SENS Note - 18 November 2004
MTN interim results September 2004
 
Group revenue increased by 22% to R13.7bn. South African mobile operations produced an increase of 15% to R8.2bn, while MTN Nigeria experienced growth of 38% to R4.6bn, despite the rand strengthening against the Naira during the period under review. EBITDA increased by 29% to R5.6bn and the group’s EBITDA margin increased from 38.4% to 40.9%. MTN South Africa recorded a pleasing improvement in EBITDA margin to 32.8%, compared to a full year margin of 30% for the 12 months ended 31 March 2004. This positive trend has been driven mainly by tighter control of distribution costs. However, the competitive environment is continually intensifying, with a resulting increase in postpaid subscriber acquisition costs. This will exert pressure on the EBITDA margin going forward. All our international operations maintained EBITDA margins in the 43% to 54% range. A 40% increase in depreciation charge from R1bn to R1.4bn was the result of the accelerated network roll-out in Nigeria and decrease in the estimated useful life of certain fixed assets. Despite increased borrowings by MTN Nigeria which has now fully drawn down on its accessible USD345m medium- term loan facilities, net finance costs declined by 53% to R127m. This decrease is primarily as a result of the substantial cash balance in MTN South Africa. If foreign exchange gains of R4m to September 2004 and foreign exchange losses of R91m to September 2003 were excluded, the decrease would have been 27%. Taxation increased by 28% to R720m. This includes R84m of STC payable on the group’s dividend payments made in July 2004. The group’s effective tax rate reduced to 17.8%, mainly because MTN Nigeria is tax exempt due to its pioneer status, coupled with the increase in the deferred tax asset of R187m on capital allowances. Adjusted Headline EPS increased by 34% to 165.8c. South African operations contributed 85.5c or 52% of total Adjusted Headline EPS. This represents a 50% increase compared to the same period last year. Adjusted Headline EPS derived from the international operations increased by 21% to 80.3c.

Prospects
During the period under review, MTN`s vision was updated to align its current position on the continent with its growth aspirations and strategic objectives. The group’s vision is to be the leader in telecommunications in developing markets. As in the past, the group will continue to explore value-enhancing international expansion opportunities in sub-Saharan and North Africa, as well as the Middle East, in line with its expanded vision. Such investment opportunities will be evaluated according to strategic and financial criteria to enhance shareholder returns and the group’s growth profile, while further diversifying its investment portfolio. The currently adopted conservative dividend policy of 6 - 7 times cover of adjusted headline earnings, paid annually, will be reviewed at the end of the year taking expansion opportunities into consideration. Assuming that current market conditions prevail, the board is confident that, while the competitive environment in South Africa is intensifying, the South African operation will continue to generate strong free cash flows for the group. MTN Nigeria’s continued significant capital investment programme will drive enhanced subscriber and revenue growth.
 
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