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MTN Group LimitedIntegrated Business Report or the year ended 31 December 2011
.beyondWelcome to possibility
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About this reportThis year, MTN Group Limited (MTN, the Group or the Company) has
moved urther in its journey towards providing a more integrated
report to its stakeholders. This incorporates the recommendations
o the revised King Code o Governance Principles or South Arica
(King III) and the latest work o the International Integrated
Reporting Committee. A structured approach was implemented to
defne material report content and provide a more holistic pictureincorporating the Groups fnancial, economic, social and
environmental perormance. This approach was achieved through
workshops and input rom key representatives o various disciplines,
including risk management, stakeholder management, fnancial
reporting, investor relations, company secretariat, sustainability and
human resources. Consideration was given to eedback rom key
stakeholders in compiling this report. The key improvement made
to the 2011 report is the inclusion o the Group opportunities as
part o its risk assessment. This orms the thread through the report,
providing insight into the most material aspects o the business
across MTNs markets. MTN has also better incorporated its social,economic and environmental contributions to the countries and
societies in which it operates.
The board has recently enhanced its committee structure, details
o which appear in governance highlights.
For more detailed inormation on the Groups sustainability
initiatives, stakeholders are directed to the separate sustainable
development report, available at www.mtn.com/sustainability.
A separate governance report is also available at www.mtn.com/investors. We welcome eedback on this report, which is datedMarch 2012, [email protected].
Reporting principlesMTN is a company incorporated in South Arica under the provisionso the Companies Act, 71 o 2008, as amended (Companies Act), and hasadopted many principles o King III, the Companies Act, the JSE ListingsRequirements and other legislative requirements. The Group subscribesto high ethical standards and principles o corporate governance and is inthe process o ensuring ull compliance with King III as ar as is practicaland easible and with the provisions o the new Companies Act. For moredetails, please see the corporate governance section on pages 50 to 57.
The Group ollows International Financial Reporting Standards (IFRS) tocompile its annual fnancial statements (AFS). MTN discloses the basis orreporting on joint ventures, subsidiaries, associates and leases in its AFS. Forreporting on sustainability issues, it also ollows the Global ReportingInitiatives (GRI) guidelines. MTN assesses itsel as level B GRI compliant.
AssuranceThe audit committee oversees the drating o the integrated report.On the basis o the recommendations rom the joint auditors(PricewaterhouseCoopers Inc and SizweNtsalubaGobodo (Inc), theaudit committee provides assurance on the annual fnancial
statements which have been prepared under the supervision o theGroup CFO, Nazir Patel. While good progress has been made to complywith sustainability assurance in the current year, MTN Group is workingtowards achieving ull compliance on sustainability assurance in 2013.
Board responsibilityThe board o directors acknowledges its responsibility to ensure theintegrity o the integrated report. The board has accordingly applied itsmind to the integrated report and in its opinion, the report airlypresents the integrated perormance o the Group.
Cyril Ramaphosa Sifso DabengwaChairman Group president and CEO
Navigation aid
Website link
Case study
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MTN Group Limited Integrated Business Report or the year ended 31 December 20111
Groupoverview
Perormancereview
Operationaland
fnancialreview
Sustainability
Financialstatement
s
Shareholderinorma
tion
Contents
03 Group overview
04 Profle
06 Structure and ootprint
08 Strategy
09 Key statistics
10 Interacting with stakeholders
11 Risk and opportunities summary
14 Chairmans statement
16 Board o directors
20 Executive committee
23 Perormance review
24 Group president and chie executive ocers report
28 Group chie fnancial ocers report
33 Operational and fnancial review
34 Five-year fnancial review
38 Operational perormance: South Arica
40 Operational perormance: Nigeria
42 Operational perormance: Iran
44 Operational perormance: Ghana
46 Operational perormance: Syria
49 Sustainability
50 Governance highlights
58 People and remuneration report74 Social and environmental report
81 Annual fnancial statements
83 Statutory certifcates and reports
88 Directors report
92 Annual fnancial statements
210 Glossary terms and acronyms
213 Notice o the AGM and shareholders
inormation
Scope and boundary o this report
MTNs integrated business report is available annually,
at least 15 business days ahead o its AGM, which is
scheduled to be held on 29 May 2012. The 2011 report
covers the period rom 1 January 2011 to 31 December2011. It provides a general narrative on the perormance
o the Groups businesses across 21 markets in the
Middle East and Arica, but ocuses its more detailed
commentary on the perormance o its main businesses
in South Arica, Nigeria, Iran, Ghana and Syria. This report
also includes the Groups consolidated annual fnancial
statements. The 2010 report was posted to shareholders
on 27 May 2011.
Group subscribers up16,2%
164,5 million
EBITDA margin up by 3,4 percentagepoints
44,9%
Adjusted HEPS up 43,2%
1 070,0 cents
Including proft rom sale o Ghana towers
Final dividendper share
476 cents
Dividend payout ratio increased to
70%
Share buybackcompleted
R927,3 million
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MTN Group Limited Integrated Business Report or the year ended 31 December 201122
MTN Group Limited Integrated Business Report or the year ended 31 December 2011
Background
As part o its transormation agenda, the Nigerian government
committed to accelerating economic growth in rural areas, where
citizens comprise 50% o the countrys population. Notionally less
than 30% o energy is supplied via grid power. MTN Nigeria set
itsel a target to increase rural mobile communication coverage
and reduce dependency on diesel by over 50% by 2020. MTN
Nigeria recognised that it could deepen its service oering while
helping the government realise its objectives.
Solution
MTN undertook to provide telecommunication access to
850 villages across Nigeria. Phase 1 is complete: 280 base
transceiver sites provide telecommunication services to
350 villages. MTN is implementing network sites using an
architecture methodology called ully meshed satellite
networks which reduces the need to hop across connection
points or networks at the last mile, thereby reducing
communication costs and improving the quality o voice calls.
Solar and hybrid solutions displaced the traditional use o diesel
to provide power to both s ites and villages.
Climate-riendly network and communitypower to close the digital divide
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MTN Group Limited Integrated Business Report or the year ended 31 December 20113
Groupoverview
Perormancereview
Operationaland
fnancialreview
Sustainability
Financialstatement
s
Shareholderinorma
tion
Group overview
Profle
Structure and ootprint
Strategy
Key statistics
Interacting with stakeholders
Risk and opportunities summaryChairmans statement
Board o directors
Executive committee
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MTN Group Limited Integrated Business Report or the year ended 31 December 20114
Profle
Botswana, Namibia and Kenya. In
2011, MTN SEA made up 37% o
Group revenue and 29%
o Group EBITDA.*
MTN WECA, comprising MTN
Nigeria, MTN Ghana, MTN
Cameroon, MTN Cte dIvoire,
MTN Congo-Brazzaville,
MTN Benin, MTN Guinea-Bissau,
MTN Guinea Conakry (trading
under the Areeba brand) and
MTN Liberia (trading under
Lonestar Cell brand). The Group
has GSM licences in all these
countries. It also has ISP
businesses in Nigeria, Cameroon,Cte dIvoire and Ghana. In 2011,
MTN WECA contributed 43% to
Group revenue and 54% to Group
EBITDA.*
MTN MENA, consisting o MTN
Irancell, MTN Syria, MTN Sudan,
MTN Aghanistan, MTN Yemen
and MTN Cyprus. The Group
has GSM licences in all these
countries. MTN also has ISP
businesses in Syria and Cyprus.
In 2011, MTN MENA made up
20% o Group revenue and 15%
o Group EBITDA.*
* Note: dierence in EBITDA percentagecalculation is due to head oce costs.
ibia
mpris
Ghana, MTN
n, MTN Cte d Ivoire,
ongo-Brazzaville,
Beni uinea-Bissau,
TN G
und
a
and 29%
A
n
oup 3
.*
MTN
Until recently, the Group organised
its operations into three regions:
South and East Arica (SEA), West
and Central Arica (WECA), and the
Middle East and North Arica
(MENA). It currently discloses
detailed inormation on its fve
largest markets: South Arica,
Nigeria, Iran, Ghana and Syria.
From April 2012, a new organisational
structure will be in place, better
reecting the contribution o the
various markets and helping to
optimise the business at a Group
level. This replaces the three regionalvice presidents reporting to the
Group President and CEO, with the
CEOs o South Arica and Nigeria and
a chie operations executive,
supported by an operations
executive. For the purposes o the
2011 fnancial year, the three regions
were the ollowing:
MTN SEA, made up o MTN South
Arica, MTN Zambia, MTN Uganda,
MTN Rwanda, MTN Swaziland and
Mascom Botswana. The Group
has GSM licences in all these
countries. It also has ISP
businesses in South Arica,
Zambia, Uganda, Rwanda,
investments in metropolitan and
long-distance fbre optic cables.
MTN continues accessing more
broadband capacity on undersea
cables.
MTNs vision is to be the leader in
telecommunications in emerging
markets.
It has 24 252 permanentemployees representingaround 55 nationalitiesand conductsits business in fve
dierent languages.
In 2011, MTN invested R265 million
in developing its employees,
mainly through the MTN Academies
established in Johannesburg, Accra
and Dubai.
MTNs head oce is in
Johannesburg, South Arica, where
the Group is listed on the JSE Limited
under the share code MTN.
MTN is the largestprimary listing on theJSE.
Incorporated in 1994, MTN Group
Limited is a multinational
telecommunications company
oering mobile communication and
related products and services to
individuals and businesses on three
continents. MTN has mobile licences
in 21 countries and internet serviceprovider (ISP) businesses in
13 countries, mostly in Arica and
the Middle East.
Recently, in additionto its mobilecommunications
business, it has alsoestablished partnerships,associates and jointventures to growrevenue and maintaincosts.
MTN is also invested in tower
management companies in Ghanaand Uganda. At the end o
December 2011, MTN had
164,5 million subscribers. In 2011,
total revenues reached R121,9 billion
and during the year the Group
invested R17,7 billion in developing
its network inrastructure. Included
in capital expenditure are
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MTN Group Limited Integrated Business Report or the year ended 31 December 20115
Groupoverview
Perormancereview
Operationaland
fnancialreview
Sustainability
Financialstatements
Shareholderinormation
MTNs core oerings include:
Voice services
Voice services via 2G and 3G networks, including prepaid and postpaid airtime.
Although the majority o MTN customers are on prepaid packages, South Arica, Syria and Cyprus have a relatively large postpaid base.
MTN Zone is a dynamic taring service pioneered successully by MTN. The service oers discounted call rates based on network use and
available capacity.
MTNs voice oering also includes international roaming, teleconerencing acilities and various community payphones models.
MTN also provides interconnectionservices to other telecoms networks.
Data services
Mobile and fxed data services via various technologies (including 3G, WiMax, EDGE, HSPA, HSDPA, WCDMA).
Mobile messaging, including basic short message services (SMS), and multimedia message services or MMS, enabling customers to send various
media including music, photographs and videos rom their phones.
MTN Mobile Money a cash transer service launched in 12 markets.
MTN Play content portal provides entertainment service.
MTN also has various USSD services (including callback and balance enquiries).
MTN customers can access the Opera Mini Browser in some markets, oering access to the web rom mobile phones.
MTN has also launched m-insurance and m-health services in some markets.
As smartphones become more accessible to people, demand or internet service grows and so does MTNs opportunity.
ICT
MTN Business provides enterprise solutions and cloud computing serv ices. In 13 o its markets, MTN serves large corporate customers, providing solutions designed to manage costs, improve eciencies and deliver
consistent quality.
Among these are: corporate data solutions, satellite connectivity, inrastructure (data centres and hosting solutions), networking o customerbranches (an MPLS network), videoconerencing and ePresence, customer and productivity solutions, system security, converged services, other support
and sector-specifc services, and cloud computing.
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MTN Group Limited Integrated Business Report or the year ended 31 December 20116
Structure and ootprint
100%
100%
100%
100% Service provider
100% Business Solutions
30%MTN Swaziland
96% MTN Uganda
53% Mascom Botswana
80% MTN Rwanda
86% MTN Zambia
100% MTN South Arica
MTN Dubai
MTN Holdings
MTN International
MTN Mauritius
70% MTN Cameroon
78,7% MTN Nigeria
65% MTN Cte dIvoire
49% MTN Irancell
100% MTN Congo-Brazzaville
49% Uganda Tower Inter Co
100%
60% Lonestar Cell
75% Areeba
98% MTN Ghana
85% MTN Yemen
85% MTN Sudan
75% MTN Benin
75% MTN Syria
100% MTN Guinea Bissau
50% MTN Cyprus
91% MTN Aghanistan
Branded names.
20%Belgacom InternationalCarrier Services
49% Ghana Tower Inter Co
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MTN Group Limited Integrated Business Report or the year ended 31 December 20117
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Perormancereview
Operationaland
fnancialreview
Sustainability
Financialstatements
Shareholderinormation
Groupoverview
Operationaland
fnancialreview
Sustainability
Financialstatements
Shareholderinormation
MTN Irancell (49%)
2012
Guidance 2011
Subscribers (000)** 38 681 34 681Revenue (Rm) 11 050
EBITDA margin (%) 42,5
Capital expenditure (Rm) 1 306 1 168
**100%
MTN Syria
2012
Guidance 2011
Subscribers (000) 6 166 5 716
Revenue (Rm) 6 463
EBITDA margin (%) 26,2
Capital expenditure (Rm) 869 449
MTN South Arica
2012
Guidance 2011
Subscribers (000) 24 933 22 033Revenue (Rm) 38 597
EBITDA margin (%) 35,2
Capital expenditure (Rm) 4 599 4 105
MTN Nigeria
2012
Guidance 2011
Subscribers (000) 45 641 41 641
Revenue (Rm) 34 879
EBITDA margin (%) 61,7
Capital expenditure (Rm) 10 500 6 331
MTN Ghana
2012
Guidance 2011
Subscribers (000) 11 106 10 156Revenue (Rm) 5 941
EBITDA margin (%) 49,5
Capital expenditure (Rm) 1 128 851
Key perormance indicators
Group
2012
Guidance 2011
Subscribers (000) 184 801 164 501
Revenue (Rm) 121 884
EBITDA margin (%) 44,9
Capital expenditure (Rm) 24 401 17 717
*Group presence through corporate oce.
*
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MTN Group Limited Integrated Business Report or the year ended 31 December 20118
Strategy
In Country
Voiceservices Data and related services
ICT evolution
Convergence and operationalevolution
In country Changes in local ownership, business
modeland new licences and spectrum
Expanding ootprint Bolt-on standalone opportunities in Arica
and the Middle East remain a strategicpriority
Scale and size o opportunity Number one or two operator
Transormation Limited number o potential opportunities Execution risk high
Consolidation anddiversifcation
Leverage existing scale andintellectual capacity
Revenue Expenditure M&A
Cost optimisation initiatives Procurement transormation project Growth o IT shared services initiative
Inrastructure sharing strategy
Back oce centralisation
Implementation o hybrid power systems
to reduce dependence on diesel
R e t u r n s t o s h a r e h o l d e r s
Convergence andoperational evolution
Leverage existing scale
and intellectual capacity
Consolidation and
diversification
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MTN Group Limited Integrated Business Report or the year ended 31 December 20119
Groupoverview
Perormancereview
Operationaland
fnancialreview
Sustainability
Financialstatements
Shareholderinormation
Key statistics
2011 2010 % change
Countries in which MTN has GSM licences1 21 21
Subscriber numbers (million) 164,5 141,6 16,2%
Countries in which MTN has largest market share 15 15
Market capitalisation (billion) at end December R271 R253 7,1%
Dividend payout ratio70%
55% 15 pct pointsRevenue (billion) R121,9 R114,7 6,3%
Datas contribution to revenue2 6,6% 5,4% 1,2 pct points
EBITDA (billion) R54,8 R47,5 15,2%3
EBITDA margin4 44,9% 41,5% 3,4 pct points
Average oreign exchange rates (rand to local currency)
Nigerian naira 21,76 20,67 (5,3%)
Ghanaian cedi 0,21 0,20 (5%)
Iranian rial 1 474 1 401 (5,2%)
Average rand/dollar rate 7,17 7,34 2,3%
Capital expenditure (billion) R17,7 R19,5 (9,2%)
Internal audit hours 166 000 130 000 27,7%
Employees5 24 252 26 055 (6,9%)
Investment in employee training (million) R265 R246 (7,7%)
CO2
emissions rom energy use (tonnes) 950 564 1 127 254 (15,7%)
Scope 1 direct emissions (tonnes) 536 541 743 646
Scope 2 indirect emissions (tonnes) 407 492 378 869
Scope 3 emissions (tonnes) 6 531 4 739
Countries in which MTN deploys alternative energy 14 14
Investment by MTN oundations R125 million R155 million (19,4%)
Brand value (million) $5 200 $4 920 5,7%
Note 1: Although MTN o perates in South Sudan it has no t yet been ormally granted its licence
Note 2: Excluding SMS revenue
Note 3: Percentage change calculated with ull EBITDA number
Note 4: 2011 fgure includes the proft rom the sale o the Ghana towers and the 2010 fgure excludes the MTN Zakhele transaction
Note 5: 2010 fgure was adjusted to exclude maintenance sta contracted to MTN who had previously been erroneously included in the sta number
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MTN Group Limited Integrated Business Report or the year ended 31 December 201110
Interacting with stakeholders
The mobile communications
industry is heavily regulated. In
many countries, it provides key
inrastructure essential to economic
development as a de acto provider
o communications services and is
a large national taxpayer and a
signifcant employer. For these
reasons alone, engagement with awide spectrum o stakeholders is
important.
In 2011, MTN, including its board
members, made progress on
stakeholder engagement and input.
A stakeholder ramework, which
aims to better track and ormalise
stakeholder engagement and input,
will ultimately be rolled outthroughout the Group and its
operating companies. It takes into
account policies and principles
defned in King III and the AA 1000
Stakeholder Engagement Standard
and Inormation Privacy: Fair
Inormation Practices and Principles
(FTC, 1999).
In our 2010 report we identifedsome o our key stakeholders.
This year, we provide a ew select
examples o new initiatives to build
on these relationships.
Employees
We launched a new employee value
proposition and a new approach to
managing leadership talent. Further
details are contained in the people
and people and remuneration
report on pages 58 73.
Regulators
MTN has always prioritised
constructive engagement with
regulators and continues to build on
this in light o increased regulation
and its impact across our ootprint.
Government bodies
MTN closely guards its
independence. However, it
recognises the importance o
balancing this with appropriate
engagement with key government
bodies by the right people rom
MTN. The signifcance o this
engagement has recently beenhighlighted by the increase in
Western sanctions against certain
o our operating countries.
The media
MTN recognises the important role
o the media in our communication
with all stakeholders. The Group
is adopting a more proactive
approach to this engagement bothat a Group and local level.
NGOs
The new social and ethics
committee will provide guidance
on dealing with the challenges o
operating in high-risk countries as
well as better engaging with key
players on a broad spectrum o
issues.
Shareholders and the investor
community
During the year, we established a
new ormat o engagement with
our larger investors. In line with best
practice, the chairman and the
lead independent director gained
valuable frst-hand insight into their
views during these meetings. Wealso introduced a new orum or
sell-side analysts which is held
regularly ater the release o the
hal- and ull-year fnancial results.
These meetings have been well
attended by our senior executives
and a wide range o equity analysts
rom leading research houses.
CustomersAs competition increases, we
recognise the importance o better
understanding our customers needs
and their behaviour. To this end,
we are enhancing our business
intelligence tools and use thereo.
Distributors
Engagement with distributors is
managed on a country-by-countrybasis, through established corporate
structures.
Suppliers and business partners
The transormation o our
procurement processes has led
to a more centralised and
closer engagement with original
equipment manuacturers and other
key suppliers. The role and strategic
nature o our business partners such
as the tower companies have
undamentally changed as our
business model evolves.
Competitors
As markets mature, industry orums
have become more prevalent.As the leading mobile operator in
15 markets, MTN takes its role in
such groupings seriously, without
compromising issues o
competition.
Local communities and the
general public
As evidenced in this report, our
contribution to economic, socialand environmental sustainability
continues to grow and extends
well beyond our basic commercial
mandate. This is inormed by ormally
communicated government priorities
and the needs o the general public,
channelled through various
touchpoints with the organisation,
including our oundations, corporate
aairs departments and sta.
Ratings agencies
We assist key ratings agencies in
better understanding our business
and corporate structure. This is
managed ormally through regular
meetings.
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fnancialreview
Sustainability
Financialstatemen
ts
Shareholderinorm
ation
Low
Low
Hig
h
Customercentric approach
Costoptimisation
Slowingrevenue
Capital investments
Skilled humanresources
Governance
and control
Increasedregulations
Currencies
High-risk countries
Environmental andsocial considerations
Risk and opportunities summary
AdvancedowLimited
Progress o mitigation o risk or optimisation o opportunity
Degreeofcontrol
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MTN Group Limited Integrated Business Report or the year ended 31 December 201112
Integrated risks and opportunities
12MTN Group Limited Integrated Business Report or the year ended 31 December 2011
Risk Opportunity (including socio-economic andenvironmental development)
Sustainable mitigation
Exposure to currencies other than
reporting currency (ZAR) impacting
reported fnancial results and
servicing oreign-denominated
obligations
Fluctuations in the exchange rate can be
avourable to reported rand results and
servicing o obligations
Contribution to the development o the
local banking industry
Upstreaming o cash Ecient local balance sheets
Local currency unding strategy, including gearing and upstreaming
principles
Management o oreign-denominated assets and liabilities to
minimise impact
Treasury policy and committee oversight or risk management A sustainable payout ratio coupled with opportunistic buybacks
Exposure to higher risk countries
Challenges include but not limited
to poor inrastructure, political and
social unrest, sanctions, irrational
competition and violations o
human rights
Potentially higher reward and scope or
growth
Provide key communications inrastructure
Grow ormal economy, bring transparency,
accountability and corporate structure
Commitment to support local ownership
Enterprise development
Opportunistic diversifcation o the portolio
Independent and dedicated risk management team which monitors
country risks and business continuity
Appropriate governance structures
MTN adopts a neutral stance although does engage through a
dedicated stakeholder unction
Ongoing vigilance in respect o sanctions compliance through legal
support and appropriate policies and controls
Social and ethics committee provides direction or decisions on socialand ethical challenges
Increased regulatory requirements
impacting commercial business
Sucient spectrum key or providing
new products in line with evolving
sector
Imposed taxes impacting proftability
Communications is a key element o
inrastructure to a country
Proactive engagement with regulators
contributing to the development o the
sector given the experience and credibility
o operating across multi-jurisdictions
Oten the largest national taxpayer
Continued constructive and transparent engagement with authorities
at a Group and country level to ensure the success o social and
commercial imperatives
Group-wide tax risk management process to proactively as well as
reactively consider the implications o changing legislation
Local market equity and credit exposure to MTN reduces the risk o
irrational behaviour
Slowing revenue growth as a result
o increased voice penetration,
aggressive competition and
substitute products Go to market
strategies as the market
demand shits
Creating more aordable voice and data
technology solutions to lower-income
segments o the market
Broader social impact on related services in
line with data strategy include banking the
unbanked, health and relevant
social initiatives
Broader and deeper penetration o the traditional voice market
A coordinated implementation o new data and related services through
a dedicated Group Commercial Function
Investments in undersea cables will allow or cheaper broadband which
will in turn make data products more aordable and accessible
Evolution o the business into a ully edged ICT player
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13MTN Group Limited Integrated Business Report or the year ended 31 December 2011
Risk Opportunity (including socio-economic andenvironmental development)
Sustainable mitigation
Eciently manage costs to oset impacto slowing revenue growth in order tosustain proftability levels
Enhancing shareholder value through themonetisation o assets
Creating eciencies allowing the Companyto maintain competitiveness and enhancespeed to market
Improved customer service Leverage scale and improve consistencyand standardisation
Managing costs across the supply chain to better respond to the evolvingbusiness model
Focus areas include: Rationalisation o suppliers through a centralised procurement unction Standardisation o network inrastructure or ecient launch o products
and services
Inrastructure sharing through the establishment o tower companies(Ghana and Uganda) Shared services, alternative energy, improving eciency o the distribution
channel, as well as tools such as ABC to leverage best practice
Shortage o skilled human resourcesin emerging markets exacerbated bycompetition in search o similar expertise.This results in high retention costs orexperienced sta
Sta advance their learning anddevelopment through dynamic nature obusiness
The diversity o the ootprint in terms o sizeo operations as well as location and maturityadds to the benefts MTN canoer employees
MTN strives to be an employer o choice Ongoing review and enhancement o retention incentives to sta Talent management programme headed by a talent board is aimed at
building leadership succession pools MTN Academys learning initiatives including the creation o a leadership
development programme
Timeous, eective and ecient capitalinvestments or the upgrading o networkand inormation technology (IT) to cateror subscriber acquisition and increasedtrac as a result o price reductions.Planning o networks and IT upgrades tocater or new product developments andensure an appropriate ROI
Inrastructure sharing addressingenvironmental issues including CO2challenges
Energy-ecient strategies including solarpowered base stations and engineeredsolution
Reductions in costs o network equipmentprovide an opportunity to penetrate lowerincome segments o the market
Networks are monitored continuously, ensuring quality andheadroom capacity
Standardisation and optimisation o systems and technologies togetherwith outsourcing o non-core activities provide reduced costs and ensurediscipline and ocus on critical business requirements
Inrastructure sharing Capital expenditure steering committees to drive the initiatives
implemented by the Groups CTIOs oce
A customer centric approach becomescritical as the business evolves. Keyelements include maintaining a positivebrand perception, broad availability oproducts and services, high quality and
consistent customer experience at allcustomer touchpoints
Enterprise development or localentrepreneurs
SME engagement Inormal distribution channels have created
job opportunities
Implementation o a streamlined distribution ramework which includes anenhanced and eective ootprint to ensure broad and deep distribution
Customer service also orms part o the distribution ramework andincludes the regular training or store and call centre sta on newdevelopments relating to products and services. This is aimed at enhancing
customer experience
Governance and control is critical inall areas to maintain proftability andbusiness continuity. Implementation oprocedures o mature and well-controlledprocesses is key
Adequate governance gives comort andconfdence to stakeholders across the valuechain when dealing with MTN
Maturity o MTNs control environment and governance structurescontinues to improve although there will always be areas o particular ocus
Comprehensive governance and oversight structures exist including auditcommittees, risk committees, internal audit, raud prevention and riskmanagement measures covering all OPCOs
MTN has done a comprehensive assessment o the King III requirementsincluding combined assurance, IT governance and integrated reporting
Integrating environmental and socialconsiderationsin business activitiesensuring MTN is responsible and sensitiveto the impact o the environment andsociety when conducting business
Reducing MTNs environmental impact acrossoperations and value chain
Contributing to the social uplitment and
development o communities
Environmental impacts are addressed cross unctionally and includeinrastructure sharing which reduces MTN carbon ootprint, energy-ecientsolutions, e-waste management and managing EMF and RF feld responsibly
Social development is inherent in the nature o the business and is addressedby providing products and services that are value enhancing to society.MTNs operations invest in communities through MTN Foundations ocusedon education, health and other social and economic uplitment projects
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CyrilRamaphosaChairman
Recognising the challenges
o change
The Greek philosopher Heraclitus i s
credited with saying that the only
constant is change. At MTN we have
seen remarkable change in the past
decade and even in the past year.
Emerging economies across Arica
and the Middle East have grown
rapidly, providing an opportunity
to reap attractive returns or those
willing to invest in what traditionally
have been considered high-risk
markets. Several countries in the
region have experienced political
and social volatility, most notably
since the start o the Arab Spring
in 2010. The increased ease o
communication can be credited,
at least in part, or both the rate o
economic development and the
political change we have seen.
Mobile telephony in particular has
been an empowering and liberating
orce throughout the emerging
world.
At a sustainable energy conerence
in January, UN Secretary-General
Ban Ki-moon put it plainly: The
phenomenal spread o mobile
phone technology has touched
every corner o the world and
empowered billions o people
a direct result o innovation,
investment and government
support.
It is air to say that MTN has played a
undamental role in the economic
and social development in the
countries in which it operates. It, too,
has benefted rom its investments.
Its ambition is to speed up the
progress o the emerging world by
enriching the lives o its people. The
Company is committed to urthering
this journey by expanding its
oering beyond just voice to more
sophisticated services. Numerous
studies show that the eects o
mobile telephony on economic
growth are already signifcantly
stronger in developing countries
than in developed markets: just
imagine what the impact will be o
greater wireless internet access, not
to mention services such as mobile
banking, all driving development.
Apart rom the eect on society,
MTNs strategy to pursue
investments in emerging markets
has provided considerable value or
the Company. With a market
capitalisation o R271 billion at the
end o 2011, MTN is the largest
primary listed company on the JSE,
a key indicator o its success.
Ensuring sound governance
For MTN, sound governance and
a strict code o conduct are
undamental to the way we do
business. Because o the dierent
dynamics across MTNs 21 markets,
most risks are managed in-country
through dedicated local stakeholder
teams under the best practice
guidance o the Group.
Chairmans statement
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contribution in 2011. During the
year, we said goodbye to Phuthuma
Nhleko as Group president and CEO
and to independent non-executive
director Doug Band. Sifso
Dabengwa was welcomed as
incoming Group president and CEO.
He takes over as a new era o
telecommunications is beginning,requiring an evolution o the
business to changing customer
demands while maintaining an
appropriate cost base.
Following the decision last year not
to orm a ormalised subsidiary
company board or the international
operations, Phuthuma Nhleko will
not be rejoining the MTN Group board.
Looking orward
I have no doubt the year ahead
will bring new opportunities,
which will no doubt come with new
challenges. While the economic and
political outlook is quite cautious,
I am confdent that MTN will
continue to strive towards
overcoming the obstacles while
increasing returns to shareholders.
Cyril Ramaphosa
Chairman
March 2012
MTN has as its core value the
imperative to respect the human
and privacy rights o people in all
the markets in which we operate.
These rights are entrenched in the
terms o reerence o the boards
newly ormed social and ethics
committee and defned as the 10
principles set out in the UN GlobalCompact Principles. We oppose
abuse o these rights by any party,
including governments, and work
hard to ensure that our businesses
do not contribute to such abuse.
South Arica has human rights
enshrined as a undamental
principle within its constitution.
Given the countrys own recent
history and our struggle against
suppression and discrimination,
we are very conscious o our moral
obligations.
Following our announcement on
2 February 2012 o a potential claim
by Turkcell and allegations made
against MTN, the Group board has
proactively responded by settingup the independent Homann
Committee. The committee has
already started its work. Lord
Homann is a ormer senior British
judge, with the highest reputation
or independence. His ull and
detailed investigation will provide
the board with deeper
understanding o the matter.
MTN will address the
recommendations made by the
Committee at the end o that process.
Engaging transparently
Engagement is important, especially
as telecommunications is a regulated
industry. MTN works to ensure
transparency with governmentbodies and regulators, enabling a
balance between the commercial
and social success o the industry
and the vital inrastructure
it provides.
Local ownership is essential to
the commercial interests o
MTN companies by ensuring local
insight and understanding, but is
also valuable in ostering local
economic participation and
empowerment.
In 2011, the Group continued its
ongoing engagement with its many
stakeholders, urthering real
partnerships with key suppliers and
other business associates, anddeveloping its employees to ensure
that they can advance their careers.
MTN also worked harder to
understand peoples needs and to
better deliver on them, considering
existing as well as potential
customers. The Group accelerated its
eorts to engage with regulators on
the requirements or more inclusive
mobile communications that help
bridge the digital divide. Access to
sucient radio spectrum is vital to
continued growth.
Personally, I ound the meetings
ellow director Alan van Biljon and
I held with large investors very
useul, giving us an opportunity tohear shareholders views frst hand.
It mirrored eorts throughout
the Group or more interaction
with stakeholders.
Accomplishing much in 2011
In 2011, MTN accomplished a great
deal. The Group achieved a sound
operational perormance under
challenging conditions. Recognising
the strength o the balance sheet
and the continued healthy cash
ows, the board decided to increase
the dividend payout policy to 70% o
annual adjusted headline earnings
per share, up rom 55% a year beore
and 25% the year beore that.
The Group also took urther stepsin its journey to produce a more
integrated business report that
provides meaningul inormation
about all aspects o MTNs
perormance and position.
Appreciation
I would like to thank the board and
management team or their
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Group board o directorsat 31 December 2011
MTN Group Limited Integrated Business Report or the year ended 31 December 201116
1.
2.
4.
6.
Cyril Ramaphosa
Alan Harper
Peter Mageza
Alan van Biljon
Koosum Kalyan
Sifso Dabengwa
3.
5.
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7.
10.
11.
12.
Dawn Marole
9.
JJ Njeke
Jan Strydom
Nazir Patel
Je van Rooyen
8.
Azmi Mikati
12.
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Other directorships
Director o various companies in the
MTN Group.
Skills, expertise and experience
Nazir is a qualifed chartered accountant
with wide international experience
in Europe and the Middle East. Since
joining the MTN Group, Nazir has been
responsible or the Group fnancial
management and accounting unction,
has participated in several o the Groupsmerger and acquisition activities and
serves on a number o MTNs subsidiary
boards.
11. J van Rooyen (62) |
BCom, BCompt (Hons), CA(SA)
Independent non-executive director
Appointed: 1 July 2006
Board committee membership
Chairman o the risk management,
compliance and corporate governance
committee Audit committee
Social and ethics committee*
Other directorships
Director o various companies in the
MTN Group, various companies in the
Uranus Group, Pick n Pay Stores Limited,
Exxaro Resources Limited and a trustee
o the International Financial Reporting
Standards (IFRS) Foundation.
Skills, expertise and experience
Je is a ounder member and CEO o
Uranus Investment Holdings (Pty) Ltd andpreviously served as CEO o the Financial
Services Board. He is also a ounder
member and ormer president o the
Association or the Advancement o Black
Accountants (ABASA) and was chairperson
o the Public Accountants and Auditors
Board in 1995.
12. JHN Strydom (73) |
MCom (Acc), CA(SA)
Non-executive director
Appointed: 1 March 2004
Board committee membership
Audit committee
Risk management, compliance and
corporate governance committee
Social and ethics committee*
Other directorships
Non-executive director o variouscompanies in the MTN Group, director o
the Public Investment Corporation Limited
and Growthpoint Properties Limited.
Skills, expertise and experience
Jan is a registered chartered accountant
and a ounding partner o Strydoms
Incorporated Chartered Accountants
(SA), a frm specialising in business
valuations, litigation support and orensic
investigations. He is now a proessional
consultant to Strydoms. He is also a senior
member o the Special Income Tax Courtor taxation appeals.
QIndependent non-executivedirectors 8
QNon-executive directors 2
QExecutive directors 2
Group boardindependence status
7. MLD Marole (51) |
BCom (Acc), Dip Tertiary Education,
MBA, Executive Leadership
Development Programme
Independent non-executive director
Appointed: 1 January 2010
Board committee membership
Risk management, compliance
corporate governance committee
Social and ethics committee*
Other directorshipsDirector o various companies in the
MTN Group, Arican Bank Investments
Limited, Incwala Resources (Pty) Ltd,
Eyomhlaba Investment Holdings Limited,
Hlumisa Investment Holdings Limited,
Richards Bay Titanium (Pty) Ltd, R ichards
Bay Mining (Pty) Limited and DEMA
Incwala Investment.
Skills, expertise and experience
Dawns career has primarily been in the
fnancial services sector and dates back
to 1983. She is the current chairperson oPOWA (People Opposing Women Abuse).
8. AT Mikati (39) (Lebanese) |
BSc
Non-executive director
Appointed: 1 July 2006
Board committee membership
Nominations committee
Remuneration and human resources
Other directorships
Director o various companies in the
MTN Group, CEO o M1 Group Limited
(an international investment group with a
strong ocus on the telecommunications
industry), director o various companies
in the M1 Group as well as EZ-Link, B-Pro
Limited, B-Jet Limited, Horizon Global
Services, IMC, Mint Trading, Unioil and
Facconable Group.
Skills, expertise and experience
Azmi ounded T-One, a telecoms company
providing long-distance services between
the United States and other international
destinations.
9. MJN Njeke (53) |
BCom, BCompt (Hons), CA(SA), H Dip
Tax Law
Independent non-executive director
Appointed: 1 June 2006
Board committee membership
Risk management, compliance and
corporate governance committee Audit committee
Other directorships
Director o various companies in the
MTN Group, Lengau Logistics (Pty) Ltd,
ArcelorMittal SA, Ivolve Procurement &
Rental Partner, Metropolitan Health Group,
MMI Holdings Limited, NM Rothschild
and Sons (SA) (Pty) Ltd, PSU Revenue
Management trading as PSU International,
RTG Fleet Services (Pty) Ltd, Resilient
Property Income Fund Limited, Serengeti
Properties (Pty) Ltd, Salvage Managementand Disposal (SMD), Sameh Properties and
Silver Unicorn Trading, Sasol Limited.
Skills, expertise and experience
Johnson is chairman o MMI Holdings Ltd,
ArcelorMittal SA and Resilient Property
Income Fund. He served as a partner at
PricewaterhouseCoopers and is a past
chairman o the South Arican Institute o
Chartered Accountants.
10. NI Patel (54) |
BCom, BCompt (Hons), CA(SA)Executive director: Group chie fnancial
ocer
Appointed: 29 November 2009
Board committee membership
Group executive and steering
committee
Attends various board committee
meetings ex ocio
*Social and ethics committee constituted in 2012.
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MTN Group Limited Integrated Business Report or the year ended 31 December 201120
Group executive and steering committeeat 31 December 2011
1.
2.
3.
4.
5.6.
7.
8.
9.10.
Sifso Dabengwa
Nazir Patel
Christian de Faria
Jamal RamadanIgnatius Sehoole
Khumo Shuenyane
Ahmad Farroukh
Shauket Fakie
Jyoti Desai
Paul Norman
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*Profles appear on pages 18 to 19 o this report.
**Retired in March 2012.
1. RS Dabengwa *
2. NI Patel *
3. C de Faria (55) (French) |Degree in Finance
Administration (CA)
Group chie commercial ocer
Directorships
Director o various companies in theMTN Group.
Skills, expertise and experience
Prior to joining MTN in 2006, Chr istian
was CEO o PT Excelcomindo Pratama,
known as XL, the largest mobile operator
in Indonesia. Beore joining XL, he was
CEO o Telekom Malaysia International,
now known as Axiata, and was
responsible or international strategy and
involved in the rapid growth o
investments in Sri Lanka, Bangladesh andCambodia. From June 2006 to May 2010,
Christian was the vice-president or MTN
West and Central Arica. Since June 2010
he has had the responsibility or the
transormation o the supply chain
unction. He is leading the way in
products, services and innovation at
Group level as well as being responsible
or Group marketing.
4. S Fakie (58) |
BCom, BCompt (Hons), CA(SA)
Group chie business risk ocer
Directorships
Director o various companies in the MTN
Group and director o Absa Group Limited.
Skills, expertise and experience
Shauket has over 37 years experience in
accounting, auditing, consulting and
advisory work. In 1999, he was appointed
Auditor-General o South Arica or a
seven-year term which ended in
November 2006.
5. JA Desai (54) |BA (Hons) BCom
Group chie technology and inormation
ocer
Other committee membership
Group commercial committee
Group technical committee
Directorships
Director o various companies in the
MTN Group.
Skills, expertise and experience
Jyoti started her career at The Standard
Bank o SA Limited. She moved to Telkom
SA in an executive position beore joining
MTN Nigeria as chie inormation ocer.
She then moved to Iran in 2005 to start
up the Iran operation as COO o MTN
Irancell beore taking up her current role.
6. PD Norman (46) |MA (Psych)
Group chie human resources and corporate
aairs ocer
Other committee membership
Risk committee
Social and ethics committee
Group tender committee (Alternate
member)
Directorships
Director o various companies in theMTN Group and trustee o the Chartered
Accountants Medical Aid Fund.
Skills, expertise and experience
Paul has been an executive at MTN since
1997. He has spent more than 20 years in
the feld o human resources and has
worked extensively in the transport and
telecommunications industries.
7. A Farroukh (51) (Canadian)|Masters in Business Administration
& Accounting and also a Certifed
Public Accountant in the USA
Regional vice-president: West and Central
Arica region
Other committee membership
Commercial committee
Directorships
Director o various companies in the
MTN Group.
Skills, expertise and experience
Ahmad previously worked or
Mediterranean Investor Group, KPMG,
Deloitte & Touche and the Investcom
Holding Group. Ahmad also lectured in
Accounting at the American University o
Beirut. Prior to his appointment at MTN,
Ahmad was managing director o
Scancom Limited (Investcom Holding
Group), Ghana and regional manager or
West Arica. Prior to taking on his currentrole, Ahmad was the CEO o MTN Nigeria.
8. KL Shuenyane (41) |B Econ and Internat Stud;
CA (England and Wales)
Group chie strategy, mergers and
acquisitions ocer
Directorships
Director o various companies in the
MTN Group.
Skills, expertise and experienceKhumo was previously head o direct
investments and a member o the
executive committee o Investecs South
Arican operations. He was also a member
o Investecs corporate fnance division.
9. I Sehoole (51) |BCom, BCompt (Hons), CA (SA), Cert
in Theory o Accountancy
Regional vice-president South and East
Arica region
Other committee membership
Group tender committee
Directorships
Director o various companies in the
MTN Group and o the Public Investment
Corporation (PIC) and Accounting
Standards Board.
Skills, expertise and experience
Ignatius also serves on various
committees within the PIC. He was the
chairman o the Developing Nations
Committee o the International
Federation o Accountants (IFAC). He was
previously a managing director o the
inland region at Fedics (Pty) Limited,
senior executive at Murray & Roberts
Holdings (Pty) Limited and also theexecutive president o the South Arican
Institute o Chartered Accountants
(SAICA). Ignatius served as a member o
the King Committee and was also the
chairman o the National Treasury Audit
Committee until March 2010.
10. J Ramadan (56)** |(French and Lebanese) |MA (In Tech)
Regional vice-president Middle East and
North Arica region
Other committee membership
Group technical committee
Group tender committee
Directorships
Director o various companies in the
MTN Group.
Skills, expertise and experience
Jamal was an executive director o
Investcom LLC, which he joined in 1996
as operations director. Prior to that, he
was director o IT and FTML (a subsidiary
o France Telecom) operating in Lebanon.
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Background
Agriculture is a critical contributor to Aricas GDP, and povertyreduction. ICT can help improve the output, value, and impact
o agriculture in Arica. The agricultural industry is the backbone
o economic development in Ghana.
Solution
MTN Ghana and Esoko partnered to provide agricultural
inormation to MTN customers through SMS services at a cost
o 8p per text. Customers can request or inormation such as
produce price alerts, bids and oers, and news and advisories,using a short code. Customers can also access inventory counts
and transport inormation. This solution oers a platorm or
armers and agricultural enterprises to interact with their
customers. The benefts include increased eectiveness,
productivity and sustainability o income generation.
Facilitating agricultural market growth
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Group president and CEOs report
MTNs long-term vision is to be the
leader in telecommunications in
emerging markets. In 2011, the
Group made good progress towards
achieving this with a solid overall
perormance, while it refned its
strategic objectives in light o
evolving market dynamics.
Key to our vision is our customers.
Increased ocus and attention on all
aspects o the customer experience
are undamental to us and are
evident in all o the main strategic
objectives discussed below.
Maintaining and increasing
our leadership position
Subscriber numbers increased
16,2% to 164,5 million across
21 markets, helping bring more
people closer together. At the same
time, MTN increased its EBITDA
margin to 44,9%, including the proft
rom the sale o the Ghana passive
inrastructure (rom 41,5% in 2010).
This perormance was
notwithstanding a stronger rand in
the year, which depressed oreign
earnings when translated back into
MTNs reporting currency. Despite
heightened competition, the Group
maintained its leadership position in
most o its markets and remains the
largest mobile communication
provider in 15 countries.
Being a leader is not only about
subscribers. Superior service, network
quality and coverage as well as the
best value proposition in the market
are absolutely critical to business
success. Solid and reliable distributors
are also vital. With increasing demands
rom authorities everywhere, clearcommunication channels with
regulators are also important.
MTN understands that it needs to
work to maintain its strong brand
preerence by meeting customers
expectations or innovative and
broader service oerings and by
being frst to market. MTN
employees are rewarded or
meeting targets related to all these
goals. It is not without its challenges.
In the frst quarter o the year,
MTN Nigerias network quality was
impacted temporarily by a large
promotion which boosted tracvolumes. To maintain network
quality, the company which
marked 10 years o operating in
Nigeria in the year had to
withdraw the promotion. Again
towards the end o the year, network
quality was compromised as trac
volumes increased ollowing pricing
competition in the market. But
MTN acted quickly and decisively by
ocusing on immediate quick wins
including the redistribution o
capacity and the establishment o
cross unctional teams in the regions
to intervene and resolve site issues.
As we move orward we will ocus
on providing a balance betweenmaintaining sound quality levels
and increased demands or services
rom the subscriber base.
In 2011, MTN invested R17,7 billion
on developing network inra-
structure across its ootprint, to
ensure network quality and capacity.
This is below 2010s R19,5 billion
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Sifso DabengwaGroup president and CEO
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Close partnerships at a Group
level with original equipment
manuacturers o handsets; MTNs
ocus on getting more data-capable
devices into the hands o customers
(without subsidies); its strong brand;
and its customer segmentation
model puts it in a solid position to
increase revenues rom data services
in the year ahead. The latter allows
the Group to have a segmented
tailored approach to each o the
identifed customer groupings.
Richer and more relevant content
and services are also very important.
MTN estimates that some 60%
o the data downloads on
MTN subscribers mobiles is local
content. This underscores the
importance o continuing to
develop good local content, make
access easier and improve on quality
and price.
At the end o 2011, 6,0 million
people in 12 countries were
registered MTN Mobile Money
subscribers. Uganda and Ghana
accounted or the lions share.
This compares to 4,3 million in
11 markets in 2010. In Uganda,
some $200 million a month is
transacted through Mobile Money.
Its popularity had a signifcant
impact on limiting churn. Equally
important is the role o Mobile
ater peak spending o R30 billion in
2008/2009 laid a solid oundation.
We continue to monitor our markets
to ensure that capital spending is
appropriate.
Revenue rom traditional voice
calls remains the largest revenue
contributor. There is still potential to
grow this as well as augment the
Groups voice oerings. Incoming
interconnect revenue grew in the
year in key countries such as Nigeria
and Ghana as competitors ocused
on an all-net tari strategy. In South
Arica, incoming interconnect
revenue continued to drop as the
price per minute declined in line
with the pre-determined glide path
to lower mobile termination rates.
The higher subscriber base in the
year, as well as many enhanced
oerings, helped lit Group revenues
6,3% to R121,9 billion and expand
the Groups earnings beore interest,
taxation, depreciation and
amortisation (EBITDA) to
R54,75 billion.
Data and the implementation
o a ull ICT oering
MTN moved ahead with plans
to implement a ull ICT oering.
Central to a comprehensive ICT
service is to ensure that the Group
has made the appropriate capital
investments and has the right skills
to execute this strategic objective.
The Group is already connected to
two other submarine cables: the
Eastern Arica Submarine Cable
System (EASSy) and the Europe India
Gateway (EIG). These cables, as well
as MTNs investment in the West
Arican Cable System (WACS) and
various metropolitan and national
fbre optic cables, support new or
enhanced data oerings.
Data revenues percentage
contribution to MTNs total revenue
remains relatively low (in single
digits, excluding SMS) in all our
markets except or South Arica and
Iran. But it is growing. For the Group,
data revenue grew by 30,5% while
SMS revenue grew by 14,2% to
total 12,8% o revenue on a
combined basis. In South Arica,
where the market is more mature
and MTN subscribers have
3,6 million smartphones, total data
revenue, including SMS, rose to
21,4% (total revenue excluding
revenue rom handsets). In Iran it
was 23,2%, up 2,4 percentage
points. However data in Iran is
almost entirely rom SMS. MTNs
Nigerian operation more than
doubled revenue rom data services
and total revenue (including SMS)
increased to 6% rom 4,6% as the
Company encouraged the use o
smartphones.
In the year, MTN continued to invest
in various transmission and radio
technologies, rom undersea and
metropolitan fbre optic cables to
2G, 3G and WiMax. It established the
role o Group chie commercial
ocer, to which Christian de Faria
was appointed.
In addition, within the South Arican
group o companies, MTN Business
Solutions has provided a valuable
platorm or the development o ICT
services on the corporate side. It is
our intention to leverage this
capability urther across the
ootprint. However, the more
sophisticated products o a ull ICT
strategy, such as managed network
services, managed hosted services
in the cloud and M2M, are in initial
stages o development. Access
remains the key oering or most
people across our ootprint.
The launch in the year o the Main
One undersea cable led to a drop in
transmission costs in West Arica. In
particular, MTN Nigerias access to
the fbre optic cable system linking
West Arica to Europe is helping the
Company deliver greater broadband
capacity at a reduced cost to
customers. This provides more
inclusive access to new data services
and greater capacity and availability
o networks.
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Employees who make an
outstanding contribution to the
Group are rewarded every year
through the Yello Stars programme.
Employees also take great
satisaction in volunteering or
those less ortunate in the Groups
annual 21 Days o Yello Care
volunteerism eort. Many enjoy
moving between operations to
share their knowledge while
developing their careers. The Group
spent R265 million on training in
the year.
Increasing returns to
shareholders
A central pillar o MTNs strategy
is to increase cash returns to
shareholders while continuing to
expand its business and invest in
better, aster networks across a wider
geography. Management targets
improving cash ow, to ensure that
the management ees and dividends
earned in MTN operations ow back
to the Group in an ecient way.
Using both ordinary dividends and
share buybacks, MTN is able to return
cash to shareholders as part o a
sustained returns strategy. During
the year, MTN executed its frst share
buyback totalling R927,3 million.
While no decision has been made
to urther gear the Group balance
sheet, dividends on annual earnings
Money in enabling the purchase
and monetisation o content and
related services oerings. These
include insurance (such as the new
uneral insurance oering by MTN
Ghana) and health services, such as
providing medical advice to mobile
phone users, which enhance
customer loyalty and reduce churn.
MTNs recent partnership with Visa,
allows Mobile Money customers to
take advantage o the acceptance
o Visa payment methods across the
globe. MTN estimates that only a
fth o customers own a credit card.
To make paying easier, MTNs mobile
wallet allows the cost o a purchase
o or example an app to be
debited directly to subscribers
airtime. The Group recently
launched a trial at South Arican
universities allowing students to
pay or caeteria meals with
their mobiles.
While the increasing aordability
o data-capable handsets and the
growth in use o social media has
stimulated demand or data services,
the availability o the appropriate
spectrum allocation as well as 3G
licence is also vital. In all o MTNs
markets, teams dedicated to
engaging with regulators on this
essential issue are in place.
By reducing its cost base, MTN is
able to proftably service those
customers at the lower end o the
income scale and increase overall
access.
Since MTN initiated its centralised
procurement unction in late 2010,
the Group increased the number o
categories purchased centrally,
improving pricing across the board.
All MTNs operating companies
rom Aghanistan to Yemen are
ocused on enhancing their
customer service oerings; ensuring
eciency o the channels used
to distribute products and services;
and using their marketing
expenditure, capital investments
and their people eectively.
The Group recognises the
importance o properly skilled
employees who are motivated by
their work. As competitive activity
increases, demand or industry
talent grows, making retention
eorts that much more important.
In April the Group launched The
MTN Deal. This is a mutual
commitment between MTN and
its employees. It represents
MTNs pledge to understand,
develop career opportunities and
improve employment oering
beyond reward and recognition.
The Group recently established clear
targets throughout its operations
with regard to growing the
contribution o data to overall
revenues. These include a KPI on
data proftability.
Enhancing operational
eciency
As more mobile communications
licences are issued across
MTNs ootprint, and competition
intensifes, mobile operators need
to become more ecient in
everything they do. While many o
MTNs markets continue to grow,
many others are maturing as mobile
penetration rates move towards
100% and growth slows. The Group
understands that it needs to do
things more eciently.
Among several organisation-wide
initiatives are: the frst shared IT
services project (launched in 2011
in the SEA region); the procurement
transormation project to ensure
a more centralised approach;
the spino with minority ownership
o passive inrastructure including
towers (such as the deals in Ghana
and Uganda); as well as the back
oce centralisation project or
support services (still in its inancy)
and the accelerated implementation
o hybrid power systems.
Group president and CEOs reportcontinued
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ation
in inrastructure and cost
optimisation initiatives are a priority
in support o this strategy.
Value-accretive opportunities which
ft within the parameters o
MTNs M&A strategy will still be
considered. We will continue to
manage the challenges brought
about by sanctions and political
instability in some o our markets.
There remains a strong commitment
to improving shareholder returns.
In 2012, MTN has earmarked capital
spending o R24,4 billion, with
Nigeria and South Arica accounting
or approximately 62% o this
investment. The Group expects to
sign up 20,3 million new subscribers
in the year, o which 53,7% are in
Nigeria, South Arica and Iran.
Sifso Dabengwa
Group president and CEO
March 2012
have been increased to 70% and
buybacks will continue to be
implemented as and when
appropriate.
M&A outlook and priorities
MTN continues to consider
bolt-on stand-alone opportunities
across Arica and the Middle East.
However it is very clear that the
ollowing criteria must be met: ft
within the organisational strategy o
the Group; have sucient scale and
size; and preerably be a number
one or number two operator.
Financial discipline is crucial in the
process. Transormational
transactions seem unlikely due
to the limited number o
opportunities and high
execution risk.
Looking ahead
All the changes required ahead,
particularly the need to optimise
at a Group level, necessitate a
change in MTNs structure.
Accordingly, the regional
structures will be replaced by a
grouping o the various
operations based on scale and size.
The success o any new strategy is
based on successul implementation
in our key markets o South Arica
and Nigeria. Accordingly, the CEOs
o these operations will report
directly to me rom 1 April 2012. As
a third contributor to the Group, to
oversee all the other operations, a
these international issues. In
partnership with its legal advisers,
MTN ensures that it remains
compliant with the various
sanctions regimes in place.
MTN has set up the independent
Homann Committee to investigate
Turkcells allegations and will
careully consider the
recommendations made by the
Committee.
MTN remains cautiously optimistic
about the year ahead with
macroeconomic conditions in key
markets not expected to change
signifcantly. The key ocus areas
over the year are to maintain and
improve our market position and
improve the customer experience.
There will be continued eort to
strengthen our position in non-voice
services in all markets. Increased
eciency in rolling out investments
new position, Chie Operations
Executive (COE) has been created,
also reporting to me. An operational
structure below the COE will ensure
adequate support or various
size-based groupings o these
operations. This will allow or
appropriate sharing o best practice
between businesses o similar scale.
I welcome the CEOs Karel Pienaar
rom South Arica and Brett Goschen
rom Nigeria onto the exco team
and congratulate Ahmad Farroukh
on his new role as COE. Finally a big
thank you to the outgoing regional
VPs Jamal Ramadan, who will be
retiring, and Ignatius Sehoole,
who will join the business risk
management team within the
organisation.
Political unrest in the Middle
East remains a concern and
MTN continues to be sensitive to
Keyto our visionis our customers
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Group chie fnancial ocers report
MTN delivered satisactory fnancial
results supported by a sound
operational perormance. The
reduction in taris by competitors
resulted in a change in trac
patterns impacting voice revenues.
Data usage showed an upward
trend compensating slower growth
in voice revenues, while cost
containment initiatives continued to
gain momentum, allowing the
Group to maintain a healthy EBITDA
margin. This enabled MTN to
increase returns to shareholders,
taking the dividend yield to 5,2%
rom 3,7% a year earlier.
However, the strong rand against
the US$ continued to negatively
impact Group results. This is despite
the weakening o the rand to the
US$ in the second hal o the year.
The once-o proft impact on the
sale o the Ghana towers has been
separated in the analysis.
On 14 February 2012, Moodys
upgraded MTNs global local
currency senior unsecured rating to
Baa2 rom Baa3 and its national scale
issuer rating to A1.za rom A2.za. The
outlook on all ratings is positive.
Considerations or the
period
Changes in ownership
In August 2011, MTN settled the
Nigeria put option through the
acquisition o the IFC interest and
thereby increased its
shareholding in the company
rom 76,08% to 78,83%.
In October 2011, MTN increased
its shareholding in MTN Rwanda
rom 55% to 80%.
In April 2011, MTN reduced itsshareholding in MTN Zambia
rom 90% to 86%. For IFRS
consolidation purposes, the
step down in equity
shareholding has not impacted
the proportionate consolidation
at 97,8% as risks and rewards are
not deemed to have passed to
the purchaser.
In February 2011, MTN Rwanda
sold its 70% investment in
Supercell.
Put options
As detailed above, the Nigerian put
option was settled in August 2011,
resulting in movements o
R254 million in fnance costs,
R266 million in air value adjustments,
R205 million in orex losses and
R138 million in non-controlling
interests share o profts. The much
smaller Aghanistan put option
resulted in R31 million o orex gains
and R2 million in non-controlling
interests share o profts in the
current year.
Currency
Currency continued to have a
meaningul impact on the results,
reducing local currency growth rates
when translated to rand. The average
Nigerian naira exchange rate
dropped 5% against the rand, the
Iranian rial lost 5% and the Ghanaiancedi was 10% weaker.
The individual country analysis is
covered in pages 38 to 47, giving
more detail on individual country
perormance. A high-level review o
the consolidated results ollows.
MTN Group Limited Integrated Business Report or the year ended 31 December 201128
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Shareholderinormation
operations enjoyed local currencygrowth o 9,6%, 26,5% and 15,1%
respectively. However, with
approximately 68% o MTNs
earnings generated outside South
Arica, the translation into rand o the
2011 results had a signifcant impact
on fnal reported Group fgures.
Revenue analysisRevenue increased by 6,3% as MTN
grew its subscriber base by 16,2% to
164,5 million users. Revenue growth
in local currencies continued to
reect more positively due to the
dampening eect o a strong rand.
In Nigeria, Iran and Ghana, MTN
The contribution o airtime andsubscription revenue reduced to
65,5% rom 68,4% or the prior year,
mainly due to slower growth in
Nigeria and Syria. Notwithstanding
lower termination rates in some
countries, total Group interconnect
revenue increased by 8,9% as
incoming trac increased in Nigeria
and Ghana on increased competition.
Interconnect revenue in South Arica
bucked the trend, reducing 9,8% as
termination rates declined in line with
the predetermined glide path without
a meaningul change in incoming
trac.
Proft analysis
R million 2011 2010
Variance
%
Airtime and subscription 79 854 78 400 1,9
Interconnect 18 530 17 012 8,9
Data 8 096 6 206 30,5
SMS 7 501 6 570 14,2
Mobile telephones and accessories 5 030 3 678 36,7
Other 2 873 2 818 1,9
Total revenue 121 884 114 684 6,3
Other income 1 458
Direct network operating costs 18 782 16 818 (11,7)
Costs o handsets and other accessories 8 160 6 819 (19,7)
Interconnect and roaming costs 13 395 12 593 (6,4)
Employee benefts costs 6 754 5 961 (13,3)
Selling, distribution and marketing expenses 14 805 14 741 (0,4)
Other 6 696 10 215 34,4
Total costs 68 591 64 174 (6,9)EBITDA 54 750 47 537 15,2
EBITDA margin % 44,9% 41,5% 3,4 pct points
MTN Zakhele costs 2 973
Proft rom sale o Ghana towers 1 185
EBITDA 53 565 50 510 6,0
EBITDA margin % 43,9 44,0 (0,1) pct points
Capex 17 717 19 466 (9,0%)
Q RSAQ Business SolutionsQ NigeriaQ IranQ SyriaQ Other
7%4%4%
57%
15%
13%
Total revenue analysis
Q Airtime and subscriptionQ InterconnectQ DataQ SMSQ Mobile handset and accessoriesQ Other
2,4
4,16,2%
65,5%15,2%
6,6%
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MTN Group Limited Integrated Business Report or the year ended 31 December 201130
Group chie fnancial ocers reportcontinued
Data revenue (excluding SMS) across
the Group remained strong,
increasing 30,5%, driven by an
increase in data trac o 55%. South
Arica contributed 57% o the total
Group data revenue (excluding
SMS). This strong perormance rom
South Arica, particularly in the
second hal o the year, was the
main driver o total data revenue
growth or the year. This should not
undermine the importance o data
as a revenue contributor rom
countries outside o South Arica.
Data growth doubled in Nigeria over
the year, increasing its contribution
to Group data revenues to 13% rom
9% in the previous year. SMS also
continued to grow strongly.
Handset revenues increased on
higher prepaid handset volumes in
South Arica as well as on increased
demand or smartphones.
Other income
Other income includes the Groups
proft on the sale o the Ghana
towers o R1 185 million as well as a
deerred gain o R273 million.
Cost analysis
Total operating costs increased by
2%, lower than revenue growth. This
is mainly due to higher direct
network operating costs due to an
increased number o sites, higher uel
costs, including electricity and diesel,
and higher transmission costs inSouth Arica. This was oset by lower
selling, distribution and marketing
expenses in almost all operations,
lower proessional ees and other
operating expenses thanks to tighter
cost management.
Handset costs are directly related to
handset sales. Employee benefts
increased due to high ination and
competition or human resources
across the ootprint. Insourcing o IT
in South Arica also had a negative
impact on employee costs but a
positive impact on IT costs.
The Groups reported EBITDA marginincreased by 3,4 percentage points
to 44,9%. However, when adjusted
or one-time MTN Zakhele costs in
2010 and the Ghana tower sale
proft in 2011, the EBITDA margin
was marginally down at 43,9%. The
strong perormance considering
revenue pressures was due to
margin expansion in South Arica
and Iran and despite a small
deterioration in margins in Nigeria.
Capital expenditure
Following a peak in network
inrastructure investments in 2008
and 2009, MTN reduced overall
capital expenditure to R17,7 billion
rom R19,5 billion in the prior year.
The ratio o capex to revenue
declined to 14,5% rom 17,0% in
2010 and 27,9% in 2009. Capital
expenditure was below that
authorised or the period by
approximately 20% mainly due to
slower spend in Nigeria and Iran.
However, execution in the second
hal was signifcantly up on the frst
hal o the year with 68% o all
capital expenditure being
capitalised ater June 2011. The
strong momentum is anticipated tocontinue into 2012 as most o the
unspent capital expenditure in 2011
had already been committed by
year-end. The stronger rand had a
positive impact on capital
expenditure during the year.
Capex/rev 28% 17% 15%
Capital expenditure
15
504
109
70
1
20
09
84
96
57
08
157
44
H2H1
2009 2010 2011
31 248
19 46617 717
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Interest and tax
Net fnance cost
breakdown (Rm) 2011 2010
%
change
Net fnance costs
Net interest paid 1 454 1 925 24,4Net orex losses 744 924 19,5
Functional currency (gains)/losses (778) 1 223 163,6
Put option 162 22 (686,4)1 582 4 094 61,4
Tax table (Rm) 2011 2010
%
change
Tax analysis
STC, WHT and CGT 2 580 1 450 (77,9)
Deerred tax 1 089 1 984 45,1
Normal tax 10 184 7 834 (30,0)Eective tax rate (%) 36,80 36,27 0,5 pct points
Net fnance cost
breakdown (Rm) 2011 2010
%
change
Tax table (Rm) 011 2010
%
change
Net fnance costs decreased sharply
due to unctional currency gains o
R778 million compared with losses
o R1,2 billion in the prior year. A
weaker rand in the second hal o
the year resulted in realised gains on
the conversion o currency.
The Groups eective tax rate
increased marginally. The relatively
high eective rate was mainly the
result o the secondary tax on
companies on higher Group
dividends as well as withholding
taxes related to stronger ows o
cash rom operations to the Group
and the Ghana tow