MTN Group delivered satisfactory set of results to June 2012

MTN Group delivered a satisfactory set of results to June 2012, increasing its subscriber numbers by 6.9% to 175.997 million from 31 December 2011. Market conditions continued to be impacted by increasing levels of competition, regulatory requirements, political unrest in certain countries and the global economic slowdown.

Despite these challenges, revenue showed solid growth of 17.5% (12.5%*) year-on-year, driven mainly by strong operational performance and competitive value propositions in South Africa, Iran and Ghana. The weaker rand exchange rate versus the USD and the relatively muted decline in the value of the naira to the USD had a positive impact on rand reported results.

Growth in Nigeria was lower than anticipated as a result of intense competition. The Group EBITDA margin expanded marginally to 44.9%** mainly due to greater efficiencies and tighter cost controls across most operations.

*constant currency

**2012 EBITDA includes the realisation of R19 million in respect of the previously deferred Ghana Tower Company profit to the income statement and R547 million profit from the sale of the Uganda tower portfolio. 2011 EBITDA includes R455 million profit from the sale of 400 of the Ghana towers.

The group continued to deliver on its strategy to improve shareholder returns, develop existing and new revenue streams, optimise costs and enable an excellent customer experience through various key initiatives:

During the six month period, MTN Holdings acquired 15.6 million MTN shares at a total cost of R2.088 million. In total, the group has repurchased 1.2% of issued shares at the cost of R3.018 million since the buy-back initiative was implemented in late 2011.

MTN remains focused on maintaining and enhancing its leadership position by offering competitive segmented voice offerings and loyalty programmes to its customers as competition increases. The group also continues to increase its distribution footprint to ensure greater accessibility.

Data usage continues to improve through an aggressive 3G roll-out, a comprehensive device strategy and appealing local content across operations. Mobile Money, which has been launched in 13 countries, recorded 7.3 million users. Data, excluding SMS, contributed 10% to group revenue, increasing 69.6% to R6.666 million. MTN's data strategy will be further supported by the West African Cable System (WACS), which became operational in May 2012, with landing stations in eight countries.

MTN's ICT strategy remains a focus. ICT will now be streamlined under a newly established Enterprise Business function, which will co-ordinate, standardise and measure ICT implementation throughout the group.

The centralised procurement project continues to show steady progress with 40%-45% of the group's procurement now centralised. Its priority is to establish an integrated supply chain organisation across the group. The IT shared services project has expanded to include Uganda, Zambia and Swaziland. Rwanda is expected to be integrated later in the year. Some of the operational efficiencies include the standardisation of intelligent network platforms, billing systems and application transformation.

Rationalisation of back-office operations with a focus on transactional activities in human resources, finance and supply chain management is under way.

Infrastructure investments for enhanced quality, capacity and to support 3G remains a priority for the group, with R10.144 million of capital expenditure (capex) incurred in the first half of the year. More importantly, a total of 69% of the total approved capex has been committed by operations through orders placed with vendors. Although capex increased when compared to the corresponding period for 2011, the rate of capex is expected to accelerate in the second half of the year.

On 28 March 2012, Turkcell Iletisim AS and EAC (Turkcell) filed a legal action against MTN Group and MTN International (Mauritius) (MTNI) in the United States district court in Washington, DC. Turkcell alleges principally that MTN violated the US Alien Tort Statute by engaging in the bribery of an Iranian and a South African government official in connection with MTN's participation in the Irancell consortium, that MTN encouraged the South African government to take a favourable position toward Iran's civil nuclear power development programme at a meeting of the International Atomic Energy Agency in November 2005, and that MTN enlisted South African government support for the provision of military equipment to Iran. Turkcell seeks damages in the amount of $4.2 billion.

On 2 July 2012, MTN moved to dismiss the case on the basis that it lacks legal merit. On 30 July 2012, the Turkcell plaintiffs filed an opposition to the motion. MTN's replying brief is due on 15 August 2012, at which point the motion will be fully briefed. MTN expects that the court will decide the motion in late 2012 or early 2013.

On 1 February 2012, the board of directors appointed a special committee to investigate the allegations made by Turkcell. The committee is chaired by an independent jurist, Lord Leonard Hoffmann, and has been directed to conduct an investigation and report its findings and recommendations to the board. The committee's investigation is continuing.

MTN is working closely with all the relevant authorities to manage US sanctions against Iran and Syria. MTN continues to retain international legal advisors to assist the group in remaining compliant with all applicable sanctions.

Xhead = Financial review

Revenue:

Group revenue increased by a healthy 17.5% to R66.426 million, due to solid growth in South Africa, Iran and Ghana of 9.5%, 29.9% and 19.9% respectively. Nigeria's reported revenue grew 16.5%. The average rand: USD exchange rate weakened from R6.80 in the prior period to R7.89 and this, together with a relatively muted naira:USD exchange rate, had a positive impact on revenue. On a constant currency basis, group revenue grew 12.5%. Local currency revenue in Iran and Ghana increased 28.3% and 22.4% respectively, while Nigeria's local currency revenue grew 4.4%.

The contribution of airtime and subscription revenue reduced to 63.2% from 66% in the prior comparative period, while data revenue increased its contribution to 10% from 7%. This was mainly attributable to strong data growth in South Africa and Nigeria, which contributed 46.8% and 28.4% respectively to total group data revenue. SMS revenue continued to show positive growth and increased its contribution marginally. This was mainly due to the continued success of SMS in Iran and South Africa.

Operating costs:

Group operating costs increased 17% to R37.194 million. This was largely driven by higher direct and operating costs related to network rollout and the cost of handsets and accessories in South Africa, which increased mainly due to adverse foreign exchange movements and higher volumes of handset sales. The weaker rand against the operational currencies had a negative impact on reported operating costs.

Other income:

Other income includes the partial realisation of the previously deferred Ghana Tower Company profit of R19 million to the income statement, the profit from the sale of the Uganda tower portfolio of R547 million, and R145 million relating to the amortisation of the BICS deferred gain.

EBITDA and EBITDA margin:

Group EBITDA, which includes the partial reversal of the previously deferred Ghana Tower Company profit and Uganda tower profit, increased 18.2% to R29.798 million. On a constant currency basis, EBITDA grew 12%.

The growth in EBITDA was mainly due to strong organic growth in South Africa and Iran, which grew local currency EBITDA by 10.5% and 36.4% respectively. Group EBITDA margin expanded 0.3 percentage points to 44.9%. MTN Nigeria's EBITDA margin declined by 2.8 percentage points to 60.5%, following intense pressure on tariffs and higher interconnect costs from an increase in off-network calls.

On a like-for-like basis, when the impact of the partial reversal of the previously deferred Ghana Tower Company profit and the profit on the Uganda towers are excluded from 2012 EBITDA, and the impact from the profit on the sale from the Ghana towers is excluded from 2011 EBITDA, the group EBITDA margin would have increased 0.2 percentage points to 44%. This was due to tight cost controls and efficiencies in South Africa, Iran, Sudan and Cote d'Iv^oire, which were partly offset by a lower EBITDA margin in Nigeria.

Depreciation and amortisation:

The group's depreciation increased 12% to R7.045 million while amortisation decreased by 2.6% to R1.112 million. This was mainly due to continued investment in network infrastructure and some of the intangible assets relating to the Investcom acquisition in 2006 becoming fully amortised during the period under review.

Net finance costs:

Net finance costs increased mainly due to foreign exchange losses. Net functional currency gains of R77 million were recorded, compared to a gain of R414 million in the prior period. A large portion of the gain was attributable to the conversion of cash balances in Mauritius, which is a rand reporting entity. Net foreign exchange losses were approximately R1.679 million higher than the corresponding period in 2011. These losses were largely due to the impact of the depreciation of the Syrian pound on dividends payable (R701 million) and the sharp depreciation of the Sudanese pound, which impacted loans and current accounts (R880 million).

Taxation:

The group's taxation charge increased by 18.6% to R7.522 million from June 2011 and the effective tax rate increased 1.15 percentage points to 38.10%. The higher effective tax rate is mainly due to the increased Secondary Tax on Companies (STC) related to the higher dividends paid to shareholders in April 2012, as well as withholding taxes due to dividend and management fees up-streamed to the group by its operating companies.

Earnings:

Attributable earnings per share (EPS) increased by 12.7% to 574.5 cents. Adjusted Headline EPS increased 14.3% to 537.4 cents from 470.1 cents. Adjusted Headline EPS was lower than Attributable EPS mainly due to the reversal of the profit from the sale of the Uganda towers. The depreciation of the Sudanese and Syrian pounds negatively impacted EPS by 58 cents and 36 cents respectively.

Cash flow:

Cash generated by operations increased 26.3% while net cash from operating activities decreased by 13.9%, principally due to a 35.9% increase in dividends and a 182% increase in tax paid.

Cash used in investing activities increased to R13.730 million mainly due to expenditure on property, plant and equipment (excluding software) of R8.688 million, which was 56% higher than the same period last year; intangibles of R1.373 million; Mauritian fixed deposits of R3.952 million and pre-payments of R800 million offset by cash inflows from the proceeds of the Uganda tower sale. Cash used in financing activities was mainly attributable to MTN Holdings purchasing shares in line with MTN's strategy to return cash to shareholders and dividends paid to minorities.

Capital expenditure:

Capex increased 77.7% to R10.144 million when compared to the same period last year. This was mainly due to an aggressive rollout programme implemented earlier in the year and the ongoing focus on critical capex investment programmes across the group's operations.

However, capex was lower than anticipated due to long lead times, equipment delays and slow site approvals by authorities. Importantly, the capex target of R24.772 million is on track for the year with a significant portion of full year authorised capex committed to projects. Roll-out is expected to accelerate in the second half of the year.

Assets and liabilities:

Assets and liabilities were positively impacted by the movement in foreign currency exchange rates. Property, plant and equipment decreased by 1.2% or R834 million to R70.776 million due to foreign currency translation and depreciation of R7.045 million, partly offset by capex additions of R10.144 million. Goodwill and other intangible assets decreased by 9.2% to R31.359 million, mainly due to the foreign currency translation impact and the unwinding of the intangible assets recognised on the Investcom acquisition in 2006.

Net debt/cash:

Net cash decreased by 22.6% to R7.654 million from R9.885 million due to the higher dividend paid in April 2012, the share repurchase and increased capex payments over the six months to June 2012.

Changes in ownership:

MTN increased its shareholding in MTN Cote d'Iv^oire by 3% to 67.7%.

Xhead = Operational review

South Africa

MTN South Africa delivered a good performance for the six months to 30 June 2012, increasing its subscriber base by 6.8% to 23.5 million. This was mainly due to growth in the prepaid segment, which increased its subscriber base to 19.3 million largely due to strong promotional campaigns, MTN Mahala and MTN Zone offerings and data services. The postpaid segment maintained a positive trend, growing its subscriber base by 9.4% to 4.2 million. Competitive data offerings and the continued success of hybrid packages were the main contributors to post-paid growth. MTN South Africa recorded market share of 35.5% and value share showed a positive upward trend, particularly in the prepaid segment.

Total revenue increased by 9.5% mainly due to a 49% increase in data revenue and strong prepaid revenue growth of 15%. Data revenue now contributes 15.9% to total revenue compared to 11.6% in the prior comparative period. Airtime and subscription revenue showed good growth of 5.9%, while handset revenue grew 29.1% due to the increase in demand for higher value phones. At 30 June 2012, there were 11.9 million data users, with 4.4 million smartphones. Interconnect revenue decreased by 15.3% as a result of the lower interconnect rate. Postpaid average revenue per user (ARPU) continued to trend downward to R265 due to the increased uptake of lower value hybrid packages and telemetry SIM cards. Prepaid ARPU decreased to R92 largely due to the interconnect rate cut and lower marginal prepaid subscribers. Reported blended ARPU was R123.

MTN South Africa recorded a slight increase in EBITDA margin to 35.4% due to tight cost controls. This was partly offset by higher handset costs due to the impact of the weaker rand and increase in volumes of handset sales. A lower interconnect margin following the reduction in the interconnect rate in March this year also had a negative impact on the EBITDA margin. This was partly mitigated by promotions increasing on-network traffic to 65% compared to 60% in the prior comparative period.

Capex for the period amounted to R1.936 million. MTN continued to modernise its network and focus on 3G coverage and capacity. The 3G population coverage is now 56%. During the period, 146 2G sites and 446 3G co-located sites were added, bringing the total number of 2G sites to 6 772 and 3G co-located sites to 3 600. Fibre roll-out remains a priority with 95% of the National Long Distance (NLD) route from Johannesburg to Durban trenched and over 50% of the fibre already installed. The Johannesburg to Bloemfontein route trenching is 91% completed, while the Bloemfontein to Cape Town route trenching is 70% completed. The qualification criteria for Long Term Evolution (LTE) spectrum is still being finalised by the minister of communications, who has embarked on a process to address the high demand frequency bands in South Africa.

Nigeria

MTN Nigeria experienced a challenging first half mainly due to aggressive pricing competition during the second quarter, driven by a multitude of bonuses on recharge, freebies and other promotional activity. The Nigerian market performance was also negatively impacted by a slower economy and the removal of fuel subsidies, which have led to lower consumer spending on telecommunications. It is estimated that only 25% of the gross additions in the market were first-time subscribers. The other 75% was mainly attributable to rotational churn and multi SIM cards in the market. The company grew its subscriber base by 3.7% to 43.184 million. While market share declined slightly to 48%, MTN has maintained its value share and captured more than 50% of first-time users in the market

Total revenue in naira grew by 4.4%. This was driven mainly by a 11.5% increase in interconnect revenue and a 130% increase in data revenue, which benefited from innovative data offerings, improved 3G coverage and an increase in the number of smartphones. At the end of June 2012, MTN Nigeria had 2.6 million smartphones on its network and over 479 685 dongles. Airtime and subscription revenue decreased by 4.4%, a function of lower consumer spending and a reduction in effective tariffs. SMS revenue declined by 9.3%, largely due to the substitution effect of instant messaging. Reported ARPU declined by 4% to USD 9.3 while local currency ARPU declined 2% due to economic challenges.

MTN Nigeria EBITDA margin decreased 2.9 percentage points to 60.5%. This was as a result of lower revenue due to lower tariffs, a lower interconnect margin due to an increase in off-network calls and increased transmission costs related to higher data volumes, the introduction of WACS and the provision in data capacity. Power costs continue to reduce, albeit off a high base, due to base stations being powered by more fuel efficient hybrid systems.

Capex for the period amounted to R4.432 million. MTN Nigeria continued to enhance the quality and capacity of the network as well as expand 3G coverage. At the end of June, 554 2G sites and 562 3G co-located sites were added bringing the total number of 2G sites to 7 611 and 3G co-located sites to 2 636. 3G population coverage improved to 35% from 28% in the previous comparative period. Capex in the first half was substantially in line with target and is expected to accelerate in the second half of the year. The regulator recently imposed fines on the four GSM operators for poor quality of service. These fines have been paid and more realistic KPIs have been negotiated. MTN Nigeria is confident that it will be able to achieve the new KPIs.

There remains no clarity on the deadline for SIM registration, although the regulator continues with the harmonisation process to form a central database for registration. The percentage of subscribers registered by MTN was 80% at the end of June 2012.

Iran

MTN Irancell delivered a strong performance increasing its subscriber base by 10.4% to 38.3 million in a highly penetrated market. This growth was largely due to the company's attractive value proposition and improved network quality. Despite competition and an increasingly challenging economy, MTN Irancell increased its market share to 47%.

Total rial revenue grew by 28.3% for the six months to 30 June 2012. This was mainly due to a 24.7% increase in airtime and subscription revenue and a 36.1% increase in SMS revenue, which benefited from promotions. WiMax performance continues to improve and the company will stand to benefit from its 3G offering when the third mobile operator's exclusivity on 3G comes to an end in May 2013. Reported ARPU decreased by 6% while local currency ARPU increased by 6% due to a better quality network, assisting increased minutes of use.

MTN Irancell recorded an increase in EBITDA margin to 44.7%. This was due to efficiencies and good cost control, which largely countered the impact of a high inflationary environment, particularly on fuel, electricity and imported goods.

MTN Irancell continued to invest in its network, with MTN's 49% share of capex for the six months at R418 million. MTN Irancell improved the quality and capacity of its network, adding 249 sites and bringing the total number of 2G sites to 7 889. The roll-out of some projects has been slower than anticipated because of delayed equipment delivery and the impact of sanctions on certain equipment. Population and geographic coverage increased to 81% and 24% respectively. At the end of June 2012, the company had 231 000 WiMax customers.

Ghana

MTN Ghana delivered a strong performance with subscribers increasing by 5.9% to 10.76 million despite aggressive competition. This performance was largely due to attractive segmented promotions across the product portfolio and a well-managed pricing strategy. A stronger economy also assisted growth. As expected, market share declined to 51% as a result of the entry of a new mobile player into the market.

Total cedi revenue increased by 22.4%. This was mainly driven by an 18.8% increase in airtime and subscription revenue, which benefited from promotions driving usage and spend. Data revenue grew by 193%, albeit off a low base, due to handset and data promotions. The 3G market is becoming increasingly competitive with the five mobile operators all investing considerable resources to upgrade or expand their 3G networks. This is partly driven by the rising demand for broadband services and the increasing usage of smartphones.

MTN Ghana's EBITDA margin dipped slightly from 38.7% at 30 June 2011 to 37.7% due to increased rent and utilities from the leasing of the 400 towers previously sold. The 2011 EBITDA margin excluded the profit from the sale of the towers. Reported ARPU decreased 10% although local currency ARPU increased 4%.

MTN Ghana continued to improve the quality and capacity of the network as well as increase its 3G coverage and capacity. During the six months it rolled out 62 2G sites and 21 3G co-located sites bringing total 2G sites to 2 318 and co-located 3G sites to 749. Capex for the period amounted to R273 million, which was below target due to project delivery issues. Corrective actions have been put in place and MTN Ghana is confident that it will meet its capital expenditure targets by the end of the year.

Syria

MTN Syria increased subscribers by 3.3% to 5.91 million despite a very challenging socio-political environment impacting the economy and the ability to operate. Market share decreased slightly to 45.5% from 46%.

Total Syrian pound revenue increased by 12%, driven by airtime and subscription revenue, which grew by 8.8%. The MTN proposition, which includes promotions, multiple communication channels and reliable systems and processes, has underpinned MTN Syria's performance. Data revenue increased by 39% and SMS revenue increased by 37%, largely due to smartphone and bundle promotions.

The tough economic environment impacted consumer spending and resulted in a decline in local currency ARPU of 3%. Reported ARPU declined by 27% following the depreciation of the Syrian pound against the USD.

Despite rising electricity and fuel prices, MTN Syria showed only a slight decrease in its EBITDA margin to 23% due to tight cost controls.

MTN Syria continued to operate the network under the basis of the “Build Operate and Transfer arrangement”. The timing of the conversion of the BOT into a free hold licence has been impacted by the current political situation in the country. Capex for the period amounted to R241 million.

Xhead = Prospects

MTN remains optimistic notwithstanding challenging market conditions. The group is committed to creating value for stakeholders through improved shareholder returns and enhancing its business model to better position itself as markets mature and competition intensifies. MTN's key priorities over the next six months are to maintain its leadership position with an increased focus on customer experience and countering competition through innovative and relevant products and services. This strategy will be supported by continued investments in infrastructure to ensure quality and capacity, the roll-out of efficiency initiatives and value accretive M&A opportunities.

In view of the change in taxation on dividends, the board has decided to increase the full year dividend payout ratio to 72% from 70%. The impact on MTN's cash outflow remains neutral. The interim dividend of 321 cents is calculated at 30% of the prior full year's adjusted HEPS.

Xhead = Declaration of interim ordinary dividend

Notice is hereby given that a gross interim dividend No3 of 321 cents per share for the six months ended 30 June 2012 has been declared payable to shareholders of MTN's shares. The dividend has been declared out of income reserves. The number of ordinary shares in issue at the date of this declaration is 1 884 968 549 (including 22 337 752 treasury shares). The dividend will be subject to a maximum local dividend tax rate of 15% which will result in a net dividend to those shareholders that bear the maximum rate of dividend withholding tax of 276.61346 cents per share after dividend withholding tax of 44.38654 cents per share and STC credits amounting to 25.08974 cents per share will be utilised. The net dividend per share for the respective categories of shareholders for the different dividend tax rates are as follows:

The different dividends tax rates above result from the application of the tax rates in various double taxation agreements as well as exemptions from dividend tax.

MTN Group's tax reference number is 9692/942/71/8.

In compliance with the requirements of STRATE, the electronic settlement and custody system used by the JSE Limited, the salient dates relating to the payment of the dividend are as follows:

Last day to trade cum dividend on the JSE: Friday, 24 August 2012 First trading day ex dividend on the JSE: Monday, 27 August 2012 Record date: Friday, 31 August 2012 Payment date: Monday, 3 September 2012

No share certificates may be dematerialised or re-materialised between Monday, 27 August 2012 and Friday, 31 August 2012, both days inclusive.

Dividends in respect of certificated shareholders will be transferred electronically to shareholders` bank accounts on Monday, 3 September 2012. In the absence of specific mandates, dividend cheques will be posted to shareholders on or about Monday, 3 September 2012. Shareholders who hold dematerialised shares will have their accounts at their Central Securities Depository Participant ("CSDP") or broker credited on Monday, 3 September 2012.

The group's Board confirms that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution.

For further information on the MTN Interim results, please refer to the group's Web site: www.mtn.com.

* Issued by MTN Group Corporate Affairs