Annual finanacial statements - Contents

Notes to the Group financial statements

for the nine months ended 31 December 2005

1. PRIMARY REPORTING FORMAT – GEOGRAPHIC SEGMENTS

December 2005	South Africa Rm	Nigeria Rm	Rest of Africa and Middle East Rm	Reconciling items** Rm	Consolidated Rm
Revenue
External sales	15 911	9 034	2 671	(404)	27 212

Total revenue	15 911	9 034	2 671	(404)	27 212

Segment result	5 009	4 874	1 495	—	11 378
Impairment charge	—	(147)	—	—	(147)
Depreciation	(744)	(1 453)	(300)	—	(2 497)
Amortisation of intangible assets	(39)	(113)	(104)	—	(256)
Finance costs	(99)	(402)	(314)	20	(795)
Finance income	225	107	110	(20)	422
Share of profits of associates	10	—	—	—	10
Income tax expense	(1 471)	427	(367)	—	(1 411)

Net profit for the period	2 891	3 293	520	—	6 704

Other information
Segment assets****

Assets	25 047	17 746	12 914	(10 954)	44 753
Associates	54	—	—	—	54

Total assets	25 101	17 746	12 914	(10 954)	44 807

Segment liabilities****	(3 089)	(6 462)	(10 352)	—	(19 903)
Capital expenditure***	(2 213)	(3 848)	(671)	—	(6 732)

Average number of employees	4 036	1 932	2 392	—	8 360

The results of MTN Nigeria are shown as a separate segment due to changes in the internal reporting structure of MTN Group.

Secondary segment disclosure is not presented as it comprises the mobile telecommunications segment and the satellite telecommunications segment, the latter of which is not considered material to the Group’s financial statements as a whole.

March 2005	South Africa Rm	Nigeria Rm	Rest of Africa and Middle East Rm	Reconciling items** Rm	Consolidated Rm
Revenue
External sales	17 755	9 310	2 334	(405)	28 994

Total revenue	17 755	9 310	2 334	(405)	28 994

Segment result	5 996	4 884	1 120	—	12 000
Depreciation	(1 201)	(1 367)	(246)	—	(2 813)
Amortisation of intangible assets	(3)	(135)	(51)	—	(189)
Finance costs	(66)	(381)	(151)	8	(590)
Finance income	230	38	60	(8)	320
Share of profits of associates	17	—	1	—	18
Income tax expense	(1 571)	407	(330)	—	(1 494)

Net profit for the year	3 402	3 446	404	—	7 252

Other information:
Segment Assets****
Assets	16 993	13 004	6 762	(7 060)	29 639
Associates	43	—	—	—	43

Total assets	16 976	13 004	6 762	(7 060)	29 682

Liabilities****	(4 542)	(4 499)	(1 180)	—	(10 221)
Capital expenditure***	(1 745)	(5 518)	(313)	—	(7 576)

Average number of employees	3 545	1 648	1 065	—	6 258

The results of MTN Nigeria are shown as a separate segment due to changes in the internal reporting structure of MTN Group.

*Amount less than R1 million
** Reconciling items relate to intercompany management fees with Nigeria and intercompany shareholders’ loans with Nigeria and the rest of Africa.
***Capital expenditure comprises additions to property, plant and equipment and software.
****Income tax assets and income tax liabilities are not included in total assets and liabilities.

		Note	9 months ended December 2005 Rm	12 months ended March 2005 Rm
2.	REVENUE
	Wireless telecommunications		24 157	26 179
	– Airtime and subscription fees		18 608	19 623
	– Interconnect		5 403	6 036
	– Connection fees		146	520
	Cellular telephones and accessories		2 351	2 158
	Other		704	657

			27 212	28 994

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3.	PROFIT BEFORE TAX
	The following items have been included in arriving at profit before tax:
	Auditors’ remuneration:		(29)	(16)
	– Audit fees		(15)	(10)
	– Fees for other services		(14)	(6)
	– Expenses		*	*
	Directors’ emoluments:		(35)	(38)
	– Services as director		(32)	(34)
	– Directors’ fees		(3)	(4)
	Operating lease rentals:		(233)	(279)
	– Property		(202)	(246)
	– Equipment and vehicles		(31)	(33)
	(Loss)/profit on disposal of property, plant and equipment		(43)	3
	Movement in the provisions on inventories	15	(58)	(5)
	Impairment charge on property, plant and equipment	8	(147)	—
	Movement in the provisions for impairment on trade receivables	16	96	(304)

	* Amounts less than R1 million

	Staff costs:		(1 310)	(1 435)
	– Wages and salaries		(1 118)	(1 196)
	– Share options granted to directors and employees		(17)	(17)
	– Pension costs – defined contribution plans		(68)	(70)
	– Other		(107)	(152)
	Fees paid for services:		(440)	(377)
	– Administrative		(39)	(61)
	– Management		(75)	(90)
	– Professional		(172)	(124)
	– Secretarial		(10)	(6)
	– Technical		(144)	(96)
	Impairment reversed against loan arising on disposal of 20% of MTN Cameroon to reflect net asset value		—	11
	Profit on disposal of Orbicom		23	—
	Profit on sale of associate		—	4
	Net foreign exchange losses from trading activities		(4)	(7)
			Number	Number
	Average number of Employees		8 360	6 258
			Rm	Rm

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4.	FINANCE INCOME
	Interest income	383	299
	Fair value adjustment	29	—
	Foreign exchange transaction gains	10	21

		422	320

	Reconciliation of interest received to finance income
	Interest received (operating activities)	371	258
	Interest received (investing activities)	12	9
	Foreign exchange transaction gains	10	39
	Fair value adjustments	29	14

	Finance income recognised in the income statement	422	320

		9 months ended December 2005 Rm	12 months ended March 2005 Rm
5.	FINANCE COSTS
	Interest expense – borrowings	(426)	(491)
	Interest expense – finance leases	(27)	(36)
	Foreign exchange transaction losses	(191)	(44)
	Finance costs – put option	(124)	—
	Other	(27)	(19)

		(795)	(590)

	Reconciliation of interest paid to finance costs
	Interest paid (operating activities)	(487)	(521)
	Arrangement fees	(6)	(43)
	Finance costs – put option	(124)	—
	Fair value adjustments	(6)	(3)
	Other	(1)	(19)
	Unrealised foreign exchange transaction losses	(171)	(4)

	Finance costs recognised in the income statement	(795)	(590)

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6.	INCOME TAX EXPENSE
	Current tax	(1 650)	(1 885)
	Normal tax	(1 616)	(1 801)
	Current year	101	—
	Prior year over provision	(135)	(84)
	Secondary tax on companies
	Foreign tax
	Foreign income and withholding taxes	(119)	(107)
	Deferred tax (note 14)	358	498
	Current year	357	478
	Prior year over provision	1	18
	Change in tax rate	*	2
		(1 411)	(1 494)

	Secondary tax on companies
	STC relating to dividends to be proposed at the AGM	(135)	(135)

*Amounts less than R1 million

Taxation for foreign jurisdictions is calculated at the rates prevailing in the respective jurisdictions. MTN Mauritius has been deemed to be a South African resident for tax purposes by the South African Revenue Service (SARS).

	9 months ended December 2005 %	12 months ended March 2005 %
Tax rate reconciliation
The income tax charge for the year can be reconciled to the effective rate of
taxation in South Africa as follows:
Tax at standard rate	29,0	30,0
Expenses not deductible for tax purposes	1,7	1,0
Assessed loss utilised	0,2	—
Effect of different tax rates in other countries	0,4	0,3
Prior year tax	(1,2)	—
Income not subject to tax	—	(0,3)
Effect of pioneer status/tax credit granted	(15,8)	(15,3)
Withholding taxes	0,8	1,1
Effect of foreign dividends	—	0,4
Effect of STC	1,7	1,3
Effect of tax rate change (deferred tax)	—	(0,1)
Other	0,6	(1,4)

	17,4	17,0

The company holds investments in Nigeria, Cameroon, Uganda, Rwanda, Botswana, Zambia, Côte d’Ivoire, the Republic of Congo (Brazzaville) and Iran. The company is regarded as a tax resident in South Africa by SARS, and as such is subject to tax on its worldwide income in South Africa, with only the income properly attributable to the presence in Mauritius being taxed in Mauritius.

During 2005 a budgeted change in the corporate tax rate from 30% to 29% was announced by the Minister of Finance. The new corporate tax rate is effective for all financial year-ends which occur after 31 March 2005. Therefore the applicable tax rate used in the prior year tax reconciliation is 30% as this was the corporate tax rate still applicable as at the end of March 2005.

Deferred tax, however, was measured at tax rates (and tax laws) that were enacted or substantially enacted by the balance sheet date (31 March 2005). The 29% tax rate was “substantially enacted” in South Africa with effect from the date of the Budget speech. Therefore, deferred tax for the prior year is measured at 29%. Taxation for foreign jurisdiction is calculated at the rates prevailing in the respective jurisdiction.