MTN Group Limited Integrated Business Report for the year ended 31 December 2009
MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Annual financial statements Book 1 – MTN Group Overview Afghanistan Benin Botswana
Cameroon Congo-Brazzaville
Côte d’Ivoire Cyprus Ghana
Guinea Conakry Guinea-Bissau
Iran Liberia Nigeria
MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Annual financial statements Rwanda South Africa Sudan
Swaziland Syria
Uganda Yemen Zambia
MTN Group Overview Book 1
MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Annual financial statements MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Annual financial statements 1 ld 2006 2006 Dec Dec 584,7 40,1
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 2007 2007 Dec Dec 681,9 61,4 Adjusted HEPS 2008 2008 Dec Dec
904,4 90,7 Subscribers 2009 2009 Dec Dec 754,3 116,0 31 December 2009 31 December ld 2006 2006 Dec Dec 22,4 56,6 2007 2007 Dec Dec 31,8 73,1 ⁄ 2008 2008 Group overview Dec Dec 43,2 102,5 Revenue EBITDA 2009 2009 Dec Dec 46,1 111,9 (Rm)
Contents 114 108 20 16 12 91 70 58 42 32 26 4 3 2 6 Group president andCEO’s report Group executive committee Group directorate Chairman’s statement Group structure Geographic footprint Group profile Glossary managementandinternalcontrolRisk Corporate governance report report Abridged sustainability Africa region EastandNorth Middle West andCentral Africa region andEastAfricaSouth region Group chiefoperating officer’s report
Group overview Sustainability review Operational review Business review Group overview Profile
Launched in 1994, the MTN Group Limited (MTN Group) is a multinational telecommunications
group offering cellular network access and business solutions. It has mobile licences across
21 countries in Africa and the Middle East and as at the end of December 2009, recorded
more than 116 million subscribers. The MTN Group is listed on the JSE Limited under the
share code: “MTN”.
MTN Group operates in three regions:
South and East Africa (SEA): MTN South Africa, MTN Swaziland,
MTN Zambia, MTN Uganda, MTN Rwanda and Mascom Botswana.
West and Central Africa (WECA): MTN Nigeria, MTN Cameroon,
MTN Congo-Brazzaville, MTN Côte d’Ivoire, MTN Benin, MTN Ghana,
MTN Guinea-Bissau, MTN Guinea Conakry and Lonestar Liberia.
Middle East and North Africa (MENA): MTN Irancell,
MTN Afghanistan, MTN Cyprus, MTN Sudan, MTN Syria and
MTN Yemen.
2 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Group overview Geographic footprint 3
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Group overview
Group overview Sustainability review Operational review Business review Group structure
MTN South Africa MTN Holdings 100% 100%
MTN International 100%
MTN Mauritius 100%
+ 100% 30% 70%* Service Providers MTN Swaziland MTN Cameroon
100% 96% 100% Network Operations MTN Uganda MTN Congo-Brazzaville
100% 53% 76%* Business Solutions Mascom Botswana MTN Nigeria
55% 65% MTN Rwanda MTN Côte d’Ivoire
98% 49% MTN Zambia MTN Irancell
*Legal ownership
4 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Group overview 5
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport MTN Sudan 85% MTN Yemen 83% Lonestar Liberia 60% MTN Ghana 98% MTN GuineaConakry 75% 31 December 2009 31 December ⁄ Group overview Belgacom InternationalCarrier Services 20% MTN Dubai 100%
MTN Guinea-Bissau 100% MTN Syria 75% MTN Benin 75% MTN Afghanistan 100% MTN Cyprus 51%
Group overview Sustainability review Operational review Business review Chairman’s statement
The intensive capital investment programme of recent years is designed to stand the Group in good stead in the years to come as competition intensifies.
Cyril Ramaphosa Chairman
Innovating and delivering In its 15th year of operation, the MTN Group passed the 100 million subscriber mark with a robust and resilient operational performance in the majority of the countries in which it operates. This was made possible by a firm adherence to our strategy, including investing heavily to extend the quality, coverage and capacity of the communications network across the 21 markets in which we operate.
6 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review desig The intensive capitalinvestment programme ofrecent years is the South African randalsoprovedthe South African aconsiderablehurdle. currency,currencies otherthan itsreporting thestrength of For anorganisation thatgenerates mostofitsrevenue in Trust Barometer inSeptember 2009. innovative brandinthetelecoms sector” award in theAsk Afrika jurisdictions. They alsohelpedMTN Group winthe “most in maintainingorgrowingshare inalmostallofits market well asothercustomised offerings, theseassisted theGroup MTN Zone and dynamictariffing MTN MobileMoney, as successful andwaswell received bysubscribers. Alongwith offering customersproved sector-specific andservices, products adoption intheyear ofasegmented approach to themarket, requirements.competition andincreased regulatory The Group’s pressure onconsumers’ disposableincomes, aggressive inthemidstofmounting with itsnovel productsandservices andMTNHard showed timesencourageinnovativethis thinking health ofmany inwhichtheGroup ofthecountries operates. to whichremain the ortocycle, prices moveskey incommodity But, understandably, itisnot immune to achallenging economic established valueproposition, MTN wasableto weather thestorm. With astrong itscontinuedcommitmentto itsmarkets, brandand investment andgrowth.supported havetightened, limitinglendingwhichwould otherwise economy byanestimated contracted 1,7%.Credit markets Across theglobe, millionsofjobswere lostin2009astheworld fromterm, theeconomicmalaiseof2008and 2009. competition intensifies fully andthe world recovers, inthelonger 7 ned t
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport o standtheGroup ingoodstead intheyears to comeas 31 December 2009 31 December ⁄ Business review
share, from 181centsfor 2008. cover resulted inapayout to shareholders for 2009of192centsa dividend to shareholders. This effective relaxation of MTN’s dividend that capitalexpenditure hasnowpeaked,theGroup increased its But, thanksto continuedstrong cashgenerationandtheexpectation per share sinceinception,to 803,2centsfrom 836,5centsin2008. As aresult, MTN Group itsfirstdrop reported inheadlineearnings essential services andinformation. essential services based educationandhealth,to helpingdisseminate various socioeconomic development are many –from facilitatinginternet- telephony’sand development. Mobile applicationsinassisting effect asbetter, more reliable communicationencouragestrade of ourcustomers, butithasthepotential to have aneven bigger hasalreadyAfrica hadasignificantly onthelives positive impact The expansionofmobiletelephony Eastand across theMiddle and thecommunitiesinwhichitoperates. to enhance itsengagementwithcustomers,worked employees began to gainmomentuminmany markets. The Group also registrationSIM-card andmanaging rates) mobiletermination requirementsthe footprint, newregulatory asvarious (suchas withregulatorsthe Groupacross stepped upitsco-operation MTN Group value. 2009, withisanimportant During it interacts transparent relationshipsMaintaining andconstructive withthose so stimulatingeconomicgrowth. companies to continueto invest inbridging thedigital divideand regime,predictable regulatory mobile to allowcash-generating isessential. itserves market This requires areasonable and andthemobile oftheMTN network Sustaining theperformance Operating sustainability
Business review Sustainability review Operational review Group overview Chairman’s statement continued
For MTN, sustainability is about ensuring sound practices are part year running in 2009, employees of MTN Yemen won the Group’s of its core business. In 2009, through the efforts of an improved first prize for this initiative. Well done to you all. Group sustainability function, the focus on the environmental, social and ethical issues that could pose an economic risk or In 2009, MTN launched a campaign to reduce deaths in Africa opportunity to MTN was heightened. Through ongoing board and from malaria, which is the number one killer of children under executive support and Group-led strategic planning, the Company the age of five on the continent. For maximum impact, the is in a better position to adapt to global imperatives and enhance Group teamed up with the Malaria Community – a coalition of stakeholder value. leading technical and advocacy groups. The aim is to help ensure 100% coverage and use of mosquito bed nets in malaria areas, In 2009, MTN Uganda won the best solution for rural services achievement of which stands to save more than four million lives award at the AfricaCom Awards in Cape Town. This was for its by 2015. This initiative is being rolled out in countries affected by MTN Google SMS offering, developed in partnership with Google the mosquito-borne disease, including Ghana, Uganda, Zambia, and the Grameen Foundation, a non-profit organisation fighting South Africa, Côte d’Ivoire, Cameroon, Botswana, Swaziland, poverty. Among the services MTN Google SMS offers is Farmer’s Congo-Brazzaville, Nigeria, Benin, Liberia, Guinea Conakry, Friend, a searchable database with both agricultural advice and Guinea-Bissau and Rwanda. targeted weather forecasts, and Google Trader, which matches buyers and sellers of agricultural produce. Addressing environmental impacts Recent studies have shown that information communications Apart from positive, direct benefits such as this, MTN also assists technologies (ICTs) can have a significant impact in reducing communities on the ground through its significant corporate energy consumption and greenhouse gas emissions. A 2008 social investment programme. It has a clear CSI mandate, which Global e-Sustainability Initiative report estimated that ICTs could is carried out through the MTN foundations already established in lessen emissions by up to 22% by 2020 through practices such as the majority of its markets. Once a year, through the 21 Days of Yello smart logistics, smart buildings, a smart power grid and reducing Care initiative, employees throughout the Group volunteer and travel through videoconferencing and tele-work. roll up their sleeves to help their local communities. The projects range from planting trees, cleaning streets, mosques and facilities MTN recognises the enabling role it can play in helping the world for disadvantaged children to building recreational centres and economy move to a lower-carbon environment. Reaffirming its soccer fields and establishing vegetable gardens. For the second commitment to reducing the impact of climate change,
8 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review supply the local community withthesurplus. supply thelocalcommunity in excess oftheaverage consumption,MTN intends infuture to without coverage. isfar As thesolarandwindgenerationcapacity radiusto peopleinanareamobile coverage previously ina50km to test MTN withanopportunity “green” technology andprovides ion batteries. The site, hometo theGroup’s tallestmast,provides energy technologies, includingsolar, wind, fuelcellsandlithium- 80 metre tower multiple onabasestationthatincorporates without accessto thenationalpower grid), MTN deployed an (anarea ofSouthAfrica Desert intheKalahari At Kleinaarpen amongothers. andRwanda, Nigeria andoperatingsolar-poweredin SouthAfrica sites inCameroon, and hydrogen inSudanandSwaziland, fuelcelltrials biogaspilots alternative energy solutionsto power basestations, includingsolar inthis efforts regard.early TheGroupof hasassessedthe viability stations, datacentres, large premises etc. MTN isproud ofits andincrease ofbase intensity theenergythe carbon efficiency results indicate thatMTN needsto accelerateto itsefforts reduce relatedenvironment risks. andmitigate climate-change The to reduceofitsbusinessonthe theimpact at opportunities 2009theGroup intensity, analyseditsowncarbon In looking practices. adding to thegrowing choruscallingfor environmentally friendly change aheadoftheUnited Nationsclimate changesummit, the Group hassigned theCopenhagen Communiqué onclimate 9
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
planet, profit and a positive legacy planet, profit andapositivefor generations legacy to come. of climate changeandiscommitted to theconceptofpeople, a East,MTNWith isacutely apresence andtheMiddle inAfrica endeavours to prevent any incidentfrom becomingacrisis. country, it responsethe nationalemergency teams inevery response measures events during ontheground. Supporting flagging providing potential crises; control andappropriate aimed atboostingtheGroup’s managementcapability; risk command, control, communicationsandinformation-relay facility 24-hours aday, seven days a week. The centre isanintegrated opened inJohannesburgto allemployees, to provide support 2009,theMTNchallenges. Group operationscentre In crisis was inwhichtheGroupcountries operates facepoliticalandsocial isparamount.Many The safety ofMTN peopleeverywhere challenging MTN to sustainandimprove onthisposition. publication. Awards suchasthisencourageusto dobetter, compiled for BusinessWeek business , aninfluentialinternational ofNintendo, GoogleandApple.included thelikes was The survey Other companiesinthe top 10 management consultingfirm. World’s byAT Best40GlobalCompanies survey Kearney, aleading environment. inthe 2009,MTN achieved In atop 10ranking the Group’s many endeavours to provide arewarding work difficult environments) andcontinues based inparticularly MTN recognises ofitsemployees thevitalcontribution (some Appreciating employees war e of how vulnerable these markets are to theadversee ofhowvulnerablethesemarkets impact
Business review Sustainability review Operational review Group overview Chairman’s statement continued
In 2009, MTN stepped up its fight against fraud, implementing I would like to thank all members of the board for their active various improved fraud prevention and detection mechanisms, participation and wise counsel in 2009 and look forward to more which included the implementation of a Group-wide fraud active debate and considered advice in the year ahead. incident register, conducting fraud risk assessments in most operations and the implementation of improved whistleblowing I would also like to congratulate management for the Group’s mechanisms. robust performance in difficult times. Group president and CEO Phuthuma Nhleko recently announced that he would not Corporate governance be renewing his long-term contract of employment when it Sound and thorough corporate governance is essential to ensure ends on 30 June 2010. However, he has agreed to continue in his business sustainability. MTN endeavours to make certain that it current role until March 2011, to allow for a seamless handover complies fully with corporate governance best practice and with to his successor, who has yet to be appointed. On behalf of the the requirements of the King code. In line with the guidelines board, I would like to applaud Phuthuma for his outstanding on the ideal composition of the board of directors, three new vision and leadership for the past eight years. Under his tenure, independent, non-executive directors were appointed, effective MTN has grown into a leading emerging market success story January 2010: Dawn Marole, Peter Mageza and Alan Harper have and expanded to become the number one provider of mobile a broad range of expertise and experience and their positive telecommunications services across Africa and the Middle East. presence is welcomed. In 2009, Phuthuma won The Sunday Times Top 100 Business Their appointments follow that of Nazir Patel, the new Group Leader of the Year award, voted by his peers who are the CEOs finance director, to the board with effect from 27 November of the top 100 listed companies in South Africa. At the time, he 2009. Nazir replaced Rob Nisbet, who resigned following acknowledged that much of his success came from the talented 14 distinguished years of service as Group finance director. We team around him. I believe it is this deep and broad skills set thank Rob for his important contribution and wish him well. We among MTN senior management that will continue to underpin welcome Nazir, who brings with him a wealth of knowledge from the Group’s success. The board is confident in the leadership of across the globe. MTN and of its consistent strategy to consolidate and diversify its
10 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review int base;leverageearnings itssignificant as footprint well asstrong 11 telecoms group African andbecausefootball it isthepre-eminent MTN’s global mobilesponsorshipoftheevent isfitting given that tosoil, regard wantsallAfricans and SouthAfrica itastheirown. time inthetournament’s thatitisbeingheldonAfrican history World Cup™ isreaching inAfrica fever pitch. This willbethefirst As excitement Isign offthis aboutthefirst2010FIFAreport, forwardLooking to2010 shareholder, to aminority 2,2% stake dilutingMTN’s to 97,8%. stake 2009MTN inthebusiness. Zambiaissueda In local participation andacross inSouthAfrica itsfootprint to stimulateskills training pursue otherinitiatives, development and suchasenterprise conditionsare alsocontinuesto conducive. when market It ownership programme operations inrespectofitsSouthAfrican deal. MTN remains committed to establishinganotherBEEequity of Newshelf, vehicle thespecialpurpose setupto facilitate the the schemematured andtheGroup completed theunwinding history. 2009, the economiclegaciesofcountry’s During tosomeof 3 000 MTN staff in inaneffort rectify SouthAfrica, ownershipprogrammethe BEE equity for more than 2002,itwasPhuthuma andimplemented whoarranged In convergence technologies. ofvarious ellec tual capacity; andto capitaliseonthetrend towards the tual capacity;
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
M Chairman Cyril Ramaphosa It’s Africa’s time. thebrandanddemonstratingourleadership.bolstering the Group’s “Can Do” approach and big”“think attitude, further the promise ofbeingaunited andunitingforce. alsodisplays It sponsor oftheworld’s event, MTN islivingupto largest sporting competinginthecompetition.As countries thefirstAfrican subscr is watched byasignificant percentage ofitsmore than100million ar ch 2010 ibers . MTN isproud to operate infive ofthesix African Ke Nako.
Business review Sustainability review Operational review Group overview Group directorate
Back row: from left to right MJN Njeke* NP Mageza* DDB Band* AT Mikati* MC Ramaphosa* JHN Strydom*
Front row: from left to right KP Kalyan* NI Patel*
*Profiles appear on pages 14 and 15 of this report.
12 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review 13
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
Front to row: from right left Back row: from left toBack row: from right left RS Dabengwa J van Rooyen AF van Biljon MLD Marole PF Nhleko A Harper * * * * * *
Business review Sustainability review Operational review Group overview Group directorate continued
1 MC Ramaphosa (57) 3 AF van Biljon (62) 5 J van Rooyen (60) BProc, LLD (HC) BCom, CA(SA), MBA BCom, BCompt (Hons), CA(SA) Independent non-executive director and chairman Independent non-executive director Independent non-executive director Board committee membership Board committee membership Board committee membership Nomination, remuneration, human resources and Chairman: Audit committee. Chairman: Risk management and compliance corporate governance committee. Other directorships committee and member of audit committee. Other directorships Directorships: Director of Hans Merensky Holdings (Pty) Other directorships Founder and executive chairman of Shanduka Group Limited, St Augustine College of South Africa, Chairman Director of various companies in the Uranus Group, (Pty) Limited, non-executive chairman of The Bidvest and trustee of Standard Bank Group Retirement Fund Pick n Pay Stores Limited, Exxaro Resources Limited, Group Limited. Joint executive chairman of Mondi and Liberty Group Pension and Provident Funds. and Trustee of the International Accounting Standards plc and Mondi Limited. Non-executive chairman of Skills, expertise and experience Committee Foundation. SASRIA Limited, non-executive director of SAB Miller Alan has held the position of the group financial director Skills, expertise and experience plc, Macsteel Global BV, Alexander Forbes Limited and for Truworths Limited, The Greatermans Checkers Group, Jeff is a founder member and CEO of Uranus The Standard Bank Group Limited. Cyril is also a director Sun International, and The Standard Bank Group from Investment Holdings (Pty) Limited and previously of Kangra Coal (Pty) Limited, Assore Limited and TBWA 1975 to 2002. In 2002, he established a specialised served as CEO of the Financial Services Board. He is Hunt Lascaris Holdings (Pty) Limited. financial services company under the name of Van Biljon also founder member and former president of the Skills, expertise and experience & Associates. Past non-executive directorships include Association for the Advancement of Black Accountants Previously chairman of the Constitutional Assembly Alexander Forbes Group, Peermont Global Limited and (ABASA) and was chairperson of the Public Accountants and the only chairman of the specially formed Black Sage Group Limited. and Auditors Board in 1995. Economic Empowerment Commission. He was also a member of parliament, secretary general of the ANC 4 MJN Njeke (51) 6 AT Mikati (37) (Lebanese) and secretary of the National Union of Mine Workers. BCom, BCompt (Hons), CA(SA), H Dip Tax Law BSc Cyril is currently on the national executive committee Independent non-executive director Non-executive director of the ANC and has also received several honorary Board committee membership Board committee membership doctorates. Audit committee and risk management and Nomination, remuneration, human resources and compliance committee. corporate governance. 2 PF Nhleko (50) Other directorships Other directorships BSc (Civil Eng), MBA Director of various companies at Kagiso Group, CEO of M1 Limited (an international investment Executive director: Group president and chief executive Lengau Logistics (Pty) Limited, ArcelorMittal SA, Ivolve group with a strong focus on the telecommunications officer Procurement & Rental Partner, Metropolitan Health industry). A director on some M1 Group subsidiary Board committee membership Group, Metropolitan Holdings Limited, NM Rothschild boards as well as EZ-Link, B-Pro Limited, B-Jet Limited, Chairman of Group executive and steering committee. and Sons (SA) (Pty) Limited, PSU Revenue Management Horizon Global Services, IMC, Mint Trading, Unioil and Attends various board committee meetings ex officio. trading as PSU International, RTG Fleet Services Fanconndale Group. Other directorships (Pty) Limited, Resilient Property Income Fund Skills, expertise and experience Director of various companies in the MTN Group. Limited, Serengeti Properties (Pty) Limited, Salvage While completing his BSc in the United States, Azmi Director of Newshelf 664 (Pty) Limited and Engen Management and Disposal (SMD), Sameh Properties founded T-One, a telecoms company providing long Limited, non-executive chairman of Worldwide and Silver Unicorn Trading. distance services between the United States and other African Investments Holdings (Pty) Limited, the Skills, expertise and experience international destinations. He became CEO of Investcom GSMC association and Trustee of the Alpine Trust. Johnson is Chairman of Metropolitan Holdings, and, under his leadership, sales grew from USD30 million Skills, expertise and experience ArcelorMittal SA and Resilient Property Income Fund. He to USD1 billion, over less than seven years. At 33, he was Previously a director of Johnnic Holdings Limited, served as a partner at PricewaterhouseCoopers and is a the youngest CEO of a Middle Eastern publicly traded Nedbank Limited, The Bidvest Group Limited, Tsogo past chairman of the South African Institute of Chartered company. Sun KwaZulu-Natal (Pty) Limited, Alexander Forbes Accountants. Limited and co-founder of Worldwide African 7 DDB Band (66) Investments Holdings (Pty) Limited. Prior to joining BCom, CA(SA) MTN, he also served at Standard Corporate Merchant Independent non-executive director Bank. Board committee membership Chairman: Nomination, remuneration, human resources and corporate governance, alternate member of risk management and compliance committee.
14 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review 15 MTN’s boards. subsidiary onanumberof andserves and acquisitionactivities inseveral oftheGroup’s hasparticipated function, mergers for theGroup financialmanagementandaccounting Since NazirjoinedtheMTN Group, hehasbeenresponsible inter accountantwithwide He isaqualifiedchartered andexperience expertise Skills, companiesintheMTNDirector ofvarious Group. directorships Other boardAttends various committee meetingsexofficio. Boar Group Finance director BCom, BCompt (Hons),CA(SA) NIPatel (53) 9 Australia.Melbourne, Commission of and economistattheElectricity Victoria, senioreconomistattheChamberofMines Africa, Southern Limited inLondon, generalmanager, corporate, for Shell ExplorationandProductionat ShellInternational (Pty) to thatshewasseniorbusinessdev ofKgontsiHoldings. iscurrently chairman Prior Koosum andexperience expertise Skills, Sweden. Solutions,Omega Risk andthe Tallberg Foundation in Company, (London), Steel, EdgoMerap McDonald BankNot South African Director ofStandard BankGroup, Airways, SouthAfrican directorships Other managementandcompliance committee.of risk resour ofthenomination,remuneration,Member human Board c directorIndependent non-executive (London BusinessSchool) West BCom (Law)(Hons)Economic, ofDurban University 8 KP Kalyan (55) and CEOofthePremier Group Limited. Int Director Myriad ofBusinessAgainst SouthAfrica, Crime directorships Other Limited Previously asmanaging director ofCNAGallo served andexperience expertise Skills, Bidvest Group Limited. Limited,Africa Standard BankGroup Limited and The ernational HoldingsBV,ernational The Standard BankofSouth national experience in Europe and the Middle East. East. inEuropenational experience andtheMiddle ville; Senior Executiveville; Senior ManagementProgramme d c ces and corporate governanceandmember ces andcorporate , CEOof The Argus HoldingsGroup andchairman ommittee membership ommittee membership
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport e Company, Mint SouthAfrican elopment manager elopment manager 31 December 2009 31 December Abuse). ofPOWAchairperson (People Opposing Women ofFinance.an adviserto theMinister Sheisthecurrent and boardregulations as forpolicy financialservices sect Dawn’s career inthefinancialservices history, primarily andexperience expertise Skills, Investment.Limited, JPMorgan SSAandDEMA Incwala Limited, (Pty) Titanium (Pty) RichardsBay Mining Investment HoldingsLimited,Hlumisa RichardsBay Limited Resources (Pty) Incwala Bank, Director atAfrican directorships Other managementandcompliancecommittee.Risk Board c directorIndependent non-executive BCom, DTE, MBA MLDMarole (50) 12 for taxationappeals.Court He isalsoaseniormemberoftheSpecialIncome Tax andforensicvaluations, litigationsupport investigations. Accountants specialisinginbusiness (SA),afirm founding par Jan isaregistered accountantanda chartered andexperience expertise Skills, Growthpoint P Director ofPublic Investment Limited, Corporation and directorships Other compliance committee Audit managementand committee andmemberofrisk Boar directorNon-executive MCom (Acc), CA(SA) (71) JHNStrydom 11 railways sectors. andinthemining industry in thebuildingservices engineer asaconsultingelectrical heworked to Eskom technology. anddistribution electrification service, Prior an executiv Prior to joiningMTN, as hewasemployed byEskom andexperience expertise Skills, Limit Newshelf 664(Pty) companiesintheMTNDirector ofvarious Group and directorships Other committee Group executive committee andsteering andtender Boar Executive MTNGroup chiefoperating director: officer (Eng),MBA BSc RSDabengwa (52) 10 or dates backto 1983.Sheisamemberofthe d c d c , Eyomhlaba Investment HoldingsLimited, ommittee membership ommittee membership ommittee membership . e director responsible for sales, customer tner of Strydoms Incorporated Chartered Chartered Incorporated tner ofStrydoms roperties Limited.roperties ⁄ Business review . ed.
A FCCA (Fellow Chartered ofCertified oftheAssociation NPMageza(55) 14 board oftrustees ofthe Vodafone UKFoundation. of chairman Vodafone Ventures ofthe andchairman to 2007,wasaboard memberoftheGSMAssociation, executive committee ofthe Vodafone Group from 1997 policy.EMF andspectrum Alanwasamemberofthe governmentrelations work, included allregulatory team,this role which heledthepublicandexternal business development, R&Dandpublicpolicy. In responsible for strategy, andregulatory corporate director for Vodafone plcfrom 2000to 2007andwas 1995 andserv forAlan previously worked the Vodafone Group from andexperience expertise Skills, Holidays plc. Ventur Director ofEaton Venture LLP, Tovo Europe Limited, directorships Other corporat Nomination, remuneration, humanresources and Remgro Limited. Chickens Limited andRainbow ontheboards of serves The Bidvest Group Limited, arena. Hecurrently inthefinancial/banking experience operations officer.extensivePrior tothishehad June 2009Absaexecutive director andgroup chief Cer Peter isaFellow oftheAssociation ofChartered andexperience expertise Skills, SAPPI Limited Director of The Bidvest Group Limited, Remgro Limited, directorships Other Audit committee. Board c directorIndependent non-executive Boar directorIndependent non-executive (Hons) BA AHarper(54)(British) 13 c countants) tified Accountants (ACCA) UKandwasuntil d c e Partnership Foundation Limited andGolden Years ommittee membership ommittee membership e governance. , and Rainbow Chickens Limited. Chickens , andRainbow es asgroup strategy andnewbusiness
Business review Sustainability review Operational review Group overview Executive committee
Back row: from left to right PD Norman** T Lowry** JA Desai** C de Faria**
Front row: from left to right NI Patel* PN January-Bardill**
*Profiles of these executive directors appear on pages 14 and 15 of this report. **Profiles of these executive directors appear on pages 18 and 19 of this report.
16 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review 17
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
Front to row: from right left Back row: from left toBack row: from right left KL Shuenyane KL RS Dabengwa* J Ramadan PF Nhleko SL Botha S Fakie ** ** ** ** *
Business review Sustainability review Operational review Group overview Executive committee continued
1 J Ramadan (53) 4 PF Nhleko (50)* MA (Inf Tech) Regional vice president – MENA region 5 NI Patel (53)* Committee membership Group executive and steering committee. 6 RS Dabengwa (52)* Group technical committee and Group tender committee. Directorships 7 C de Faria (54) Director on the boards of all MENA region operations and MTN Dubai. Degree in Finance Administration (CA) Skills, expertise and experience Regional vice president – WECA region Jamal was an executive director of Investcom LLC, which he joined in 1996 as Committee membership operations director. Prior to that he was director of IT at FTML (a subsidiary of Group executive and steering committee and tender committee. France Telecom), operating in Lebanon. Directorships Director on the boards of all WECA region operations, MTN Dubai and 2 TP Lowry (54) Uniglobe SA in France. BA (Soc Sci) Skills, expertise and experience Regional vice president – SEA region Christian was previously CEO of PT Excelcomindo Pratama, known as XL, the Committee membership largest mobile operator in Indonesia and before that he was CEO of Telekom Group executive and steering committee and Group tender committee. Malaysia, responsible for international strategy and involved in the rapid growth Directorships of investments in Sri Lanka, Bangladesh and Cambodia. Director on the boards of all SEA region operations. Skills, expertise and experience 8 PN January-Bardill (59) Tim has over 30 years’ experience in the global telecommunications industry. Dip (HR Man), BA (Eng and Phil), MA (Ling), Cert in Edu He was the vice president for Western Europe Telecom at France Telecom. Group executive: corporate affairs and MTN spokesperson Prior to that he held executive positions at Orange, France Telecom and Committee membership Cable & Wireless in Africa and the Middle East, Australia and Europe. Group executive and steering committee. Directorships 3 S Fakie (56) Director of various companies in the MTN Group. BCom, BCompt (Hons), CA(SA) Director of Afrisam (Holcim SA). Executive: business risk management Skills, expertise and experience Committee membership Nozipho was a deputy director-general in the Department of Foreign Affairs Group executive and steering committee. 2005 to 2007. She was South Africa’s ambassador to Switzerland from 2001 Directorships to 2005. She has served on the boards of, among others, FirstRand Insurance Director of various companies in the MTN Group. (Momentum) and Southern Life Insurance Companies. She served as a Director of Absa Group Limited. member of the United Nations Committee on the Elimination of Racial Skills, expertise and experience Discrimination from 2000 to 2008. Shauket has over 36 years’ experience in accounting, auditing, consulting and advisory work. In 1999, he was appointed as Auditor-General of South Africa for a seven-year term which ended in November 2006.
*Profiles of these executives appear on pages 14 and 15 of this report.
18 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review Committ Group executive: mergers andacquisitions BEcon andInternatStud;CA(EnglandWales) Shuenyane (39) KL 9 2003 by the Institute ofPeople2003 bytheInstitute Management. telecommunications industries. Hewasawarded HRPractitioner ofthe Year in field ofhuman resour Paul hasbeenanexecutive at MTN since1997.Hespentover 13years inthe andexperience expertise Skills, Trust companiesintheMTNDirector ofvarious Group. Directorships Group executive committee. andsteering C Group executive: humanresources MA (Psych) Norman(44) PD 11 for for sixyears.also worked Unilever (UK) Mar Santie wasanexecutive director atAbsaBankLimited. Shewasawarded andexperience expertise Skills, Direc companiesintheMTNDirector ofvarious Group. Directorships Group executive committee. andsteering Committ Group executive: marketing BEcon (Hons) SLBotha(45) 10 of Investec’s financedivision. corporate committ washeadofdirectinvestmentsKhumo andamemberoftheexecutive andexperience expertise Skills, companiesintheMTNDirector ofvarious Group. Directorships Group executive committee. andsteering 19 ommitt keter ofthe keter Year Federation in2002bytheMarketing She ofSouthAfrica. ee of the Chartered Accountants AidFund.ee oftheChartered Medical tor of Tiger BrandsLimited. ee ofI ee membership ee membership ee membership
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport nvestec’s operations. SouthAfrican Hewaspreviously amember ces and has worked extensively in the transport and and extensivelyinthetransport ces andhasworked 31 December 2009 31 December ⁄ Business review
to Iran in 2005 to start up the Iran operationasCOO uptheIran MTN Irancell. in2005to start to Iran in anexecutiv hercareer at started Jyoti The Standard BankofSALimited. Moved to Telkom SA andexperience expertise Skills, companiesintheMTNDirector ofvarious Group. Direc Group chieftechnologyandinformationofficer (Hons)BCom BA 12 JADesai(52) torships e position. Joined MTN Nigeria aschiefinformation officer.e position.JoinedMTN Nigeria Moved
Business review Sustainability review Operational review Group overview Group president and CEO’s report
MTN’s strategic agenda is clear: it aims to be the leader in telecommunications in emerging markets. This strategy is built on three pillars – consolidation and diversification; leveraging MTN’s footprint and intellectual capacity; and convergence and operational evolution. Phuthuma Nhleko Group president and CEO
Harnessing the benefits of MTN’s scale At no time is a clear strategic vision more necessary than in an environment of uncertainty. The global economic crisis has tested the mettle of organisations the world over and exposed the robustness – or otherwise – of their business models. While the MTN Group did not escape its share of challenges in 2009, including greater competition, more demanding regulatory requirements and slowing economies, it was another year of a strong operational performance across the Middle East and Africa.
20 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review 21 these jurisdictions. MTN maintainedorgrew share inallbutoneof its market numbers to more than116millionpeoplein21countries. of thenetwork. This facilitated growth of28%insubscriber R31,2 billionandsubstantiallyenhancingthequality atmore than in infrastructureandsystems peaking infrastructure roll outprojects, withannualinvestment theyear,In theGroup continuedto execute onmajor losses, increasedcurrency by8,5%to 878,9cents. 16,6% to 754,3cents, andexcludingofthefunctional theimpact 2008. Adjusted pershare headlineearnings decreased by margin, resulting inareading of41,1%in2009from 42,1%in putpressurechallenges inSouthAfrica onthe Group’s EBITDA fees andvarious regulatory inSyria above thatreported. Higher 11 percentage pointshigherandEBITDA 12percentage points theyear,rates during revenue reported would have been To illustrate this, hadthere beennomovement incurrency ontheGroup’ssubstantial negative impact financial results. itsresults –therandhada inwhichitreports the currency moves inthecurrencies ofMTN’s compared to majormarkets the Group’s sourced theadverse earnings outsideSouthAfrica R46,1 billionfor theyear 2009. ended31December With 70%of interest, (EBITDA) by6,7%to tax,depreciation andamortisation revenue increased before by9,2%to R111,9billionandearnings well forThe Group theyear performed underreview. MTN Group
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
operational evolution. MTN’s andconvergence and footprint capacity; andintellectual on three pillars–consolidationanddiversification; leveraging telecommunications inemerging markets. This strategy isbuilt MTN’s itaimsto strategic betheleaderin agendaisclear: Strategic agenda value-added services are fundamentalto this. services value-added and offer customers more features. Data,moneytransfers and also continuesto findnewways to augment growth in revenues to reduce capitalandoperationalcosts,While working theGroup MTN’s base. current subscriber continent aloneataround 500millionpeople–almostfive times ontheAfrican market the untappedpotential mobilesubscriber researchrates are putsthesize stillhigh.Reputableindustry of present whereas MTN incountries isprimarily populationgrowth its footprint. this, alsosupport The demographics ofthemarkets and MTN believes there isstillsignificant growth to behadacross absolute level across many oftheGroup’s operationsremains low theincreaseown amobile. Notwithstanding inpenetration,the more are peopleatthelower endoftheincomespectrum ableto This wasanticipated. evolve, As drop markets ARPUstypically as economies. inthevarious bythedeterioration a lesserextent most operations, inlinewithgreater mobilepenetrationandto Average revenue peruser(ARPU) permonthdeclinedacross
Business review Sustainability review Operational review Group overview Group president and CEO’s report continued
Consolidation and diversification Leveraging MTN’s footprint and intellectual capacity MTN believes that consolidation in the sector will continue. In its 15 years of operations, MTN has established a truly global Increasingly, in the face of growing competition, achieving better brand, whose leadership is best displayed through the exclusive economies of scale and spreading earnings and risks over more global mobile sponsorship of the 2010 FIFA World Cup South markets will determine the success and sustainability of mobile Africa™. MTN’s strategy is to leverage the brand and already communication operations. In an attempt to achieve this, the widespread presence to achieve sustained growth and more Group continued to assess a number of opportunities to expand operational efficiencies. In his report on page 26, the chief its operations and diversify its earnings base. In 2009, MTN was in operating officer details Group initiatives to standardise equipment discussions considering an opportunity with an Indian operator, and processes, and simplify and centralise functions. Among these which we were unable to conclude to both parties’ satisfaction. are successful efforts to leverage the Group’s scale to secure more competitive pricing from vendors, the number of which MTN This does not deter MTN from its long-term strategic objective. continues to rationalise without sacrificing competition. Another However, there is no obligation, or pressure from any quarter, important objective is the standardisation of IT architecture and to do a deal and MTN will not rush into any transaction without we are pleased to report encouraging progress in this regard. thoroughly evaluating it and ensuring that it is a good fit and is in the interest of shareholders. MTN continues to work to The record capital investment made during 2009 to enhance identify transactions that are meaningful either strategically or network capabilities has given the Group the headroom it required from a size perspective and we continue to believe the current and a step change in capability, quality and capacity. economic environment presents a number of opportunities in emerging markets that could add value to the Group. MTN MTN expects that 2009 will represent the peak in capex funding, is the largest primary listing on the JSE. Its comparatively which has built up steadily since the Group’s inception in 1994. In low level of gearing enables the Group to consider potential the year ahead, MTN intends to continue to pursue opportunities acquisitions with confidence regarding its ability to finance such to unlock value from its infrastructure assets, realising liquidity and transactions. improving competitiveness through further reducing capital and operational expenditure.
22 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review needs oftheorganisation. are aimedataddressingandcapacity theleadershipcapability such asastrategic talentinvestment board andtheMTN Academy ofouremployees. to thedepthandquality attributable Initiatives Group significant benefits. At MTN we recognise thatoursuccessis in culture, languageandways ofdoingbusinessandbringing the oftheCompany,the internationalisation showingmore diversity recent years,In theMTN staffcomplementhasbegun to reflect our footprint. across andcapability andretain to attract thebestskill ability bolster our time,emerging Over thisshouldfurther markets. for growth opportunities andmeaningful withinattractive transfer acrossand skills thebusinessandproviding staffwith operation to another, share facilitatingincreased knowledge leadership set.Many managersinthefield moved from one senior managementwere deepening theGroup’s made, further greater 2009,anumberofnewappointments things. In capacity,intellectual too, canbeleveraged to achieve even andpassioninitsteam ofstaff. experience skills, This theyears,Over MTN hasbuiltupastrong core ofvaluable 23
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
underpinned data’sunderpinned to overall contribution Group revenues in2009. ofmobiledataofferings inSouthAfrica addition, increased take-up is currently referred to as “other revenue” inMTN accounts).In This represents aboostinrevenue from fixed data(however this the rest ofthecontinentand–intimeoffer managedsolutions. into MTNAfrica Business, whichitwilluseasaspringboard into in2009,MTN SouthAfrica, successfullyintegratedIn Verizon South establishing itsownISPs. cables;purchasingsubmarine 3GlicencesandISPs; and significantfacilities; securing bandwidthonhigh-capacity rolling fibre outthe most modern transmission this technology; using securing to establishservices WiMax licencesandstarting toupgrade protocol; onebasedoninternet theGSMnetwork investments. These include:investing considerablesumsto recent years hastened numerous thegroundwork bymaking Anticipating thisrapidlyapproaching newera,MTN hasover to andservices. provide seamlessinternet-based connectivity gr hasbeenthedriverforWhile demandfor MTN’s voice services Convergence andoperational evolution owth to date, increasingly mobileoperators willberequired
Business review Sustainability review Operational review Group overview Group president and CEO’s report continued
To support the convergence of technologies, MTN has also worked assets of MTN International Carrier Services. This will provide to evolve its product offering. It launched MTN Mobile Money, the Group with another important avenue to carry international first in Uganda and then in Ghana. This innovative, useful and voice and data traffic and lead to a reduction in costs as well as affordable tool with which to transfer money, offers customers an improvement in the service quality. MTN continues to invest convenience and creates “stickiness”, which in turn helps limit in the various undersea cable opportunities to further support its customer churn. To date it has also been launched in South Africa, strategy. Rwanda, Côte d’Ivoire, Benin and Yemen. Its success in Uganda, where it had more than 500 000 users at the end of December Prospects 2009, is a good indicator of the scale of opportunity ahead. Competition across our footprint is likely to continue to increase, which with regulatory pressures will make 2010 a challenging one. To address the growing demand for content, in October 2009 MTN believes it is well positioned for the period ahead. MTN entered a strategic partnership with India-based software and managed services provider IMImobile. Through this alliance, In line with its strategy, MTN also continues to work to identify MTN’s markets will gain access to a repository of globally popular transactions that will reduce concentration risk and further content through enhanced delivery platforms. The content will improve its ability to leverage economies of scale. These include music, sports, games, entertainment, news and much opportunities have historically been difficult to close but this does more. It will also enable MTN to launch new income-generating not make their rationale any less compelling. voice and data services. MTN has already introduced a number of exciting products and services on its portal and on After achieving record infrastructure roll out in 2009, MTN expects www.mtnfootball.com. capital expenditure to slow. There will be continued investment in fibre and cable to service its evolving voice and data requirements The evolution of the business model is envisaged to take and MTN is still pursuing opportunities for infrastructure sharing. coverage infrastructure from a fully owned network basis to an outsource-based or infrastructure sharing model. While in Within a dynamic environment, MTN will continue to optimise November 2009, MTN acquired a 20% investment in Belgacom efficiencies and improve processes and systems to strive for International Carrier Services (BICS) mainly in exchange for the sustained or improved profitability.
24 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Business review by signing up7,5millioncustomers. months oftheyear, theGroup went someway to achievingthis to itscustomer20 millionsubscribers thefirstthree base. In continue to achieve goodgrowth. to 2010,MTN add expects In careful theGroup planningandwisedecision-making, can MTN hasambitiousgoalsandsignificant opportunities. With with anumberofothermobilecommunicationsfirms. innovation projectleaderwhoisinvestigating apotential project pursuitofthistheGrouplead. recently In appointed adedicated the isgoingto take inAfrica MTN believes thattheindustry more toother sectors function efficientlyand and effectively exciting newphaseinmobiletelephony isreally aboutenabling a rangeofotherproductsare increasingly clearly important. This together with includingthepopularBlackBerry®, Smartphones, increased momentumtowards real convergence were everywhere. At therecent Mobile World Congress inBarcelona, signs ofthe BEE transaction. MTN SouthAfrica, isstillcommitted to theimplementationofits In 25 shared valuesofleadership, integrity, innovation,relationships and employees. Iapplaudthemfor thezeal withwhich theylive MTN’s to theincredible energy andcommitmentdisplayed byMTN To andthatof2009,isthanks alarge thisperformance, extent, Closing andappreciation
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Business review
M Group president andCEO Phuthuma Nhleko ahead. intheyears growthto inthisdynamicindustry facilitate further with whomwe engage. We together to lookforward working thanks isalsodueto oursuppliers, aswell asto theregulators enthusiasm theydisplay inadoptingourinnovations. Anote of fromthe bestvalueproposition MTN inthemarket andfor the the communitiesinwhichwe operate for constantlydemanding a “Can Do” attitude. to Iwould thankourcustomers alsolike and ar ch 2010
Business review Sustainability review Operational review Group overview Group chief operating officer’s report
In more than half of the 21 countries in which MTN operates, mobile penetration remained below 50% of the population in 2009, indicative of the continued opportunity for growth in the years ahead.
Sifiso Dabengwa Group chief operating officer
Sustaining the success of operations The success of MTN Group’s operations in 2009 was characterised by a reliable network, a compelling brand with attractive value propositions and extensive and efficient distribution. All these factors were underpinned by teams of inspired and motivated people.
26 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 27 in 2009. gratifyingcentral to MTN.note goodprogress It is inthisregard as well asadvancingtheGroup’s are also to work optimiseskills inallthatMTN doesdevelopment bestpractice ofinternational arerun andGroup-wide functions managed. The adoptionand programmes to achieve excellence intheway operationsare thispursuit,MTNeconomies ofscale. continuesto honevarious In lies, to alarge inachievinggreater extent, costefficienciesand regulators, sustainingthesuccessofMTN Group’s operationsnow With mountingcompetitionandheightened demands from years ahead. for growth2009, indicative inthe ofthecontinuedopportunity mobile penetrationremained below50%ofthepopulationin more inwhich MTN thanhalfofthe21countries operates,In depressed economicenvironment becameincreasingly important. promotions, andascustomer affordabilityprice-based inamore ofincreased aperiod competition,including picture wasduring Group’s overall representation inthemarket. This encouraging more to joinMTN, than25millionnewsubscribers expandingthe itenabled to turn, thatofitscompetitors inmostcountries. In andensured thatMTN’s networks various offering wassuperior This strong momentumrapidlyimproved ofthe thecapacity stations amonthwaseasilyattainedinthebiggermarkets. an example, theroll outofanaverage 100–150basetransceiver As thenetwork. toan execution extend –initsability perspective expenditure majorsuccesses –from year andispleasedto report believes 2009wastheGroup’sManagement peakcapital
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review environment. italsoonthe specialised infrastructurefirms), reduces itsimpact withcompetitors (or infrastructure andtransmissioninpartnership Group reduce itscapitalandoperationalcostsbyowningor using country. Notonlydoesthe inaparticular – theageofnetwork is anelementofthis, dependingon–for withtheextent example there MTN market remained every sharing apriority. In Infrastructure understanding andmanagementofcosts. to ensure inaneffort andSyria Iran were launchedinNigeria, electromagnetic costing fieldsafety toolkits. Pilots ofactivity-based and management, thedeploymentofradioaccessnetworks were appliedinrelation suchassite to build, functions network guidelines throughout theGroup. 2009,suchguidelines In continues. So, too, doestheimplementation ofbestpractice This initiative, aswell asthestandardisation ofITinfrastructure, hasdropped byclosetonetwork 50%inthepastthree years. Group procurement thecostofelectronicequipment for function, the development. thatthanksto MTN thecentralised ispleasedto report andsoftware information technology equipment,consultingservices areastheprocurementimpact like and andstandardisation ofnetwork So far, drive hasbeenonbig thefocus oftheoperationalefficiency with MTN. and positivelyofcustomers dealing influencedtheexperience to costcutting.same timecontributing alsodirectly These efforts consistent andwell understood across theorganisation, andatthe processes streamlined,and centralisemany functions, making The Group continuedto postgainsinitsdriveto standardise
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued
Related to infrastructure sharing is the contracting out of the through its customer segmentation model, MTN is now able to market management of certain physical assets. In some countries – Iran its products and services in a more effective and consistent manner is one example – MTN already outsources the ownership and across its operations, greatly assisting business planning and in line management of infrastructure. The Group considers this desirable, with its standardisation initiatives. as it allows for a better depth of skills, as well as economies of scale, and fits in with MTN’s endeavours to reduce costs and optimise its Aiming to deliver on the brand promise, MTN launched a number assets. of products to enhance the value proposition to customers in 2009. MTN Zone, the dynamic tariffing tool first introduced in Among the so-called green aspects of sharing network facilities some countries in 2008, was rolled out to many other markets are the Group’s renewable energy efforts. As mentioned by the in the year. This helps the Group manage network capacity use chairman in his statement (on page 6), MTN is running a number by offering discounted rates when network utilisation is low and of pilot stations to test the feasibility of alternative power supplies so support use during these off-peak times. By offering affordable to provide energy for base stations and other facilities. pricing to customers, it encourages more subscribers to sign up for The new generation network, installed virtually throughout MTN services, keeps them loyal and limits churn. MTN operations, is also already considerably more energy efficient than its predecessor. The Group is also pleased with the initial response in select markets to the launch of MTN MobileMoney – a simple, secure The distribution framework continued to evolve in the year, and convenient way to send money, buy airtime and pay bills. The widening the footprint in which MTN products are available and extension of seamless roaming, known as MTN One World, to more increasingly involving third parties, to whom the Group endeavours markets is also encouraging. This innovation allows customers to to structure the best trade partner proposition. With a strong focus make and receive calls across the MTN footprint at local rates and on specific, localised geographic areas, MTN products are easily without having to buy a new SIM card. accessible to existing customers, as well as to potential subscribers. MTN launched a number of promotions linked to the Group’s Given that ultimately the customer experience determines the Group’s sponsorship of the 2010 FIFA World Cup South Africa™ in 2009. These success, MTN recently undertook an exercise to find out just what were particularly popular in jurisdictions such as Cameroon, Nigeria, makes its customers tick, in a survey that included interviewing 25 000 Ghana, Côte d’Ivoire and South Africa where the national football team people across its footprint. This showed that even with the diverse will participate in the event. And although the real revenue benefits will social, religious, racial and cultural groups in the 21 markets, the needs not be realised immediately, MTN believes its exclusive global mobile of six broad segments are largely similar. The findings mean that sponsorship is a real differentiator, bolstering the brand.
28 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review also fits in with efforts to drive toeconomiesofscale also fitsinwithefforts Group-wide. empowerment withregards to standard processes andprocedures of MTN staff to otheroperationswithintheGroup. Employee management changesin2009,mostofwhichwere theappointment countries. calibre ofemployees incertain There were numerous MTN footprint, right andtheheightened challengeoffindingthe given theincreasedimportant competitionfor talent across the sets andfocusing ondeveloping peoplelocally. This isparticularly training ofMTN theGroup’s bolstering employees everywhere, skills itssecondyear ofoperation,theMTNIn Academy stepped upthe competitive energy advantage. andenthusiasmofitspeople–key All MTN’s endeavours anddrivenbytheexpertise, are supported voice capacity. operations, isprovidingbutalsomuchneeded notonlydatacapability areas mainlyinurban out of3G networks, andinlarger, more mature to providedataandvoice into highquality thefuture. Finally, theroll The investment inthecableswillensure theGroup operationsare able System), whichare Marine already EastAfrica operational. TEAMs (The to 2011.MTN Group alsoacquiredinSAT3/WASC/SAFE capacity and Gateway), whichare to expected comeonlinefrom around mid-2010 System), WACS CableSystem) andEIG(Europe Africa India (West investments Cable are Submarine Africa thoseinEASSy(Eastern cable submarine speeds atalower cost.Amongthemostimportant which willprovideto offer itwiththecapacity faster broadband in anumberofcountries, aswellnewunderseacables, asinvarious of theseISPs. The Group hasalsocontinuedto invest infibre roll out infrastructure –suchas WiMax –neededto optimisethefunctioning tothe pasttwo three years, MTN hasbeenputtinginplacethe providers in service Since theacquisitionofanumberinternet 29
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review M Group chiefoperating officer Sifiso Dabengwa operations inMTN’s universe. ofthefive largest ontheperformance well asdetailedreports operating regions for give eachoftheirregions, overviews as thepagesthatfollow,In thevicepresidents ofMTN’s three ar
ch 2010
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
30 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 31
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport Contents 31 December 2009 31 December ⁄ Operational review
52 46 West andCentral Africa region 42 58 Middle East and North Africa region MiddleEastandNorth 58 36 andEastAfrica South region 32 66 62 Ghana Nigeria Syria Iran South AfricaSouth
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
South and East Africa region MTN’s South and East Africa (SEA) region encompasses six countries: South Africa, Uganda, Botswana, Rwanda, Swaziland and Zambia. The MTN SEA regional office is in Johannesburg, which is also home to the main elements of the MTN Group head office and the place it is listed.
Population Subscribers Revenue EBITDA Capex (million) (000) (Rm) (Rm) (Rm)
Total for region 107,8 26 152 39 669 12 701 8 645
Contribution to Group total* 21% 23% 35,4% 27,6% 28%
* Difference in head office. Country contributions to SEA region total
Subscriber contributions (%) Capex (%)
South Africa – 61% South Africa – 70% Uganda – 20% Rest of region – 30% Botswana – 5% Rwanda – 7% Zambia – 5% Swaziland – 2%
32 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 33
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
South and East Africa region continued
Performance nearly a quarter of the data market in South Africa, the operation The launch and enthusiastic take-up of money transfers via is working on opportunities to extend its services throughout the MTN Mobile Money in Uganda was one of the key highlights African continent. of the region. Strong subscriber growth, infrastructure roll out and improved market positioning, particularly in Uganda also In East Africa in 2009, MTN strengthened its position despite punctuated the performance in the smaller countries. However, widespread deregulation of the industry in recent years, increasing the first prolonged contraction in South African economic activity competition and significant declines in tariffs. Continued since MTN started operating 15 years ago squeezed consumers, investment in the network, together with the launch of innovative and together with the implementation of a new regulatory products and a revamp of MTN’s distribution model in Uganda and requirement to register all customers’ identity details (the so-called Rwanda, led to a solid increase in customer numbers. RICA process) in the second half of the year, put pressure on subscriber numbers in the region’s biggest market. In the year, MTN invested R8,65 billion of capital in SEA, up from R7,35 billion in 2008. In South Africa, more than 1 000 base Overall, SEA subscriptions expanded 8,8% to 26,2 million, led transceiver stations came on air in the year – the largest network by good growth in Zambia, Rwanda, Uganda, Botswana and roll out in this market in eight years, making the South African Swaziland (in order of each country’s percentage growth GSM network now one of the world’s most modern. In Rwanda, contribution). These were offset by a fall in user numbers in South demand increased significantly as prices declined. The network Africa due to the economic slowdown, the effect of RICA and was able to handle this thanks to the considerable investment exacerbated by IT system problems (the details of which appear in made in providing additional coverage and capacity. a separate country report on page 36). In an effort to build market share through network quality Average revenue per user per month fell across the region, by improvements, in Uganda MTN rolled out 436 BTS, up from 251 in between USD1 and USD4,50. This was in line with increased 2008, leading to substantial increases in network traffic. In March mobile penetration, which ranges between 19% and more than 2009, MTN Uganda launched Mobile Money, and by year-end had 100% in the six SEA markets, as well as greater competitor activity. signed up 470 000 users, illustrating the scale of opportunity for Half the MTN markets in South and East Africa have mobile this offering for the greater Group. penetration rates still below 50%. A steep decline in the price of copper depressed economic In line with the Group’s increased focus on data, MTN South Africa activity in Zambia and led to a depreciation of the local currency successfully integrated Verizon South Africa (Proprietary) Limited and a drop in ARPU to USD7 from USD11 in 2008. Nevertheless, with MTN Network Solutions to launch MTN Business in 2009. With MTN Zambia’s new management team completed the roll out
34 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 35 willbuildonrecent wheresupplies. gainsinEastAfrica, in2009 It alternativefrom andrenewable exploring itssites, power byfurther MTN willcontinueto to work reduce environmental emissions ofMTN’s andcapacity quality network. in theSEAregion in2010. This willbedevoted to improving the for capital expenditureSome R6,1billionhasbeenearmarked MTN Business, willboostoverall datacapabilitiesintheregion. fibre submarine access to cables, various andthe recent launchof andfacilitate greaternetwork datausage. Similarly, theGroup’s the installationof3Gfacilitieswillrelieve congestiononthe2G will remain afocus for theSEAregion inthe year Uganda, ahead. In andseamlessroaming,MTN Money Mobile aswell asdataservices, products, including theprovisionExtending ofvalue-added Outlook in mobilepenetrationto more than120%. increasing useofmultipleSIMcards, to anexpansion contributing databundles.Botswana launchedattractive This boosted the To ofdataofferings,Mascom stimulate adoption bythemarket to thedepressed demandfor diamonds, Botswana’s export. key intheeconomyhelped counter theeffect ofacontraction related uptheoffering. base–taking some 40%ofthesubscriber This year waswell with525000customers received –or bythemarket, inBotswanathemiddleof The launchofdynamictariffing whileroaming onotherMTNand purchase networks. airtime to enjoytheirlocalratesMTN prepaid customers theopportunity launch ofseamlessroaming intheyear. offers The service andUganda–saw thesoft Rwanda – alongwithSouthAfrica, sluggish economy andhighlevels ofunemployment.Swaziland MTN Swazilandrecorded growth goodsubscriber despite a promotional activity. refined modelandstepped upits itsdistribution of thenetwork,
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review a previous forecast of96,6million. infive potentialyears’ mobilemarket time to 102,9million,from theGroupmarkets, hasincreased itsestimate for thesize ofthe Given thelowlevel ofmobilepenetrationinhalfMTN’s SEA recharge batteries, andlesspowertheday. isthenusedduring solar power whichmeansthatsurplus atnightisusedto business alsoestablishedhybrid stationswithsomereliance on easier to deliveriesandmonitor forecast fueluse. necessary The MTN it rolled outacentralisedfuelmanagementsystem, making
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
South and East Africa region continued
MTN South Africa
Subscribers (’000) Launched June 1994, market share 32%, population 49,4 million, forecast market size in 2014 – 64,3 million, shareholding 100%. 17 169
16 067 MTN South Africa revenue and expenses summary
14 799 12 months to 12 months to 14 415 12 655
13 044 December 2009 December 2008 %
12 306 Rm Rm change
10 368 Airtime and subscription revenue 17 885 17 881 0 Interconnect revenue 7 271 6 951 5 Data and SMS 4 496 3 596 25
Prepaid Connection revenue 69 35 94 Cellular telephones and accessories 2 870 3 122 (8) 3 023
Postpaid 2 754 2 493 2 288 Other 558 561 (1)
Dec 06 Dec 07 Dec 08 Dec 09 Total revenue 33 149 32 148 3 Direct network operating costs 2 319 2 301 1 Costs of handsets, SIMs and vouchers 4 173 4 293 (3) ZAR ARPU Interconnect and roaming costs 6 400 5 140 25 Employee benefits and consulting costs 1 576 1 212 30 441 396 403 Selling, distribution and marketing costs 6 832 6 374 7 Other expenses (general and administration) 1 439 2 243 (36) 365 Total operating expenses 22 739 21 563 5 EBITDA 10 410 10 585 (1,7) 159 149 148 145 EBITDA margin 31,4% 32,9% (1,5) pts 95 92 97 100
Dec 06Dec 07 Dec 08 Dec 09
Postpaid Blended Prepaid Average total MOU comprises both 124 106 102 100 incoming and outgoing minutes
Outgoing MOU 79 65 64 64
36 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 37 points to 31,4%. This wasduemainlyto reducing fixed to mobile of 3%.As aresult, theEBITDA margin slipped1,5%percentage inoperatingexpenditurerise of5%outpacedgrowth inrevenue MTN SouthAfrica’s EBITDA decreased by1,7%intheyear asthe monthly spendingonmobilecommunication. a downward migration customers amongmany to contract lower pressure onconsumers’ disposableincome, theCompany noted paid ARPU, whichdecreased byR38to R365,wasindicative ofthe inthesecondhalfofyear. particularly Lowerthe network, post- points,coupled withenhanceddistribution continuedupgrades to for theprepaidof several innovative market, productsandservices 1,4 millionprepaid subscribers. This wasalsoaresult ofthelaunch of by R3to2009,despite R100atDecember thedisconnections tomeaningful revenue. Consequently, prepaid ARPUincreased that theprepaid lostintheRICAprocess subscribers were not MTN increased SouthAfrica revenue modestlyby3,1%,indicating Company’s 15-year history, reducing by6%to 16,07million. from 36%. basenarrowedThe subscriber for thefirsttimein MTN SouthAfrica’s share decreased market to 32%in2009 demand for mobilecommunicationsfor telemetry. of multipleSIMcards bymany customers, aswell asincreasing use exceeded thepopulation. This wasaresult ofthegrowing use where –formarket, thefirsttime–numberofSIMcards in details. Competition continuedto bevigorous inthismaturing requirementof theregulatory to register allusers’ personal and adrop numbersfollowing insubscriber theimplementation depressed economy, system problems andITsupport network 2009 wasatough year bya for MTN marked SouthAfrica, Overview
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review 2010. ratesmobile termination whichbecameeffective fromMarch 1 quarter, mobileoperators agreed SouthAfrican onaninitialcutin alloperators’ impacting of themarket, thefourth connections.In (RICA)cameinto Act effect.Information Thischangedthedynamic of Communications andProvision ofCommunications-Related astheRegulationofInterception inthethird quarter mandatory The registration ofsubscribers’ personaldetailsbecame consumer confidencedeclinedsharply. lendingrate asinflationslowed and the centralbankcutitskey customers tocontract more affordable the During year, packages. by higherlevels ofbaddebtandthedownward migration among wereConsumers inSouthAfrica undersevere pressure, evidenced Market environment second mosttrusted company inSouthAfrica. andthe MTN wasrated numberoneintheinnovationcategory the new “Ayoba” the2009Ask campaign. Afrika In Trust Barometer, sponsorship ofthe2010FIFA World Cup aswell SouthAfrica™ as IT system problems, theMTN brandsaw benefitsfrom its sufferingAfter a reverse atmid-year and because ofnetwork reduce theCompany’s environmental footprint. to share mastsites withcompetitors were to pursuedinaneffort ofinfrastructurewascompleted andopportunities modernisation programme, spendingR6,03billionintheyear. The core MTN continuedwithitsaggressive SouthAfrica capitalinvestment of iTalk andCell Place. reduced costsfollowing andhigherdistribution theintegration interconnect traffic, anincrease inhandsetsalesasmargins
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
South and East Africa region continued
MTN South Africa continued
ZAR (million) Capex Infrastructure Network
6 034 MTN South Africa continued to invest in modernising its core, radio and transmission network to enhance its 3G, 2G and overall data capacity. Thanks to a focused effort from the 3 034 4 868 network team, the Company integrated 1 155 base transceiver stations in 2009, the most it
3 096 has installed in a single year in South Africa since 2001. This investment, in addition to that made in 2008 and the commissioning of its metropolitan fibre-optic network, enabled the 2 843 Company to increase its circuit switch (voice) capacity by 26% and packet switch (data) 2 391 3 000
1 549 capacity by 50%. The 3G population coverage increased to 48% from 35% in 2008. In early
1 186 2009, MTN South Africa agreed with other operators to build a joint 5 000km national fibre- H2 1 772 optic network to connect the major centres across South Africa. Work has since begun with 1 294 H1 1 205 the Gauteng north ring expected to be completed by July 2010.
Dec 06 Dec 07 Dec 08 Dec 09 Capex as % IT systems 9,7 10,1 15,0 18,2 of revenue After experiencing problems with a number of the Company’s IT systems in the year, ZAR (million) Data revenue MTN South Africa embarked on a three-year development plan to upgrade those systems responsible for tracking, reporting and billing of a customers’ network use. Working closely 4 496 with a new team, to whom the Company outsourced its IT in 2008, improvements to the stability of various legacy systems have been made. Tools for better monitoring system 2 444 3 596 performance have been implemented with the aim of ensuring a more versatile systems
1 900 with better developed customer solutions. A command centre has also been commissioned 2 756 in November to allow faster tracking and resolution of system issues. 1 535 1 938 2 052 In September the Company swapped out its wholesale billing system, replacing it with 1 159 1 696 a new state-of-the-art solution. The call data network was also modified after delays in H1 1 221 779 reporting data usage. Although many issues have been addressed, some remain unresolved.
H2 More work needs to be done to transform the current systems, with preparation being undertaken on numerous developments expected to go live over 2010/2011. Dec 06 Dec 07 Dec 08 Dec 09 As % of SA revenue (excluding handsets) 9,0 11,0 12,4 14,8
38 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 39 to the2010FIFA prior home countries World Cup™. intheir to SouthAfrica tourists capture asignificant poolofsports launched theFIFA packwhichwillenableMTN to visitor starter offerings led to six-fold base. MTNalso growth intheBlackBerry® the reinforced service focus onpostpaidconsumerBlackBerry® for prepaid The launchofBlackBerry® TopUp customers and solution. 2009usingtheMTNMoney Mobile pilot inJanuary groups. The Company alsolaunchedadomesticmoneytransfer exclusive accessto songsfrom SouthAfrica’s biggesthiphop packandMuziqbundles, whichgiveMTN Muziqstarter customers year were theMTN Zone “100% Mahala” (free) promotion, and introduced inthe newproductsandservices Among thevarious spectacle. a strong localfeel, upexcitement stirring aheadofthesoccer – bolstered brandperception. The “ in localhouseholdstheslangword thatisgood for everything the “Ayoba” summercampaign –through whichMTN entrenched theMTNlaunches in2009,positively brand. impacting Similarly, Cup™ wasusedasaspringboard for many MTN exclusive product The MTN Group’s globalsponsorshipofthe2010FIFA World Products andservices cost ofbandwidthto customers corporate bysome30%. into MTN Business, theenlarged Company wasableto reduce the realised dueto themerger of Verizon Solutions andMTN Network Together andtheeconomiesofscale withadditionalcapacity whenSEA undersea cablecapacity MTN secured SouthAfrica accessto more broadband international Undersea cablesanddatasolutions
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport COM cameonlineinmid-2009. Ayoba” have advertisements 31 December 2009 31 December ⁄ Operational review airtime. MTN seta newin-houserecord SouthAfrica for of thedistribution the plannedchangesto rates. mobiletermination December, In agreements withwholesalersandretailers into to account take quarter,the fourth MTN signed SouthAfrica newdistribution to more customers. appropriate In locations to better service 200 stores; andtheclosure andrelocation ofsomeretail outlets Cell Place andiTalk; therebuilding orupgrading ofmore than channels intheyear. These includedtheintegration ofretailers There wasmuchprogress madewithregard to distribution Distribution measurable improvement in this important indicator.measurable improvement inthisimportant retrenchments, showed a arecent survey customer satisfaction in thecurrent circumstances.isencouraging thatinspite ofthe It now operatingcloseto whatitbelieves to beoptimalheadcount positions. This right-sizing, painfulasitwas, meanstheCompany is workforce and1500temporary/contract bysome400permanent retrenchments. March 2010,MTN hadreduced By South Africa its specific areas, it restructured jobsandwas forced some to make to realign theorganisation behindthe customer in2009.In anaggressivecompetition, MTN undertook exercise SouthAfrica Faced challengesofeconomicrecession withthetwin andfiercer People sports blipsbesidestheregular content downloads.sports More content becameavailable onMTN Loaded, suchasnewsand applicationsandmessaging capabilities. enhanced web-orientated deviceswith smartphone by thesuccessfuldeploymentofvarious There wasgrowth of75%indatatraffic2009. Thiswashelped
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
South and East Africa region continued
MTN South Africa continued
Skills development remained a priority in the year, with employees licence fee regulations came into effect in April 2009. The new attending various types of training, and 100 graduates participating fee is 1,5% of gross profit, versus the 5% of net operating income in the graduate development programme. The Company paid previously. understands the imperative of making South Africa a more equal • RICA came into effect in July 2009. Since then, MTN South Africa society – socially, politically and economically. Accepting that has been registering subscribers’ personal details as required by everyone has a responsibility in this regard, MTN South Africa the RICA provisions. Mobile operators have until end-December invests in training previously disadvantaged individuals and 2010 to complete the exercise. supports enterprise development through various programmes • In 2009, MTN South Africa and a smaller competitor settled a including preferential procurement. In 2009 it spent R9,07 billion dispute over interconnect fees for certain so-called community with black-owned businesses, up from R5,3 billion in 2008. service telephones. As part of the settlement agreement, the competitor withdrew its complaint from the Competition Regulatory environment Commission and the matter has been withdrawn by the The South African ICT regulatory environment underwent a Commission. number of changes in 2009. In January, a new licensing regime • Following the release of the draft facilities leasing guidelines by was established and new licences were issued to more than the regulator, MTN South Africa is awaiting the final regulations, 350 organisations which are now entitled to provide their own expected this year. telecoms infrastructure. MTN South Africa continues to engage • MTN agreed to a reduction in mobile termination rates together with various parties, including the industry regulator ICASA with its competitors in late 2009. The cut (to 89 cents from and numerous governmental bodies. Key recent regulatory R1,25 during peak hours) took effect in March 2010. developments include: The regulator has released draft regulations relating to • Following the conversion of MTN South Africa’s mobile licence interconnection in April this year. MTN, together with other to an electronic communications network services licence and operators, has been given the opportunity to comment on an electronic communications service licence in early 2009, new regulations and is in constructive engagement with ICASA.
40 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 41 Outlook The regulator hasindicated• thataccessto theappropriate IT systems. It has earmarked capexfor 2010ofR4,25billion. hasearmarked IT systems. It the newmetropolitan andthe fibrereplacement of network continue to fibre invest network, inthenationallong-distance isalmostcomplete. thenetwork to However, modernise itwill converging mobileandISPsectors. The Company’s programme thereby improving MTN’s competitive positionintherapidly Durban. The growth ofMTN to businessisexpected continue, by therecent landingoftheEASSyunderseafibre cablenear Further developing thedatabusinesswillremain apriority, helped expected. MTN continuesto engagecustomers around thisevent. boost theeconomy, withalarge inflowof foreign exchange also butthe2010FIFAremains weak, World Cup™ to isexpected stronger. Retailsalesfigures indicate thatconsumerconfidence has experienced, buttheCompany believes ithasemerged the The pastyear wasoneofthemostdifficult MTNSouthAfrica and isapplyingfor ofself-provisioning. interms frequency MTN South continuesto engagewithICASAinthisregard Africa for smallerplayers ownership. with30%directblackequity r spectrum
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport
equired for LTE evolution) (long-term isdestined 31 December 2009 31 December ⁄ Operational review Johannesburg campus. plantatthe site andthetri-generation at theKleinaarpen focus,will remain akey withprogress beingcarefully monitored energy-reduction andrenewable energygovernment. Its efforts –fromstakeholders staffandcustomers to regulators andthe to enhancingitsrelationships andcommunicationwithall MTN intends to SouthAfrica devote considerableenergy
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region MTN’s West and Central Africa region encompasses nine countries; Nigeria, Ghana, Cameroon, Côte d’lvoire, Benin, Congo-Brazzaville, Guinea-Bissau, Guinea Conakry and Liberia. The WECA regional office is in Accra.
Population Subscribers Revenue EBITDA Capex (million) (000) (Rm) (Rm) (Rm)
Total for region 222,0 52 859 50 543 27 029 16 518
Contribution to Group total* 43% 45% 45,2% 58,7% 53%
* Difference in head office. Country contributions to WECA region total
Subscriber contributions (%) Capex (%)
Nigeria – 58% Nigeria – 62% Ghana – 15% Ghana – 16% Cameroon – 8% Rest of region – 22% Côte d’Ivoire – 8% Benin – 3% Guinea Conakry – 3% Congo-Brazzaville – 3% Liberia – 1% Guinea-Bissau – 1%
42 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 43
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
Performance adopting an aggressive approach to cost management. However, Most MTN operations in the WECA region consolidated their the Company did not cut back on investment in the network, positions in increasingly competitive markets for mobile including the upgrade of voice and data capabilities. Among its communications in 2009. The Group’s significant investment in investments in Nigeria (the details of which appear in a separate upgrading the networks in West and Central Africa in the past two country report on page 46), MTN continued to roll out fibre years paid off, bolstering MTN’s value proposition in terms of both transmission facilities and to further develop the 3G network. In coverage and capacity. This, along with a revamp of the regional Ghana (the details of which appear in a separate country report distribution framework and a proactive approach to competitive on page 52), MTN was the first operator to launch a 3G network pressures, ensured that MTN’s operations in WECA were insulated in 2009, offering customers high-speed internet access and other somewhat against the effects of the world economic slowdown. multimedia services. In Côte d’Ivoire, MTN integrated ISPs Arobase This was particularly true of MTN operations in Nigeria, Ghana and and Afnet and in Cameroon it continued to invest in WiMax Cameroon. capabilities. All of these investments were in addition to spending on enhancing MTN’s voice offerings. However, consumer spending did suffer in those smaller markets that are particularly sensitive to changes in demand for their In 2009, the Group rolled out solar energy solutions to power commodity exports, including Congo Republic and Liberia. MTN base stations in Guinea-Bissau, Congo Republic, Liberia, Ghana and Nigeria. MTN Group is working closely with national In many countries regulatory activity mounted, further pressuring environmental agencies to reduce the businesses’ impact on the revenue and average revenue per user (ARPU) figures. Among environment as well as to inform the population in this regard. various new regulatory requirements, the registration of MTN is now sharing infrastructure and sites with other operators subscribers’ personal details has or will soon become law in in every WECA market, and in Ghana the Group is piloting a new, a number of markets. In 2009, MTN embarked on SIM-card more systematic way to share infrastructure. registration drives in Côte d’Ivoire and Cameroon, drawing on lessons learnt by the Group in accomplishing this in other markets. In 2009, WECA operations applied a new customer segmentation Proactive stakeholder engagement remains an MTN hallmark, model, enabling it to address more effectively the various and the Company continues to work together with regulators to segments in terms of products and services, distribution and achieve the best results for the industry as a whole. customer care. MTN launched Mobile Money in Ghana and Côte d’Ivoire and completed the preparations for the launch of this Total subscriber numbers in WECA rose 31% to 52,9 million, while product in all WECA markets, once regulatory approval has been ARPUs in the region fell between USD1 and USD5 a month. attained. Following the launch of Mobile Money pilots in Ghana, MTN worked hard to counter the slower revenue growth by Nigeria, Cameroon and Côte d’Ivoire in late 2008, the Company
44 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 45 encouraging. very MTN Academy, andfeedback wherehave participation been increased engagementaswell astrainingthrough the pleasing increaseinthe year, instaffsatisfaction helpedby auditsshowavery amongcolleagues.and experience Internal region andthewiderGroup, increasing ofknowledge thesharing careermeaningful paths, to MTN rotate worked staffwithinthe to develop linewithefforts human resourcesIn andcreate LonestarMTN co-branded Cell withtheMTN tag. Liberia successfully negotiated therenewal ofitsoperatinglicence, innovation, relationships andintegrity. where Liberia, theGroup In to itscustomers. These valuesare a “Can Do” approach, leadership, This hasalsohelpedbuildthebrandandpromote MTN’s values of programmes to care for andtheenvironment. thecommunity outanumber 2010,Guinea-Bissau),whereand inearly theycarry Cameroon,(Congo Republic,Côte Benin,Ghana,Nigeria, d’Ivoire, MTN foundations are nowestablished inmost WECA countries position inthe WECA market. and high-spendcustomers, helpedensure MTN maintainedits buy anewSIMcard. Loyalty for programmes, medium- particularly theygoatlocalrates,receive without having callseverywhere to to thisevent.linked MTN One World allowscustomers and to make byofferingSouth Africa™, anumberofproductsandpromotions Group alsoleveraged itssponsorshipofthe2010FIFA World Cup World withenthusiasm,andMTN continuesto promote it. The Customers adopted theseamlessroaming offering MTN One Liberia. in Benin,Congo Republic, Guinea-Bissau, GuineaRepublicand implemented five additionalpilotsin 2009.February These were
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review services intheregion to increaseservices to 185,5millionwithinfive years. forthe digital sodoing, divide. mobile themarket MTN In expects andhelpbridge country provider inevery service a majorinternet of 2011 operationalstart WACS willallowMTN to positionitselfas countries, andcontinuesto to work secure theseinothers. The Côte d’Ivoire. MTN inmost hasobtainedlandingstationrights which willbelandinginCongo, Ghanaand Cameroon, Nigeria, isthelaying offibreto the linked priority WACS underseacable, is positioningitselffor thebundlingofdataand voice. Another haveRepublic andLiberia already obtained WiMax licences)and 2010,MTN aimsto rollIn outthe (Congo,WiMax networks Guinea oftheseon mitigate theimpact WECA operations. registration,such assubscriber to managementalsoexpects requirementsahead. regulatory Having already anticipated certain regional managementbelieves MTN is well positioned for theyear the Group’s sponsorshipofthe2010FIFA World Cup™, the WECA capitalisingon productsandservices, andattractive network MTN’s remains work challenging. However, withagoodquality interconnection regimes) andstiffer competitionwillmeanthat requirementsmore demandingregulatory (includingnew give causefor cautiousoptimismintheyear ahead, but inthe Signs ofarebound ineconomicactivity WECA region Outlook considered theemployer ofchoice. staff for developmentIn many andpromotion. countries, MTN is helped bythetalentmanagementboardwithidentifying tasked MTN’s WECA managementcontinuesto honeitssuccessionplans,
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
MTN Nigeria
ARPU ($) Subscribers (’000) Launched August 2001, market share 49,6%, population 146,6 million, forecast market size in 2014 – 110,7 million, legal shareholding 76%.
MTN Nigeria revenue and expenses summary 30 827 12 months to 12 months to December 2009 December 2008 % Rm Rm change 23 077
Airtime and subscription revenue 27 534 25 557 8 16 511 Interconnect revenue 4 045 4 291 (6)
MTN 12 281 Data and SMS 1 321 1 110 19 Subscriberssubscribers Connection revenue 116 236 (51) ('000) 18 17 16 12 Other 309 363 (15) ARPU (USD) Total revenue 33 326 31 558 6 Dec 06 Dec 07 Dec 08 Dec 09 Direct network operating costs 3 240 3 418 (5) Outgoing MOU 53 52 55 53 Costs of handsets, SIMs and vouchers 785 590 33 Interconnect and roaming costs 2 793 2 847 (2) (’000) Net additions Employee benefits and consulting costs 1 034 1 048 (1) Selling, distribution and marketing costs 3 250 2 976 9 7 750 Other expenses (general and administration) 2 477 2 431 2 3 489 6 566 Total operating expenses 13 579 13 310 2 EBITDA 19 746 18 248 8 4 512 EBITDA margin 59,3% 57,8% 1,4 pts 4 230 3 911 4 261 2 475 2 645
H2 2 054 1 755
H1 1 266
Dec 06 Dec 07 Dec 08 Dec 09
46 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 47 USD16 in2008. the fallindollarterms, withARPUofUSD12for 2009downfrom by 9,6%for theyear. exacerbated Weakness inthenairacurrency average revenue peruser declinedmarginally inlocalcurrency, lower-usage segments andpressure onconsumerspending, In linewithincreased penetrationinto inthefirst. weakness rand strength inthesecondhalfofyear compoundingnaira lower 5,6%growth to inrandterms R33,3billion,dueto the growth,period, inlinewithsubscriber thistranslated into amuch revenue increasedAlthough localcurrency by30%for the years ago. Total penetrationgrew mobilemarket to 42,4%from just15%five rolled outitsnew0813numberrange.MTN Nigeria share of49,6%. market To accommodate thesenewsubscribers, to endtheyear with30,83millioncustomersmarket andaGSM ofthe netadditionsinthe achieved more thanthree-quarters boosting promotions thatMTN alsoassisted inensuring Nigeria nature ofitssegmented valuepropositions andeffective usage- The strength oftheMTN brand, thebroad appeal and innovative almost half. a third MTN Nigeria’s in2009,andlift share to market numbersinAfrica’sboost subscriber by mostpopulouscountry with amore streamlined channel, salesanddistribution helped together ofitsnetwork, andcapacity to enhancethequality MTN Nigeria’s investment continuedheavy ininfrastructure Overview
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review Market environment producing Niger Delta –continuedto Delta beinadequate.producing Niger –aggravated intheoil- bypoliticalinstability supply ofelectricity banks.remained high andthe undercapitalised Inflation Nigerian central bankreplaced theexecutive managementofanumber improved collapse. Liquidity loans andastock the after market high localinterest rates dueto banks’ exposure to non-performing credit didnotescapetheworldwide squeeze,Nigeria resulting in the nairahadstabilised, recovering someofitslosses. affected thecurrency. further However,counterparties by year-end foreign andareductionincredit exchange linesbyforeign policy response to2008. In thechallenges, changesinthecentralbank’s ground to thedollarfollowinginlate therunoncurrency earnings. thepressureThis kept onthenaira,whichlostfurther theyear withadepressed whichreduced oilprice export starting economy facednumerous challenges, 2009,theNigerian In the Company’s wireless dataoffering. andcoverage,capacity withamajoremphasisonstrengthening Investments were andimprove thenetwork madeto its modernise expenditure in2009,accountingfor someR10,2billion. remained thetop destination forNigeria MTN Group capital offuel. an18%declineintheprice particular of scaletogether withacontainmentofoperatingexpenses, in to 59,3%mainlydueto anincrease inrevenue andthebenefits terms. The EBITDA margin improved by1,4percentage points MTN Nigeria’s EBITDA grew and32%innaira 8%inrandterms
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
MTN Nigeria continued
ZAR (million) Capex In this difficult economic environment, the Nigerian telecoms sector also faced increasing regulatory requirements. A new interconnect regime was adopted at the end of the year.
10 222 The number of CDMA operators increased by four to 20. These companies offer low prices 9 610 in voice and data, but do not meet customers’ needs for complete mobility. A new GSM 4 519
5 668 licence holder commenced full commercial operation in 2009, bringing to five the total number of GSM operators and intensifying competition through aggressive promotions and price reductions. In 2009, both CDMA and GSM operators focused on promoting their data offerings, leveraging 3G and 3G-related technologies. MTN Nigeria was able to effectively 4 789
5 703 compete and remains supported by the strength of the network, the MTN brand and 3 674
2 979 the continued attractiveness of its segmented propositions. During the year, it increased 3 942 2 121 its market share by subscribers by over five percentage points, and also lifted its brand H2 preference scores significantly. 1 810 H1 1 553 Infrastructure Dec 06 Dec 07 Dec 08 Dec 09 MTN Nigeria maintained its strong momentum in infrastructure development in 2009, Capex as % of revenue 24,6 23,6 30,5 30,7 rolling out a total of 1 220 base transceiver stations to bring to 7 113 the total number built so far. Roll out maintained momentum despite numerous challenges, including delays in BTS roll out customs clearing of goods and generally slow delivery of network equipment. The coverage of the network was enhanced in the year with the addition of 215 towns and cities, taking to
1 560 83,4% the land mass covered by MTN Nigeria, from just over two-thirds in 2008. In an effort
802 to expand transmission facilities, some 1 561km of new backbone and 110km of metro
1 220 fibre were implemented in the year, however the challenge of fibre cuts resulting from
726 roadworks, as well as vandalism remain. 785 639 758 398
H2 494 209
H1 189 146
Dec 06 Dec 07 Dec 08 Dec 09
48 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 49 information aswell assecurity. to GoogleSMSenablessubscribers providing accessto market, suited to theNigerian are particularly and datainfrastructure(HSPA, 3G,EDGE,GPRS). These services byMTN’sand MTN Backup, bothsupported extensivemessaging line withthis, in2009theCompany launchedMTN GoogleSMS In services. indataandvalue-added revenue growth, particularly initiatives thatwillenhanceMTN’s brandequity, aswell asfacilitate MTN Nigeria’s development focuses on productandservice Products andservices Company-wide. and environmental awareness initiatives are beingencouraged currently beinginvestigated for possibleadoptioninfuture into theatmosphere. Wind andsolarenergy optionsare also diesel consumptionandtheassociated emissionofcarbon alternative energy systems withaviewto significantly reducing ontesting andcommissioningof embarked MTN Nigeria environmental footprint. aswell asits of reducing theoverall capitalcostofthenetwork, ofBTSsites andfibrethe sharing infrastructurepursuedasameans initiatives with sharing continuedto gaintraction, Infrastructure to 2009. 1117inDecember 3G roll outplanandbringing thetotal numberoflive 3Gsites 561 3Gsites goinglive, completingthesecondphaseof with gainedtraction, 3Gnetwork The roll outoftheNigerian
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review roaming. inthree majorcities)andseamless3G services emergency customers with24-houraccesstoprovides medicaland Nigerian launchesin2009were MTN CareAmong otherservice (which Yello Bounty Train. designed to reward customers viatheinnovative neighbourhood promotion,Africa™ aswell asthe “ also goodresponse to MTN Nigeria’s 2010FIFA World Cup South than four were millionsubscribers usingthisservice. There was led to increased userawareness more andacceptance. year-end By enhanced features to allowcustomers to personalisetheservice) A solidcampaign to promote Caller Tunez (withseveral Re-Loaded usersonthenetwork. more BlackBerry® than25300active among MTN Nigeria’s datapropositions. year-end, there By were handsets–isanindicator ofincreased momentum of BlackBerry® year. Althoughthisisstillrelatively small, it–aswell asthetake-up channels.various More than78000datamodemswere soldinthe 3G/HSPAbundles, marketing datadonglesandSIMcards via ofmobilebroadband introduced data avariety MTN Nigeria Nigeria. kind in Bothproductswere thefirstoftheir MTN network. offtheirSIMcardstheir contacts andhandsetsdirectlyon to the information etc, whileMTN allowsusersto save Backup acopyof use theirmobilephonesto dosearches, getthelatest news, sports
Yello promotion year-end Bounty”
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
MTN Nigeria continued
MTN also tapped into the youth market’s passion for music the importance of customer care and has also led to a number and sport through a number of significant sponsorships. These of recommendations from employees to improve the customer included “MTN Project Fame West Africa”, a musical talent search experience. Among the many proposals implemented are the show that dominated prime-time television viewership across deployment of point-of-sale terminals for electronic transactions, West Africa for four months. It also recorded the highest SMS and the introduction of queue management systems as well as website hit rate for any show of its kind in Nigeria. The Lagos Street aesthetic upgrades of MTN shops. Soccer Championship, which aims to develop young football talent by giving youths a platform to display their skills, was an MTN Nigeria is pleased to report a 100% participation rate in important sponsorship linked to the Group’s 2010 FIFA World Cup™ the 2009 Group culture audit, from which the Company gauges sponsorship. employee satisfaction. The Company works hard to engage with its employees to ensure a happy, motivated staff. With a focus on Distribution career enhancement, many of MTN Nigeria’s people travelled in MTN Nigeria continued to benefit in 2009 from the restructuring the region in 2009, providing their expertise to other operating of the distribution model executed the year before and as more of units through short-term assignments and secondments. the unregistered informal distribution points were integrated into MTN Nigeria continued to improve its remuneration policies to the Company database in the year. The focus now is to improve position the Company competitively to attract and retain top the distribution footprint in areas outside major cities, improving talent. distribution logistics to deepen MTN Nigeria’s reach into outlying areas. Regulatory environment Continued evolution of the telecoms regulatory environment People in Nigeria has led to increasing demands on the businesses In an effort to drive a customer-centric culture at MTN Nigeria of all mobile operators. In the year, MTN Nigeria continued to and ensure a consistent MTN-branded experience for all, 90% of actively engage the regulator, the NCC, on a number of proposed employees participated in a project to go back to the shop floor initiatives such as subscriber registration, quality-of-service and spend a day in a customer-facing role. This initiative reinforces parameters, mandated customer care centres and mobile number portability.
50 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 51 South Africa™. the mostofGroup’s sponsorshipofthe2010FIFA World Cup segment-based valuepropositions for voice anddata,alsomaking operators andbankswilllaunchnew through e-payment Company recharge willencouragegreater useofelectronic airtime increasing thecommercial roll outofwireless internet. The expenditure ofsomeR6,4billionfor 2010,whichincludes andhascommitted to capital ofitsnetwork, and availability willcontinueto to work improveMTN Nigeria the quality Outlook reduction ininterconnect fees to bemuted. MTN Nigeria’s ofthe theimpact itexpects trafficison-network, will converge three over years. thenext As somefour-fifths of rates infavour skewed with asymmetrical ofnewentrants. These interconnect regime cameintoDecember 2009 effect on31 rates for fixed andnewer termination mobileoperators. Thenew rates 30%belowprevious rates, witha glidepathto uniform operators. Later intheyear, theNCC newinterconnect determined interconnect rates downward following consultationwith 2009theregulator April reviewedIn thewholesaleSMS remain achallengeintheindustry. to recover substantialsums. However, interconnect receivables interconnectto debtsdueto collect MTN, andasaresult, wasable alsoaimedto pursueazero-tolerance strategy 2009.It December planrangein cable landingstationandthenew0816numbering The Company secured approval from theNCC for MTN’s submarine
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review that still exists in this important economy.that stillexistsinthisimportant for mobiletelephony theconsiderableopportunity underscoring to 110,7millionin2014, expandto nearly inNigeria mobile market in2010andforecasts to itsnetwork new subscribers thesize ofthe istargeting theaddition ofapproximatelyMTN Nigeria sixmillion growthsubscriber for whenitisimplemented. aperiod 2010–to inMay requirementonlydampen regulatory –starting greatly intheprocess ofregistering this subscribers, andexpects to assist itsstrong network expects distribution MTN Nigeria iscautiouslyoptimistic. MTN Nigeria outlook remains uncertain, toAlthough competitionisexpected intensify, andtheeconomic
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
MTN Ghana ARPU ($) Subscribers (’000) Launched November 1996, market share 55%, population 24 million, forecast market size in 2014 – 22,5 million, shareholding 98%.
8 001 MTN Ghana revenue and expenses summary 12 months to 12 months to
6 428 December 2009 December 2008 % Rm Rm change
Airtime and subscription revenue 4 077 4 308 (5) 4 016 Interconnect revenue 1 145 1 172 (2) MTN Data and SMS 351 473 (26) 2 585 Subscriberssubscribers Connection revenue 38 61 (38) ('000) 17 14 12 8 Other 57 33 72 ARPU (USD) Total revenue 5 667 6 047 (6) Dec 06 Dec 07 Dec 08 Dec 09 Direct network operating costs 519 468 11 Outgoing MOU – 104 119 105 Costs of handsets, SIMs and vouchers 194 143 36 Interconnect and roaming costs 646 845 (24) (’000) Net additions Employee benefits and consulting costs 256 271 (6) Selling, distribution and marketing costs 592 563 5
2 412 Other expenses (general and administration) 894 971 (8) Total operating expenses 3 101 3 261 (5) 1 431 EBITDA 2 566 2 786 (8)
1 573 EBITDA margin 45,3% 46,1% (0,8) pts 1 431 782 624 981 567 807 791 H2 567
H1
Dec 06 Dec 07 Dec 08 Dec 09
52 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 53 USD12 in2008. the valueofcedi,resulting inadrop to USD8amonthfrom dollarterms,terms. bythedeclinein thefallwasexacerbated In put pressure onaverage revenue peruser(ARPU) inlocalcurrency offersprice penetration from newcompetitors anddeepermarket inthefirsthalfof year.Ghanaian cedi,particularly Aggressive rand strength inthe inthesecondhalfofyear andweakness in revenue to inrandterms R5,7billiondueto acombinationof growth,ahead ofsubscriber thistranslated into a6,3%decline revenue increasedAlthough localcurrency by25,1%for theperiod, measured intheyear. customer satisfaction numbers,subscriber there wasasignificant improvement in thateven withthisstrong ispleasingto report growthIt in upto 61%ofthepopulation. cocoaandgoldexporter important operation in2006),helpingto pushmobilepenetrationinthe eight million(four timesthebasewhenMTN took over the MTN to Ghanagrew basebyalmostaquarter itssubscriber as MTN Zone andMTNMoney. Mobile andcapacity,quality aswell asenhancedvaluepropositions such capitalinvestmentcontinued heavy to ensure thebestnetwork andthestrong MTN brand.performance by This isbacked Company’s productoffering, superior outstandingemployee share at55%in2009istestamentable to to maintainmarket the upsoon. dueto start thatMTNand asixth Ghanawas The fact with five operators currently offering mobile telephony services, inwhichMTN operates,Ghana isthemostcompetitive market Overview
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review from the industry regulator.from theindustry fierce and growing competitionas well asincreased demands backdrop, mobiletelecoms operators alsohadto contend with to slowfrom peaksofaround 20%.Against thistough economic Later intheyear, thecedistabilisedsomewhatandinflationstarted disposable incomeandcompaniesfelt theeffect ofhighercosts. keeping interestup inflationand rates high. Customers hadless currency, athird whichlostnearly ofitsvalueto thedollar, pushing overseas Ghanaianworkers. strainonthecedi This putfurther donor aidandremittances from thesubstantialnumberof translated into downturn worldwide adeclineintrade, foreign tothe year,The Ghanaianeconomy hadadifficultstart asthe 2009. smooth transitionofpower to anewpresident inJanuary Following closelycontested a elections,Ghanaexperienced Market environment number ofbasetransceiver stationsincreased by30%withtheroll the overall quality, andcoverage ofthenetwork. capacity The capital expenditure, withsomeR2,6billioninvested inenhancing to contributor MTN Group 2009,Ghanaremained animportant In Infrastructure 28% increase inBTSsites inoperationtheyear. increased by11%,mainlyasaresult ofincreased rentals from the denominated ineuros operatingcosts ordollars. Directnetwork onoperatingexpensesasmany ofthecostsarea majorimpact 46,1% despite numerous challenges. ofthecedihad The weakness EBITDA margin narrowed onlymarginally to 45,3%from
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
MTN Ghana continued
ZAR (million) Capex out of 729 stations, bringing to more than 3 000 the total in operation. Positioning the business for increasing take-up of data services, MTN Ghana also brought on air
2 586 531 3G stations in the year. These investments meant that the Company added 10 new towns to its coverage and facilitated a sharp increase in data throughput on the network. 1 411 1 854 Some 660km of new fibre transmission routes were completed in the year: 605km of 938
1 239 national routes and the rest in the metropolitan network. These national route cables 977 801 provide capacity for transmission within Ghana, and also fit into the regional cross-border network connectivity requirement into Côte d’Ivoire and beyond, providing alternative
H2 484 routes to the international gateway for both countries. H1 262 840 317
1 175 To reduce its impact on the environment, as well as manage capital and operational costs, Dec 06 Dec 07 Dec 08 Dec 09 MTN Ghana continues to work toward greater sharing of fibre infrastructure with other Capex as % of revenue 28,5 32,8 30,7 45,6 mobile operators. It is pleased to report some important successes in this regard in 2009, with more sharing agreements expected to be sealed in 2010. BTS roll out Products and services 729 718 704 MTN Ghana kept up its reputation for innovative product offerings, launching a number 440 390 221 of new services in the year and optimising and building on the success of the 2008 introduction of dynamic tariffing through MTN Zone. This product continues to help differentiate MTN from its increasingly aggressive competitors and encourages on-network 483 calls. 302 328 302 289
H2
H1
Dec 06 Dec 07 Dec 08 Dec 09
54 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 55 withmarketing. implemented inconjunction programmes bycustomerinitiatives, experience supported base grew accountmanagementselling key thanks to byafifth handset shopsandexclusive dealershops. customerThe corporate outletssuchaspharmacies, focus inhigh-end onsoliddistribution of salemore thandoubledto 210000from 98000,withanextra footprintdistribution in theyear. The numberofMTN retail points to getcloser aneffort to itscustomers,In MTN Ghanaincreased its Distribution usingtheseservices. jump insubscribers leadingtoMTN asudden Ghanalaunched3.5GUMTS services, upto three2009, May connections timesfaster thanviaGPRS.In that beganinJune2008allowscustomers data to make year, roll outofEDGEtechnology bythecountry-wide supported MTN Ghanarecorded anoverall increase indatausagethe accessingthisservice. one millionuniquesubscribers many offerings, withmusicthemostpopular, resulting inover platform. advantageofMTN Ghanaianscontinuedto Loaded’s take 3G mobilebroadband SIMlaunchedonaprepaid andinternet year, aswell asanumberofenhanceddataofferings, including full commercial took place inthe launchofMTNMoney Mobile promotion andthe “Rally RoundtheFlag” programme. loyalty The customers to choosetheirnumbers)andthe “Text Goto2010 were Voice SMS;Conference your Number(allowing Call;Reserve launchesin2009 robustAmong various productandservice
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ” ⁄ Operational review employee ideasfor sustainedbusinessresults. Hub projectto provide competitive advantagebyharnessing interactive staffsessions, and, finally, thelaunchof Innovation The campaign to drivecommunicationontotal rewards; more 24-hour helpdeskfor employeethe queries; “ thelaunchofa introduction ofamonthlyin-housenewsletter; staff inthe year. Thiswaseffected through initiatives suchasthe 2009, resulting improvement inasharp incommunication with in priority wasakey performance that translates into exemplary MTNEnsuring Ghanamaintains anengagedemployee base People and will be leveraged further as a key differentiator asakey in2010. and willbeleveraged further todesign improve relevant interventions distribution performance atthelocallevel. sales performance This alsohelpstheCompany MTN Ghanaalsoimplemented anewtool for better measuring plan. distribution of MTN pointsofsales, aswell asMTNMoney’s Mobile enhanced based dealercommissions;investment to increase thevisibility leadership. Sotoomarket didtheuseofperformance-indicator- and canvassers. These initiatives helpedto secure MTN Ghana’s as thenationwide deploymentofabout2000 “foot soldiers” were driventhrough ofnewevent thework salesteams, aswell more merchants andregistrationactivations agents. Service byacquiring services MTNMoney Mobile geared upto support thesecondhalfofyear,In structurewasfurther thedistribution
It AllAddsIt Up”
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
West and Central Africa region continued
MTN Ghana continued
Flowing from these initiatives, MTN Ghana is pleased to report Mobile operators also pay a rural development levy of 1% of an improvement in both the level of participation and the results revenue. of the recent Group culture audit. Some 96% of all employees participated in this important gauge of staff satisfaction, up MTN Ghana continued to engage proactively with the regulatory 20 percentage points in the year, and the results were equally authorities on various issues, including such things as the encouraging. proposed implementation of GVG (global voice group), which will put additional charges on international traffic and is thus expected Recognising the importance of uplifting the community in which to lead to lower international mobile traffic volumes from Ghana. we operate, the MTN Ghana Foundation continued to invest MTN Ghana is also gearing up to register subscribers’ personal primarily in education and health in 2009. Among key initiatives details, as required by the regulator, in line with similar initiatives in were projects to improve literacy and numeracy in the Northern other MTN markets. Region of Ghana, support for the construction of new classrooms in the Western and Eastern Regions, as well as support in Accra for Outlook the Princess Marie Louise Children’s Hospital – the only specialist Among MTN Ghana’s key priorities in 2010 are to sustain the children’s hospital in the country. recent significant improvements in network performance, as well as increase the penetration and usage of MTN Mobile Money. Regulatory environment Focus will also be given to concluding more infrastructure- During the year there was heightened interest in the telecoms sharing agreements with other operators, thereby reducing the industry from the Ghanaian authorities and the public, with Company’s environmental footprint. In an effort to improve increasing demands and expectations from the authorities on the MTN Ghana’s broadband capacity, the Company will continue to country’s mobile operators. This followed the implementation of work to secure approval for a landing station in the country for the a new communications service tax of 6% of revenue in 2008 and WACS submarine cable. the increase in the same year of regulatory fees to 1% of revenue.
56 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 57 addition ofsome800000newcustomersin2010. to itsnetwork the year. allthesefactors, Considering MTN Ghanaistargeting the interest rates ease, andcommercial oilproductionbegins later in health oftheeconomy to isexpected improve asinflationand providers. to putpressureGhana, islikely However, onservice the mobileoperator in competition, withtheentranceofsixth bythemiddleof2011.Increased becollected existing subscribers registered. require authorities The regulatory thatthedetailsofall mustbe to commenceinJuly2010whenallnewactivations front, theregistrationOn theregulatory ofcustomer dataisdue
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
Middle East and North Africa region MTN’s Middle East and North Africa (MENA) region is made up of Irancell Telecommunication Services (Proprietary) Limited (in which the Group owns 49%), MTN Syria, MTN Sudan, MTN Yemen, MTN Afghanistan and MTN Cyprus. The MTN office in Dubai hosts the Group’s network technology and operations process group along with the region’s functional units.
Population Subscribers Revenue EBITDA Capex (million) (000) (Rm) (Rm) (Rm)
Total for region 190,1 37 014 21 525 5 782 5 785
Contribution to Group total* 36% 32% 19,2% 12,6% 19%
* Difference in head office. Country contributions to MENA region total
Subscriber contributions (%) Capex (%)
Iran – 63% Iran – 57% Syria – 11% Syria – 13% Sudan – 10% Rest of region – 30% Afghanistan – 9% Yemen – 6% Cyprus – 1%
58 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 59
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
Middle East and North Africa region continued
Performance Seamless roaming was implemented throughout the six operating MTN’s operations in most MENA countries performed well in the companies, offering the local recharge, traffic steering and year, largely meeting Group forecasts – a particularly good showing welcome SMS features. Further features and services will be added considering the difficult political and security situation in many in the year ahead. Yemen was the first country in the region to offer jurisdictions. MTN Sudan recorded some operational improvements MTN Mobile Money, with its successful soft launch in December. by building the necessary internal infrastructure as well as an improved strategy. MTN continued to hone its distribution model in the year, implementing new commission schemes to ensure the commitment Total subscribers in the region grew 41% to 37 million, led by the of distributors to MTN’s offering, as well as the loyalty of customers. The logistics network was improved, with MTN operating warehouses Group’s newest Middle East operation in Iran, which benefited from for its products in all regions, improving the Group’s reach and significant capital investment to improve the quality and coverage accessibility, particularly in rural areas. of its network. (For more details, please see the separate country report on page 62.) MTN’s people across the region are the backbone of the business. In 2009, the Group continued to implement initiatives to manage In 2009, mobile penetration across the six MTN MENA countries human resources better by rewarding staff for their tenure and ranged from 25% in Yemen to more than 100% in Cyprus, with clearly defining career paths for exceptional talent. These initiatives four of the countries in this area recording penetration rates below helped to provide consistency and motivation to employees 50%. Average revenue per user across the region declined in 2009, everywhere. However, the uncertain security situation in many as more lower-usage customers signed up to the network and MENA countries makes attracting and retaining suitable middle competition intensified. management skills a challenge. MTN’s strategy to employ and develop local resources, rather than rely on expatriates, has proved MENA capital expenditure in the year was led by Iran, where successful in many areas, helped by the recent establishment of the MTN Irancell spent R6,78 billion to bring on line more than MTN Academy in Dubai. In Yemen and Sudan, MTN reduced the 2 000 base transceiver stations. (Only 49% of this total capex was for number of expatriates in the year. the MTN Group’s account.) In Syria, where the Company operates under a build, operate and transfer (BOT) contract, MTN spent After a difficult 2008, marked by the regulator’s directive to R748 million in total capex, with 504 BTS added. disconnect 1,1 million subscribers who had not registered their personal details, MTN Sudan devoted considerable energy in 2009 MTN’s MENA operations adopted a segmented approach to to redefining its business and its operational approach. The new customers, tailoring products and services to meet the needs of strategy is more aggressive, particularly in the south of the country specific market segments across the region. Marketing initiatives and in Darfour, as well as the suburbs of big cities, including were focused on managing churn and enhancing customer loyalty.
60 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 61 for thesuccessfulimplementationof “ year running, employees ofMTN Yemen won theGroup’s firstprize numbers grew by26%as240BTSwere rolled out.For thesecond also managedto sustainahealthy blendedARPU. Subscriber andreduced intheyear. churn just under40%ofthemarket, It MTN Yemen maintaineditsleadershipposition,withashare of improved itsreach bysigning upseven newdistributors. pointsinfive majorcitiesandsignificantly new customer service resilience andredundancy.of network The business launched five interms andagoodperformance improvements inthebackbone country. This led to asignificant incongestion,marked reduction situationinthat a significant thesecurity numberconsidering MTN Afghanistancustomer service. deployed 236BTSintheyear, and distribution position thanksto enhancementsto itsnetwork, Afghanistan, shareIn MTN gainedthenumber onemarket sometimeto to befeltexpected take way. inameaningful each callupto 30minutes). The benefitsofthenewstrategy are Free minute (whichoffers of thefifth after customers free airtime location)and ofthesubscriber on theavailable capacity Talk For discountsofupto 90%on-netandoff-netdepending subscribers the enhancedversion ofMTN Zone (which dynamictariffing offers usagewere capacity at thesametimehelpedmanagenetwork Furthermore, productsthatdifferentiated thekey MTN Sudanand adopted. model,2010. Anewdistribution enhancingoverall reach, was forvendors andobtainedboardastrong support rollout planin MTN alsoconcludedanewapproach withitsmain Khartoum. Product offering mobile voice, fixed voiceand broadband access. in theyear, includingtheFIFA Pack andafirst-in-market Triple-Play MTNSouth Africa™, Cyprus launchedmany productinnovations Leveraging MTN Group’s sponsorshipofthe2010FIFA World Cup outreachcommunity programme.
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 21 Days ofYello21 Days Care 31 December 2009 31 December ” ⁄ Operational review potential market to expandto some148,6millionpeopleby2014. potential market growthprospects for mobilemarket across this MENA,MTN expects andshare functions sites withcompetitors. certain With significant –to outsource inSudan–andothermarkets explore opportunities the outlookfor theeconomy isencouraging. MTN willcontinueto 40 millionpeoplewhere mobilepenetrationremains below40% and provides astrong foundation for ofsome growth inthecountry MTN isconfidentthatthe businessstrategyrevised for Sudan for commercial launchsoon. provider,commercial service internet whileMTN Syria’s ISPisdue approval isstillawaited. andAfghanistan Iran have launchedtheir SudanandAfghanistan, Iran, aswellwhere asinSyria, regulatory Yemen in2010.MTN alsoplansto in introduce Money Mobile in operations planto launchdynamictariffing Afghanistan and Building onthesuccessofMTN Zone theMENA inothermarkets, will enabletheregion to achieve theambitioustargets set. to intensify. However, MTN isconfidentthatitsoperationalstrategy and in Syria Yemen, competitionintheMENA region isexpected andpossiblyalso With inIran theentranceofnewoperators likely Outlook and began to install a new intercity and metropolitan fibre network. and beganto installanewintercity andmetropolitan fibre network. MTN Cyprus to rolled expanditsHSDPA out66BTS,worked network
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
Middle East and North Africa region continued
MTN Irancell
ARPU ($) Subscribers (’000) Launched August 2006, market share 40%, population 72,5 million, forecast market size in 2014 – 75,8 million, shareholding 49%.
23 260 MTN Irancell revenue and expenses summary (49%) 12 months to 12 months to December 2009 December 2008 % Rm Rm change 16 039
Airtime and subscription revenue 4 051 2 360 72 Interconnect revenue 2 167 1 676 29 MTN Subscriberssubscribers Data and SMS 1 210 689 76 6 006 ('000) 154 Connection revenue 150 206 (27) 9 10 9 8 ARPU (USD) Other 47 4–
Dec 06 Dec 07 Dec 08 Dec 09 Total revenue 7 625 4 935 55
Outgoing MOU – 69* 60* 62 Direct network operating costs 722 604 20 Regulatory fees – revenue share 2 067 1 280 61 *Restated to exclude free minutes Costs of handsets, SIMs and vouchers 179 162 10 (’000) Net additions Interconnect and roaming costs 937 666 41 Employee benefits and consulting costs 95 63 51
10 033 Selling, distribution and marketing costs 614 469 31 Other expenses (general and administration) 347 199 74 4 446 Total operating expenses 4 961 3 443 44 7 221 EBITDA 2 664 1 492 79 5 852 4 073 EBITDA margin 34,9% 30,2% 4,7 pts 4 023 5 587
H2 3 148 1 829 H1 154
Dec 06 Dec 07 Dec 08 Dec 09
62 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 63 inareas inlocaldialects where Farsi bycustomised advertising part continuesto benefitfromMTN Irancell astrong brand, helpedin costincreaseskeep incheck. maintenance andlocallymanufacturedrecharge vouchers, helped expenditure, alongwiththeimplementationofsinglevendor control ofcommissions, headcountgrowth andmarketing margin inby4,7percentage particular, pointsto 34,9%.In tight of 44%lagging revenue growth of55%,improving theEBITDA of economiesscaleresulted inoperatingexpensesgrowth Aggressive costcontrol initiatives combinedwiththebenefits subscribers. declined byonlyUSD1to increase USD8despite thesharp in revenue wasR7,6billion.Average revenue perusermonth 54,5% increase inrandterms. MTN’s 49%share ofMTN Irancell’s significantly aheadofsubscriber growth whichtranslated into a increasedRevenue by60%for inlocalcurrency theyear, 61% ayear earlier. MTN Irancell’s share rose market to 40%from 37%. penetrationto 80%attheendof2009from drive mobilemarket improvements incustomer care thishelped andwiderdistribution, Together offerings, withenhancedproductandservice increased to total 23,26million. subscribers packs helpedensureof7,2millionintheyear and netconnections FreeGet One targets in2009.Promotionsits performance suchas “Buy One, ensured exceeded thatMTN thenetwork extending Irancell further Aggressive investment andheavy in acquisitionactivity subscriber Overview
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport ”, “ ”, Magic SMS” ofprepaid andacutintheprice starter 31 December 2009 31 December ⁄ Operational review during 2010. during nowisthatitwillbeissued andtheexpectation licence inIran economic activity. There hasbeenadelay inissuingthethird GSM bythepresidentialinJunealsoputpressure election sparked on oil. Socialunrest export which affected thedemand for itsprimary didnotescapetheeffects oftheglobaleconomicslowdown, Iran Market environment priority, as do site acquisitions, particularly inthemaincities.priority, asdosite acquisitions, particularly moreand attracted customers. Further enhancementsremain a inimprovingandcoverageassisted MTN Irancell boththequality quality.to enhancenetwork sites addedinEsfahan The extra significant numberofthese were brought onairin Tehran, helping monthly average of170andbringing thetotal to 3532.A base transceiver stations(BTS)intheyear, giving animpressive Siemens, andHuawei) 2043new activated Ericsson MTN Irancell thethreeBetween buildvendors outsourced (Nokia- network from 5932km. 10 928km towns amonth. The Company alsoexpandeditsroad coverage to coverage,had MTN Irancell representing additionsof62new reaching year-end, atotal R3,3billion.By of1429citiesandtowns with MTN Group’s 49%share ofcapitalspendingfor theCompany in2009, the quality, ofitsnetwork coverage andperformance upitsstrong kept investmentMTN Irancell momentumto enhance Infrastructure exemplary compliancewithtaxregulations.exemplary theyear,In received MTN Irancell thelocaltaxaward for its sponsorship ofthe2010FIFA World Cup SouthAfrica™. language, aswell astheMTN Group’sis nottheprimary global
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
Middle East and North Africa region continued
MTN Irancell continued
ZAR (million) Capex (49%) MTN Irancell became the first operator to launch WiMax technology successfully in December 2009, by providing wireless data transmission services. 3 326 Products and services 2 282 2 743 The Company continued to enhance its value proposition to customers and maintained its reputation for innovation with the launch of numerous new products and services in 2009. 2 142 Customers responded positively to the “Buy One, Get One Free” SIM card promotion, with
1 559 2,9 million people taking advantage of the offer. The “Magic SMS” promotion was similarly well received, attracting 1,4 million subscribers. 845
773 Among other promotions was the “WOW” campaign, during which users loaded their H2 1 044 675 714 recharge cards with special “WOW” codes and received additional free airtime. Ring-back 601 H1 tones, the service that allows subscribers to select a tune to play to their callers, was 98 launched with great success in January 2009, reaching two million subscribers within two Dec 06 Dec 07 Dec 08 Dec 09 months and almost doubling that figure by year-end. Initiatives such as these helped in our Capex as % of revenue – 116,3 55,6 43,6 efforts to reduce churn and improve brand awareness, which also received a fillip from the ™ BTS roll out MTN Group’s global sponsorship of the 2010 FIFA World Cup . Distribution 2 043 MTN Irancell worked to ensure wide distribution and availability of its products in the year,
1 250 with the addition of eight new distributors, increasing the total from seven to 15. Among 1 642
1 529 the various methods of buying airtime in Iran are via bank cash machines (ATMs), logical 894
833 points of sales, web kiosks and internet banking. During the year, the number of banks distributing our products increased from four to 15.
Some 5 000 new dealers formed part of the service channel, with the dealer footprint up 793 748
696 to 8 000 dealers, each of whom is also a customer registration point. MTN Irancell noted H2 361 a sharp improvement in the collection of customers’ registration documents from dealers
361 in the year, thanks to the installation of the necessary systems at dealerships to make this H1
Dec 06 Dec 07 Dec 08 Dec 09
64 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 65 signing ofamemorandumunderstandingwiththeincumbent frontdevelopments in 2009. ontheregulatory These include:the anumberofpositive ispleasedto report MTN Irancell environmentRegulatory a motivated andcompetent employee base. employees staff, to permanent thereby to assistingitsefforts retain in theyear. anumberofitstemporary converted MTN Irancell wasalsointroducedlocal employees. Anewstaffbenefitpackage transferAcademy to behindskills and putconsiderableeffort The Company continuedto bolster trainingthrough theMTN People answer rate sincetheinceptionofbusiness. MTN Irancell’s level and callcentres achievingtheirhighestservice theyear,In to improve efforts thecustomer experience resulted in andimprovedrestocking availability. recharge vouchers andSIM cards lowered costs, enhanced rapid machines. andpoint-of-sale the internet The localproductionof denomination vouchers thatare available onlythrough bankATMs, high productavailability, beganissuinglower- MTN Irancell to costswhilstensuring aneffort reduce distribution In customer convenience. centres, greater tradinghoursandensuring extending service wasintroduced shift An additionalwork attheeightMTN Irancell channelforanother distribution productsin2009. MTN Irancell With 580pointsofpresence, thePost wasaddedas Office enhanced customer experience. andnowofferto ensure an anincreasingairtime rangeofservices easier. have Dealers moved away from onlysellingSIMcards and
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review adding around fivein2010. millionsubscribers arethese factors to expected helpthebusinessmeetitstarget of centrethe year ahead. strategy, Alongwitharenewal ofitsservice Iraniancustomers in Money as toits tariffing wellasMobile MTN product launches, theCompany to introduce expects dynamic strong competitive position.Amonganumberofotherplanned forto openupthebroadband MTN Irancell, market providing a The fullcommercial launchof 2010isexpected WiMax inearly for in2010. MTN Irancell capitalexpenditure ofR2,67billionasitsshare ofcapex earmarked centres of Tehran andEsfahan. To achieve this, MTN Group has inthemain andcoverage, quality to particularly itsnetwork improvements theyear ahead, onfurther willwork In MTN Irancell third operator, in2010. expected ofa competitorposition versusandtheentry awell-established thecompany continuestoremarkable, entrench striveto firmly its While thegrowth 2006launchis sinceitsOctober inMTN Irancell Outlook authorities also published draft number portability regulations. numberportability alsopublisheddraft authorities the granting ofthe0938GSMnumberrangeto theCompany. The interferencesinmajorcitiesaswell as ofspectrum the clearing range following thegranting ofa WiMax licenceto thebusiness; rate for theaward theyear; ofa to MTN Irancell WiMax number operator oninterconnection, andagreement ofaninterconnect
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
Middle East and North Africa region continued
MTN Syria
ARPU ($) Subscribers (’000) Launched June 2002, market share 45%, population 20,5 million, forecast market size in 2014 – 12,7 million, shareholding 75%.
4 249 MTN Syria revenue and expenses summary 12 months to 12 months to December 2009
3 539 December 2009 December 2008 vs 2008
3 109 Rm Rm % 22 7
23 202 Airtime and subscription revenue 5 451 5 254 4
2 237 1199 18 Interconnect revenue 514 472 9 Data and SMS 533 397 34 MTN subscribersSubscribers Connection revenue 64 84 (24) ('000) Other 425 301 41 ARPU (USD) Total revenue 6 987 6 508 7 Dec 06 Dec 07 Dec 08 Dec 09 Direct network operating costs 622 419 48 Outgoing MOU 134 130 124 120 Regulatory fees – revenue share 3 269 2 789 17 Costs of handsets, SIMs and vouchers 70 38 85 (’000) Net additions Interconnect and roaming costs 424 460 (8) Employee benefits and consulting costs 243 216 13
873 Selling, distribution and marketing costs 342 250 37 Other expenses (general and administration) 644 507 27 517 710 Total operating expenses 5 614 4 679 20 699 EBITDA 1 373 1 829 (25) 494
430 EBITDA margin 19,6% 28,1% (8,5) pts 494 164 355
H2 266
H1 11
Dec 06 Dec 07 Dec 08 Dec 09
66 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 67 of20million.Athird inthecountry telecommunications services companieslicensedtoMTN isoneoftwo provide Syria mobile isaheavily regulated inSyria The telecoms oneand market Market environment country. entitiesinthe theCompanybetween regulatory andvarious significant interaction constructive and ispleasedto report in complyingwiththehigheststandards governance, ofcorporate and traffic. MTNSyria recorded good progress throughout the year This provides asolidbasisfor future growth inbothsubscribers strengthened theMTNpopulation coveragebrand. andfurther of itsinfrastructureto thenewIPgeneration,increased its theendof2009,MTN hadcompleted thetransformation Syria By (effectiveauthorities end-June 2008). 40% intheshare ofrevenue MTN hadto pay Syria to theSyrian This wasaresult ofthefullyear effect oftheincrease to 50%from The EBITDA margin decreased by8,5percentage pointsto 19,6%. USD18 for theperiod. revenue to inrandterms R7,0billion.ARPUdecreased USD1to growth,than subscriber whichtranslated into a7,4%increase in Local revenue increased currency by8,2%for theperiod, slower 38% in2008. market’s mobilepenetrationto around 46%byyear-end, from additions to some710000for 2009. This helpeddrivetheSyrian and productenhancements, bolsteredalong withnetwork net Company’s aggressive useracquisitioninitiatives late intheyear, baseby20%to 4,25million. the expansionofitssubscriber The ofMTN exceeded Syria forecastsThe performance in2009,ledby Overview
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review MMS filtering andananti-spamsolution. MMS filtering enhancements were implemented, suchasthelaunchofSMS/ prepaid centre callscontact wasoutsourced other andvarious flexible platform designed to improve customer satisfaction. The system dedicatednetwork to prepaid users, resulting inamore upgraded theintelligent managementsystem. It new network sites, whichimproved availability, network andimplemented a MTN finalisedthe outsourcing Syria ofthemaintenance ofitsradio which customers canaccesstheinternet. MTN hasalsogreatly Syria improvednetwork, thespeedwith area to more majorcities. implementing7,2HSDPA By onthe the3Gcoverage extending 2009,MTN enhancedits3Gnetwork, In stations intheyear. challenges,various MTN rolled Syria out504basetransceiver to Despite connected allnodes andrecently cameinto service. of HLR(homelocationregister) –NT-HLR –wasinstalledand Anewtype multiplexingto anIPbackbone. on time-division completed themigration ofitscore infrastructurefrom onebased throughout theyear ofthenetwork asMTN Syria performance There wasanoticeableimprovement and intheoverall quality Infrastructure promotions and packages relatedpromotions to thebigevent. andpackages However, the 2010 FIFA World CupMTN launchedseveral SouthAfrica™, Syria Capitalising ontheMTN Group’s globalsponsorshipofthe Products andservices end oftheincomepyramid. thoseatthelower particularly challenges to consumersinSyria, globaleconomicenvironmentthe weaker posedanumberof 2009, operator to isexpected belicensedbytheendof2010.In
Operational review Sustainability review Operational review Business review Group overview Group chief operating officer’s reportcontinued for the year ended 31 December 2009
Middle East and North Africa region continued
MTN Syria continued
ZAR (million) Capex Company maintained a cost-efficient approach, pending the opportunity to convert the current BOT contract into a freehold licence. 1 039 During the year, MTN Syria improved its segmented approach to customers, offering 730 products tailored to meet the needs of specific groups. These included Youth and Mini 748 packages. It also focused on strengthening its position in the corporate segment. This was 362 accompanied by offering so-called top-up promotions to induce usage and an extension of validity periods to increase affordability. Another major development was the introduction 418
338 during 2009 of per-second billing for prepaid subscribers, corresponding to market demand 171 386 and aiming to increase customers’ satisfaction. 219
H2 309 247
H1 119 While providing high-quality voice service remained MTN Syria’s primary role, a more concerted effort was made in 2009 to support the introduction of data solutions. This Dec 06 Dec 07 Dec 08 Dec 09 came as a result of the regulator’s approval to launch limited 3G services. MTN Syria Capex as % of revenue 9,8 9,0 16,0 10,7 introduced a bouquet of mobile broadband (3G) bundles including a pay-as-you-go bundle as it introduced 3G coverage in major cities across Syria. The Company also successfully BTS roll out implemented seamless roaming, while the launch of MTN Mobile Money is still pending regulatory approval. 596 Distribution 444 504 Recognising the competitive advantage of an efficient and effective distribution network, 283 the Company implemented several initiatives to enhance its market position. Improvements
317 were made to distributors’ channels and – with a focus on quality – the number of 260
193 distributors was reduced to seven from 11. The commission scheme to distributors was
191 further modified to ensure more emphasis on the value and quality of the subscribers. 221 H2 152 124
H1 69
Dec 06 Dec 07 Dec 08 Dec 09
68 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Operational review 69 its BOT conditions, (withitsstringent includingrevenue contact onthepossible conversion withtheauthorities constructively of 2010.MTN continues to during engagecloselyand Syria expected new telecoms law andtheentranceofathird mobileoperator are environmentThe regulatory isevolving andthe publicationofa environmentRegulatory managers, seniormanagersandexecutives. the Company hasdeveloped personaldevelopment plansfor all is theleadershiptalentmanagementprogramme, through which development businessgrowth.initiative Animportant to support needed andskills all employees are equippedwiththeknowledge achieve optimumefficiency, increaseandensure that productivity aswell asheadcountoptimisationinorder towith multipleskills strategic objectives. Amajorfocus wasondeveloping employees withtheGroupto achieve function theCompany’sco-ordination human resources projectsandinitiatives were launchedin2009 and honingstrategies develop to andretain attract, talent.Several MTN iscontinuously investing Syria indevelopingtalent theright in great assetand demand. Humancapitalisthemostimportant and developments intechnology, suitablyqualifiedpeopleare isdrivenbytherapidchange Given thatthetelecoms industry People appropriate response isgenerated within24 hours. complaints, etc, whichare thenstored withinadatabaseandan application. This allowsfor thesendingofsuggestions, requests, communication withcustomers, Linkwaslaunchedasaweb Dealer better accommodate customers’ needs. To facilitate improved ofsomeprepaidThe validity vouchersto wasextended
MTN Integrated Business Report ⁄ MTN Integrated BusinessReport 31 December 2009 31 December ⁄ Operational review later intheyear. application of3Gtechnology, are to expected follow otherservices is MTNMoney. Mobile accessisthemain Althoughinternet Among commercial productlaunchesplannedfor in2010 Syria R456 million oncapitalprojects. some 400000customersin2010andspend to itsnetwork andwillstimulate usage.of subscribers to MTN add expects conversion ofMTN Syria’s BOT shouldhelpintheuptake contract entrance ofathird andtheanticipated operator into themarket However, theissuingofnewtelecoms law, theexpected in tariffs bythemarket’stwo operators andconstrains roll out. and theBOT structure, whichprevents any reduction meaningful customers) isslowingbecauseofthehighcostsrevenue sharing growth indicator (andtheacquisitionoflower income inthiskey Although mobilepenetrationincreased 2009,thepaceof during Outlook Syria intheyearsSyria ahead. preparations were madeto positiontheCompany asamajorISPin 2009,MTN receivedissue. Syria In anISPlicence, andextensive governmentgiving considerationtowith theSyrian serious thattherepleased to hasbeensomeprogress report inthisregard, share) into astandard mobileoperator licence. The Company is
Operational review Sustainability review Operational review Business review Group overview Abridged sustainability report
MTN is a leading provider The Group is pleased to present an abridged report of the Group’s 2009 sustainability results. The detailed report may be accessed on of telecommunications www.mtn.com/sustainability.
services in emerging markets. Sustainability vision, strategy and principles This provides us with the MTN is a leading provider of telecommunications services in emerging markets. This provides us with the opportunity to catalyse development that improves quality of life opportunity to catalyse by providing opportunities for social and economic inclusion and growth, connecting development that improves people, providing better ways of doing business, and facilitating the trade growth. quality of life by providing MTN’s sustainable business practices represent an incremental journey. The Group started this journey in 1994; in 2009 the implementation of the Group sustainability opportunities for social and function, board and executive support, Group-led strategic planning, and resource economic inclusion and commitment have positioned the Group to better realise its sustainability vision. growth, connecting people, Our sustainability vision: In meeting MTN’s business objectives, we will continue to enhance stakeholder value, manage risks and opportunities posed by economic, social, providing better ways of doing human and environmental capitals, within our scope of influence.
business, and facilitating the To remain resilient, sustainability is not secondary to the business: it is about trade growth. positioning social, environmental and ethical considerations at the core of MTN.
To accelerate the implementation of MTN’s sustainability vision, a strategy and key implementation principles have been defined.
70 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Strategy Implementation principles Group overview Group
• Focus on environmental, social and governance issues of • Set foundations for sustainability: ensure internal awareness and importance to stakeholders, and that may have a material impact education, implement human and system resources, identify on MTN’s economic position opportunities and risks, and manage and report performance
• Business decisions will be motivated by sustainability opportunities • Focus on no more than three project initiatives per annum. Projects and risks, rather than mere compliance are to be prioritised based on effort required and potential impact
• Use pilots, trials, and a phased implementation approach where suitable Business review • Share successes and use lessons learnt from previous experiences
• Group sets direction and influences imperatives, in collaboration • Balance Group’s vision and requirements with local operating with operations, which maintain closest working relationships with conditions, challenges and opportunities stakeholders
Governance of sustainability corporate affairs, who reports progress and plans to the Group The Group board is accountable for sustainable business practice executive committee (Exco). Signoff of major deliverables is and as such, has delegated responsibility to the risk management undertaken by the Group president and CEO, where commitments and compliance committee. The executive management of the bind the entire Group. review Operational sustainability function is the responsibility of the Group executive Sustainability review
71 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
The diagram below indicates the governance and management of the sustainability function in MTN.
Group board
NRHR & CG Group risk and Group audit committee compliance committee*** committee*
Exco Tender committee
Business Corporate affairs Group finance Marketing Human resources Mergers and risk management Technology acquisitions
Stakeholder Corporate relations communications
Group sustainability
OPCO** sustainability Sustainability working champions teams/forums****
* Nominations, remuneration, human resources and corporate governance committee ** Operating company, used within MTN to denote all subsidiaries and associates *** Sustainability is a standing item on committee agenda **** Sustainability working teams and forums will be implemented in regions or operating companies commencing in the latter half of 2010 † Exco also includes the chief operating officer’s office and company secretary
72 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report 2008 Sustainability commitments’ feedback Group overview Group Degree to which objective 2009 commitments in 2008 Status was achieved
Risk/Governance
Roll out annual reputation review • Self-assessment of MTN’s reputation by Exco and Opco CEOs via questionnaire completed. Results presented to Exco • In 2011 MTN will undertake external assessment with media, Business review analysts and regulators
Complete whistleblower roll out; improve • Roll out completed. Operations also received basic fraud staff awareness awareness training
Review/improve consistency of government • Stakeholder governance model incorporating identification relations engagements and management processes defined. Implementation of model planned in 2010
• Appointment of an executive for regulatory affairs at Group level review Operational
Establish Group sustainability governance • Group Sustainability Manager appointed to drive strategy and structure (corporate affairs, SHE, risk, network implementation and technology, HR, investor relations, Opco • In 2010, implementation of local and regional sustainability representation) forums to commence
Enhance CURA risk management system to • Reviewed decision to only track this indicator. Determined that a track hours of disability due to injuries more holistic incident management system was required to address stakeholder reputation management, insurance, safety and health, and sustainability-related incidents proposed Sustainability review
Degree of MTN’s achievements Degree yet to be achieved
73 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Degree to which objective 2009 commitments in 2008 Status was achieved
Social contribution
Monitor implementation of Group CSR • All 21 Opcos now undertake projects that deliver sustainable framework and align activities. Review impact framework effectiveness
Launch foundations in remaining operations • Underway – see section titled Foundations
Increase MTN South Africa spend on black • Spending increased to over R520 million (unaudited), a women-owned/managed companies 43% increase from the previous year’s spend
Staff development
Roll out sustainability education/training • Board/executive/senior level awareness and engagement programme, including policy, management ongoing framework, performance • Car bon footprint training undertaken
Degree of MTN’s achievements Degree yet to be achieved
74 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Degree
to which overview Group objective 2009 commitments in 2008 Status was achieved
Staff development (continued)
Confirm sustainability resources at • Sustainabilit y champions have been identified in operational level MTN South Africa, Swaziland, Nigeria, Ghana, Uganda, Cameroon, Syria, Cyprus, Rwanda, Zambia, Yemen, Congo-Brazzaville and Benin Business review
Environment
Ensure environmental management • Further work to clarify internal roles of different functions will concerns are included in sustainability need to be undertaken to ensure roles and tasks are appropriately management team’s work and performance allocated and executed. Some work on the top environmental monitor mandate priorities and actions has commenced (see section titled The environment)
•
Ensure electromagnetic fields (EMF) See section titled The environment review Operational health and safety level site agreement implemented across all Opcos Sustainability review
Degree of MTN’s achievements Degree yet to be achieved
75 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Material sustainability opportunities and risks for 2009 The Group’s review has determined the environmental, social, and ethical or governance issues that could pose a material opportunity or risk to MTN’s business.
The top sustainability-related opportunities, and MTN’s response, are described below.
Opportunity Description Response
Environmental Operations were concerned about the business‘ environmental impact and See section titled Environment explored solutions to reduce this
2010 FIFA World Cup™ MTN’s sponsorship provides longer-term opportunities to make a sustained See section titled Community sponsorship economic and social difference
Community/Foundation Given the size and scope of our operations, opportunities exist to fulfil our desire See section titled Community to be the pace-setter of community development and upliftment efforts
The top sustainability risks, and MTN’s response, are described below.
Risk Description Response
Regulatory MTN’s top regulatory risks included an array of challenges including the matter See section titled Regulatory of interconnection charges, quality of service and bureaucratic challenges eg, regulatory changes to telecommunications legislation, and ambiguous legislation
Environmental MTN’s material environmental risks predominantly relate to carbon-based energy See section titled Environment consumption, operating base transceiver station (BTS) sites, public concerns about EMF emissions of BTS sites and cellular handsets, and global increase in environmental legislation
Fraud External and internal types of fraud include theft of assets and inventory (such as See section titled Fraud airtime and diesel), distribution fraud and procurement fraud management
76 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Material stakeholder matters addressed over 2009 • Technology such as an integrated voice recognition (IVR) system is used to enable customer self-service and reduced waiting Customers overview Group For purposes of this abridged report, examples of initiatives by times. Dedicated help lines for high-value customers have also operations are illustrated below. These do not necessarily represent been introduced eg, by MTN Uganda. the full scope of initiatives, products and services offered by all MTN operations. Bridging the communications divide Reducing financial barriers by addressing handset access and Quality of network acquisition costs helps reduce the communications divide. The Group’s network roll out strategy remained a key feature MTN Virtual Number was introduced in a number of operations. throughout 2009, enabling MTN to maintain or improve market This solution enables customers without handsets to make and share and relevance. MTN expanded the number of base stations, receive calls, send messages and make financial remittances using increased network capacity, prepared for 3G solutions, extended someone else’s handset. To reduce acquisition cost, low-cost Business review coverage, and improved infrastructure management. The handsets are also offered in all MTN operations. For example, MTN Group chief operating officer’s report (page 26), contains more Zambia’s entry level handset of R107,00 is one of the lowest in the information in this respect. market. MTN Uganda plans to subsidise handset costs in 2010.
Customer relations Rural network coverage is a feature in all our markets. For example, As markets develop, customer intimacy and differentiation since 2002, MTN Nigeria’s “phone ladies” programme empowers become key success factors. Improving service is one of the rural entrepreneurs through extended telephony access, while solutions to retention, reducing churn, and mitigating the impact generating a small return for entrepreneurs. In 2009 MTN Uganda of reduced spend due to global financial crisis. Examples of efforts partnered with Grameen Foundation USA to implement the Operational review Operational are set out below. VillagePhone solution. • To differentiate MTN, operations developed a better understanding of customers. This informed the design and Value-added services help extend access to commercial and social implementation of a customer segmentation model in all benefits. One such solution, MTN Zone, was introduced across operations. operations to reduce call costs (and help ease network congestion • A customer service charter was introduced, and is being over peak periods). MTN Google SMS, another value-added service, implemented within a number of operations. was recently introduced in Uganda. Communities access services • Service quality is assessed through a variety of means eg, such as Farmer’s Friend, Health Tips, Clinic Finder and Google MTN Benin conducts a mystery shopper assessment Trader through SMS queries, and receive a near-instant reply. More programme. than 1,7 million electronic hits have been recorded since its mid- Sustainability review • Customers are acknowledged through loyalty and retention 2009 launch. programmes. MTN Yemen, for instance, launched a retention programme to activate dormant accounts.
77 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Innovation that it benefits from the input of local knowledge at shareholder • MTN’s Can Do spirit focuses on staying in touch with the needs and board level. MTN South Africa’s broad-based black economic of markets. Recent innovations include MTN MobileMoney, empowerment performance is available in the detailed 2009 enabling subscribers to remit money or pay bills using a secure, sustainability report on www.mtn.com/sustainability easy and fast service, was made available in Yemen, Ghana, Uganda, Côte d’Ivoire, Benin, South Africa, Rwanda, Liberia, King III Code of Corporate Governance and Sustainability Congo-Brazzaville, Nigeria, and Cameroon. With significant MTN has taken cognisance of the new requirements of King III and emerging market demand for such services, further roll out has initiated a project to assess gaps between MTN’s sustainability across other operations is also underway. practices and the requirements of King III. Current practices and systems will be adapted where necessary. MTN Play is an interactive mobile access channel enabling customers to enjoy digital 2010 FIFA World Cup™, and boost Business continuity planning mobile penetration rates. A business continuity management (BCM) strategy was developed, comprising critical aspects of emergency response, Improving systems crisis management, business recovery and resumption. A holistic After experiencing problems with a number of the Company’s management process to adequately address these risks, and a IT systems in the year, MTN South Africa embarked on a three- framework to build operational resilience using a phased approach year development plan to upgrade those systems responsible were implemented. Disaster recovery plans were also developed. for tracking, reporting and billing of a customers’ network use. A crisis management plan was defined, and investment in network Working closely with a new team, to whom the Company infrastructure and redundancy has continued, with operating outsourced its IT in 2008, improvements to the stability of various companies adopting network architecture design principles legacy systems have been made. Tools for better monitoring coupled with major investments to improve network redundancy. system performance have been implemented with the aim of This has significantly enhanced MTN’s capability to effectively ensuring a more versatile system with better developed customer respond in order to safeguard the interests of key stakeholders. solutions. A command centre has also been commissioned in November to allow faster tracking and resolution of system issues. Interconnection There has been an increased focus by national regulatory Governance and regulation authorities (NRA) on the effective regulation of interconnect Local participation charges, also known as MTR. MTN has noted all the MTN is committed to partnering with local shareholders in all requirements and the rationale that each NRA has proposed countries in which it operates. MTN regards this practice as and continues to engage NRAs on this matter. It is necessary essential in all of its operations to ensure that the benefits of its for operators and regulators to fully understand the detailed investments are shared with local investors and in turn to ensure costs of providing interconnect services based on an approved
78 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report cost model, to ensure that MTN and all network operators the details of their customers. SIM card registration has been realise a fair return on facilities provided. introduced by NRAs in a number of markets. Group overview Group
In South Africa, draft regulation regarding interconnection rates Key developments in 2009: was published in April 2010. MTN is currently in constructive • The Regulation of Interception of Communication Act (RICA) engagement with ICASA (the regulatory authority) to establish a came into effect in South Africa. The Act stipulates that the rate going forward. phone numbers of active SIM cards not registered by phase 1, ending 31 December 2010, must be removed from the network. In Nigeria, interconnection rates were reduced effective 1 January • In Nigeria, GSM operators requested the Nigerian Communications 2010. Commission (NCC) to extend the start date of the registration process, given the short notice period, lack of consensus on the In Uganda, the regulator proposed a MTR tariff which was less than identity form required, and the volume of registrations that needs to Business review the cost of network operations. MTN Uganda and the regulator be undertaken. The NCC extended the start date to allow operators reached settlement on this matter, and are set to engage on time to implement the necessary facilities to identify customers. interconnection discussions. Fraud management Following the promulgation of the Information and In 2009, fraud risk was addressed through the following actions: Communication Technologies Act, Act No 15 of 2009 in Zambia, • The heads of business risk management (BRM) were tasked MTN Zambia’s licence will be migrated into the new licensing with operational fraud risk management. Additionally MTN regime which is technology-neutral. Nigeria, South Africa, Conakry and Benin appointed a dedicated forensics resource. Congo-Brazzaville will appoint a dedicated Operational review Operational Increasing competitive activity through the issue of new forensics staff member by April 2010 licences is also a focus of regulators. MTN Cyprus upgraded the • In some operations, the revenue assurance function was network to improve 3G service coverage and quality, and moved segregated to ensure a dedicated focus on fraud identification the data traffic management backbone to a fibre optic network, (particularly airtime fraud) which is more reliable and stable compared to the old radio • A revenue assurance tool was procured, and implemented transmission network to strengthen prospects for entering into • The Whistleblower line Tip-offs Anonymous was launched a commercial agreement to access future mobile virtual network for staff to report internal and external instances of unethical operator (MVNO) licences. behaviour.
SIM registration Basic training in fraud awareness has now been undertaken in For global authorities to combat crime, industries such as the 85% of operations. Training for the remaining operations will be Sustainability review financial and elecommunicationt services are required to register undertaken when local BRM functions are established.
79 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Our people Recognition Training and development The MTN Y’ello Stars campaign was launched to boost staff morale Our 34 243 people (including temporary staff and contractors) are and create a sense of belonging by recognising outstanding our ambassadors, custodian of our values, innovators, and managers employees. It is in its fourth year of existence. of our stakeholders. Offering opportunities for career training and staff development enables leadership development, succession The environment planning, and talent retention and attraction, and is a competitive Electromagnetic fields (EMF) and safe communications differentiator. In 2009 the MTN Academy created a standardised Stakeholders may express concern about possible health effects approach to learning and development initiatives, and established that could result from exposure to spectrum or electromagnetic regional learning centres in South Africa, Ghana and Dubai. Learning waves upon which voice and data communications are based. solutions, leadership talent management, coaching and performance support, and services such as organisational development, standards, MTN supports open, independent, quality, scientific research. best practice and benchmark research now enable a holistic, Group- The results of international studies, and positions undertaken by wide response to the need to develop talent. authorities including the International Commission on Non- Ionising Radiation Protection (ICNIRP), World Health Organisation MTN Yemen, Uganda and South Africa introduced the leadership (WHO), European Committee for Electro Technical Standardisation, talent management (LTM) programme, a new approach to learning the UK National Radiological Protection Board, the American and skills development based on self-development, to mitigate National Standards Institute and Standards Australia indicate there inadequate depth of managerial skills and lack of time to register for is no substantiated scientific evidence that radio signals from base training by busy managers. MTN South Africa offers learning through stations, operating in accordance with recognised safety standards, experience programmes to newly qualified graduates. In 2009, 76 pose a health risk. graduates were placed in engineering, legal, sales and marketing areas for a period of 24 months. Six trainee chartered accountants MTN continually reviews the results of radio frequency research were also placed, while 16 university students have benefited from performed throughout the world. To ensure operations are full-time bursary awards. Bursaries to the value of R5 000 are available consistent with the most current health and safety standards to full-time MTN employees. information, EMF guidelines were updated in 2009. These prescribe that in countries where there is existing legislation and Rotation of staff across MTN regions enables knowledge sharing regulations around EMF, these national limits should be taken into and the alignment of new acquisitions to the MTN culture, consideration, and the stricter of legislation applied. Commencing promoting a standardised customer experience across the Group. 2010, those operations which do not currently maintain a basic
80 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report compliance programme will be required to implement this, using Figure 1: MTN Group 2009 CO2 footprint guidelines issued by WHO, the EU, and Institute of Electrical and Total scope 3 – CO emissions 4 414 (1%) overview Group Electronics Engineers (IEEE) RF Safety Programme. 2
Electromagnetic field levels in areas surrounding MTN base station Total scope 2 – CO2 emissions Total scope 1 – CO2 emissions sites in residential areas are well below the ICNIRP guidelines. 281 201 (50%) 280 246 (49%) This is achieved through adoption of best practice, including not raising signal strengths beyond that which is necessary to achieve service objectives. Examples of activities by operations include: • In MTN Cyprus, EMF emissions are measured twice a year to The Group’s footprint for the period 1 January 2009 – 31 December ensure emissions remain significantly lower than minimum
2009 of 565 860 tonnes CO e, is predominantly caused by diesel Business review EU standards. Together with organisational support from the 2 use or electricity purchased for base station sites. This presents Union of Municipalities, MTN Cyprus and the incumbent service the greatest opportunity for reduction, efficiency, and investment provider are the official sponsors of information seminars on in alternative technologies, which will help the Group mitigate “EMF and Mobile Telephony in our Lives”. the impact of rising global energy prices, energy insecurity, and • MTN Yemen has started working with the Ministry of possible future carbon taxes. This will also contribute to cost Telecommunications on health safety regulations and creating management and business continuity objectives. awareness about EMF in communities. • MTN South Africa surveyed 408 BTS sites located near hospitals Examples of MTN’s consideration of alternative energy solutions and schools. In total, 261 assessments were completed, and all include: were found to be compliant in terms of the INCIRP guidelines.
• Hybrid and solar-powered base station trials in Sudan, and review Operational The remaining 147 site assessments still have to be undertaken. operating stations in Cameroon. • I mplementation of an off-grid BTS in Kleinaarpen in South Africa, Carbon footprint powered by solar and wind, with hydrogen fuel cell secondary In 2009, the Group undertook its first detailed and wide-scale power. Also in South Africa, the Smalvisch project currently carbon (CO ) footprinting exercise, representing 62,2% of the 2 underway will implement a BTS powered by a hybrid solar/wind business by subscriber numbers. solution. Biogas and fuel cell technology projects are also under development. Sustainability review
81 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
• The use of a hydrogen fuel cell for GSM and 3G base station The Group is actively pursuing several opportunities to share backup (as an alternative to diesel) in Swaziland is currently infrastructure assets across its footprint in Africa and the Middle being trialled. Hybrid solutions are also being tested in Guinea East. MTN is, among others, engaging with other mobile operators Conakry, Rwanda, Liberia, Nigeria, and Uganda. to explore site sharing, leasing space on towers to others operators, and jointly rolling out fibre networks. The East Africa Submarine The implementation of engineered solutions is also undertaken to Cable System (EASSy), an undersea fibre-optic cable that will link manage base station power. Operations in Côte d’Ivoire and South the countries of Southern, Eastern and Northern Africa to the rest
Africa have saved fuel, maintenance fees and CO2 output through of the world, Europe India Gateway (EIG), SAT-3, Main-1 and the engineered solutions such as battery management. West Africa Cable System (WACS) form part of the Group’s strategy to ensure further operational cost reductions and increased quality “ICT’s largest influence will be by enabling energy efficiencies in delivery by all our operations. other sectors, an opportunity that could deliver carbon savings five times larger than the total emissions from the entire ICT E-waste sector in 2020 ” The Climate Group and Global e-Sustainability Electronic waste is any form of technology that has been discarded Initiative. or is no longer required. Environmental groups indicate that e-waste is predominantly dumped in developing countries, and As an ICT company, MTN’s role in reducing the impact of other the problem is growing. E-waste contains valuable components sectors through de-materialisation (substituting high carbon or such as copper and gold, and communities often attempt to physical products with electronic solutions eg, e-commerce, video salvage this. Electronic devices also contain lead, cadmium, conferencing and teleworking) will help the global economy mercury, and other heavy metals, and other toxic and chemical reduce emissions by helping other sectors optimise how they components harmful to both humans and the environment. operate, and improving how society works and lives. MTN needs to explore these opportunities further. MTN’s direct and indirect generation of e-waste predominantly stems from obsolete computers and associated information MTN’s 2009 Carbon Disclosure Project report will be published on technology, and the provision of handsets and recharge vouchers. www.cdproject.net towards the end of 2010. Operations have responded to this issue as follows: • In Yemen, MTN is helping the Ministry of Environment Infrastructure sharing implement its strategy to deal with mobile waste. Network operators who share base station infrastructure benefit both in terms of reduced operating and capital costs, and a lower environmental and social impact.
82 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report • To reduce the blight of plastic vouchers on the landscape or to • Education: ICT connectivity at schools, universities and landfill sites, MTN Congo-Brazzaville and Yemen accelerated the community centres, classroom and facilities’ construction, and Group overview Group use and distribution of electronic voucher distribution process. adult skills’ training centres. This is also available from MTN Cameroon and MTN South Africa. • Culture: promotion of rural-based tourism, music, arts and • MTN Cyprus is a member of Green Dot, the European Packaging culture education sponsorship and educator training. and Waste Directive (94/62/EC), AFIS (recycling protocol for batteries), and Waste Electrical and Electronic Equipment Volunteering: 21 Days of Y’ello Care European Union Directive (recycling protocol for used electronic The 21 Days of Y’ello Care programme is conducted in each batteries). operation over 21 days in each year. From humble beginnings in 2007, the programme has grown substantially, and in 2009 As a Group, MTN acknowledges the need to develop a better approximately 40% of staff volunteered in their communities. understanding of e-waste generation, and a strategy customised Business review for local operating conditions, on how to address this issue. In 2009, 40% of MTN staff volunteered their services. Figure 2: Increase in staff volunteers between 2007 and 2009 The community MTN foundations 14 000 In 2006, the board stipulated that all operations were to reinvest up 12 000 to 1% of profit after tax in corporate social responsibility activities. Countries in which MTN foundations have been established by 10 000 the end of 2009 (including both non-profit organisations and 8 000 internal division foundations) include South Africa, Uganda, Operational review Operational Swaziland, Nigeria, Cameroon, Côte d’Ivoire, Guinea-Bissau, Ghana, 6 000
Benin, Congo-Brazzaville, Yemen and Afghanistan. Community 4 000 investment focuses on supporting multi-year, sustainable projects in the areas of health, education and culture, and nationally 2 000 aligned priorities such as environmental management and 0 economic empowerment. 2007 2008 2009
2007, 2008, 2009 Examples of projects include: • Health: malaria, HIV/Aids, cancer, sickle-cell disease, mother and child mortality, cholera, and road safety programmes which vary in implementation from clinic investment to education and Sustainability review access to medical services.
83 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Motivation and support is provided through awarding the Group Our suppliers President and CEO Y’ello Care Award to the operation with the Reducing costs highest percentage of staff volunteers, and greatest community To reduce and contain cost, procurement adopted strategic impact. Efforts range from raising community awareness sourcing principles coupled with the formulation of strategic and products to address health and environmental issues, partnerships with key vendors. Group frame agreements, including environmental cleanup and restoration, sport facility provision, Group price books, supported by individual country contracts are refurbishment and support at facilities for children and the elderly. in place for these vendors. Regular industry price benchmarking takes place. Electronic reverse auctions have been successfully Legacy projects piloted and are currently being implemented. MTN’s sponsorship of the FIFA 2010 World Cup™ is being leveraged to make a measurable contribution to social development Standardisation using Africa’s love for football to create a lasting legacy. To The Group tender committee is appointed by the board to address persistent challenges and accelerate achievement of consider all Group procurement tenders and ensure that the Millennium Development Goals, the Group focused on two the procurement of goods and services is commercially and projects in the health and education fields: legally sound and conducted in a fair, honest, transparent and • In partnership with United Against Malaria (UAM), awareness is equitable manner. Its terms of reference have been based on the being raised globally, worldwide commitment to ending malaria requirements of good corporate governance. renewed, and focus on increasing use of prevention tools and malaria treatment in Africa undertaken. To achieve economies of scale, the Group standardised product, • With more than 75 million children around the world being service and process specifications across multiple business areas denied an opportunity to go to school, MTN and other and reduced the number of suppliers in these areas. Procurement participating mobile operators support the 1Goal: Education for toolkits defining the centralised procurement function and All initiative.
84 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report tender committee structures were implemented in 80% of MTN’s to improve their entrepreneurial skills and management operations. Approval levels were also specified. Implementation approaches through this programme. Group overview Group was complemented by toolkit training, and other learning programmes. Key performance indicators (KPIs) have been set The transfer of knowledge and skills to local management helps to measure the effectiveness of procurement functions, and a in the reduction of expatriate staff, another means with which to supplier performance management framework for key suppliers enhance local development. was developed. Future sustainability commitments Enterprise development The forward-looking sustainability commitments detailed in The development of small enterprises can be better sustained this report are informed by the Group’s objective to continue through the provision of mentorship, support and advice to implementing and extending its sustainability imperative, and developing businesses locally. Examples across the footprint communicating with stakeholders. Business review include: • MTN South Africa commenced training of business enterprises, The Group advises that the commercial and sustainability encouraged development in rural communities and supported maturity positions of operations, which varies across its footprint, enterprises that produce goods that were previously not will impact the extent and timing of implementation of the available in South Africa, or that enhance job creation. commitments set out below. Although the MTN Group is based in • MTN Nigeria’s Bizlift initiative provides business ideas, increased South Africa, the business is truly multinational across the African access to finance and sales support material to more than continent and the Middle East. Operating conditions vary across 53 000 MTN retailers. It also implemented a project to train and countries, and the macro conditions often makes for a difficult develop enterprises among disabled and disadvantaged youth. trading environment, Nevertheless, the Group is actively driving Operational review Operational • MTN Uganda partnered with Enterprise Uganda’s business operations to integrated sustainability imperatives into their linkage programme in a pilot initiative between 2005 and 2007 activities, from strategy and governance through to infrastructure to enhance the productive capacity, efficiency, competitiveness and community engagement. While this may add further and sustainability of the 12 local small to medium enterprises. internal pressures, operations acknowledge the importance of In 2009, MTN Uganda nominated more of its SME suppliers sustainability and have welcomed the imperative. Sustainability review
85 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Reporting period/s Commitment Target
Group sustainability
2010 Develop and commence implementation of internal education and training plan By quarter 3, 2010
2010 Complete identification of sustainability champions in remaining operations By December 2010
2010 – medium term Close gaps in current risk identification, reporting and management Commence by quarter 3, 2010 processes, and possible sustainability risks not identified/reported/managed
2010 – medium term Improve sustainability data collection, reporting, management and Commence by quarter 3, 2010 assurance systems
2011 Identify and report sustainability performance (objectives, material Commence by quarter 3, 2011 opportunities and risks and management data) at least twice a year internally
Customer
2010 and medium term Continue network infrastructure investment across MTN’s footprint —
2010 and medium term Continue rolling out MTN MobileMoney —
2010 Reduce cost of handset ownership through subsidy provision —
2010 Focus on innovation, customer-centricity and loyalty to reduce customer — churn and increase stickiness
2010 Increase use of e-billing in MTN Uganda Additional 4% of customer base
86 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Reporting period/s Commitment Target Group overview Group Customer (continued)
2010 and medium term Improve MTN South Africa customer experience by integrating customer — management and retail billing systems, and rolling out customer contract strategy at segment and channel level
2010 Increase operational efficiency, visibility into spend by customers, and By December 2010 provide single bill for multiple services
Regulatory Business review
2010 Review strategic relationship with possible new MVNO entrants (MTN Cyprus) By December 2010
Governance
2010 Continue emphasising zero tolerance policy —
2010 Complete King III Code of Good Conduct review and determine required Quarter 3, 2010 compliance actions Operational review Operational Sustainability review
87 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Reporting period/s Commitment Target
People
2010 Improve staff health and safety in MTN Cyprus —
2010 Complete integration processes: MTN in Cyprus —
2010 Continue investment in staff: Determine effectiveness of LTM programme — in MTN Yemen and continue driving staff development and growth in MTN Uganda
2010 Improve staff engagement levels in MTN Cameroon —
Environment
2010 Carbon footprinting data, process and education improvement. Commence • Implement process to Phase 2 footprinting ensure monthly reporting by quarter 4, 2010, for Phase 1 operations • Extend organisational scope to more operations
2010 Provide additional capacity building and support for carbon footprinting By quarter 3, 2010
and associated environmental issues: New and refresher training for CO2 footprinting champions
88 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Reporting period/s Commitment Target Group overview Group
Environment (continued)
2010 – medium term Review and determine actions to address e-waste Commence by quarter 4, 2010
2010 – medium term Focus on energy-reduction initiatives —
2010 – medium term Continue exploring opportunities to switch to lower-emission or alternative — renewable power sources for BTS power Business review
2010 Roll out EMF framework across operations —
2010 Improve understanding of EMF in MTN Cyprus and Yemen communities —
Medium – long term Develop and implement a carbon/energy management strategy —
Communities
2010 Launch MTN Rwanda foundation February 2010 Operational review Operational
2010 Include focus on malaria in 21 Days of Y’ello Care May 2010 Sustainability review
89 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Abridged sustainability report continued
Reporting period/s Commitment Target
Suppliers
2010 Increase supplier participation in 21 Days of Y’ello Care: MTN Congo- May 2010 Brazzaville
2010 Reduce late payment complaints: Ensure all purchase orders and approvals Meet 30-day payment terms are captured electronically (MTN Cameroon) where applicable eg, SMEs
2010 Improve procurement toolkit: Improve purchasing/procurement controls — (MTN Yemen)
2010 • Help improve sustainability of MTN Uganda SME suppliers • 10 MTN Uganda SME suppliers • Roll out national training on enterprise development in South Africa • Training in all nine South African provinces
2010 Improve procurement processes, working with suppliers as strategic partners Complete procurement process (MTN South Africa) automation
2010 Develop multi-sourcing strategy —
90 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Sustainability report Corporate governance report 91 roles andresponsibilities as and 145000shareholders. Company whichhasover and seniormanagement
31 December 2009 ⁄31December MTN Integrated BusinessReport are committed to good corporate governance corporate 116 millioncustomers The board ofdirectors and understandtheir custodians ofthe ⁄ Corporate governance report reporting, financial and risk management. financialand reporting, theboardLikewise, placesstrong emphasisonimplementinghighstandards of andthe requirements governanceprinciples corporate ofglobalbestpractices. The board ofdirectors endeavours to ensure thatalloperationscomplywiththese committees auditors. andinternal including regulators, andthroughoflocallybasedauditrisk theactivities which includeinformation stakeholders, onanykey significant with interaction complied with. The board monitors compliancebymeansofcommittee reports, monitored onanongoingbasisto requirements ensure thatlocalregulatory are where theCompany otherjurisdictions operates,In governancedevelopments are the muchawaited newCompanies (Act Act No71of2008). III)and onGovernancefor 2009(King SouthAfrica Report updated andrevised King addressingalready thechallengesposedbyrecommendations started ofthe Requirements, theCompanies andtherequirements Act II,theboard has ofKing While theboard issatisfiedthattheGroup doescomplywith theJSEListings II). (King 2002 onCorporate GovernanceinSouthAfrica Report recommended bytheKing containedintheCode ofCorporateprinciples Practices andConduct withitsvisionandstrategy, keeping In theGroup subscribes, andapplies the andislisted ontheJSELimitedcompanies inatleastthree (JSE). otherjurisdictions East,holding andtheMiddle inAfrica encompasses operationsin21countries provisions oftheCompanies 1973,asamended(Act Act, No61of1973). The Group The MTN Group Limited isacompany underthe inSouthAfrica incorporated complianceRegulatory sustainable way, bottom line. ofthetriple inthecontext ofcreating objective valuefor ina itsstakeholders ofitsprimary cornerstone Company’s foundation. The Company’s governancesystem corporate isthe governance.corporate featureThis hasbeenanimportant ofthebusinesssince The MTN Group to Limited highethicalstandards subscribes of andprinciples Introduction
Sustainability review Operational review Business review Group overview Corporate governance report continued
The MTN Group financial statements are prepared in accordance • Continue to review regulatory and legislative developments with International Financial Reporting Standards (IFRS) as required to ensure that the Group is able to respond appropriately; by the JSE Listings Requirements, Corporate Laws Amendment Act • Prepare to implement the new corporate law regime, together and other legislative requirements or corporate governance with new or amended legislation relating to competition, frameworks. The Company’s corporate governance systems are privacy of information and consumer protection; designed to exceed minimum compliance levels and continue to • Review and update the board charter, articles of associations evolve to meet the expectations of all stakeholders. and committees’ terms of reference to incorporate the requirements of the new Companies Act, the JSE Listings During the year under review: Requirements and King III; and • The board received presentations on King III as well as the • Review all shareholder agreements to align them with new implications of the newly promulgated Companies Act, focused regulatory and corporate governance developments. on the board, committees and individual directors; • The board undertook a comprehensive review of the existing Board of directors and composition composition and skills available on the board and defined the The MTN Group has a unitary board structure comprising three key attributes that would be required for future appointments. executive directors, two non-executive directors and nine It also reviewed the composition of the audit committee, independent non-executive directors. nominations, remuneration, human resources and corporate governance committee (NRHR & CG committee) and the risk The non-executive directors and independent non-executive management and compliance committee as well as the directors play a critical role as board representatives on the various composition of the board itself and, based on the findings, board committees and ensure that the Company’s interests are decided to reconstitute the membership of committees served by impartial, objective and independent views that are and the board. The effective date of such appointments separate from those of management and shareholders. was 1 January 2010. Determination of independence is guided by the King Code, the • The board received presentations from the sponsor on the Companies Act and corporate best practice. implications of changes to the JSE Listings Requirements. The MTN Group board retains full and effective control over the Looking forward to 2010 and ahead Group and is responsible, inter alia, for the adoption of strategic In keeping with King III, Companies Act, No 71 of 2008, JSE Listings plans, the monitoring of operational performance and Requirements and other governance and legislative developments, management, and the development of appropriate and effective the focus in 2010 and ahead will be on the following initiatives: risk management policies and processes. The full extent of the • Implementation and assessment of the Company’s compliance board’s responsibilities is contained in an approved board charter. with King III, including a gap analysis exercise to identify specific The directors are of the opinion that they have adhered to the areas of improvements; terms of reference as detailed in the board charter for the financial year under review.
92 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report of att The board anditscommittees’ compositionandtherecord on pages14and15page98. individual directors, includingappointmentdates, are setout 93 Relationship withallstakeholders. • oftheboard anditscommittees; Evaluation andperformance • Board andcommittees governance • The role thechiefexecutive ofthechairman, • andthecompany for reserved Matters theboard • Role oftheboard • Balance ofpowers • Size andcompositionoftheboard • Division ofresponsibilities theboard between andmanagement • detailsthefollowingmatters: The board key charter conduct. well asthelaws, regulationsgoverningtheir andbestpractices all board membersunderstandtheirdutiesandresponsibilities as ofgoodgovernance.the principles aimsto ensure that The charter members oftheboard discharge theirresponsibilities according to regulatesThe board howthe board charter andindividual members oftheCompany ingeneralmeeting. with bytheCompany, whichare to notexpressly the reserved inrespectofmatters whichmayauthorities beexercised anddealt ofassociation. articles unspecifiedpowers and They have further The generalpowers ofthedirectors are setoutintheCompany’s ofassociation andboardArticles charter secr and endance ar etar
31 December 2009 ⁄31December MTN Integrated BusinessReport y e setoutonpage98. The profiles ofthe ⁄ Corporate governance report or withoutamendments, astrategic planpresented by Exco. Company. Annually, theboard considers, debates andadoptswith (Exco), isresponsible for settingthestrategic directionofthe and recommendation oftheexecutive committee andsteering executive directors. andnon-executive The board, ontheadvice andensures relationships constructive between in particular and facilitates theeffective directors ofnon-executive contribution alsoensureschairman effective communication withshareholders directors receive accurate, timelyandclearinformation. The its agenda. isalsoresponsibleThe chairman for thatthe ensuring andsetting itseffectivenessofactivities ensuring inallaspects separate. isresponsibleThe chairman for leadershipoftheboard, oftheboardthe chairman andthechiefexecutive officer are ofthebusinessareconduct differentiated. Accordingly, the roles of for managing theboard andexecutive responsibilityfor the member hasunfettered Responsibility powers ofdecisionmaking. NoindividualboardThe board MCRamaphosa. ischaired byMr Chairman of adirector isconsidered bytheboard asawhole, onthe To ensure arigorous andtransparent procedure, any appointment Appointment and resignation by theboard. develops theCompany’s strategy for considerationandapproval executive committee for considerationbytheboard, andalso proposalsrunning thebusiness, developed co-ordinates bythe The GP & CEOprovides leadershipto theexecutive team in management oftheGroup, byExco, supported whichhechairs. istheGP & CEOandresponsible for PFNhleko theday-to-day Mr (GP & CEO) Group president andchiefexecutive officer
Sustainability review Operational review Business review Group overview Corporate governance report continued
recommendation of the NRHR & CG committee. Where necessary, Requirements. During the year under review, Mr RD Nisbet MTN Group uses external service providers to source the skills resigned from the board as Group finance director and was required by the board. The selection process involves consideration replaced by Mr NI Patel effective from 27 November 2009. The of the existing balance of skills and experience on the board and appointments will be confirmed at the annual general meeting to a continual process of assessing the needs of the Company. be held on 15 July 2010. The board is confident that the current Non-executive directors are required to devote sufficient time board, consisting of 14 members, is sufficiently well resourced and to the Company’s affairs. experienced.
There is no formal limitation on the number of board Retirement of directors by rotation appointments that non-executive directors can hold but all The Company’s articles of association provide that one-third of the directors are required to carefully consider the number of directors who have been longest in office since the last election, appointments they take so as to ensure that they have the time are required to retire at each annual general meeting (AGM) and and capacity to properly and comprehensively carry out their may offer themselves for re-election. During the year under review, duties as a director. Non-executive directors are required to advise Messrs RS Dabengwa, AT Mikati, MJN Njeke and J van Rooyen the chairman of the board or the chairman of the NRHR & CG retired from the board and were re-elected at the annual general committee before accepting membership on other external meeting on 24 June 2009. boards. In line with the directorships policy, executive directors are permitted to accept one external non-executive board The board, on the recommendation of the NRHR & CG committee, appointment subject to approval by the board. All fees received reviewed the independence of Messrs MC Ramaphosa, DDB Band relating to the holding of a directorship on the board of an and AF van Biljon, who are due to retire from the board by rotation external company by an executive director are ceded to the at the forthcoming AGM. Details of retiring directors are set out on MTN Group. page 171 of book 2.
Non-executive directors are required to advise the board of any The board concluded that despite Messrs MC Ramaphosa and subsequent changes to or additional commitments from time to DDB Band having served as directors since October 2001, and time as provided for the Companies Act, 1973. Mr AF van Biljon since November 2002, their independence of character and judgement are not in any way affected or impaired Three non-executive directors namely; Messrs NP Mageza and A Harper and Ms MLD Marole were appointed to the board, by their length of service, and the board is therefore of the opinion effective from 1 January 2010. All board appointments met the and has declared the three directors to be independent. The requirements of the Companies Act, King II and the JSE Listings determination of independence is guided by the King Code, the Companies Act and international best practice.
94 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report 95 MTN directors 2010 * asat1January The graph ofindependencedirectors belowshowsextent their independence. andthuspreserve conflicts in whichadirector hasaninterest is followed to mitigate any such ofdisclosure ofinterestsrigorous policy andrecusal from discussions ofinterests asa conflict thatmightarise result, however remote.A on page40inbook2. The board ismindfulof thisandthepotential directorsnon-executive hasinterests intheMTN Group asoutlined guidelines outlinedintheJSEListingsRequirements. Oneofthe definitionandthe directors to oftheKing II beindependentinterms directors. The board considersnineoutofthe11 non-executive ofindependentnon-executive The MTN board amajority comprises Independence ofdirectors dir non-executive Independent Executive directors directorsNon-executive ec Executive directors directors Non-executive directors non-executive Independent tors
31 December 2009 ⁄31December MTN Integrated BusinessReport ubr Percentage Number* 3 2 96 22 14 4 ⁄ Corporate governance report management, andto theadviceofcompany secretary. 2009.Furthermore,during alldirectors have accessto interests of theCompany, althoughnosuchadvicewas sought advisers atthe expenseoftheCompany inorder inthe best to act ofindependentprofessionaldirectors have accessto theservices changes, directors are informed accordingly. addition,all In Whenever there are newlegislative/corporate governance JSE Listings Requirements. requirements IIIandthe oftheCompanies No71of2008,King Act, the directors received andpresentations briefings onthenew underwhichitoperates.framework theyear During underreview, the Company’s governancestructureaswell asthelegislative they are ableto effectively discharge their responsibilities within ongoing development ofalldirectors, that inensuring iscritical MTN recognises ofnewdirectors, thattheinduction aswell asthe and developmentInduction board member, andattendance over thepastyear. Company, thedirector’s asa viewsonhis/herownperformance issues, theconstantchallenges thatfacethe andkey views oncritical to investment decisions, consideration ofsignificant financialmatters, ofthebusiness, providing knowledge strategic direction,contribution availability, ofadirector, thefunctions commitmentto performing time isassessed againstthesecriterias: Director performance included intheevaluationprocess. ofDirectors (IoD).Executivethe Institute directors were also effectiveness canbeimproved. outby Theevaluationwascarried howtheboard’s aimedatinteralia,determining was conducted Consistent withprevious years, evaluationoftheboard acollective evaluationBoard anddirectors
Sustainability review Operational review Business review Group overview Corporate governance report continued
The process included: Delegation of authority and risk management • An evaluation of board effectiveness; The ultimate responsibility for the Group’s operations rests with the • An assessment of the performance of board members; and board. The board retains effective control through a well- • An assessment of the performance of board subcommittees and developed governance structure of board committees that an evaluation of their terms of reference. specialise in specific areas of the business. Necessary authorities have been delegated to the GP & CEO to manage the day-to-day The GP & CEO’s performance is also evaluated according to his business affairs of the Company. The Group executive and steering performance scorecard, which is approved annually by the NRHR & CG committee assists the GP & CEO in discharging his duties and the committee. The outcomes of the board evaluation were as follows: duties of the board when it is not in session. However, in terms of • The board has more significant areas of strength than statute and the Company’s constitution, certain matters are weaknesses; reserved for board and/or shareholder approval. • the board is firmly focused on strategy; • the effectiveness of the audit committee is seen as one of the The delegation of authority is reviewed periodically to ensure it biggest strengths of the board; remains aligned and relevant in relation to the rapid growth of the • board meetings appear to be well run and managed; Company. Future amendments will also include the integration of • the company secretary is seen to provide excellent support to a risk appetite framework, which has recently been adopted by the the chairman and the board; Group, with a view to identifying, classifying, escalating and • the monitoring role played by the board in ensuring delivery on mitigating risks. Further details of the risk management philosophy its mandate and oversight of systems controls and risks is seen appear on page 108 of the risk management report. as particularly good; • the board charter was seen as providing a good roadmap to the Board remuneration and shareholding board in so far as duties and responsibilities were concerned; Details of remuneration paid to directors are set out on page 26 in • the agenda-setting process is seen as being strong. The book 2. Non-executive directors receive fees for their membership NRHR & CG committee was seen as adding significant value; and attendance at meetings of the board and committees on • the role, composition and terms of reference of the which they serve. In addition, where non-executive directors subcommittees and the considerable value that they add to perform ad hoc work, they are paid in accordance with an overall board effectiveness are also viewed as a major strength approved schedule of fees. Proposals on non-executive directors’ of the board; remuneration are made through the NRHR & CG committee for • The Group’s annual report and sustainability reporting are taken review by the board. The remuneration of non-executive directors seriously by the board and are regarded as an effective stakeholder communication.
96 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report meeting pr is submitted to shareholders for attheannualgeneral sanctioning are setoutonpage40inbook2. 97 bodies External departments forums/ Management Committees underreview.with theJSEListingsRequirements theperiod during orthedesignatedchairperson director. Allthedirectors complied required to trading, prior to obtainclearanceto tradefrom the compliancewiththeJSE ListingsRequirements,In alldirectors are inplacethatregulatesCompany dealingsbydirectors. hasa policy Directors’ dealingsare disclosedonpage41inbook2. The Dealings by incompany directors securities
31 December 2009 ⁄31December MTN Integrated BusinessReport ior t o implementation. Details ofdirectorso implementation.Details shareholding auditors Group Audit Audit/BRM compliance committee Risk management and managementand Risk Internal Commercial committee ⁄ Corporate governance report Group board Exco presented inthetablesto follow: theyearcommittee meetingsheldduring underreview. These are reflected bythenumberofboard and committees andispartly put to goodusethrough carefully various structuredboard andexperience. The board oftalent,expertise hasadiversity This is additional responsibilities managementandcompliance. ofrisk operations, theauditcommittee assumesthe all subsidiary This structureislargely replicated insignificantIn MTN subsidiaries. governance structureandrelated mechanisms. oftheCompany’s providesThis section anoverview formal Group governance structure committee Technical
NRHR &CG Talent board Tier IItender Group tender committee
Sustainability review Operational review Business review Group overview Corporate governance report continued
Scheduled Special board board meetings meetings Directors Age Director since attended attended#
Independent non-executives
MC Ramaphosa 57 Oct-01 4/4 10/10
DDB Band 66 Oct-01 4/4 10/10
KP Kalyan 55 Jun-06 4/4 9/10
MJN Njeke 51 Jun-06 4/4 9/10
AF van Biljon 62 Nov-02 4/4 10/10
J van Rooyen 60 Jul-06 4/4 9/10
Non-executives
AT Mikati 37 Jul-06 4/4 10/10
JHN Strydom 71 Mar-04 4/4 10/10
Executives
PF Nhleko 50 Jul-01 4/4 10/10
RS Dabengwa 52 Oct-01 4/4 10/10
RD Nisbet (Resigned as Group finance director on 54 Oct-01 3/4 10/10 30 September 2009)
NI Patel (Appointed as Group finance director 53 Nov-09 1/4 n/a on 27 November 2009)
# Special board meetings (meetings scheduled outside predetermined meeting dates on special business) are convened at short notice and therefore directors are not always available to attend.
98 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report 99 nie / nie / / / ebr1/2 Member 2/2 1/2 Member n/a Member 2/5 n/a 5/5 5/5 Invitee Invitee n/a Invitee 4/4 Invitee 4/4 4/4 Invitee Invitee 1/6 Invitee 4/4 5/6 Invitee 6/6 Member 6/6 Invitee 4/4 Invitee 3/4 Invitee 5/6 Chairman 2/4 Invitee Member Member 6/6 6/6 Member 5/6 Chairman Member Audit
31 December 2009 ⁄31December MTN Integrated BusinessReport attended Meetings ebr44Mme 5/5 Member 4/4 Member Alt committee compliance ment and manage- Risk er aen/a nate teddNRHR&CG attended Meetings ⁄ Corporate governance report himn5/5 Chairman ebr5/5 Member
attended Meetings tender Group attended Meetings
Sustainability review Operational review Business review Group overview Corporate governance report continued
Additional Group tender committee members (Including independent non-executive chairman) Age Committee member since Scheduled meetings attended
MLD Marole (Chairman) 50 05/2004 2/2
C de Faria 54 06/2007 2/2
T Lowry 54 06/2007 1/2
J Ramadan 53 06/2007 2/2
C Wheeler 46 05/2004 2/2
In camera meetings Special committees may consist of different directors depending During the period under review most of the board meetings were on the expertise required to resolve any special matters under preceded by in camera meetings of non-executive directors. review by the committee.
Executive and steering committee (Exco) Special ad hoc board committees This committee facilitates the effective control of the Group’s In certain instances, the board constituted special board operational activities in terms of its delegated authority approved committees which are granted the necessary authority to deal by the board. It is responsible for recommendations to the board with the salient matters under special projects and to allow for a on the Group’s policies and strategies and for monitoring their more detailed consideration of issues. implementation in line with the board’s mandate. The committee
100 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report communicat is assisted who bythree regional vicepresidents (VPs) Both committees ar The commercial committee.• The technical committee • operational matters: to manageandoversee enhancingitsability view to further The committee constituted thefollowing subcommittees witha committee ischaired bytheGP & CEO. meets atleastmonthlyandadditionallyasrequired. The operations. committee subsidiary to thevarious The committee profile oftheexecutive committee issetoutonpages18and19. inviteesattend aspermanent to ensure broad representation. The other seniormanagementrepresentatives oflarge subsidiaries additionalExcowith two members, includingthe VPs. Various 101 approved bytheboard. All board committees operate ofreference terms underwritten outtheirdutiesandresponsibilities. the obligationto carry management innoway absolves theboard anditsdirectors from tothat theissueofdelegated board authorities committees and and responsible andaffairsoftheGroup for and theperformance The MTN Group board recognises thatitisultimately accountable Board committees
31 December 2009 ⁄31December MTN Integrated BusinessReport e andco e chaired bytheGroup chiefoperatingofficer -ordinate thepoliciesandstrategies-ordinate ofthe ⁄ Corporate governance report under review. contained intheirrespective ofreference terms theyear during below have effectively discharged their responsibilities as The boar Executive (Exco) andsteering • Group tender (Tender) • Nominations, remuneration, humanresources andcorporate • managementandcompliance(Risk) Risk • • Audit (Audit) The committees are asfollows: of itsresponsibilities isdirected byacharter. set outonpage98.Eachcommittee’s andthedischarge authority responsibilitiesmembership andprincipal ofthecommittees are fromtransparency thesecommittees to theboard. The ofseniormanagement. comprised There isfulldisclosure and committeesare ofanoperationalnature primarily andso committeeand steering andthe Tier IItender committee, which directorsnon-executive only, withtheexception oftheexecutive ofboardMembership independentand committees comprises to eachoftheboard committees. andsecretarial services support deemed necessary. The officeofthe provides Group secretary independentoutsideprofessionaltake adviceasandwhen on recent committee activities.Board committees are to permitted alsoprovideAll committee chairpersons theboard withareport gover nance (NRHR&CG) d issatisfiedthattheboar
d committees setoutindetail
Sustainability review Operational review Business review Group overview Corporate governance report continued
The committees’ profiles are detailed as follows: its chairman. The committee chairman also meets regularly with the head of business risk management. BRM reports to the Group audit committee GP&CEO and to the chairman of the Group audit committee as The audit committee is a statutory committee and also has duties well as to the risk management and compliance committee. BRM’s delegated to it by the board. The audit committee is appointed performance is reviewed annually by the committee. annually by the board as required by the Companies Act, No 61 of 1973. The audit committee assists the board in discharging its Audit committees exist in each Group operation and significant duties relating to the safeguarding of assets, the operation of risk and audit matters relating to operations are regularly reported adequate financial systems and control processes, and the to the Group audit committee. The non-executive chairpersons of preparation of financial statements and related financial reporting subsidiary audit committees do meet formally with the Group in compliance with all applicable legal requirements and audit committee annually or more often as required. Members of accounting standards. the Group audit committee do periodically visit selected subsidiary operations so as to enhance their understanding of the Group’s The audit committee activities report as required by the Companies overall financial control environment. Audit workshops are held Act is contained on page 17 in book 2. Membership of the annually to consider and agree on audit plans for all operations for committee and attendance at meetings is reflected on page 98. The the year ahead and to review the effectiveness of the overall audit committee has a majority of independent non-executive internal audit function. directors who are financially literate as recommended by King II. The audit committee operates in line with a charter as approved The committee’s chairman attended the annual general meeting by the board and fulfils its corporate governance and statutory during the year under review. duties as applicable.
The executive directors, as well as internal and external audit In-camera meetings representatives (the Company auditors), attended all committee The main meetings of the committee are preceded by an meetings as permanent attendees. The committee chairman also in-camera session of non-executive members only and are attends Group risk management and compliance committee concluded by a separate in-camera session with the following key meetings. invitees: • Management The head of business risk management/internal audit (BRM) and • Internal audit external auditors have unrestricted access to the committee and • External audit.
102 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report of k auditors provideThe jointexternal anindependentassessment audit External directors. ofthefinancial andexperience appropriateness, expertise underreview,period formally considered andsatisfieditselfofthe effect from 27November 2009. Theauditcommittee had, for the NIPatelwas replaced byMr whowasformally appointed with financial dir asGroup underreview, theperiod served During RDNisbet Mr Financial over whoserved directors theperiodunderreview are five rotated years. every iswithinthescopeofthatpermitted.the work The auditpartners committee to ensure thatthereofinterest isnoconflict andthat oftheaudit inadvancebythechairman isauthorised performed committee andformally assessedannually. Non-auditwork independence isregularly monitored bytheGroup audit shareholders. auditors’The external and performance recommendation oftheGroup auditcommittee andratifiedby Group. The auditors are appointed bytheboard onthe 103 fromother matters arising theabove responsibilities. financialstatementsadoption oftheannualandinterim andany recommendations andmakes to theboardactivities regarding the ofthecommittee accountstoThe chairman theboard for its andaccountabilityReporting ey accountingandinf
31 December 2009 ⁄31December MTN Integrated BusinessReport ec tor until30September 2009.Onhisresignation, he ormation systems andcontrolsormation inthe ⁄ Corporate governance report overlapping responsibilitiesoverlapping are dealtwithinanefficientmanner. managementandcompliancecommittee.risk This ensures that onthe ontheauditcommitteeexecutive alsoserve directors serving compliance committee andtheauditcommittee. Three non- relationshipmanagement and therisk existsbetween A closeworking forreporting theMTN Group. also responsible for andsustainability framework thesustainability governanceframeworks. corporate voluntary The committee is requirementsprevailing legislation including andotherstatutory theCompany impacting andensurerisks compliancewith its dutieswithregard to identifying, andmonitoring considering to oftheboard improve andassistitindischarging theefficiency managementandcompliancecommittee wasestablished The risk committee Group riskmanagement andcompliance quorum isthree memberspresent. The committee meetsnotlessthanfour timesperyear andthe Meetings within theambitofcommittee. general meetingto answermatters falling questionsconcerning ofthecommittee isrequiredThe chairman to attend theannual
Sustainability review Operational review Business review Group overview Corporate governance report continued
The committee is responsible for performing the following formulation of a remuneration philosophy and human resources functions: strategy to ensure that the Company employs and retains the best human capital possible relevant to its business needs; maximises Compliance the potential of its employees; and ensures the Group’s adherence • To periodically review issues relevant to the board’s oversight to sound corporate governance principles. responsibilities, including compliance with the relevant laws and governance standards; Some committee meetings were preceded or followed by an • Review compliance with all local and foreign legislation and in-camera session (meeting of non-executive directors only). regulatory body requirements applicable to the Company including but not limited to the following: The committee’s mandate, which is reviewed annually by the – Companies Act board, defines its key responsibilities as follows: – JSE Listings Requirements • Reviews the size, structure and composition of the board. – Governance frameworks • Conducts an annual assessment of the board’s performance. – Safety and health legislation • Conducts an annual assessment of the chairman’s as well as the – Employment equity GP & CEO’s performance. – Security Services Act • Sets criteria for the nomination of directors and committee – Taxation legislation. members. • Identifies, evaluates and nominates candidates for appointment During the year under review, the committee assessed the to the board to fill vacancies as they arise. Company’s compliance with all statutory and other voluntary • Reviews and determines the remuneration of executive governance codes and was satisfied that it had complied with directors. requirements. The committee is constituted of independent and • Reviews and approves the Group’s policy on executive non-executive directors only and details of attendance and remuneration. membership of the committee are set out on page 98. • Reviews and approves Group policies on corporate governance. • Monitors the Group’s compliance with King II and other relevant Group nominations, remuneration, human legislation. resources and corporate governance committee • Makes recommendations to the board on annual salary (NRHR & CG) increases and performance-related bonus awards. The NRHR & CG committee has been constituted to assist the • Reviews and approves performance-related incentive schemes, board in discharging its duties relating to the nomination of performance criteria and measurements, including share board members and senior management. It also oversees the scheme allocations to executive directors and senior staff.
104 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report Reviews andapproves newremuneration methodologies for • during theyearduring underreview. Further detailsregarding directors’ The committees’ attended theannualgeneralmeeting chairman committee’s attendance andmembershipare setoutonpage98. Requirements directors ofnon-executive only. ofthe Details directors IIandJSEListings andthusexceeds theKing The committee isonlyconstituted ofindependentnon-executive the nominationprocesses sufficiently. member oftheNRHR&CG committee andthusableto influence recommendation. oftheboardThe chairman is, however, a II committee. compliantwiththeKing As suchMTN isnotstrictly well governancecommittee asthecorporate underone committee, humanresources andremunerations committees as directors.non-executive MTN hascombinedthenominations board, andmembershipofthecommittee mustconsistofonly ofthe of thenominationscommittee shouldbethechairman IIandtheJSEListingsRequirements, ofKing terms thechairman In andreviewsMonitors compliancewithemploymentequity • Reviews theGroup’s• philosophy regarding fees payable to 105 the managementt practices and ratifiedbyshareholders. remuneration reviews). bytheboardThis mustbeconfirmed executive directors (asaseparate process from executive non-ex options. schemes, benefitfundsandbenefits related tosalary-sacrifice
31 December 2009 ⁄31December MTN Integrated BusinessReport ecutive directors, basedonrecommendations from the . eam including , butnotlimited to, incentive ⁄ Corporate governance report on page98. remuneration andtheGroup remuneration philosophy are setout Details ofattendanceDetails andmembershipare setoutonpage98. to theboard.chairman dueto theappointmentofcurrentindependent chairman ofthetender committeechairman willbereplaced byanother tenders are reviewed withthesamelevel ofefficiency. The committees are inplacegroup-wide to ensure thatallother high-level tenders astheneedarises. Various lower-level tender evaluation process. The committee, however, onlyreviews effective, transparent andindependentprocurement and tender by theboard andreviewed periodically, aimsto promote an director.non-executive The committee’s charter, whichisapproved development. The committee ischaired byanindependent andpromote to developbusiness practices economic allmarkets policies are appliedconsistently, inmindbest always bearing sustainable andfairtender culture andto ensure thattender The Group tender committee’s isto objective promote a primary Group tendercommittee review annuallyandiscascadeddownto alloperations. to issubject governance,of goodcorporate thecodeofconduct employees. accordance andintheinterests withthisobjective In of ethicalbehaviour amongitsdirectors, managementand The MTN Group iscommitted to promoting thehigheststandards Code ofconduct
Sustainability review Operational review Business review Group overview Corporate governance report continued
Group company secretary the annual board plan, administers the long-term incentive Ms SB Mtshali is the Group company secretary. The company schemes and ensures compliance with the statutory requirements secretary is a central source of information and advice to the board of the Company and its subsidiaries. and within the Company on matters of ethics and good governance. Together with the investor relations department, the Compliance office company secretary provides a direct communication link with A compliance function has been established within the company investors and liaises with the Company’s share registrars on all secretary office, responsible for advising and assisting the board of issues affecting shareholders. The company secretary assists the directors and management in implementing the awareness and board in its deliberations, drawing the attention of members to assessment of compliance with the regulatory environment. their legal duties and ensuring, together with the executive MTN understand that compliance with laws, regulations and all directors and senior management, that decisions of the board are governance frameworks promotes and sustains the reputation and properly implemented. standing of a company.
This office also communicates and monitors compliance, among Group executive: regulatory affairs others, with the Group trade embargo policy, ensuring that no MTN Group has 21 operations in Africa and the Middle East. There employee, executive director or non-executive director is allowed are many regulatory issues that are applicable in these operations. to deal in the Company’s securities during prohibited periods. During the year under review, a Group Executive: regulatory affairs was appointed to advise the Group of related legal developments The company secretary provides the board as a whole and in various operations. directors individually with guidance on the discharge of their responsibilities. Appointment and removal of the company Stakeholder communication secretary are matters for the board as a whole. The company MTN strives to have transparent, open and clear communication secretary ensures that in accordance with pertinent legislation, the with all of its relevant stakeholders. It is the policy of the Company, proceedings and affairs of the board and its members, the where practical, to ensure that financial and non-financial Company itself and, where appropriate, the owners of securities in information is timeously and accurately disseminated to relevant the Company, are properly administered. The company secretary stakeholders. To communicate Group strategy and performance, ensures compliance with the rules and Listings Requirements of regular presentations are made by executive directors and senior the JSE Limited. The company secretary also assists in developing management to institutional investors, analysts and the media.
106 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Corporate governance report lat websiteA corporate (http://www.mtn.com) communicates the the website immediately following the AGM. the outcome ofvoting onitems ofbusinessare posted on oftheproceedings ofallgeneralmeetingsand A summary questionsandto withdirectors. interact to raisepertinent forgeneral meeting, shareholders whichprovides anopportunity The MTN Group encouragesshareholders to attend theannual information.historical 107 the information provided to hasallowed understand stakeholders element ofeffective reporting. considerationiswhether key The information isacritical sustainability inreporting transparency II,MTN of accordance understands thattheprinciple withKing In Integrated sustainabilityreporting heldinSouthAfrica. elections of thedemocratic Company fundinginsupport distributed representation. theyear During underreview,parliamentary the CommissionElectoral No57of1996,andmusthave Act, mustberegistered 15ofthe political parties ofsection interms Commission. Electoral from theIndependent To qualifyfor funding, Parties thatreceive fundingare chosenusingverifiedprovisions environment through itspoliticalfundingpolicy.policy-making governance andhealthy competitionofideasinthecountry’s andgood inSouthAfrica democracy multi-party MTN supports Political donation policy est Gr oup financialandoperationaldata,as well as relevant
31 December 2009 ⁄31December MTN Integrated BusinessReport ⁄ Corporate governance report discharged theirresponsibilities withduecare andskill. a soundrelationship withitssponsorandconsidersthattheyhave Lynch Limited.sponsor replacing (Pty) MTN SouthAfrica Merrill has Limited wasappointed (Pty) theCompany’s Securities Deutsche intheJSEListingsRequirements.as described On February 2009, MTN fullyunderstandstherole andresponsibilities ofthesponsor Sponsor sustainability review appearsonpage70tosustainability page 90ofthisreport. Group managerhasbeenappointed. sustainability Afull To ensure thattheCompany hasfocus issuesa onsustainability negative. environmental wellbeing ofthecommunity, bothpositive and Company’s operationhashadontheeconomic, socialand issuesaffecting the Companythe key as well astheeffect the
Sustainability review Operational review Business review Group overview Risk management and internal control
The Group has adopted a Overview As a Group that operates in and understands emerging markets, MTN believes risk philosophy that is aimed that risk management and internal control are fundamental to effective corporate governance and the development of a sustainable business. The Group has at maximising business adopted a risk philosophy that is aimed at maximising business success and success and shareholder shareholder value by effectively balancing risk and reward.
value by effectively MTN’s objective has always been to embed risk management and internal control into the day-to-day running of the business in a practical manner. This involves balancing risk and reward. continual proactive identification and understanding of risk factors and events that may impact business objectives, development of appropriate response strategies and internal control mechanisms, continual monitoring and reporting and independent assurance. This is achieved through the implementation of various risk management and governance mechanisms. These include: • Monitoring the effective implementation by the various operations’ chief executives and other management of corporate governance measures. • Embedding risk management procedures into day-to-day activities such as business planning, operational reviews, projects etc. • Business risk management functions in most operations to facilitate, co-ordinate and monitor the effective implementation of risk management mechanisms. • Assurance from internal audit and external audit on the internal control environment. • Audit and risk committees in all operations. • Group oversight.
MTN has taken cognisance of the new requirements of King III and has initiated a project to assess gaps between MTN’s current risk management practices and the requirements of King III. The gaps will be assessed and current practices and systems will be adapted where necessary.
108 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Risk management and internal control 109 ov The Group board ofdirectors isultimately responsible for Board ofdirectors Roles andresponsibilities the chiefexecutive officerofeachoperatingcompany. and chiefexecutive officer, andatanoperatingcompany level by the Group executive committee, headedbytheGroup president operational level. isrepresented Management ataGroup level by of adequat oftheGroupManagement isresponsible for theimplementation Management oversight from aGroup perspective. to theGroupreport committees on aregular basisto ensure managementandcompliancecommittee.risk These committees a lower level therole oftheGroup auditcommittee andGroup directorsindependent non-executive andessentiallymirror on of thatoperatingcompany. These committees are chaired by committee whichisasubcommittee oftheboard ofdirectors lower level, eachoperatingcompany hasitsownauditandrisk managementstructuresandresponseof risk strategies. Ata andreviews theoverall effectivenessmanagement framework, for managementintheGroup. risk setsandapproves therisk It management andcompliancecommittee istheoversight body effective control internal mechanismsintheGroup. The Grouprisk the oversight bodyfor theimplementationofadequate and and compliancecommittee. The Group auditcommittee is the Group auditcommittee andtheGroup management risk subcommittees, bytwo namely mechanisms andissupported ersight ofpr
31 December 2009 ⁄31December MTN Integrated BusinessReport e andeff oper risk management and internal control managementandinternal oper risk ective internal control internal ective mechanismsatan ⁄ Risk managementandinternalcontrolRisk M R management andinternalRisk control mechanisms compliance committee. the Group auditcommittee andGroup managementand risk andmethodologiesframeworks whichhave beenapproved by are managementfunction guidedbyasetofpolicies,risk managementfunction. business risk ofthebusiness The activities inallofitsoperationswithoversight fromfunctions theGroup compliance committee. MTN management nowhasbusinessrisk of theGroup auditcommittee andGroup managementand risk has directaccessto, andregular meetingswith,thechairpersons directly to theGroup president andchiefexecutive officerand managementisheadedbyaGrouprisk executive whoreports and doesnotgetinvolved managementactivities.Business inrisk management isindependentfrom managementdiscipline therisk specialists. auditdisciplinewithinbusinessrisk The internal ofwhichmore arecountries thantwo-thirds audit internal andforensicaudit, fraudrisk specialistsacross the21operating internal hasmore than160risk, management.It and fraudrisk assesses the acceptability ofMTN’s consolidatedassesses theacceptability profile. risk and theGroup managementand compliancecommittee risk levels intheGroup. Aggregation isdonequalitatively oftotal risk MTN’s thresholds andasetofrisk atvarious capacity risk-bearing escalation structurewasimplemented attheendof2009basedon for amor f responsible managementisanindependentfunction Business risk Independent businessriskmanagement function or thedisciplinesofent isk appetite TN’s ofrisk. appetite bytype isdetermined risk This allows e controlled way ofmanaging levels. risk Aformal risk erprise risk management, internal audit management,internal risk erprise
Sustainability review Operational review Business review Group overview Risk management and internal control continued
Enterprise risk management Fraud risk management As far as enterprise risk management is concerned, the business The fraud risk management function is responsible for assessing risk management function is responsible for ensuring the existence fraud risk across the Group and driving the implementation of an effective framework for risk management and driving the of fraud prevention activities, which include whistleblowing implementation of this framework throughout the Group. This is processes. Fraud risk management is also responsible for detecting done by assisting and advising management on the topic and by and investigating fraud. The implementation of fraud prevention ensuring effective reporting and escalation of risks. mechanisms in the Group remains a priority. There was an increase in the number of fraud and theft cases reported in 2009. We The process of risk management in the Group is guided by a risk believe that this was not because of an increase in fraud and theft framework which is based on best practice risk management activities, but mainly the result of the implementation of improved procedures. The Group business risk management function, fraud prevention and detection mechanisms. These included together with management, has the mandate and responsibility the implementation of a Group-wide fraud incident register, of ensuring that adequate risk management processes are conducting fraud risk assessments in most operations and the implemented in all areas of the business in line with the risk use of improved whistleblowing mechanisms. The overall value of framework. During the year under review, significant progress fraud and theft incidents uncovered to date is not material. was made with the migration of decentralised risk databases to a consolidated risk database. This will allow for better analysis, In 2010, MTN will focus on the following inherent fraud risk monitoring and reporting. categories from both a fraud risk and internal audit point of view: • Procurement – conflict of interest and collusion with suppliers Insurance and risk transfer • Asset and inventory theft MTN has a comprehensive insurance programme in place which • Site acquisition and construction covers perils such as material damage/business interruption, • Manipulation of billing data political risk, public liability, directors’ and officers’ liability, crime • Bribery and corruption and professional indemnity. The limits of indemnity for these covers have been structured to optimise the balance between Internal audit maximum potential loss and containing premiums. MTN also MTN has a substantial internal audit discipline function which is believes that risk retention and self-insurance are necessary to responsible for providing independent internal audit assurance keep premiums at reasonable levels and show commitment to the Group. The independence of the internal audit discipline towards risk management. MTN’s risk retention levels differ from is maintained by ensuring that internal audit employees are not policy to policy. involved in risk management activities and by virtue of the fact
110 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Risk management and internal control 111 % audithours committ isultimately auditwork that internal governedbytheGroup audit corevarious businessareas canbeillustrated asfollows: processes.and mosthigh-risk ofthesehoursinthe The distribution point where auditcoverageto internal mostoperations extends are inexcess of130 000hours. The Group is now reaching the evaluation.Projectedextensive risk audithoursfor internal 2010 auditassuranceisguidedby 110 000 from 98 000in2008.Internal past few years to withtotal audithoursin2009rising internal intheGroup hasbeenincreasing auditactivity for the Internal provides for auditfunction. theindependenceofinternal by theGroup andtheoperatingcompanies’ auditcommittees, also Other (legal, companyOther secretary, follow-up) Warehouse andstockmanagement anddistribution Sales Revenue assurance Marketing IT/IS/network Human resources Finance Facilities Customer relations Asset management Procurement
ee 31 December 2009 ⁄31December MTN Integrated BusinessReport . auditcharter,The internal whichhasbeenapproved ⁄ Risk managementandinternalcontrolRisk undertaken. auditwork of theinternal andindependence auditsaddtoon someinternal theobjectivity assessmentplannedforquality 2011.Outsourcing arrangements willcontinueinto 2010withaneventualthese efforts external auditcoverage ofinternal over thepastyearand maturity and There hasbeenmajorfocus ontheimprovement ofthequality operationsisillustrated asfollows: country The splitofaudithoursplannedfor thevarious 2010between Total audithours Cyprus Afghanistan Guinea Bissau Sudan Swaziland Syria Benin Guinea Conakry Congo Zambia Yemen Rwanda Liberia Iran Côte d’Ivoire Uganda Cameroon Ghana SA Nigeria
Sustainability review Operational review Business review Group overview Risk management and internal control continued
Regulatory Principal risks Supply chain vulnerability Sector The board believes that management has identified Competition Physical security the core risks in relation to the Group. These, as Impact of sanctions displayed in the graphic alongside, are categorised Strategy Tax Declining revenue growth into operational, telecoms sector, strategy and under current business model macro-economic risks. MTN’s principal risks fall mainly Operational into the macro-economic, telecoms sector and Network performance Political strategic categories.
The year under review Impact of economic recession/inability Strategy to contain or reduce cost Business continuity The steep growth experienced by the Macro Exposure to financial markets telecommunications industry in the past is starting to slow. This is because of a number of factors ranging Privacy and security Repatriation of earnings Processes and systems from strong competition, regulatory pressures as well Human resources Risk increased over the period to support business strategy – Risk reduced over the period as converging technologies. A challenge for MTN and Risk stayed unchanged over the period most mobile operators is to adapt its business model and technologies from the traditional voice offerings International sanctions against some countries in which MTN operates, pose to a converged offering including voice, data and a threat to the MTN Group with regards funding arrangements, supply chain content. MTN has made good progress in this regard management, investor relations etc. The Group is actively aware of these situations with various offerings including MTN MobileMoney, and has taken appropriate mitigating action wherever possible. MTNPlay as well as a number of business solutions through MTN Business. MTN MobileMoney has been Sector launched in a number of countries with good uptake. The regulatory environments in the MTN operating countries define special MTN has committed in excess of USD191 million of conditions under which MTN operates. These conditions are very dynamic, investment in various submarine broadband cables to changing from time-to-time and are becoming more complex. During the ensure high-speed connectivity and improved quality period under review, MTN has seen a number of regulatory instruments and capacity of voice and data offerings. introduced in many markets. These include the registration of SIM cards, changes to mobile termination rates, site sharing and the promulgation or repeal of In addition to building new revenue growth models, telecommunication legislation and regulations. These are deemed to have been MTN is continuing to focus on improving operational made under legislative and licensing regimes that gave rise to the first wave of efficiencies in order to keep operational expenditure licences to MTN. Regulatory pressure will continue to impact the Group. The Group under control and maintain competitive EBITDA levels. continues to monitor and engage with policy makers and regulators in order to align its investment with the various regulatory and policy road maps.
112 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Risk management and internal control MTN operat inwhich The politicalsituationinsomeofthecountries Macro continues to consolidate. faceincreasedMTN willlikely competitionasthetelecoms industry has continuedasplannedin2009,andgoodprogress wasmade fromThe repatriation ofearnings most oftheGroup’s operations atmorepeaked thanR32billionin2009. countries. This is a result ofconsiderablecapitalexpenditure which reducing ther thepastfew years,In MTN hasmadesignificant progress in Operational policy.a Group treasury mechanismsandproceduresimplementation ofvarious including withthe are function managedthrough acentralisedtreasury risk. interestThese risks rate changes,andcounterparty liquidity hasmanyrisk facetsincludingexposure fluctuations, to currency Exposurerisk to theGroup.remains a to financialmarkets This citizenship.and goodcorporate Group operationscentre, crisis transfer risk andinsurancestrategies with regulations, measures, physical security theestablishmentofa to theGroup.the risk compliance These strategies includestrict management strategies inresponse have to theserisks mitigated may ontheGroup. negatively impact MTNrisk isconfidentthatits These challengesare beyond often MTN’s to control ability and challenges. bysecurity,has beencharacterised politicalandsocialunrest 113
31 December 2009 ⁄31December MTN Integrated BusinessReport es continuesto bechallenging. The year underreview isks associated with network performance in certain incertain performance isks associated withnetwork ⁄ Risk managementandinternalcontrolRisk in theyears ahead. together withotherleadershipdevelopment initiatives, willassist ontechnical aspects, on leadershipdevelopment ande-learning However, theMTN Academy isnowwell establishedanditsfocus MTN remains operatingcountries achallengeto theGroup.certain in anddepthoftechnicalThe availability andleadershipskills implemented to improve themanagementoftaxrisk. A comprehensive managementstrategy hasbeen taxrisk willbeaddressed.shortcomings information technology are beingassessedandany potential requirementsIncreased IIIonthegovernanceof from King completed. projectsinprogressformal businesscontinuity or, cases, incertain progress inthepastyearnowhaving withanumberofcountries managementprojecthasmadegood The businesscontinuity human resources. However, ongoingfocus isstillrequired. costingand site build,management, network activity-based the Group withspecificattention given to capitalproject MTN hassteppedto standardise upitsefforts processes across countr in overcoming to repatriation incertain theexistingbarriers ies .
Sustainability review Operational review Business review Group overview Glossary
Terms and acronyms 2G Second generation 3G Third generation ADR American depository receipt AI Africa Investor ARPU* Average revenue per user per month ATM Automatic teller machine BA Bankers’ acceptance rate BEE Black economic empowerment BOT Build operate and transfer Bps Basis points BRM Business risk management BTS Base transceiver station BWP Botswana pula Capex Capital expenditure CBC African business awards CDMA Code-Division Multiple Access CFA Communaute Financiére Africaine franc CGU Cash-generating unit CSR Corporate social responsibility CST Communication service tax dti South African Department of Trade and Industry E Emalengeni EASSy Eastern Africa Submarine Cable System EBITDA Earnings before interest, tax, depreciation and amortisation ECA Electronic Communications Act of South Africa ECICSA Export Credit Insurance Corporation of South Africa EMF Electromagnetic field EPS Earnings per share eTOM enhanced telecom operations map EUR Euro EURIBOR Euro Interbank Offered Rate EVD Electronic voucher distribution EXCO Executive committee FEC Forward Exchange Contract
* ARPU is measured on a monthly basis. The revenue (including interconnect fees but excluding connection fees and visitor roaming revenue) is divided by the weighted average subscriber base over the reported period.
114 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Glossary 115 NRHR &CG LTE LIBOR Loerie LCs King III King II JIBOR JSE IVR ITIL ISP ISO IS IRR IP IFRS IFRIC ICT ICASA IAS HSDPA HR HIV/Aids HEPS GSM GRI GPRS GHC GDP FMCG FIPPA FIFA Terms andacronyms (continued) IFC
31 December 2009 ⁄31December MTN Integrated BusinessReport Nomination, remuneration, humanresources governancecommittee andcorporate Long-term evolution Rate London Offered Interbank accolades industry’s advertising South African LettersCredit of governance2009 oncorporate committee report King governance2002 oncorporate committee report King Rate Offered Johannesburg Interbank stockJSE Limited exchange –theSouthAfrican voice responseInteractive technology infrastructurelibrary Information provider service Internet Standards OrganisationInternational Systems Information rials Iranian protocolInternet Financial Standards International Reporting Committee Financial Interpretation International Reporting FinanceInternational Corporation andcommunicationtechnologiesInformation ofSouthAfrica Communications Authority Independent Accounting StandardsInternational access speeddownlinkpacket High Human resources syndrome virus/acquired immunedeficiency Human immunodeficiency pershareHeadline earnings Global system for mobilecommunications Initiative Global Reporting radioservice General packet Ghana cedi Gross domesticproduct Fast movingconsumablegoods Foreign Investment Promotion andProtection Act Federation I nternationale deFootballnternationale Association ⁄ Glossary
Sustainability review Operational review Business review Group overview Glossary continued
Terms and acronyms (continued) MCharge MTN’s virtual recharge mechanism MENA Middle East and North Africa region includes operations in Iran, Afghanistan, Syria, Yemen, Cyprus and Sudan MMS Multimedia messaging service MNP Mobile number portability MOU Minutes of use MPLS Multiprotocol label switching NCC Nigerian Communications Commission NGN Next-generation networking NGN Nigerian naira NIBOR Nigerian InterBank Offered Rate NokNok MTN’s instant social messaging chat service, launched in 2007 NTC National Telecommunications Corporation off-net Telephone calls originating and terminating on different networks OIETAI Organisation for Investment Economic and Technical Assistance of Iran on-net Telephone calls originating and terminating on the same network PAT Profit after tax PAYG Pay as you go PIC Public Investment Corporation PIN Personalised identification number postpaid/contract Services for which the subscriber has a contract and pays monthly PTO Public telecommunications operator prepaid Services for which the subscriber pays in advance PSTN Public switched telephone network PWC PricewaterhouseCoopers RICA Communication-Related Information Act SAICA South African Institute of Chartered Accountants SARS South African Revenue Services SARs Share Appreciation Rights Scheme SDG Sudanese pounds SEA South and East Africa includes operations in South Africa, Botswana, Swaziland, Uganda, Rwanda and Zambia SHE Safety, health and environment SIM Subscriber identity module SME Small and medium enterprise SMS Short message service SP Service provider
116 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Glossary Terms and acronyms (continued)
SPE Special purpose entities overview Group STC Secondary taxation on companies SPV Special purpose vehicle STRATE Share Transactions Totally Electronic subscriber A customer who has participated in a revenue generating activity within the last 90 days SYP Syrian pound SRI Social responsible investment index TCI Telecommunications Company of Iran TDM Time division multiplexing UCT University of Cape Town Unisa University of South Africa USD US dollar UGX Uganda shilling VGC VGC Communications Limited VoIP Voice over internet protocol VP Vice president WECA West and Central Africa includes operations in Nigeria, Cameroon, Côte d’Ivoire, Ghana, Benin, Liberia, Guinea Republic, Guinea-Bissau and Congo-Brazzaville WiMax Worldwide interoperability for microwave access/broadband wireless technology ZAR South African rand ZCA Zambian Communications Authority
ZMK Zambian kwacha reviewOperational Business review Sustainability review
117 MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Glossary Afghanistan Benin Botswana
Cameroon Congo-Brazzaville
Côte d’Ivoire Cyprus Ghana
Guinea-Bissau Guinea Conakry
Iran Liberia Nigeria
MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Annual financial statements Rwanda South Africa Sudan
Swaziland Syria
Uganda Yemen Zambia
MTN Integrated Business Report ⁄ 31 December 2009 ⁄ Annual financial statements MTN Group Limited Integrated Business Report ⁄ 31 December 2009 ⁄ Group Overview and Financial Statements