MTN Group Limited Final audited results for year ended d 31 December 2010
Agenda Strategic and operational overview Phuthuma Nhleko Group President and CEO Financial overview Nazir Patel Group Finance Director Message from the MTN Group Chairman Cyril Ramaphosa Looking ahead Sifiso Dabengwa Group COO and CEO designate
Strategic and operational overview Phuthuma Nhleko Group President and CEO
MTN vision To be the leader in telecommunications in emerging markets Convergence & operational evolution Leverage existing footprint & intellectual capacity Consolidation & diversification Increased competitiveness Best practice Hub and Procurement Skills Value Diversification Brand cluster synergies optimisation proposition Execution excellence
Medium term considerations - market opportunities Attractiveness and challenges Africa seen as the last frontier of growth ME opportunities often focused on oil and property Resources remain important, but Africa is slowly diversifying, with over 60% of growth coming from non-traditional sectors retail, manufacturing, financial services, telecoms, real estate, tourism etc Geo-political risks (events in North Africa and the Middle East) Doing business in emerging markets requires a long-term commitment and a steady hand as risks may appear overwhelming at times Interesting facts As most economies contracted during recession, Africa s GDP expanded by 2% in 2009, while GDP dropped 4% in the US, 2.8% in the EU and 1.5% in Latin America Emerging markets out paced the developed markets with GDP growth of at least 6% compared to global l GDP growth of about 2.5% excluding the shadow economies Urbanisation: 40% of Africans live in the cities (67% or 1 billion by 2050, creating economies of conglomeration. 52 cities in Africa have over 1 million people, and growing Africa entering a take-off phase, due largely to a positive mix of socio-political and economic forces (Democracy, fiscal discipline) FDI in Africa has increased from USD15 billion to USD 80 billion in 8 years
Group highlights Group subscribers Up 22,0% to 141,6 million EBITDA margin Up 2,9% points to 44,0% Approximate FCF Up 108% to ZAR 31,0 billion Adjusted HEPS Up 20,5% to 909,1 cents Final dividend Net cash per share of of 349 cents ZAR 905 million Dividend payout ratio increased to 55%
Impact on financial framework Continued organic growth Capex spend peaked Cost Cost efficiencies efficiencies Shareholder returns Final dividend per share of 349 cents Increased cash generation Opportunistic M&A
Revenue growth Revenue growth ZAR (billion) 127.3 Underpinned by subscriber growth Negatively impacted by strong rand Rev (constant currency Rev (reported) 114.7 111.9 14% 2,5% 2009 Dec-09 Dec-10 2010 Regulation of termination rates in SA and Nigeria resulted in a decline in revenue Significant increase in data revenue, albeit off a low base Proportionate subscribers (million) Total subscribers (million) 88.5 106.9 116.0 141.6 26% 20,8% 26% 32% 22% 32% 47% 47% 45% 46% 27% 27% 23% 22% Dec-09 Dec-10 Dec-09 Dec-10 SEA WECA MENA
Key revenue drivers Data and SMS revenue Introduction of new commercial and ZAR (billion) innovation function to drive data products and 4 000 services 3 500 3 000 2 500 2 000 1 500 1 000 500 0 3 638 25% 20% 20% 2 490 19% 11% 15% 1 633 5% 7% 10% 1 009 538 288 109 178 297 447 South Nigeria Ghana Iran Syria Africa (49%) Data ZAR '000 SMS ZAR '000 Data (incl SMS) as % of rev Mobile money customers ( 000) 231 16 120 5% 0% Distribution of data devices (smartphones and other related products) Data opportunity (other than SMS) still immature outside of SA Investments and upgrades of network and IT infrastructure t including 3G and WIMAX Investments in undersea cables implemented EASSY (Aug 10), EIG (partly, Feb 10) Mobile money 4,3 million customers (Dec 10) 691 1 403 Launched in 11 countries to date 1 838 South Africa Uganda Ghana Cote d' Ivoire Rwanda Benin
EBITDA and key drivers EBITDA growth ZAR (billion) 60 50 40 30 EBITDA 20 (constant currency 10 EBITDA (reported) 0 EBITDA margin (%) Group SEA WECA 56.7 50.5 46.1 23% 9,7% 2009 Dec-09 Dec-10 2010 41.1% 44.0% 32.0% 34.2% 53.5% 55.5% Cost containment initiatives on opex and staff costs Decreased selling, distribution and marketing costs Decrease in interconnect cost Supply chain management Increased centralisation of procurement activities and rationalisation of suppliers Infrastructure sharing Strategy pursue passive infrastructure sharing considering circumstances of each market MTN Ghana tower sharing joint venture with ATC established Structural framework for Shared services and outsourcing Standardisation and optimisation of systems and processes MENA 26.9% 33.6% Dec-09 Dec-10
Regulatory Market regulation Signed MOU in Syria for the conversion of the BOT to a freehold licence Discussions on terms ongoing Infrastructure Expected terms : effective date Apr 11, 20 year GSM licence, upfront fee of ± SYP 25 bn and between 25% and sharing 27% rev share Evidence of some regulatory preference for a tariff floor to ensure sustainability and long term commercial success of the telecommunications sector Mobile termination rates South Africa Final regulation published 29 Oct 10, First reduction Mar 10 and further cuts in Mar 11, Mar 12 and Mar 13 to 40c/min Nigeriai Implemented 31 Dec 09 SIM registration South Africa 81% of prepaid and 71% of postpaid base RICA d (Dec 10) Deadline extended to 30 Jun 11 Nigeria i : 34% of base registered, regulator issued directive i to sell partly active new SIMS from 14 Feb 11 Ghana : 70% of base registered, existing SIMS to be registered by Jun 11
Other key developments People/sustainability MTN Academy Delivers focused learning services and solutions to meet key talent and critical skills needs Reached over 25 000 employees over 3 years (classroom and e-learning) Effective talent retention strategies incl. job rotation and special assignment projects Greening operations Energy efficiency and environmentally-friendly energy investments to reduce opex, carbon tax risk and greenhouse gas emissions, incl. e-waste management Carbon footprint initiatives to identify regulatory, physical and other risks and opportunities posed to MTN by climate change and improve business efficiencies Social and economic development projects through MTN Foundations across ops BEE MTN Zakhele Achieved MTN SA s objectives in creating a broad-based empowerment transaction Holds 4% of MTN Group 80,900,000 MTN Zakhele shares offered to members of the Black public Allocated shares to 120,349 individuals and 2,203 groups
Operational framework N A L Brand preference Quality service Efficient distribution I N T E R Customer Experience e E R E X T Products and value added services Segmentation N A L Experienced people
South Africa operational highlights Launched Jun 1994 Market share 36% Population 50.2m Market sizing 63m (2015) Penetration 105% Shareholding 100% Subscribers ( 000) 14,799 17,169 16,067 18,842 Subs growth driven by prepaid segment MTN Zone Mahala4Life Prepaid retail data promo s 12 306 14 415 13 044 15 477 Marginal postpaid growth Growth in hybrid subs; +57% Prepaid Postpaid Net additions ( 000) 2 493 2 754 3 023 3,365 Dec-07 Dec-08 Dec-09 Dec-10 2,370 2,144 1740 Decrease classic subs; 5% Stabilised network and billing systems Optimised branded distribution footprint 2,775 Customer experience Strategic locations 1 198 1 579 Brand preference improvement 946 791 62 1,035 FIFA 2010 Soccer World Cup Decreased churn H2 H1-1 164-1,102 Dec-07 Dec-08 Dec-09 Dec-10
South Africa - operational highlights ARPU ZAR 396 403 365 329 Increased prepaid ARPU Larger % of rev generating g subs in reported base Increased data revenue Declining postpaid ARPU Postpaid Blended Prepaid Avg. total t MOU comprises both incoming and outgoing minutes 149 92 148 97 145 100 152 112 Dec-07 Dec-08 Dec-09 Dec-10 106 102 100 107 Lower out-of-bundle usage Growth in hybrid and telemetry base Initial impact of MTR cut Revenue and cost decline Increased on-net traffic positive for margin Outgoing MOU 65 64 64 71
South Africa - infrastructure and data highlights Capex ZAR (million) 6,034 H2 H1 Capex as % of revenue 2,843 1 549 1 294 4,868 3 096 1 772 3 034 3 000 3,908 2 894 1 014 Dec-07 Dec-08 Dec-09 Dec-10 10.1 15.0 18.2 11.0 369 2G and 284 3G BTS s added 49% 3G population p coverage Expansion and modernisation of 3G and data core network for increased capacity Migration of various voice interfaces to IP based for increased bandwidth Fibre deployment Ongoing deployment of national long distance, behind schedule Continued high data growth Data revenue ZAR (million) 9.2m packet data users (49% of base) 6,128 1.6m Smartphones H2 H1 4,496 3 209 3,596 2,756 p 2 444 1 900 1 535 2 919 1 221 1 696 2 052 946k modems (incl modules and USB dongles) Data product drive Business Solutions remains challenging Rev up 11% Dec-07 Dec-08 Dec-09 Dec-10 Maintained margin As % of SA revenue (excl. Handsets, incl. SMS) 11.0 12.4 14.8 19.0 40% cut in fixed-line data tariffs
Nigeria - operational highlights Launched Aug 2001 Market share 52% Population 152m Market sizing 117m (2015) Penetration 49% Shareholding 76%* Subscribers ( 000) /ARPU ($) MTN Subscribers ('000) ARPU (USD) 16 511 23 077 17 16 30 827 38,669 12 11 Increased market share Attractive segmented value propositions Quality network Dec-07 Dec-08 Dec-09 Dec-10 Quality service Outgoing MOU 52 55 53 48 Effective churn management Aggressive competition increasing in Q4 Additional call centres set up Net additions ( 000) 6,566 7,750 3 489 7,842 3 612 Wide and efficient distribution framework Improved brand perception LC ARPU declined 10% Increased on-net traffic 4,230 4 512 Stable effective tariffs H2 H1 2 475 1 755 2 054 4 261 4,230 25% decrease in local currency interconnect revenue, partly offset by higher h on-net traffic *Legal Dec-07 Dec-08 Dec-09 Dec-10
Nigeria - infrastructure and data highlights Capex ZAR (million) H2 H1 Capex as % of revenue BTS Rollout 9,610 10,222 4 519 5,668 4,789 4,700 2 979 5 703 2 168 3 942 1 810 2 532 Dec-07 Dec-08 Dec-09 Dec-10 23.6 30.5 30.7 14.0 *1,984 1,560 1,220 1 332 802 785 726 Rollout gained momentum in H2 Maintained quality and capacity on networks 4,800 BTS upgraded to increase capacity 480 3G BTS s rolled out Transmission expansion 696 km of backbone fibre ring complete (Maiduguri-Yola-Gombe) National fibre expand project (phase 1), linking 71 high capacity BTS s to fibre and integrating 66 sites Further rollout of WIMAX (total 5 states) Data as % of rev 5% 65% SMS revenue Segmented data bundles H2 H1 *Including 3G 639 758 494 652 146 Dec-07 Dec-08 Dec-09 Dec-10
Ghana - operational highlights Launched Nov 1996 Market share 53% Population 25m Market sizing 20m (2015) Penetration 67% Shareholding 98% Subscribers ( 000) /ARPU ($) 8 001 8,721 Subscribers increased 9% despite aggressive competition 6 428 Introduction of new price plans MTN Subscribers ('000) ARPU (USD) 4 016 14 12 8 7 Dec-07 Dec-08 Dec-09 Dec-10 Revised MTN Zone offer Loyalty programs Negative net additions in H2 due to SIM registration Outgoing MOU 104 119 105 114 Net additions ( 000) 2,412 Quality of networks maintained Effective distribution Stable LC ARPU 1,431 1 431 1,573 Marginal decrease in market share reduced d H2 H1 624 782 720 981 807 791 722 Dec-07 Dec-08 Dec-09 Dec-10-2 Increased off-net traffic to due on-net price reductions Stable effective tariffs
Ghana - infrastructure and data highlights Capex ZAR (million) H2 H1 Capex as % of revenue BTS Rollout 3,092 2,586 1 688 1,854 1 411 1,239 938 977 1 404 1 175 840 262 Dec-07 Dec-08 Dec-09 Dec-10 32.8 30.7 45.6 54.8 940 H2 rollout gained momentum Switch centre and fibre rollout Maintained network quality 77 3G BTS s added Data usage continues gaining momentum 1.8m Mobile Money subs (Dec 10) Data as a % of revenue 7% 72% SMS revenue 718 704 729 390 221 703 440 H2 H1 483 328 289 237 Dec-07 Dec-08 Dec-09 Dec-10
Iran - operational highlights Launched Aug 2006 Market share 44% Population 73m Market sizing 81m (2015) Penetration 92% Shareholding 49% Subscribers ( 000) /ARPU ($) MTN Subscribers ('000) ARPU (USD) 6,006 16,039 23,260 29 743 10 9 8 8 Dec-07 Dec-08 Dec-09 Dec-10 Outgoing MOU 69* 60* 58* 60 Solid 28% increase in subscribers Segmented tariff plans Enhanced seasonal promo s Continued focus on wider electronic distribution channels Efficient and improved brand awareness campaigns 3% increase in LC ARPU Net additions ( 000) 10,033 Increased usage from improved capacity and coverage in key areas Increased on-net traffic 5,852 4,446 7,221 6,483 4 073 2 776 Stable effective tariffs 3rd operator expected to launch in Q2 11 H2 H1 4,023 1 829 5 587 3 148 3 707 Dec-07 Dec-08 Dec-09 Dec-10 *Restated to exclude free minutes
Iran - infrastructure and data highlights Capex (49%) ZAR (million) 2,743 3,326 Improved network quality and capacity in Tehran Site rentals remain challenging in Esfahan 1,559 2 142 2 282 1,661 Increased coverage 77% population coverage (up 4%) 845 765 20% geographic coverage (up 9%) H2 H1 714 601 1 044 896 Dec-07 Dec-08 Dec-09 Dec-10 5772km of road coverage (total 16700km) Slow uptake of WIMAX Capex as % of revenue BTS Rollout 116.3 55.6 43.6 18.1 2,043 Bandwidth and content limitations Promo s launched in H2 Data as a % of revenue 20% 89% SMS revenue 1,642 1,529 1 250 1,284 894 833 556 H2 H1 748 696 793 728 Dec-07 Dec-08 Dec-09 Dec-10
Syria - operational highlights Launched Jun 2002 Market share 45% Population 22m Market sizing 12.7m (2015) Penetration 50% Shareholding 75% Subscribers ( 000) /ARPU ($) Net additions gained momentum in H2 MTN Subscribers ('000) ARPU (USD) 4 898 4 249 3 539 3 109 20 19 18 16 Dec-07 Dec-08 Dec-09 Dec-10 Effective sales and marketing Segmented value propositions Loyalty programs Improved brand perception Churn management remains a priority Outgoing MOU 130 124 120 108 8% decline in LC ARPU Net additions ( 000) 872 Increased in on-net traffic Marginal decrease in effective tariff 517 430 710 164 699 649 478 H2 H1 355 266 171 11 Dec-07 Dec-08 Dec-09 Dec-10
Syria - infrastructure and data highlights Capex ZAR (million) 1,039 H2 H1 418 171 247 730 309 748 362 386 410 230 180 Dec-07 Dec-08 Dec-09 Dec-10 Enhanced efficiency and capacity of networks Re-engineered radio transmission incl frequency plan to increase capacity Rollout affected by delayed resolution of BOT Limited 3G services Launch of data products Data as a % of revenue 11% 60% SMS revenue Capex as % of revenue 9.0 16.0 10.7 6.0 BTS Rollout 596 504 317 193 444 283 415 200 H2 H1 221 215 124 152 Dec-07 Dec-08 Dec-09 Dec-10
Closing remarks Current market conditions Ongoing management of risks and precautionary measures Election update and local tensions Secession Sanctions Operational performance relatively unaffected Some reflection EBITDA margin target of 45% Capex investment strategy timing and payoff Organic growth M&A People Thanks and appreciation
Nazir Patel Financial overview Group Finance Director
Financial highlights Strong free cash flow growth Group summary: 2008-2010 (ZAR bn) Reported 09-10 Organic 09-10 Strong underlying organic growth in key markets 102.5 +9% 111.9 +3% 114.7 Rev +3% +14% ZAR strength dampened reported results Higher EBITDA margin mainly due to Nigeria, Iran and RSA 65.8 59.3 46.1 43.2 28.3 31.2 64.2 50.5 19.5 OpEx +2% -7% EBITDA +10% +23% CapEx -37% -30% Strong free cash flow generated as EBITDA increased and capex reduced Dividend payout ratio increased to 55%, dividend yield 4%** 31.0 AFCF* +108% +134% 14.9 14.9 2008 2009 2010 42% 41% 44% EBITDA margin 28% 28% 17% Capex / Rev * EBITDA Capex (approximates free cash flow) ** Based on share price of ZAR 125.75
Financial overview Zakhele All income statement t t numbers exclude Zakhele unless otherwise stated t Zakhele impact non-cash and in equity except for transaction costs Infrastructure Notional vendor finance ZAR 1,382m Donation ZAR 1,294m ESOP ZAR 171m sharing Transaction costs ZAR 126m Trading conditions Economic and trading conditions stabilised (but uncertain) Increased competition in key markets resulting in tariff pressure Subscriber growth at reduced marginal ARPU s Strong data growth, declining access pricing Foreign exchange rates ZAR reported results negatively impacted by ZAR strength Functional currency impact due to foreign currency bank balances Forex losses from Iran loans limited to EUR/USD FX exposure FX impact on capex, ZAR strength Regulatory MTR changes impacted revenue RSA 1 Mar 10 Nigeria 31 Dec 09
Key accounting considerations Change in ownership Zambia shareholding h reduced d from 97.8% to 90.0% 0% - Jun 10 Afghanistan shareholding reduced from 100% to 90.9% - Jun 10 Cyprus shareholding reduced from 51% to 50% - Nov 10 Put options Put options net impact: Nigeria Finance costs ZAR 471m Fair value adjustment (ZAR 208m) Forex loss (ZAR 277m) Non-controlling interests share of profits - (ZAR 230m) Afghanistan Fair value adjustment ZAR 36m Non-controlling interests share of profits (ZAR 42m) Taxation Group effective tax rate of 36.3% mainly due to: Disallowed expenses 2.3% STC on Group dividends 2.1% Withholding tax 2.5% Education tax (Nigeria) 1.3%
FX trends (average rate) ZAR strength severely impacted results USD: Local currency Rial ZAR NairaCedi ZARial Naira Cedi 9 830 9 872 10 103 10 253 9 175 9 477 147 149 151 151 118 119 7.62 8.13 9.06 8.32 7.52 7.34 0.99 1.06 1.38 1.42 1.43 1.44 09-10 -4% -1% +12% -1% H1-08 YTD -08 H1-09 YTD -09 H1-10 YTD -10 ZAR: Local currency Rial Naira Cedi Naira Cedi Rial 1 198 1 152 1 091 1 195 1 343 1 401-17% 15.45 14.54 16.13 17.83 0.17 013 0.13 0.15 0.13 20.04 20.67 0.19 0.20-16% -18% H1-08 YTD -08 H1-09 YTD -09 H1-10 YTD -10
Revenue Strong organic growth impacted by strong ZAR Revenue (ZAR bn) 102.5 111.9 114.7 Revenue breakdown (ZAR bn) +14% 3.2 0.8 3.3 127.3 12.6 54.6 58.7 5.3 2.8-11% 56.4 114.7 46.1 57.3 56.0 111.9 LC ZAR NIG 16% 1% RSA 8% 8% IRA 42% 21% GHA 14% 0% 2008 2009 2010 2009 NIG RSA IRA GHA Other 2010CR FX 2010 H2 H1 2010CR is at constant prior year FX rate Reported revenues adversely impacted by ZAR strength 2010 revenues at constant prior year FX rates would be 14% higher than prior year Revenue in key markets driven by strong subscriber growth Nigeria share of net adds above 60% RSA growth driven by prepaid and data revenue Iran growth driven by higher subscribers, data and SMS
Data revenue (excl sms) High growth across operations Data revenue (ZAR bn) +48% YOY growth rate % share of Group data revenue 6.2 0.4 Other +100% 6% 0.2 Iran +100% 3% 0.3 Syria NM 5% 0.5 Nigeria +25% 8% Group data revenue grew by 48% from prior year RSA contributed 58% of Group total Packet switched data users increased from 6.6m to 9.2m 3G handsets up to 3m includes 1.6m smartphones, data devices on network 946k 4.2 * 0.2 0.1 0.1 0.4 1.2 Business Solutions +33% 20% Nigeria revenue increased by 25%. 150k dongles and 40k 3G handsets sold in 2010 Iran revenue growth due to uptake in GPRS services (10.6m users) 09 0.9 2.5 3.6 RSA +44% 58% Ghana revenue increased by 87%. Bundled offerings and reduction of data pricing led to increased data usage. 44k dongles and 166k 3G subscribers on network Syria revenue growth over 100% due to better value proposition for both pre- and postpaid market 2009 2010 *Business Solutions included in other revenue in 2009
Interconnect Large reduction in MTR in Nigeria and RSA Group interconnect (ZAR bn) Cost 2009-14.1 19.5 Revenue MTR changes in Nigeria and RSA RSA peak rate dropped from ZAR 1.25 to ZAR 0.89 Nigeria peak rate dropped from 11.4 Naira to 8.2 Naira Interconnect revenue decreased 13% RSA revenue decreased 10% 54 5.4 Margin % currency Nigeria revenue decreased 25% in local currency 28% Net interconnect margin increased from 28% to 32% Higher on-net net traffic offset some of the interconnect rate decline 2010-11.5 17.0 RSA prepaid on-net improved 7pts to 61% Nigeria total on-net net increased by 4pts to 83% 5.5 Margin % 32%
EBITDA Strong organic EBITDA growth EBITDA (ZAR bn) EBITDA breakdown (ZAR bn) 50.5 46.1 43.2 4.5 1.8 +23% 1.8 0.3 22 2.2 56.7 6.2 50.5-13% 23.6 21.6 26.3 46.1 42.1% 19.6 41.1% 24.5 44.0% 24.2 LC ZAR NIG +24% +7% RSA +17% +17% IRA +67% +41% GHA +13% -4% 2008 2009 2010 2009 NIG RSA IRA GHA Other 2010CR FX 2010 H2 H1 EBITDA margin 2010CR is at constant prior year FX rate Strong organic EBITDA growth in key markets 2010 EBITDA at constant prior year FX rates would be 23% higher than prior year Strong margin improvements (local currency) through focused cost control initiatives Overall strong subscriber growth positively impacted revenue Improvements in on-net traffic patterns
EBITDA margin Margin expansion in Nigeria, Iran and RSA EBITDA margin reconciliation (%) 41.1% 2009 1.1 NIG 0.7 RSA +3.4pts 0.4 0.1 IRA GHA 2010CR is at constant prior year FX rate 1.3 Other 44.5% 2010CR 0.5 FX 44.0% 2010 +2.9pts Nigeria Nigeria EBITDA increased by 7% (LC 24%) due to Revenue growth on subscriber increase Decrease in interconnect cost Outsourced spares management resulted in impairment reversal e RSA RSA EBITDA growth due to Revenue increase, higher data and prepaid revenue Net interconnect t improved due to increased on-net call percentage Lower distribution cost Iran Iran EBITDA growth due to Revenue increase on strong subscriber growth Single vendor maintenance, marketing cost reduction Ghana Margin decreased by 1pt. Higher electricity and utility cost. Increased maintenance to improve quality Other Margin improvement in Afghanistan, Syria and Zambia. Margin deterioration in Sudan, Cameroon and Benin
CapEx Capex reduction in most operations CapEx (ZAR bn) 31.2 CapEx breakdown (ZAR bn) 28.3 31.2 4.8-30% 15.7 2.1 18.0 19.5 14 1.4 0.9 2.0 21.8 2.3 28% 10.3 28% 15.5 11.0 17% 8.5 LC ZAR NIG -46% -54% RSA -35% -35% IRA -44% -48% GHA +31% +19% 19.5-7% 2008 2009 2010 2009 NIG RSA IRA GHA Other 2010CR FX 2010 H2 H1 Capex/Rev 2010CR is at constant prior year FX rate Positive spend below June authorised (ZAR 21.3bn) mainly due to 2009 peak capex spend Positive FX impact, ZAR 2.3bn Ongoing price book reductions Nigeria reduced capex in 2010 on core network and site rollout RSA reduced capex in 2010 on switch facilities, BSS (2G and 3G) and transmission (MW, VSAT etc) Iran reduced d spend on site rollout, prepaid systems (IN) and core network Ghana completion of switch centres and greater fibre rollout in 2010
CapEx guidance Significant capex reduction vs prior year ZAR m 2010 Authorised 2011 2009 South and East Africa 5 421 5 676 8 645 South Africa 3 908 3 920 6 034 Other operations 1 513 1 756 2 611 West and Central Africa 9 919 10 723 16 518 Nigeria 4 700 7 784 10 222 Ghana 3 092 1 221 2 586 Other operations 2 127 1 718 3 710 Middle East and North Africa 3 402 4 871 5 785 Iran 1 661 1 317 3 326 Syria 410 1 066 748 Other operations 1 331 2 488 1 711 Head office companies 724 861 300 Total 19 466 22 131 31 248 2009 USD:ZAR 8.30 2010 USD:ZAR 7.34 2011 USD:ZAR 7.42
EBITDA - CapEx Strong free cash flow growth EBITDA - CapEx (ZAR bn) 31.0 15.2 EBITDA - CapEx breakdown (ZAR bn) 9.3 3.9 +134% 3.1 0.6 4.3 34.9 3.9 31.0-26% 14.9 14.9 5.6 15% 9.3 5.9 13% 9.0 27% 15.8 14.9 LC ZAR NIG +98% +73% RSA +89% +89% IRA NM NM GHA NM NM 2008 2009 2010 2009 NIG RSA IRA GHA Other 2010CR FX 2010 H2 H1 % revenue 2010CR is at constant prior year FX rate Strong organic operational growth Low capex spend, led to high adjusted free cash flow Nigeria EBITDA increase, capex decrease after high investments in 2009, realising significant growth in adjusted free cash flow RSA and Iran increased adjusted free cash flow on the back of higher margins and lower capex Ghana high capex spend in 2010
Interest and tax Lower interest charge and increase in effective tax rate Net finance cost (ZAR m) 2010 2009 2008 Net interest paid 1 925 2 201 1 851 Net forex losses 924 1 106 1 249 Functional currency losses/(gains) 1 223 3 204 (2 442) Put options 22 (701) 1 259 Functional currency loss reduced due to cession of Iran loans to MTN Dubai Iran loans forex exposure limited to EUR / USD (included in net forex losses) Functional currency loss due to cash build up in holding company and effect of strong ZAR closing rate New put option in Afghanistan Total 4 094 5 810 1 917 Tax (ZAR bn) 11.4 1.0 39.9% 11.3 1.5 3.1 8.6 2.0 1.2 36.3% 73 7.3 2008 Eff rate 1.0 33.4% 6.4 2009 STC & other WHT Def tax 7.8 2010 Normal tax Deferred tax higher than prior year due to Significant capex spend in prior year Functional currency impact on Iran loans in the prior year Year-on-year rate increased due to Additional STC on interim dividend Lower investment allowance in Nigeria Impact of reduced put option credit on pre-tax income
AHEPS (excl Zakhele) Increased adjusted headline earnings per share AHEPS (ZAR cents) Adjusted EPS (excl Zakhele) increased by 20.5% to 909.1 cents 904 495 754 390 909 470 Strong earnings conversion from operational performance despite FX and higher tax charge 409 364 439 2008 2009 2010 H2 H1 ZAR cents 2010 2009 Variance % Attributable earnings per share 938.4 791.4 18.6 (Gain)/loss on disposal of non-current assets (7.2) 3.8 - (Reversal of)/impairment of PPE and other non-current assets (8.5) 8.0 - Basic headline earnings per share 922.7 803.2 14.9 Reversal of the put options in respect of subsidiaries (13.6) (48.9) 72.2 Adjusted headline earnings per share 909.1 754.3 20.5
Net debt Group in net cash position 13% ZAR bn Repayment schedule (ZAR bn) 12000 2% 10000 9.6 29% 56% Gross debt 35,3 8000 6000 8.1 7.0 53 5.3 53 5.3 4000 2000 Holdco's and RSA Iran Other 8% 11% Nigeria Syria 0 2011 2012 2013 2014 >2014 USD 2.3bn of non-recourse debt closed in 9% 2010, partially drawn 49% Cash 36,2 Unproductive debt of ZAR 5.6bn remains due to recap of Dubai Gross intercompany loans (excl holding companies and SA) total ZAR 11.7bn 23% Net cash 0.9 Short term liabilities include ZAR 2.0bn from the capital market and ZAR 3.0bn due under the international syndication Syrian cash to be used in BOT conversion
Income statement ZAR bn 2010 (excl Zakhele) 2010 (incl Zakhele) 2009 Variance % (excl Zakhele) Revenue 114.7 114.7 111.9 +3 EBITDA 50.5 47.5 46.1 +10 EBITDA Margin % 44.0% 41.5% 41.1% 1% +2.9pts Depreciation -13.2-13.2-11.8-12 Amortisation -2.1-2.1-2.7 +22 Profit from operations 35.2 32.2 31.6 +11 Net finance cost -4.1-4.1-5.8 +29 Profit before tax 31.1 28.1 25.8 +21 Income tax expense -11.3-11.3-8.6-31 Profit after tax 19.8 16.8 17.2-15 Non-controlling interests -2.5-2.5-2.5 - Attributable profit 17.3 14.3 14.7 +18 Effective tax rate 36.3% 40.1% 33.4% -2.9pts
Statement of financial position ZAR bn 2010 2009 Non-current assets 99.7 110.2 Property, plant & equipment 63.4 67.5 Goodwill and other intangible assets 31.6 37.5 Other non-current assets 4.7 5.2 Current assets 54.3 46.0 Bank balances 35.9 24.0 Restricted cash 0.3 0.7 Other current assets 18.1 21.3 Assets of disposal group classified as held for sale 0.8 - Total assets 154.8 156.2 Capital and reserves 74.0 72.9 Non-current liabilities 34.0 28.4 Borrowings 24.9 21.1 Deferred taxation and other non-current liabilities 9.1 7.3 Current liabilities 46.8 68 54.9 Non interest-bearing liabilities 36.3 39.0 Interest-bearing liabilities 10.5 15.9 Equity and liabilities 154.8 156.2 Net debt -0.9 12.2 Net debt/ebitda -0.02 0.26 USD:ZAR 6.61 7.39
Statement of cash flows ZAR bn 2010 2009 Net cash generated from operations 50.55 49.6 Net interest paid -1.5-3.1 Taxation paid -8.0-6.8 Dividends paid -6.3-3.4 Cash inflows from operating activities 34.7 36.3 Acquisitions of PPE (excl software) -15.3-27.7 7 Acquisition of intangible assets -1.2-2.0 Other investing activities 0.8-3.5 Cash outflows from investing activities -15.7-33.2 Cash outflows from financing activities -2.0-0.9 Net movement in cash and cash equivalents 17.0 2.2 Cash and cash equivalents at the beginning of the year 22.6 25.6 Realised losses on bank accounts -3.7-5.1 Cash and cash equivalents at the end of the year 35.9* 22.6* * Incl bank balance ZAR35 947m (2009:ZAR23 999m) and bank-overdraft ZAR40m (2009:ZAR1 353m)
Message from MTN Group chairman Cyril Ramaphosa
Phuthuma Nhleko s history with the MTN Group Joined the board as non- executive chairman in Jun 2001 and as CEO of MTN Group Jul 2002 2000 2005 2010 Operations 5 11 21 Population 68m 344m 552m Market cap (ZAR bn) 58 (31 March 2000) 103 (31 Dec 2005) 253 (31 Dec 2010) Revenue (ZAR bn) 6 29 115 EBITDA 2 12 50.5 Subs(m) 2,3 12 141,7
Welcome to Sifiso Dabengwa History at MTN With MTN for 12 years Joined 1999 - MD MTN SA Infrastructure sharing 2004-2006 CEO MTN Nigeria 2006-2011 COO MTN Group Previous roles Executive Director at Eskom responsible for sales, customer service, electrification and distribution technology Consulting electrical engineer in the building services industry Technical management roles in the mining and railway sectors Education BSc Electrical Engineering MBA degree
Looking ahead Sifiso Dabengwa Group COO and CEO designate
Looking forward Strategic continuity In line with MTN s previous announcements on the 15 July 2010 and 20 August 2010, the vision remains unchanged as does the strategy to balance increasing returns to shareholders with opportunistic M&A Revenue opportunities Leverage data opportunities and facilitate increased smart phone availability Segment focused products and services Partnership model for development of value added services offerings Optimising efficiencies Continued evaluation of individual markets for infrastructure sharing opportunities of both passive infrastructure and fibre Leverage structural framework formed for key projects Cost effective platforms for delivery of data and services Ongoing standardisation of systems and processes Increased centralisation of procurement activities and rationalisation of suppliers Shared services and outsourcing
Looking forward (cont) Rollout Execute network investments t and rollout plans effectively to manage supply and demand; network quality as a competitive edge Upgrade and optimise networks to meet increased demand in data services Shareholder returns Continue to investigate options to improve sustainable returns to shareholders Dividend payout ratio policy of 55% Regulatory Continued engagement with authorities ensure the social and commercial success of the telecommunications sector
Subscriber guidance 2011 Net additions guidance for 2011 000 South Africa 2,000 Nigeria 4,200 Ghana 390 Iran 3,350 Syria 600 Rest 6,385 16,925
Capex guidance - 2011 (ZAR mn) Authorised 2011 South and East Africa 5 676 South Africa 3 920 Other operations 1 756 West and Central Africa 10 723 Nigeria 7 784 Ghana 1 221 Other operations 1 718 Middle East and North Africa 4 871 Iran 1 317 Syria 1 066 Other operations 2 488 Head office companies 861 Total 22 131 26% 5% 16% 2G 17% 3G 19% 17% Cable/fibre Core and other IT & VAS Physical infrastructure 5% 6% 11% 5% 3% 22% 48% 54% 27% 4% 9% 6% 21% 10% 8% 54% 49% 17% 7% 22% 8% 4%
Thank you Questions
Notice The information contained in this document has not been verified independently. No representation or warranty express or implied is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Opinions and forward looking statements expressed represent those of the Company at the time. Undue reliance should not be placed on such statements and opinions because by nature, they are subjective to known and unknown risk and uncertainties and can be affected by other factors that could cause actual results and Company plans and objectives to differ materially from those expressed or implied in the forward looking statements. Neither the Company nor any of its respective affiliates, advisors or representatives shall have any liability whatsoever (based on negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation and do not undertake to publicly update or revise any of its opinions or forward looking statements whether to reflect new information or future events or circumstances otherwise. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
Annexures
Nigeria - Financial Strong free cash flow growth achieved Nigeria YTD financial: 2008-2010 (ZAR bn) Reported 09-10 Organic 09-10 +1% +5% 33.3 33.5 31.6 Rev +1% +16% Significant growth in AFCF for Nigeria in 2010, following consistent cash flow generation in prior years EBITDA increased by 7.1% (LC 23.8%) 13.4 18.2 13.6 19.7 12.4 OpEx 21.1 EBITDA 4.7 CapEx +9% -6% Revenue growth due to subscriber increase Cost optimisation +7% +24% programmes -54% -46% Higher on-net traffic 9.6 10.2 Reduced capex in 2010 on core network and site rollout 16.4 AFCF +73% +98% 8.6 9.5 2008 2009 2010 58% 59% 63% EBITDA margin 30% 31% 14% Capex / Rev
Nigeria NGN bn Revenue 2010 2009 596.5 Airtime and subscription 92.5 Revenue Increase in subscribers Increase in dongles and 3G handsets Data 4.8 Reduction in interconnect rate Interconnect (12.6) Other 10.6 2010 691.8 Direct network and operating costs Increase in BTS sites % Growth 16.0% EBITDA 2010 2009 351.8 Revenue 95.3 Selling and distribution (12.5) Interconnect and roaming costs 11.1 Selling and distribution FIFA promotional costs Commission increase in line with revenue EBITDA margin Improvement, on-net ratio up Other (9.9) 2010 435.8 % Growth 23.9% EBITDA margin 63.0%
RSA Financial* Strong free cash flow growth achieved RSA YTD financial: 2008-2010 (ZAR bn) Reported 09-10 Organic 09-10 Consistent generation of AFCF in prior years, with 2010 increasing by 89% 32.1 +3% 33.1 +8% 35.8 Rev +8% +8% EBITDA increase Revenue increase, higher data and prepaid revenue 21.5 22.7 23.6 OpEx -4% -4% Interconnect rate reduction, increased on-net call percentage Lower distribution cost due to distribution through internal service providers 10.6 10.4 4.9 6.0 5.7 44 4.4 12.2 22 3.9 8.3 EBITDA CapEx AFCF +17% +17% p -35% -35% +89% +89% Reduced capex in 2010 on switch facilities, BSS (2G and 3G) and transmission (MW, VSAT etc) Dec 2008 Dec 2009 Dec 2010 33% 31% 34% EBITDA margin 15% 18% 11% Capex / Rev * Excl Network Solutions and Business Solutions
RSA* ZAR bn Revenue 2010 Revenue Higher data and prepaid revenue 2009 33.1 Higher postpaid revenue but lower ARPU Out-of-bundle usage Airtime and subscription 1.4 Growth in hybrid and telemetry base Data 1.1 Drop in interconnect rates Interconnect (0.7) Other 0.9 2010 35.8 % Growth 8.2% EBITDA 2010 2009 10.4 Revenue 2.7 Interconnect and roaming costs 0.9 Other (1.8) 2010 12.2 % Growth 17.3% EBITDA margin 34.1% Direct network and operating costs Higher rent and utilities Higher maintenance Handsets and accessories Volume increase Average cost: prepaid down, postpaid up Selling and distribution Marketing higher due to FIFA Lower distribution cost EBITDA margin Higher on-net traffic offset some of the interconnect rate decline * Excl Network Solutions and Business Solutions
Iran - Financial* Strong free cash flow growth achieved Iran YTD financial: 2008-2010 (ZAR bn) +21% Reported 09-10 Organic 09-10 Positive AFCF of ZAR 2.1bn Strong cash flow generation on lower capex and higher revenue 4.9 13 1.3 2.1 +55% 7.6 2.1 2.8 9.2 2.2 3.2 3.8 Rev +21% +42% Rev share OpEx EBITDA -5% -21% -14% -34% +41% +67% Revenue increase on strong subscriber growth and stable ARPU s 2043 BTS sites in 2009 v 1284 in 2010 Expansion of prepaid system (IN) and core network in 2009 2.7 1.7 CapEx -48% -44% 1.5 2.7 3.3 2.1 AFCF NM NM -1.2 12-0.6 2008 2009 2010 30% 35% 41% EBITDA margin Capex / Rev 55% 43% 18% * at 49% proportion
Iran* IRR bn Revenue 2010 2009 9 075 Airtime and subscription 2 017 Data 146 Interconnect 655 Other 991 2010 12 884 % Growth 42.0% EBITDA 2010 Revenue Increase in subscribers Stable ARPU Uptake of GPRS Selling and distributionib i Decreased marketing spend Commission in line with revenue Direct network operating costs Single vendor maintenance 2009 3 183 Revenue 3 809 Selling and distribution (26) Interconnect and roaming costs (477) Other (1 185) 2010 5 304 % Growth 66.6% EBITDA margin 41.2% * at 49% proportion
Ghana - Financial High 2010 infrastructure investment Ghana YTD financial: 2008-2010 (ZAR bn) Reported 09-10 Organic 09-10 High capex spend in 2010 Completion of the switch centres 6.0-5% 5.7 +0% 5.7 Rev 0% +14% High fibre rollout in 2010 EBITDA increase by 13% in local currency 3.2 3.1 3.2 OpEx -3% -17% Revenue growth following strong subscriber growth and success of MTN Zone 2.8 2.6 2.5 EBITDA -4% +13% EBITDA margin decreased by 0.3pts 19 1.9 2.6 3.1 CapEx +19% +31% 0.9 0.0-0.6 AFCF NM NM 2008 2009 2010 46% 45% 44% EBITDA margin Capex / Rev 32% 46% 54%
Ghana GHC m Revenue 2010 2009 973 Airtime and subscription 104 Data 12 Interconnect 5 Other 16 2010 1 110 % Growth 14.1% EBITDA 2010 2009 436 Revenue 137 Selling and distribution (25) Interconnect and roaming costs (24) Other (30) 2010 494 % Growth 13.3% EBITDA margin 44.5% Revenue Increase in subscribers 3G uptake Direct network operating costs Increased electricity i and utility cost Increased maintenance to improve quality Interconnect and roaming On-net ratio decreased from 86% to 83% Selling and distribution FIFA promotion Media inflation cost driven by competition Cost of handsets and accessories Increased handset cost due to uptake of bundled offers (to drive data and 3G) EBITDA margin Down by 0.3pts due to higher direct network cost
SYRIA - Financial Strong free cash flow growth achieved Syria YTD financial: 2008-2010 (ZAR bn) Reported 09-10 Organic 09-10 AFCF increased by 71% in 2010-3% +8% 7.0 6.8 6.5 Rev -3% +10% 3.1 Rev 2.8 3.2 share -3% -19% EBITDA growth Revenue growth due to increase in subscribers, sms and data bundles Selling and distribution cost decrease on commission rate reduction Capex down following high spend in 2009 1.9 2.5 OpEx +20% +11% 2.0 1.8 EBITDA +14% +31% 1.6 1.4 1.0 0.4 CapEx 0.7-43% -37% 1.2 08 0.8 AFCF 0.7 +71% +86% 2008 2009 2010 28% 20% 24% EBITDA margin Capex / Rev 15% 10% 6%
Syria SYP bn Revenue 2010 2009 39.3 Airtime and subscription 3.2 Data 1.1 Interconnect 0.3 Other (0.4) 2010 43.5 % Growth 10.7% EBITDA 2010 2009 7.7 Revenue 4.2 Revenue Increase in subscribers SMS and data bundles Direct network operating costs Revenue share Interconnect and roaming Increased international calls (economic growth) Selling and distribution Commission rate decrease Handsets and accessories Increase in 3G handset sales Selling and distribution costs 0.2 Interconnect and roaming (0.4) Other (1.4) 2010 10.3 % Growth 33.8% EBITDA margin 23.7%
Net debt ZAR m Cash and Interest Net debt Net debt cash bearing Intercompany /(cash) / (cash) equivalents liabilities* eliminations 2010 2009 South & East Africa (4 725) 14 550 (12 971) (3 146) (783) RSA (3 786) 11 900 (11 726) (3 612) ( 1 852) Other operations (939) 2 650 (1 245) 466 1 069 West & Central Africa (9 786) 13 543 (628) 3 129 8 973 Nigeria (8 480) 10 332-1 852 7 461 Ghana (168) - - (168) (469) Other operations (1 138) 3 211 (628) 1 445 1 981 Middle East & North Africa (7 965) 7 105 (5 928) (6 789) (5 069) Iran (2 874) 3 760 (3 195) (2 309) (1 350) Syria (3 791) - - (3 791) (3 331) Other operations (1 300) 3 345 (2 733) (688) (388) Head office companies (13 756) 22 648 (2 992) 5 901 9 055 Total (36 232) 57 846 (22 519) (905) 12 176 * Including long- and short-term borrowings and overdrafts
Exchange rates analysis Average (EBITDA) Closing 2010 2009 % var 2010 2009 % var Rand per USD 7.34 8.32 12 6.61 7.39 11 Nigerian Naira per USD 151.19 149.20 (1) 152.11 149.97 (1) Nigerian Naira per ZAR 20.67 17.83 (16) 23.00 20.29 (13) Iranian Rials per USD 10 252.62 9 871.69 (4) 10 356.00 10 004.00 (4) Iranian Rials per ZAR 1 401.06 1 195.03 (17) 1 565.67 1 353.72 (16) Ghanaian Cedis per ZAR 0.20 0.17 (18) 0.22 0.19 (16) Syrian Pounds per ZAR 6.39 5.60 (14) 7.13 6.20 (15)
MTN data sheet part 1 Market overview Group SEA WECA MENA Nigeria RSA Ghana Syria Iran Population (m) 552.3 111.1 248.8 192.4 153.5 50.3 24.5 21.8 73.2 Mobile penetration (%) 49 105 67 50 92 Number of operators 79 21 40 18 5 4 5 2 3 Operational data Subscribers ( 000) 141 597 31 891 64 448 45 258 38 669 18 841 8 721 4 898 29 743 ARPU (USD) 11 21 7 16 8 Outgoing MOU (mins) 48 71 114 108 60 Market share (%) 52 35.8 53 45 44 Operational data (ZAR bn) Revenue 114.7 42.5 49.9 22.0 33.5 35.8 5.7 6.8 9.2 EBITDA 50.5 14.6 27.7 7.4 21.1 12.2 2.5 1.6 3.8 EBITDA margin (%) 44.0 34.4 55.5 33.6 62.9 34.1 43.9 23.5 41.3 CAPEX 19.5 54 5.4 99 9.9 34 3.4 47 4.7 39 3.9 31 3.1 04 0.4 17 1.7 Depreciation 13.2 3.7 7.2 2.3 5.0 2.7 0.8 0.5 1.0 Amortisation 2.1 0.5 0.8 0.7 0.1 0.3 0.2 0.3 0.1
MTN data sheet part 2 (SEA) Sub Total RSA Botswana Zambia Swaziland Uganda Rwanda Shareholding (%) 100 53 90 30 97 55 Licence period (years) 20 15 15 10 20 13 Market overview Population (m) 111.1 50.3 1.9 13.5 1.0 34.1 10.3 Mobile penetration (%) 105 136 37 71 34 33 Market position 2 1 2 1 1 1 Number of operators 21 4 3 3 1 7 3 Market size (m) (2015) 105.7 62.9 2.8 9.9 0.9 21.9 7.3 Operational data Subscribers ( 000) 31 891 18 841 1 414 1 900 726 6 463 2 547 ARPU (USD) 21 12 6 12 5 5 Market share (%) 35.8 54 38 100 56 75
MTN data sheet part 3 (WECA) Sub Total Nigeria Ghana Cameroon Congo B Benin G. Bissau G. Conakry Liberia Cote d Ivoire Shareholding h (%) 76 98 70 100 75 100 75 60 65 Licence period (years) 15 15 15 15 10 10 18 15 20 Market overview Population (m) 248.8 153.5 24.5 19.9 4.0 9.1 1.6 10.8 3.4 22.0 Mobile penetration (%) 49 67 40 85 52 48 36 40 64 Market position 1 1 1 1 1 1 1 1 1 Number of operators 40 5 5 3 4 5 3 5 5 5 Market size (m) (2015) 189.4 117.0 20.1 11.0 4.5 6.9 1.2 7.3 1.9 19.5 Operational data Subscribers ( 000) 64 448 38 669 8 721 4 792 1 666 2 144 568 1 761 746 5 381 ARPU (USD) 11 7 8 10 9 8 5 10 7 Market share (%) 52 53 60 49 45 75 45 54 38
MTN data sheet part 4 (MENA) Sub Total Sudan Iran Afghanistan Cyprus Syria Yemen Shareholding (%) 85 49 91 50 75 85 Licence period (years) 20 15 15 20 15(BOT) 15 Market overview Population (m) 192.4 41.7 73.2 30.6 0.8 21.8 24.3 Mobile penetration (%) 39 92 39 109 50 48 Market position 2 2 1 2 2 1 Number of operators 18 3 3 4 2 2 4 Market size (m) (2015) 165.3 34.6 82.0 19.7 1.2 12.7 15.1 Operational data Subscribers ( 000) 45 258 3 475 29 743 4 045 241 4 898 2 856 ARPU (USD) 5 8 5 32 16 6 Market share (%) 21 44 34 27 45 40
MTN Group Limited Final audited results for year ended d 31 December 2010