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MTN Group Limited

MTN Group Limited. Final audited results for the year ended 31 December 2006. Agenda. Strategic & operational overview Phuthuma Nhleko Group President and CEO Financial overview Rob Nisbet Group Finance Director Looking ahead … Phuthuma Nhleko.

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MTN Group Limited

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  1. MTN Group Limited Final audited results for the year ended 31 December 2006

  2. Agenda Strategic & operational overview Phuthuma Nhleko Group President and CEO Financial overview Rob Nisbet Group Finance Director Looking ahead… Phuthuma Nhleko

  3. Strategic and operational overviewPhuthuma Nhleko Group President and CEO

  4. MTN Vision To be the leader in telecommunications in emerging markets

  5. Key considerations for the period… • Investcom acquisition • Integration almost complete • Synergy benefits included in 2007 budgets, including rebranding • Asset base increased • Significant interest in emerging markets, operations more competitive • Increased regulatory intervention • Margin management key • Changes in ownership levels • Increased shareholding in Côte d’Ivoire, Uganda, Botswana and Nigeria Significantly different Group going forward

  6. MTN an emerging market leader… National Player African Player Emerging Market Player 1993 - 1997 1998 - 2005 2006 Operations 1 11 21 Population 41m 274m 501m 2006 Revenue Subscriber #’s 1998 - 2005 1993 - 1997 Successfully delivering on our vision

  7. Group highlightsfor the 12 months ending 31 December 2006 Group subscribers up 73% to 40.1 million Revenue 49% higherto ZAR 51,6 billion against 12 months to 31 December 2005* EBITDA up 53% toZAR 22,4 billionagainst 12 months to 31 December 2005* PAT increased to ZAR 12,1 billionfrom ZAR 6,7 billion against 9 months to 31 December 2005 Adjusted headline EPS increased by 73% to 584.7 cents against 9 months to 31 December 2005 EBITDA margin increased to 43.4% from 42.4% against 12 months to 31 December 2005* Dividend of 90 cents per share declared * Unaudited

  8. Subscriber growth... MTN Group Split of subscribers by region Comparative annual growth 40.1 No. of operations: 21 +110% Population (m): 501 +83% Subscribers (m): 40.1 +73% 12% 23.2 49% 27% 73% 39% Subscriber growth increasingly diversified

  9. Relative ARPU performanceUSD per month South African ARPU: ZAR164 (Dec 05 – ZAR167)

  10. Relative EBITDA margins Group Region Key operations New Operations: Iran – 21 October * 12-month comparison Group EBITDA margin expansion

  11. Risk management Governance structures • Comprehensive risk management structures aligned to King II and best practice • Ultimate board responsibility with dedicated group executive risk officer Political / regulatory regimes • Senior executive and board involvement on the ground • Not politically aligned • Commitment to local and regional regulatory forums • Constructive engagement • Extensive pre-investment research – deep understanding • Strong corporate responsibility –social investment, governance, tax etc • Positive contribution through broadbased infrastructure roll-out Committed and involved

  12. Risk management (cont.) Emerging market risk • Expanded regions/ markets limit concentration exposure to any single region • Co-investment with local partners • Experienced and committed local management teams limit execution risks • Detailed market analysis and robust business plan preparation contributes to informed risk decisions FX risk • Local currency funding maximised to limit revenue / liability mismatch • Operations hedge foreign currency obligations where possible • Translation risk not hedged - income statement impact • Diversification of assets and earnings reduces risk profile

  13. South & East Africa (SEA) region Deeper mobile penetration over last 12 months 26% increase in subscribers

  14. SEA region – OverviewBotswana, South Africa, Swaziland, Zambia, Uganda, Rwanda • No contribution from Investcom, inclusion of Uganda and Rwanda, previously in MENA • Appointment of key roles in progress • South Africa key driver of growth and profitability • Strong performance from Uganda, subscribers up 63% • Zambia negatively affected by slow start to roll-out Revenue EBITDA Subscribers South & East Africa EBITDA margin 35.2%

  15. SEA region South Africa – Financial and operational highlights • Market share improvements ~ 36% up 1% • Highly competitive market • Expanded distribution channels • Customer centricity through improved service initiatives • Impact of regulatory changes still unclear • Margins still healthy due to effective cost management • Continued focus on data revenue growth *Unaudited 12-month period Subscribers/ARPUmillion 12,483 MTN well positioned for change

  16. SEA region South Africa – Financial and operational highlights (cont.) ARPU ZAR per month • Increased prepaid ARPU’s due to lower denomination vouchers • Prepaid pricing segmentation • Lower end packages boost postpaid subscribers but negatively affect ARPU • MyChoice TopUp: 582k from 281k • MyCall 100: 806k from 761k • MOU decline slowing due to larger subscriber base Mar-04 Mar-05 Dec-05 Dec-06 Avg. MOU per sub 155 140 129 124 ARPU pressure

  17. SEA region South Africa – Data highlights Data revenueZARmillion • SMS approx 79% of total data revenue • 3G roll-out on track • Expanded to 793 from 431 at June 2006 • Approx 20% subscribers under coverage • Approx 280k users at December 2006 • Good HSDPA uptake • Mobile money transfer system showing good over past six month – 203% increase in registered users • Data tariffs reduced to improve competitive position and stimulate traffic 1,938 1 082 905 670 As % of MTN SA revenue* 5,9% 5,0% 8,2% 8.0% * Includes data revenue from subscriptions from Dec 05 Competitive tariffs

  18. SEA regionSouth Africa – Regulatory changes • Electronic Communications Act (ECA) Promulgated on 19 July 2006 • Licence conversion process still pending • Existing rights and obligations “protected” - new terms still unclear • Interconnect Ongoing dialogue • COA/CAM submitted to ICASA in March 2007, awaiting approval • Market definitions as prescribed in ECA now proposed • Re alignment of ICT BEE charter in process New DTI codes announced in December 2006 • Other • Court rules Cell C CST roll-out irregular – interconnect settlement pending • MNP operational from 10 Nov 2006 – limited impact, 40k subscribers to end Feb 2007 • RICA, MTN ready but final implementation still outstanding Constructive engagement

  19. West & Central Africa (WECA) region Footprint opportunities significantly increased G. Conakry: Launch 18 April * Acquired as part of Investcom LLC acquisition 80% increase in subscribers

  20. WECA region - OverviewNigeria, Ghana, Cameroon, Côte d’Ivoire, Benin, Congo B, G. Conakry, Liberia, G.Bissau • Low regional penetration at 19% offers opportunity for growth • Investcom merger contributing ~ 42% of net movement in subscribers • Increasingly competition and regulatory activities • Strong performance from Cameroon, subscribers up 43% • Integration of Investcom operations well advanced with focus on branding and products Revenue EBITDA Subscribers Strong contribution to the Group, region dominated by Nigeria

  21. WECA regionNigeria - Financial & Operational Highlights • Market share up from 45% to 46% • Strong EBITDA margin through cost savings • Regulator activities: • Expanding GSM license with unified licence and 3G license (awarded in last week of March 2007 for $150m) • Award of 5th GSM operator • New interconnect rates effective from 22 September 2006 • Broadening shareholder base still a priority • Tax holiday ending 1 April 2007 • Uncertain outcome of 2007 elections *Unaudited 12-month period Subscribers/ARPU 12,281 Pre Dec 05, subscribers and ARPU based on 30 day activity window Increasingly competitive

  22. WECA regionNigeria – New product offering Quarterly analysis of total MOU and net connections • Launch of segmented value proposition products on 22 September 2006 • On net calling preference • Growth from returning inactive MTN subscriber • Incremental minute of use from both existing and returning inactives • Brand preference at 54% from 49% • Customer satisfaction at 80% from 69% • Churn at 30% from 35% last year • Pressure on network quality currently being addressed MTN successfully repositioned

  23. WECA regionNigeria – Network infrastructure & enhancements Geographic and population coverage • Network infrastructure • 2 518 base stations • Continuing expansion of transmission backbone (~3600km) • Acquisition of unified licence & VGC (fixed wireless PTO) aimed at corporate market • Capacity of ~13.5m subscribers in core network • Pressure on network: focus shifted to radio expansion to accommodate higher subscriber numbers and expansion into new areas Most competitive coverage and backbone

  24. WECA regionGhana – Financial & operational highlights • Market share loss stabilised in early 2007 • Increasing competition • Market penetration at 22% from 12.76%, fuelled by decrease in entry barriers (handset / SIM) • Privatisation of 2 licenses • Aggressive roll-out to improve network quality well underway by December 2006 • Approx 100 BTS’s/month (Sep-Dec) **Unaudited 12-month period Subscribers/ARPU Dec 06: 6 month ARPU figure * * * * * Investcom LLC 12 month disclosure Successfully integrated

  25. Middle East & North Africa (MENA) Footprint opportunities significantly increased with greenfield areas * Acquired as part of Investcom LLC acquisition New – Launched in 2006 New subscribers acquired over period

  26. MENA region – OverviewAfghanistan, Cyprus, Iran, Sudan, Syria, Yemen Revenue EBITDA Subscribers • Under-penetrated region with high growth potential • Aggressive roll-out in Sudan, Iran and Afghanistan contributing to low EBITDA • High revenue share in Syria and Iran • Strong growth in Syrian subscribers to 2.2m from 1.5m Regional consolidation concluded

  27. MENA region Iran – Highlights • MTN’s market sizing increased to 46m (2011) from 31m (2015) estimated in 2005 • Pioneer in privatisation • Low year end subscriber numbers due to • Late launch • Slow regulatory approval processes • Limited coverage • Competitive pressure • Current daily run rate now > 15 000 • Efficient subscriber centric activation process - registration within 15 minute • Strong brand awareness within 3 months • Costs well contained Subscribers/ARPU Slow start challenges identified and rectified

  28. MENA regionIran – Infrastructure • Significant vendor finance secured • Roll-out behind schedule due to challenges • Local ownership requirements • High land costs • Environmental procedures • Access to intercity transmission • Roll-out progressing well • 4 switches deployed with a core capacity in excess of 1m subscribers • Risk of sanctions mitigated by: • Diverse suppliers and contractual commitments • Outsourcing (network and IT) • Front end supply Coverage statistics Cities & BTS’s roll-out

  29. MENA region Iran – License obligations and regulatory • Year 1 roll-out most onerous • Higher connection fee retained on postpaid • Competitive pressure reduced on prepaid • Lower connection fee negatively impacts business targets • Peak funding of $1.9m in 2009 whereas previously targeted at $1.5m in 2007/8 • Low tariffs not offset by higher usage • Interconnect terms contained in Irancell licence, agreements to be finalised in 2007

  30. MENA region Sudan • First full year of operation • Market share growth to 25% • Regulatory & logistical challenges • Despite roll-out challenges • 36% of population covered • 3G and GPRS launched • 662 BTS’s and 3 MSC’s • Introduction of aggressive CDMA competitor • ARPU dilution limited, low tariffs • Dinar appreciation of 15% vs USD in 2006, positive contribution to margin **Unaudited 12-month period Subscribers/ARPU Dec 06: 6 month ARPU figure * 19 * 16 * * Investcom LLC 12 month disclosure High growth market, 800k net adds for the year

  31. Financial overviewRob Nisbet Group Finance Director

  32. Financial trends Group revenueZAR billion Group EBITDAZAR billion Adjusted HEPS*cents CAGR 03FY – 06FY 38% CAGR 03FY – 06FY 28% CAGR 03FY – 06FY 42% * Basic headline earnings Dec 2006 – 606.5 cents (December 2005 – 359.8 cents) Adjustment made to eliminate deferred tax asset raised by MTN Nigeria and put option impact

  33. Key accounting issues • Investcom • Consolidated from 1 July 2006 • Cash-flow hedging of purchase price resulted in gain of ZAR 2.5bn • Set off against investment • No tax provided on gain (ZAR 680m) • PPA amortisation – ZAR 587m (an additional ZAR 72m relates to Uganda) • Increased ownership • Nigeria: 6.9%, ZAR 2,7bn from 75% to 82% (77% to 84% incl. put option impact) • Cote d’Ivoire: 17.34%, ZAR 363m from 51% to 68.34% • Botswana: 7%, ZAR 146m from 44% to 51% (remained as a JV) • Uganda: 45%, ZAR1,577m from 52% to 97% (fully consolidated from 1 July) • MTNI (Mauritius) • Forex gain (ZAR 452m) in MTNI Mauritius (ZAR functional currency), after transfer to reserves below • Early adoption of IAS21 – ZAR 242m gain taken to reserves instead of Income statement (Dec 05 – loss of ZAR 79m – restated numbers) • Deferred tax credit (ZAR 145m) on timing differences

  34. Earnings per share HEPS (584,7 cents) • Adjusted headline earnings items: • Deferred tax credit ZAR 825m (MTN share ZAR 650m) • Impact of put option (MTN share ZAR 268m) (Finance costs – ZAR 212m, Fair value adj. – ZAR 120m, Forex loss – ZAR 89m, Minority share profits – ZAR 153m)

  35. Income statement Net profit excluding Investcom 11 241

  36. Exchange rates analysis If Dec 2005 rates are applied to Dec 2006 PAT there is an impact of -11%

  37. Revenue analysis % change * Including MTN Network Solutions

  38. Interconnect Revenue Net Interconnect Net Interconnect % Revenue analysis (% of Revenue) Nigeria Interconnect ZAR million Dec 2006100% = ZAR 51 595m South Africa Interconnect ZAR million • Strong South Africa interconnect revenue growth offset by higher interconnect cost growth due to “All net” proposition • Regulatory focus on interconnect rates • New Nigerian interconnect tariffs effective 22nd Sep reducing mobile to mobile tariffs significantly and increasing mobile to fixed and fixed to fixed. Negative impact offset over last quarter by value proposition • Equipment sales contribute less due to SA impact being diluted • Interconnect revenue unchanged from 2005 at 20% * 9 months

  39. EBITDA analysis * Including MTN Network Solutions

  40. EBITDA trends EBITDA (R22 413m) • Strong contribution from WECA • Nigeria margins up to 57% from 52% on strong cost control initiatives, especially staffing and fuel • RSA margins lower compared to prior twelve months on higher interconnect costs • Accretive EBITDA contribution from full consolidation of Uganda • Impact of lower margins from start – up operations i.e Iran and Sudan • Dilution impact of revenue share arrangements in Iran and Syria * * 9 months

  41. Profit after tax(excluding Nigeria deferred tax asset) % change * Including Network Solutions ** Excluded deferred tax asset: 2006 – R825 million (Dec 2005 – R427 million)

  42. Dec-07 Dec-08 Dec-09 Dec-10 Tax considerations Effective tax rates% Tax – effective rate • Bulk of disallowed expenses relate to unproductive interest on Investcom acquisition debt • Prior year adjustment relates predominantly to Cameroon • Investcom effective tax rate has limited impact at this stage Looking forward • Pioneer status in Nigeria expires on 31 March 2007 • Forecast rate for 2007 previously reported at 47%, now reported 52% is due to the deferred tax effect revised depreciation charge in MTN Nigeria • Corporate tax rate is 30% plus the impact of a ~2% education levy • Group effective rate expected to increase based on • Nigerian tax • Non deductible interest Nigeria - expected trends in effective tax rates Illustrative Currently deferred tax asset reversed for adjusted headline earnings

  43. Balance sheetAssets

  44. Balance sheetEquities and liabilities

  45. Analysis of net debt position * Including long-term borrowings, short-term borrowings and overdrafts ** Including MTN Network Solutions # Includes debt from MTNI Mauritius

  46. Interest bearing liabilities splitas at 31 December 2006 • Undrawn facilities of over ZAR 10 billion, mainly at MTN Holdings • No FX exposure on SA debt • Repayment of more than US$ 850m of Investcom acquisition debt from subsidiary dividends • De-leveraging results in Net debt to EBITDA of 1.02 • Funding of underlying operations continued focus for 2007 to ensure • Local balance sheet efficiency • Better utilization of cash across the Group 1 879 6 203 24 897 70% of USD hedged

  47. Cash flow statement

  48. Capital expenditures (incl. software) * Including MTN Network Solutions

  49. Capital expenditure analysis CAPEX (R9 778m) • 60% of capex due to Nigeria and RSA invested in network coverage and capacity • RSA focus on 3G coverage (close to 800 sites rolled out to date) • Nigeria $100 million investment in fibre network • Roll – outs in Iran and Sudan accelerating in last quarter CAPEX as a % of revenue

  50. Looking forward..Phuthuma Nhleko

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