries*	1 404	—

		1 407	—

	* The put options in respect of subsidiaries arise from arrangements whereby minority shareholders of two of the Group’s subsidiaries have the rights to put their remaining shareholdings in the subsidiaries to Group companies. On initial recognition, these put options were fair valued using effective interest rates as deemed appropriate by management. To the extent that these put options are not excercisable at a fixed strike price, the fair value will be determined on an annual basis with movements in fair value being recorded in the income statement.

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21.	TRADE AND OTHER PAYABLES
	Trade payables	2 541	1 978
	Sundry creditors	597	647
	Accrued expenses and other payables	4 902	2 822

		8 040	5 447