MTN’s response to Sunday Times article published on Sunday, 12 August 2012, with headline “Still no explanation for R1.4 billion loan”
The “R1.4bn loan” referred to in the article is a shareholder’s loan between MTN Group Limited (“MTN Group”) and Mobile Telephone Networks Holdings (Proprietary) Limited (“MTNH”). The details of this loan have been published in the MTN Group Limited Integrated Business Report for the year ended 31 December 2011. The loan forms part of the MTN Group standalone financial statements (page 195) with further details listed in note 4 (page 199). The loan eliminates on consolidation (as being provided between the holding company and its wholly owned subsidiary) and is not reflected in the MTN Group's consolidated financial statements as a result.
The loan dates back to June 1995 when Multichoice Limited transferred to M-Cell (subsequently renamed MTN Group) a 25% interest in MTNH and a 60% interest in M-Tel (Proprietary) Limited (“M-Tel”, now renamed MTN Service Provider (Proprietary) Limited together with the corresponding shareholder loan accounts and subsequently unbundled the M-Cell shares to its shareholders.
Subsequently in February 1996 M-Cell entered into a share swop agreement in terms of which it acquired:
• The 2% shareholding and associated shareholders loan account held by Fabcell Holdings Limited (“Fabcell”) in MTNH; and
• The 2.5% shareholding and associated shareholder loan account held by the South African Clothing and Textile Workers Union (SACIWU) in MTNH.
As a consequence of the above transactions, M-Cell’s principal investment comprised a 29.5% shareholding in MTNH as at 31 March 1996 – the first financial yearend of M-Cell.
M-Cell was listed in the Johannesburg Stock Exchange effective 14 August 1995.
M-Cell then increased its stake from 29.5% to 100% by 2001 via a series of piecemeal transactions:
The piecemeal acquisitions resulted in an increase in the shareholders loan in the books of M-Cell from a proportionate 29.5% to 100% of the loan.
This loan was fully disclosed from inception in 1996, please see attached the relevant disclosure pages from 1996 – 2011 MTN Group annual financial statements. These are also available from MTN’s website. The attached also includes excerpts from the Multichoice circular to its shareholders, date of issue 24 July 1995, which gives detailed explanation how M-Cell was formed and how the shareholders loan transpired.
The immaterial movement between 31 December 2007 and 31 December 2008 mainly relates to the IFRS 2 charge relating to MTN Group Management Services (Pty) Ltd which was reflected separately in the financial statements from 31 December 2008 onwards”.
MTN Group Chief HR & Corporate Affairs Officer