| SENS Note - 28 December 2017 |
| MTN - assigns shareholder loan to IHS Holding |
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MTN Group assigns its long dated USD231m shareholder loan to IHS Holding Ltd and agrees to improved and volume-based commercial terms for MTN Nigeria’s future network expansion plans, resulting in a once-off accounting charge to HEPS and EPS for 2017. Shareholders are advised that MTN Group (through MTN Nigeria Towers SPV B.V.) has assigned its shareholder loan of approximately USD231m (R2.8bn) which was due in 2024/2025 to IHS Holding Ltd (together with other group companies, “IHS”) and IHS has facilitated certain network volume commitments and provided more attractive terms for MTN Nigeria’s future network rollout applicable from 2018 onwards. The agreement allows MTN Nigeria to continue to invest in its network more efficiently, and further simplifies MTN’s interests in IHS. The agreement will enable MTN and IHS to mutually benefit from continued investment and commitment to the rollout of broadband and data services in Nigeria. Under International Financial Reporting Standards, the operational cash flow benefits to be realised from the improved commercial terms of the future rollout are not capitalised as a prepayment and will be accounted for as and when they are realised. As a result, the assignment of the loan to IHS leads to a loss on transfer of the carrying value of the loan of approximately ZAR2.8bn or 158 cents per share for 2017 for MTN Group. This accounting loss on transfer will impact earnings per share (EPS) and headline earnings per share (HEPS) for 2017 but not earnings before interest, tax, depreciation and amortisation (EBITDA). In February 2017, MTN Group exchanged its interest in Nigeria Tower Interco B.V. (“Interco”) resulting in MTN Group having an economic interest of 29% in IHS and no longer being a shareholder of Interco. MTN Group realised a profit of approximately R6bn on this transaction recorded in its 2017 first half results. The combination of the profit from the exchange of Interco shares for IHS shares in the first half of the 2017 financial year and the loss on assignment of the shareholder loan in the second half of the year has a combined positive impact of R3.2bn to earnings in 2017. The shareholder loan arose as part of MTN Nigeria’s tower transactions whereby MTN Nigeria sold a portfolio of towers to INT Towers (Nigeria) (“INT”) in 2014 and 2015 which, through Interco, was 51% owned by MTN Nigeria Towers SPV B.V. and 49% by IHS. At the time of the original transaction MTN also acquired an approximate 15% interest in IHS. When forming INT, MTN Group (through MTN Nigeria Towers SPV B.V.) as well as IHS, provided proportionate shareholder loans to INT. These loans were subordinated and due for repayment in 2024 and 2025 with interest capitalised until 2 years prior to repayment. Note: Using an FX rate of USUSD:ZAR 12.31 as at 27 December to convert the USUSD value of the loan to ZAR. The financial information disclosed in this announcement has not been reviewed and reported on by MTN’s external auditors. |
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