Overview

The MTN Group today is a vastly different organisation to the one I reported on a year ago. While the scale and scope of operations have increased substantially, the focus of our Group remains in place – we are rapidly becoming the leading provider of telecommunications in emerging markets, giving voice to over 40 million people.

The MTN subscriber base grew 73% to 40 million during the 12 months to 31 December 2006 on strong growth in most markets, notably Nigeria (up 47%) and South Africa (up 22%). Total subscribers include 8,4 million subscribers of the former Investcom operations which have been consolidated since acquisition in July 2006. Subscriber bases increased by 26% and 80% respectively in the South and East Africa (SEA) and West and Central Africa (WECA) regions. Total Group subscribers also include an additional 4,9 million subscribers in the Middle East and North Africa (MENA) region.

Trading conditions in most countries where MTN operates remained challenging with increasing competition from local, regional and international operators. Tariffs continued to decline across all our markets as acquisitions were increasingly achieved on deeper penetration of addressable markets. As a consequence, average revenues per user (ARPUs) have declined in most operations. Interest rates in most major operations remained steady, while increased lending rates in South Africa have not significantly affected consumer spending.

Group revenue increased by 49% for the period, with contributions split 52%, 41% and 7% among the SEA, WECA and MENA regions respectively. Attributable earnings for the period were R10,6 billion, compared to R5,9 billion for the nine months ended December 2005. The Group EBITDA margin was strong at 43,4% as initiatives to drive operating efficiencies propelled savings in operating units, especially in Nigeria.

Investcom operations contributed R5,9 billion or 12% of total revenue for the year since acquisition in July 2006. These results have underlined the benefits of MTN’s expansion strategy in diversifying the revenue base through strategic acquisitions in emerging markets.

Key objectives for the past period

The MTN Group has made good progress on the strategic objectives set at the beginning of the year:
Continue to identify and pursue value-enhancing expansion opportunities to consolidate our position and diversify earnings - the MTN Group has established itself as a leader in telecommunications in emerging markets with the acquisition of Investcom LLC, broadening our operating footprint to 21 countries in Africa and the Middle East. The US$5 billion acquisition has, however, had a significant impact on our debt profile in the short to medium term. While the integration of Investcom has been smooth, management’s focus will be on reducing our net debt level to approximately 0,4 times EBITDA by the end of 2008. During the year, we launched commercial operations in Iran and Afghanistan, and Sudan completed its first full trading year. The MTN Group will continue to explore expansion opportunities where these have a strategic and significant positive impact on the Group’s earnings in the medium term.

Managing the Investcom integration – the key aspects of the integration project were formally concluded at the end of October 2006. The broad objectives were largely achieved, including the alignment of Investcom processes to MTN standards and disciplines. The rebranding programme for these operations has been finalised and will be launched in most countries during 2007, together with new products and value-added services to capitalise on opportunities and maximise impact. Group-wide procurement benchmarks have been established and opportunities identified for significant cost reduction in both network capital expenditure and operating expenses over the next two years.

Most importantly, the Investcom acquisition has added significant depth to our management teams as well as professional and telecommunicationspecific skills. In such a rapidly developing market, this is a considerable competitive advantage.

Regionalisation – the strategy we initiated in the prior period has shown encouraging results. We have established three unique regions in our portfolio which form the basis of our hub and cluster strategy to drive operating focus, synergies and efficiency.

Improve operational cost efficiency and expand margins to take full advantage of scale across our operations – the least-cost operator approach is now embedded at operating unit level and has promoted a strong cost-reduction culture across the Group. Key performance indicators are reviewed for all operating units and benchmarked across the Group to drive efficiency in spending and roll out best practices in our operations.

We are now assessing outsourcing certain functions of the business, culminating in the development of a new business model. This model should enable us to achieve our Group EBITDA margin target of 45% in the medium term, even though the Group margin will be diluted by lower margin contributions from Iran and Syria due to high revenue-share licence commitments.

Manage ambitious network roll out in the Islamic Republic of Iran – MTN Irancell launched commercially on 21 October 2006 with a network capacity of 450 000 covering Tehran (46% population coverage), Mashad and Tabriz and connecting 154 000 subscribers by yearend. The launch was a postpaid-only offer.

At launch, the distribution infrastructure included nine dealers and 500 primary points of sale. Internally, call centres, enterprise resource planning systems, customer care (unique in Iran) and sales support were all in place. By year-end, the distribution network had trebled and network infrastructure rolled out to cover 16% of the population of 70 million.

MTN Group results

MTN’s performance for the 12 months ended December 2006 was solid with revenue and profits strongly up on the prior year. Revenues at R52 billion were 49% above the previous year as a result of subscriber growth and the consolidation of former Investcom operations. EBITDA was R22,4 billion, up 53%. Group profit after taxation of R12 billion was 32,4% above the previous year on higher revenues and functional currency gains as the rand weakened against foreign currencies.

MTN South Africa (48%) and MTN Nigeria (29%) contributed 77% of total revenue, down from 91% in 2005 following the consolidation of Investcom operations at Group level. Investcom operations contributed 12% of total revenues for 2006. MTN’s international operations increased their contribution to Group results during the period and now account for 52% of revenue and 63% of EBITDA, up from 43% and 55% respectively at the end of the previous period. These results support ongoing initiatives to diversify our revenue and earnings base.

Total assets at 31 December 2006 increased by 116% to R96,9 billion. Net debt as a result of the Investcom acquisition was R22,9 billion with the debt/equity ratio at 77,2% and net debt/equity ratio at 53,6%.

Operational review

South and East Africa
MTN South Africa has maintained market share during the year and increased subscribers by 22% to 12,5 million. The pre-paid value proposition introduced during the year in combination with lower-denomination airtime vouchers have resulted in a very strong performance with pre-paid ARPU increasing to R94 from R93 in the previous year. Constructive discussions on the interconnect cost/tariff structure are continuing with ICASA.

Our focus on the consumer, corporate and reseller business units has resulted in a more efficient distribution channel and a broader distribution base.

MTN Uganda, Rwanda and Swaziland all recorded strong subscriber growth of 62%, 40% and 26% respectively. These operations have all maintained EBITDA margins in excess of 50%.

The infrastructure roll out in Zambia gathered pace in the latter half of the year, resulting in strong subscriber growth of 93% for the year.

West and Central Africa
In September, MTN Nigeria introduced a new pre-paid value proposition, with a number of new tariff plans at reduced rates, each targeting specific segments of the market. Subscribers increased by 47% to 12,3 million with 3,9 million net additions for the year. Significant acquisitions were recorded in the second half of the year following the introduction of the new product plans.

The majority of new additions continue to be connected at the low end of the market resulting in slightly lower ARPUs of US$18, down from US$22 for the previous financial period.

MTN Nigeria launched its ultra-modern fibre optic transmission backbone in October 2006. The network is one of the largest of its kind in Africa and spans 3 500km. It will provide MTN Nigeria with a competitive advantage and potentially redefine service delivery in the Nigerian telecommunications sector. In December 2006, MTN Nigeria acquired VGC Communications as a strategic platform to expand its presence in the corporate market. The acquisition will give MTN MAN (Metropolitan Area Network) the ability to deliver high bandwidth, reliable data and advanced voice service to corporate customers in the key cities of Lagos, Port Harcourt and Abuja. VGC Communications’ assets and customer base will also give MTN Nigeria immediate traction in the corporate market and provide a high quality service. Post year-end, Nigeria was awarded a 3G licence for US$150 million.

MTN Ghana remains the biggest operator in the country with 2,6 million subscribers and a market share of almost 52%. In the second half of 2006, management’s focus was on the expansion of network capacity and the improvement of network quality. Some 357 BTS sites were commissioned in the six months, bringing the total to 965.

MTN Cameroon and MTN Côte d’ Ivoire experienced subscriber growth of 43% and 50% respectively. Cameroon increased market share during the year to 58% while Côte d’ Ivoire secured a significant position in the important single-call market. The majority of subscriber acquisitions in Côte d’ Ivoire occurred in the second half of the year as integration synergies and organisational changes took effect.

Middle East and North Africa
Iran, Afghanistan and Sudan in the MENA region are operations with the greatest growth potential in the Group.

Since commercial launch, MTN Irancell has expanded its network coverage to eight cities at December 2006 and has rolled out some 361 BTS stations covering 16% of the population. From commercial launch in October to the end of December 2006, 154 000 postpaid subscribers were connected. Subsequent to year-end, MTN Irancell launched pre-paid services to meet competitive market challenges. The pre-paid launch was at a connection fee of approximately US$25, representing a significant discount to the prevailing price for postpaid SIM cards of approximately US$150. The launch of the pre-paid offer has accelerated subscriber acquisition, which exceeded 1 million at the end of March 2007.

Afghanistan commenced operations in August 2006 and has rolled out 155 BTS sites. The operation has connected 218 000 subscribers in the five months since launch. The most significant challenge in this operation remains the network roll out.

Sudan has completed its first full year of operation and connected over 1 million subscribers with market share of close to 25%. The acceleration of the network roll out in advance of the third competitor entry remains a key focus.

Investment and expansion strategy

Geographic expansion during the year was achieved through the Investcom acquisition which increased the Group footprint from 11 to 21 countries. This was a significant step forward in our strategy to be the leading provider of telecommunications services in emerging markets. Today, the MTN Group spans 21 countries with a combined population of over 500 million.

The Group has also increased its stake in Côte d’ Ivoire by 17%, Mascom (Botswana) by 7% and Uganda by 45%, for a combined sum of R2,1 billion. The Group increased its shareholding in Nigeria by 7% at a cost of R2,7 billion.

Sustainability performance

Sustainable development has long been a cornerstone of our business and approach, given the close relationship between mobile telecommunications and quality of life. At industry level, MTN is making a material contribution in developing appropriate regulations in different regions, believing that free-market principles will best support entrepreneurial development and the significant multiplier effect this can have on individuals and communities. We also believe that corporate citizenship and economic prosperity can be extended to more citizens in every territory by increasing the percentage of local procurement in almost all areas of operation.

At present, there are MTN foundations funded by after-tax profits active in three countries. These foundations address relevant social and educational priorities in each country and, where appropriate, combine traditional marketing activities with corporate citizenship. These are detailed in the sustainability review section of this report.

In each country, MTN’s policy is to support local suppliers wherever possible and to the fullest extent. In Nigeria, for example, recharge cards are now locally sourced, generating employment, contributing to the domestic economy and producing savings that are passed on to MTN subscribers to keep tariffs affordable.

Corporate governance

The MTN Group board of directors was reconstituted during the year to align more closely with best practice in corporate governance by appointing more independent directors.

Our people

The MTN Group now has a workforce of over 14 000 that fully reflects the demographic diversity of our markets. The addition of skilled and experienced Investcom teams is an important advantage in an industry so reliant on specialist skills. Importantly, the cultural fit between the teams ensures that we can rapidly move ahead as a larger multinational organisation with arguably the strongest base of human capital in our operating jurisdictions. Training and development plays an important role in achieving our business targets, accounting for some 5% of our total payroll cost each year. This includes a comprehensive succession strategy to align resources with strategic objectives.

In South Africa, MTN conforms to the requirements of the industry charter of economic empowerment and has been independently recognised as a leading empowerment company. During the year, MTN was rated progressive company of the year at the prestigious presidential awards for business leadership of the Black Management Forum.

At operating unit level, Ahmad Farouk was appointed CEO of MTN Nigeria and Amiable Mpore CEO for MTN Côte d’Ivoire. Brett Goschen moved from chief financial officer of MTN Nigeria to CEO of MTN Ghana. Given the expanded responsibilities of the chief operating officer in the enlarged group, Sifiso Dabengwa has returned to South Africa.

In line with the strategic change to a more regional structure, Christian de Faria and Jamal Ramadan were appointed vice presidents for the WECA and MENA regions respectively. Sifiso Dabengwa, the Group COO, is currently acting as vice president for the SEA region.

The MTN Group has been characterised by the spirit of its people since its formation – energy, passion and dedication permeate our operations, at times against formidable challenges. Your loyalty and enthusiasm continue to inspire as we strive to reach our business goals. I thank every one of you for your valued contribution to making the Group what it is today – a leading provider of telecommunications services in emerging markets.

I also thank the board members for their guidance and unwavering support.

Looking ahead

• Completing the final elements to integrate acquisitions that complement our expansion strategy
• Optimising regional synergies and ensuring strategic regional focus through a hub and cluster structure
• Continuing to pursue appropriate expansion opportunities to further diversify earnings and consolidate our position
• Improve operational efficiency through our least-cost operator strategy and explore outsourcing to improve the business model
• Take advantage of money transfer and mobile money opportunities in MTN Group markets.

Phuthuma Nhleko
28 March 2007