Earnings per share

The calculation of basic earnings per ordinary share is based on net profit for the year of R5 866 million (March 2005: R6 357 million), and weighted average number of shares of 1 663 208 548 (March 2005: 1 659 670 617) ordinary shares in issue (excluding treasury shares).

The calculation of basic and adjusted headline earnings per ordinary share is calculated on basic headline earnings of R5 984 million (March 2005: R6 339 million) and adjusted headline earnings of R5 626 million (March 2005: R6 074 million) respectively, and weighted average number of shares of 1 663 208 548 (March 2005: 1 659 670 617) ordinary shares in issue (excluding treasury shares).

The calculation of diluted basic headline and adjusted headline earnings per ordinary share is based on the respective earnings as indicated above, and the weighted average number of 1 677 386 926 (March 2005: 1 675 654 318) fully diluted ordinary shares in issue (excluding treasury shares) during the year. The number of fully diluted ordinary shares has been calculated by taking into account ordinary shares that will be in issue in respect of the MTN Holdings convertible debentures and outstanding MTN Group share options.

Explanation of adjusted headline earnings

Impact of put option

The implementation of IFRS requires the Group to account for a written put option held by a minority shareholder of one of the Group’s subsidiaries, which provides them with the right to require the subsidiary to acquire their shareholding at fair value. Prior to the implementation of IFRS the shareholding was treated as a minority shareholder in the subsidiary as all risks and rewards associated with these shares, including dividends, currently accrue to the minority shareholder.

IAS 32 requires that in the circumstances described in the previous paragraph:

Reversal of deferred tax assets (refer to note 14)

The dividends paid during the March 2005 and 2004 financial years were R1 081 million and R680 million respectively. A dividend in respect of the period ended 31 December 2005 of R0,65 per share is to be proposed at the annual general meeting on 13 June 2006.

These financial statements do not reflect this dividend proposed.

Encumbrances

MTN Holdings

Borrowings by MTN Holdings are secured by land and buildings, the book value of which is R590 million (March 2005: R271 million) (note 19).

MTN Nigeria

Loans to MTN Nigeria are secured by a fixed charge over the company’s moveable assets, the book value of which is R11 347 million (March 2005: R8 874 million) (note 19).

MTN Rwanda

The syndicated loan acquired from four local banks and the BPC loan are secured by a floating charge on MTN Rwanda’s property, plant and equipment, the book value of which is R81 million (March 2005: R51,8 million) (note 19).

MTN Uganda

In terms of the Inter-creditor Security Package, MTN Uganda has provided a first and second fixed charge totalling R70 million (March 2005: R66 million) over its property, plant and equipment as security for a syndicated loan made to MTN Uganda by various banks and financial institutions (note 19).

MTN Swaziland

Loans from the Swaziland Industrial Development Corporation are secured by notarial bonds over MTN Swaziland’s moveable assets including the network and information system infrastructure, the book value of which is R20,4 million at the end of March 2005 (note 19).

MTN Côte d’Ivoire

Loans to MTN Côte d’Ivoire are secured by a fixed charge over the company’s network equipment with a book value of R270 million (note 19).

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGU) identified according to country of operation and relates to the Group’s investments in MTN Côte d’Ivoire, MTN Zambia, MTN Congo Brazzaville, Mascom Botswana, MTN Network Solutions, Cellplace (Proprietary) Ltd, MTN Rwandacell and MTN Uganda.

Goodwill is tested annually for impairment. During the period ended 31 December 2005 and for the year ended 31 March 2005, the Group determined that there was no impairment of any of its cash-generating units to which goodwill had been allocated.

A summary of the goodwill allocation is presented below:

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The following key assumptions have been used for the value-in-use calculations:

– Growth rate: We have used a steady growth rate to extrapolate revenues beyond the budget period cash flows. The growth rate is consistent with publicly available information relating to long term average growth rates for the markets in which the respective CGU operates. The average growth rates used range from 3% to 8% per annum.

– Discount rate: Discount rates range from 13,7% per annum to 14,78% per annum. Discount rates used are pre-tax and reflect specific risks relating to the relevant CGU.

These assumptions have been used for the analysis of each CGU.

There are no significant contingent liabilities relating to the Group’s interest in associates.

A list of significant investments in associates including the name, country of incorporation and proportion of interest is given in Annexure 2.

MTN International invested an amount of R500 million into an international sinking fund policy with a major financial services institution in South Africa. The accumulated foreign exchange loss incurred upon translating the investment to rand at the ruling spot rate at balance sheet date, together with investment costs, amounted to R188 million (March 2005: R200 million), which has been charged to the income statement. The term is five years commencing on the inception date (24 October 2002). From time to time, the portfolio of assets in the investment can be restructured to include listed shares in offshore companies on recognised bourses, listed bonds on recognised bourses and investments in various cash instruments and bank deposits.

*Loans by MTN Mauritius to minority shareholders of MTN Nigeria are USD denominated and interest free.

The amount consists of two loans:

Loan 1: Included in sundry debtors for the current period an amount of USD8 million (March 2005: USD9 million). The loan is repayable by 1 July 2006 out of shareholder distributions to which the borrower is entitled in respect of the shares acquired from the proceeds of the loan. The fair value of the loan approximates book value.

Loan 2: USD11 million (March 2005: USD12 million). There is no fixed repayment date. The loan is repayable out of all shareholder distributions to which the borrower is entitled. On initial recognition, the loans were not stated at fair value due to the loans not having specified repayment terms. Accordingly these loans are stated at cost, less impairments, if any.

**The disposal of a 30% shareholding by MTN Mauritius in MTN Cameroon was effected in two tranches:

20% tranche

This was funded by two loans:

Loan 1: USD3,5 million (March 2005: USD4,5 million) is interest free and repayable on 31 December 2010 out of 80% of the borrower’s entitlement to shareholder distributions. The fair value of the loan is USD2,2 million.

Loan 2: USD15,2 million attracts interest at LIBOR plus 6% per annum (effective rate of 7,2% per annum) which will be capitalised bi-annually. The loan is repayable by 31 December 2010 out of 80% of the borrower’s entitlement to shareholder distributions. The repayments shall first be applied against loan 1 until it is repaid in full and thereafter shall be applied against loan 2. The fair value of the loan approximates the book value.

10% tranche

The USD denominated loan amounting to USD10,1 million is repayable at the higher of (i)10% of the market value of MTN Cameroon if onsold by the purchaser; and (ii) USD10,1 million plus interest at LIBOR plus 6% per annum (effective rate is 7,2% per annum). If dividends are declared, an interest charge equal to the dividends will be levied.

As the Group still retains beneficial interest in this 10% stake, the Group financial statements include 80% of MTN Cameroon.

The minority shareholders in MTN Nigeria and MTN Cameroon have provided their shares in the respective companies as security for the above loans.

*** Loans by Irancell to Iran Electronics Development Company are USD denominated. The fair value of these loans approximate the carrying value.

USD43,61 million (March 2005: nil) will attract interest at LIBOR plus 4% per annum (effective rate 8,6% per annum). Interest is payable six monthly in arrears. The loan is repayable in full at the end of three years. The fair value of the loan approximates the carrying value.

**** Loans by MTN Mauritius to Irancell are USD denominated. The fair value of the loans approximate their carrying values. The amount consists of two loans:

Loan 1: USD43,61 million (March 2005: nil) attracts interest at LIBOR plus 4% per annum (effective rate of 8,7% per annum) which will be capitalised against the loan. The loan and capitalised interest is repayable by August 2009. The fair value of the loan approximates the book value.

Loan 2: USD174,4 million (March 2005: nil) will attract interest at LIBOR plus 4% per annum (effective rate 8,6% per annum) which will be capitalised against the loan. The loan and capitalised interest is repayable by November 2009. The fair value of the loan approximates the book value.