MTN : 'Reviewed condensed consolidated interim financial results for the six months ended 30 June 2016'

Johannesburg - MTN is a leading emerging markets mobile operator, connecting 233 million people in 22 countries across Africa and the Middle East. We are committed to continuously improving our customers' experience and delivering a bold, new Digital World to them.

Financial results snapshot for the six months ended 30 June 2016

Group subscribers remained flat at 232,6 million from 31 December 2015

Revenue increased by 14,0% (1,5%*) to R78 878 million

Data revenue increased by 32,2% (19,7%*) to R19 849 million

Voice traffic and data traffic increased by 7,9% and 135,3% respectively

EBITDA decreased by 3,3% (25,9%*) to R29 273 million

EBITDA margin decreased 6,6 percentage points to 37,1%

Headline loss per share of 271 cents**

Interim dividend of 250 cents per share

Capex increased by 26,9% (15,4%*) to R13 772 million

Nigeria regulatory fine re-measurement impact of R10,5 billion

Note: Certain financial information presented in these interim financial results constitutes pro forma financial information. The pro forma financial information is the responsibility of the Group's board of directors and is presented for illustrative purposes only. Because of its nature, the pro forma financial information may not fairly present MTN's financial position, changes in equity, results of operations or cash flows.

1. Certain financial information presented in these interim financial results has been prepared excluding the impact of hyperinflation and the relating goodwill impairment, tower profits and the Nigerian regulatory fine and constitutes pro forma financial information to the extent that it is not extracted from the segment disclosure included in the reviewed condensed consolidated interim financial results for the six months ended 30 June 2016. This pro forma financial information has been presented to eliminate the impact of hyperinflation and the relating goodwill impairment, tower profits and the Nigerian regulatory fine from the financial results in order to achieve a comparable analysis year on year. Hyperinflation adjustments and the relating goodwill impairment, tower profits and the Nigerian regulatory fine have been calculated in terms of the Group accounting policies disclosed in the previous consolidated financial statements for the year ended 31 December 2015. The pro forma financial information including the constant currency information (refer below) incorporated in these condensed consolidated interim financial results has not been audited or reviewed by our external auditors.

2. Constant currency ('organic') information has been presented to illustrate the impact of changes in currency rates on the Group's results. In determining the change in constant currency terms, the current financial reporting period's results have been adjusted to the prior period's average exchange rates determined as the average of the monthly exchange rates which can be found on www.mtn.com/investors. The measurement has been performed for each of the Group's currencies, materially being that of the US dollar and Nigerian naira. The organic growth percentage has been calculated based on the current period constant currency results compared to the prior period results. In addition, in respect of Irancell, MTN Sudan and MTN Syria, the constant currency information has been prepared excluding the impact of hyperinflation. In 2015, the Iranian economy was assessed to no longer be a hyperinflationary environment. MTN therefore discontinued hyperinflation accounting in that operation effective 1 July 2015.

*Constant currency ('organic') information.

**Reported - includes hyperinflation and the relating goodwill impairment, tower profits and the Nigerian regulatory fine.

The Group's results are presented on a regional basis in line with the Group's new operational structure. This is comprised of South and East Africa (SEA), West and Central Africa (WECA) and Middle East and North Africa (MENA).

The SEA region includes: South Africa, Uganda, Zambia, Rwanda, South Sudan, Botswana (joint venture - equity accounted) and Swaziland (joint venture- equity accounted). The WECA region includes: Nigeria, Ghana, Cameroon, Ivory Coast, Benin, Congo Brazzaville, Liberia, Guinea Conakry and Guinea Bissau. The MENA region includes: Iran (joint venture - equity accounted), Syria, Sudan, Yemen, Afghanistan and Cyprus.

Although Iran, Botswana and Swaziland form part of their respective regions geographically and operationally, they are excluded from their respective regional results due to being equity accounted for by the Group.

Overview

MTN continued to operate in a challenging environment for the six months ended 30 June 2016. The financial performance for the period reflects the confluence of a number of material issues, which created the 'perfect storm'. The Group has made strides towards resolving these challenges although many of these factors fall outside of its control.

The Group's reported results were significantly impacted by the Nigerian regulatory fine. On 10 June MTN Nigeria resolved this matter with the Federal Government of Nigeria (FGN) and agreed to pay the FGN a total cash amount of 330 billion Nigerian naira (US$1,671 billion, using the exchange rate prevailing at the time) over three years in a full and final settlement. This was agreed in addition to complying with certain other regulatory conditions imposed as part of the settlement reached. The 50 billion naira (US$250 million) paid in good faith and without prejudice by MTN Nigeria on 24 February 2016 forms part of the monetary component of the settlement, leaving a balance of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the time) outstanding. In June 2016 the first scheduled payment of 30 billion naira (US$124 million) was made. The remaining cash payable at 30 June 2016 amounted to 250 billion naira (US$882 million).

The Group has accrued the present value of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the time), which in total had a negative impact of R10 499 million on reported earnings before interest, tax, depreciation and amortisation and impairment of goodwill (EBITDA) and a R8 632 million negative impact on the Group's reported headline losses, or 474 cents on reported headline losses per share. The reported impact on the Group's statement of cash flow for the period amounted to R5 870 million, which equates to the 80 billion naira paid during the period.

During the period, R1 324 million costs were incurred on a range of professional services relating to the negotiations that led to a reduction of R34 billion in the Nigerian regulatory fine to 330 billion naira (US$1,671 billion, using the exchange rate prevailing at the time). The board has exercised its judgement and approved the quantum of the professional fees incurred taking into account global benchmarks and the value delivered culminating in the final settlement of the Nigerian fine.

Apart from the Nigerian regulatory fine, the depreciation of local currencies against the US dollar had a substantial impact on the Group's results. This resulted in foreign exchange losses amounting to R3 606 million during the period. MTN South Sudan reported an impairment on property, plant and equipment (PPE) of R259 million** (using a Rand/ Sudanese pound exchange rate of 0.376). When the impairment write-off is presented on an organic basis the impairment amounts to R2 632 million* (using a rand/Sudanese pound exchange rate of 3.837). This organic impairment write-off had a significant negative impact on organic EBITDA.

The Group's underlying performance was impacted by weak macro-economic conditions affecting consumer spending, thewithdrawal of regulatory services in MTN Nigeria from July 2015 until May 2016 and disconnections of subscribers related to subscriber registration requirements, mainly in Nigeria. MTN Nigeria disconnected the last batch of 4,5 million subscribers in February 2016. MTN Uganda and MTN Cameroon were also impacted by subscriber registration requirements. This resulted in significant free minutes provided for subscriber re-registration campaigns,

contributing to a 12,2%* decline in the effective voice tariff. The Group's performance was further impacted by aggressive price competition and under-performance of MTN South Africa.

EBITDA (Rand 'million)	H1 16	Change %
Reported	18 882	(38,4)
Nigeria regulatory fine	10 499
Hyperinflation	(90)
Tower profit	(18)
Operational	29 273	(3,3)
Organic	22 434	(25,9)
Impairment of PPE in South Sudan	2 632
Professional fees relating to Nigerian regulatory fine	1 324
Organic excluding above costs	26 390	(12,8)

MTN Irancell (joint venture - equity accounted), MTN Ghana and MTN Cyprus delivered strong operational and financial performances for the period.

EBITDA reconciliation

EBITDA, excluding the impact of the Nigerian regulatory fine (R10 499 million), hyperinflation (R90 million) and the realisation of the deferred profit from the sale of towers in Ghana (R18 million), declined 3,3%. This was positively impacted by foreign exchange movements (23%). Organic EBITDA declined 25,9%*, negatively impacted by R1 324 million in costs incurred on a range of professional services relating to the negotiations that led to a reduction of R34 billion in the Nigerian regulatory fine and the impairment of PPE in South Sudan of R2 632 million*. The impairment for PPE of South Sudan impacted organic EBITDA by 8,7%*. MTN South Sudan's full results impacted organic EBITDA by 9,8%*. Excluding the impact of professional fees relating to the Nigerian regulatory fine negotiations and the MTN South Sudan impairment, EBITDA declined 12,8%*.

The Group EBITDA margin declined 6,6 percentage points (pp) to 37,1%. This excludes the impact of the Nigerian regulatory fine, hyperinflation and the realisation of the deferred profit from the sale of towers in Ghana.

Losses from joint ventures and associates amounted to R1 692 million**. This included a charge of R1 039 million** incurred by MTN Irancell, mainly relating to the depreciation and amortisation of hyper-inflated assets that were historically written up under hyperinflation reporting. Upon the discontinuation of hyperinflation accounting in Iran, effective 1 July 2015, hyperinflation adjustments are limited to the depreciation and amortisation charges on previously hyper-inflated assets until 2033. The Group reported losses of R2 463 million in relation to MTN's share of Nigerian TowerCo losses, which were mainly as a result of foreign exchange losses incurred on US dollar-denominated loans. In addition, the Group also reported short-term losses on MTN's share in Africa Internet

Holdings (AIH), Middle East Internet Holdings (MEIH) and Iran Internet Group (IIG)(R494 million).

HEPS reconciliation table Earnings (loss) per share (cents)	H1 16	Change %
Reported attributable earnings (loss) per share	(301)	(146)
Profit on disposal of non-current assets (including tower profits)	(2)	(100)
Profit on dilution of investment in joint venture	(15)	(100)
Impairment of goodwill, PPE and non-current assets	47	NM
Reported basic headline earnings (loss) per share	(271)	(141)
Nigeria regulatory fine	474
Basic headline earnings (loss) per share excluding Nigeria regulatory fine	203	(69)
Hyperinflation	20	150
Operational basic headline earnings (loss) per share (excluding Nigeria regulatory fine, hyperinflation and tower profits)	223	(63)
Losses from AIH, MEIH and IIG	27	50
Losses from tower companies	136	NM
Net forex losses	135	160
Professional fees related to the Nigerian regulatory fine negotiation	73
Basic headline earnings per share excluding Nigeria regulatory fine, hyperinflation, tower profits, losses from AIH, MEIH, IIG, tower companies, net forex losses and professional fees related to the Nigerian regulatory fine	594	(12)

The Group reported a headline loss per share of 271 cents**, which was mainly as a result of the Nigerian regulatory fine (474 cents**). Excluding the impact of the Nigerian fine, headline earnings per share (HEPS) declined 69% to 203 cents. In addition, the headline number was negatively impacted by losses from joint ventures and associates, which were negatively affected by hyperinflation of 20 cents** (positive impact of 40 cents** in 2015), losses from the TowerCo's of 136 cents** (3,5 cents** in 2015), AIH, MEIH and IIG of 27 cents** (18 cents** in 2015) and net forex losses of 135 cents** (52 cents** in 2015). This was further negatively impacted by a range of professional services relating to the negotiations that led to the reduction in the Nigeria regulatory fine (73 cents**). Excluding the impact of the fine, hyperinflation, losses from the TowerCo's, AIH, MEIH and IIG, forex losses and a range of professional fees relating to the fine negotiations, basic HEPS declined 11,7% to 594 cents.

Financial performance summary

The Group continued to benefit from its significant scale and footprint, maintaining its leadership position in 15 markets. Group subscriber numbers remained flat at 232,6 million following 6,6 million subscriber disconnections over the six month period in Nigeria, Uganda and Cameroon. Since October 2015 approximately 18 million subscribers across the Group were disconnected to ensure compliance with the subscriber registration processes. MTN South Africa reported a decline in subscriber numbers mainly as a result of strong competition and economic pressure in a highly penetrated market.

Group revenue increased by 14,0% to R78 878 million, benefiting from the average exchange rate movement of the rand against the naira. On an organic basis, Group revenue increased by 1,5%*, impacted by a decline in outgoing voice and data revenue in Nigeria following the withdrawal of regulatory services from MTN Nigeria until May 2016. This had a significant negative impact on MTN Nigeria's revenue growth for the first four months of the period. This was partly offset by higher revenue growth by MTN South Africa, supported by strong device sales and an increase in data revenue during the period.

The Group benefited from healthy double digit data revenue growth in the majority of the markets in which it operates. Group data revenue increased by 32,2% (19,7%*) and contributed 25,2% to total revenue despite a 46,9% decline in the effective data tariff (in constant currency US dollar terms). Digital revenue, including Mobile Financial Services revenue, contributed 32,1% to data revenue. This was supported by a 135% increase in data traffic and the increased take up of digital lifestyle services.

Outgoing voice revenue increased by 8,0% and decreased by 5,4%* on an organic basis. This was negatively impacted by a 12,2%* decline in the effective voice tariff (average price per minute, in constant currency US dollar terms) as a result of continued price competition, subscriber disconnections and free minutes used for subscriber re-registration campaigns. The use of multiple SIM cards, increased substitution for data services and increased pressure on consumer spending also negatively impacted outgoing voice revenue.

MTN Nigeria's competitiveness was compromised by the mandatory disconnection of subscribers and the suspension of regulatory services until May 2016 when the operation attained the necessary approvals to introduce market-related pricing plans and promotions. In addition, the introduction of regulatory restrictions on 'out-of-bundle' data tariffs impacted MTN Nigeria's data revenue growth.

MTN South Africa's revenue increased mainly as a result of higher device sales and data revenue. These were supported by our continued investment in our 3G and LTE network as well as attractive data and digital value propositions. Growth in outgoing voice revenue remained a challenge, impacted by a 48 hour network outage affecting approximately one million subscribers in February 2016 and higher churn in the post-paid segment.

Excluding the impact of the Nigerian regulatory fine, hyperinflation and tower profits, the Group EBITDA margin declined by 6,6 pp to 37,1%. This was a result of the lower EBITDA margins in Nigeria and South Africa. The EBITDA margin in Nigeria was impacted by the 4,8%* decline in revenue and an 11,3%* increase in costs mainly as a result of the transfer of the second tranche of the previously sold passive infrastructure into the TowerCo as well as US dollar-denominated expenses associated with the TowerCo and build-to-suit sites. Costs were further impacted by increased marketing and commission spend related to re-connecting subscribers affected by the subscriber registration process. MTN South Africa's EBITDA margin was negatively impacted by lower handset margins following aggressive handset sales and increased network-related costs associated with the expansion of 3G and LTE sites.

Cash inflows generated by operations decreased by 9,2%** to R23 870 million** mainly as a result of the down payment of R5 870 million** relating to the Nigerian regulatory fine during the period.

The Group continued to increase investment in the network with a focus on increasing coverage, speed and quality of 3G and LTE in prime areas to support the increasing demand for data services. Capital expenditure (capex) increased by 26,9% (15,4%*) to R13 772 million. MTN South Africa's capex amounted to R4 773 million, representing 34,7% of total capex. Capex in Nigeria amounted to R2 534 million and was impacted by delays in network re-planning more recently, our capex in Nigeria was impacted by the limited availability of US dollars. During the period, the Group rolled out 873 2G sites, 3 660 co-located 3G sites and 2 691 LTE sites. The Group also rolled out 1 132 km of long-distance fibre and connected a total of 422 sites to fibre. Capex spend included the purchase of LTE spectrum and licences in various markets to enable better quality data networks across its operations.

Leadership changes

During the period the Group announced the appointment of new executives and additional independent non-executive directors to the board with the objective of strengthening management, enhancing governance and aiding the strategy of the Group.

Management

• Following a widespread executive search, MTN announced the appointment of Rob Shuter as the new Group president and CEO. Rob will join MTN as soon as is practically possible in 2017 but no later than 1 July 2017. Rob has extensive experience in telecoms and banking across Africa and Europe, including holding the position of CEO, Vodafone Europe cluster. The Group also welcomes the newly appointed vice presidents (VPs):
• Stephen van Coller, VP for M&A and Strategy, effective 1 October 2016, who brings with him commercial and banking experience, and will help broaden MTN's skill set as the Company evolves beyond telecommunications; and
• Godfrey Motsa, VP for the South and East Africa region (excluding South Africa), who brings vast experience in telecoms and operating within Sub- Saharan Africa.
• Kholekile Ndamase was appointed as deputy head of mergers and acquisitions, with effect from 10 September 2016. Kholekile joins MTN from Rand Merchant Bank (RMB), where he led the equity based financing business.

  The Group appointed Babak Fouladi as Group chief technology and information officer, effective 1 June 2016. Babak will spend 12 months as chief and technology officer for the South African operation until the network is operating at an optimum level and higher quality before taking on the Group role. Babak brings with him global expertise and experience to build and lead strong teams to drive and implement on large-scale converged networks, complex systems and applications.

• Brett Goschen, the Group chief financial officer (CFO), will be leaving MTN after 14 years of service to MTN, effective 30 September 2016. At the same time he will be stepping down from the board of directors of the Group. The board of directors and management would like to thank Brett for his valuable contribution to the Group. Gunter Engling, currently CEO of MTN Rwanda and previously Group finance executive, will assume the position of Acting Group CFO on Brett's departure until a permanent CFO is appointed. The Group hopes to appoint a new CFO before the year-end.
• After completing his two key mandates of settling the Nigerian fine and appointing the new Group CEO, Phuthuma Nhleko will revert to his role as non-executive chairman as soon as Rob Shuter assumes his position as Group president and CEO. In the interim, Phuthuma will hand over more operational responsibility to Stephen van Coller and Gunter Engling and will continue to provide the necessary leadership as non-executive chairman for a maximum period of two years (until no later than December 2018) when he plans to step down from this position.

Board of directors (appointments and resignations)

• The Group also refreshed the composition of the board of directors for MTN Group and MTN South Africa, providing more in-depth commercial, risk and governance skills and experience.
• Specifically, the following individuals have been appointed to the Group board of directors as independent non-executive directors effective 1 August 2016:
• Stan Miller has global experience in expanding businesses into new markets, exposure to convergence, as well as strong business and operational acumen. His telecoms experience ranges from co-founding subscription television channel M-Net to leading the growth of Dutch telecoms company KPN in the Netherlands. He is the executive chairman of AINMT A.B. Sweden and non-executive member of the board of MTS JSC. Russia, a telecommunications operator in Russia.
• Paul Hanratty brings a wealth of experience in financial services in the UK, US, Africa, Asia and Latin America. He has worked at Old Mutual for over 30 years and has sat on the boards of various other financial services companies. Paul has extensive M&A experience and has devised and implemented growth strategies for businesses in many countries.

  Nkululeko 'Nkunku' Sowazi is the chairman of Kagiso Tiso Holdings, a leading South African investment holding company, with significant interests in the media, financial and industrial sectors. Nkunku was the executive chairman and co-founder of the Tiso Group and is currently a director of Grindrod Limited, a JSE listed company, and a non-executive director of listed and unlisted organisations spanning Ghana, the UK, the US and South Africa. Nkunku has had significant exposure to listed and non-listed Boards and has extensive experience in M&A and management transformation. He sat on the Nominations Committee, Audit & Risk Committees at Exxaro and Aveng.

• MJN Njeke and JHN Strydom, who served on the board of directors of the Group as independent non-executive directors for an aggregate period in excess of nine years, retired as directors of the Group at the Annual General Meeting held on 25 May 2016. The board of directors of the Group thanks them for their valuable contribution over the years.
• Mike Harper, Mike Bosman, Lerato Phalatse and Trudi Makhaya have been appointed as independent non-executive directors to the board of directors of MTN South Africa, effective 1 July 2016. The commercial experience of these additional directors will greatly benefit MTN South Africa. These directors collectively have extensive experience in the media, insurance, retail banking and FMCG sectors as well as in-depth knowledge of stakeholder engagement.

Prospects

• The MTN Group continues to work towards achieving its vision of 'leading the delivery of a bold, new Digital World to our customers'. The Group is in the process of undertaking, with external assistance, a deep and fundamental strategic review of its operations and processes to ensure it is operating far more optimally given the pressure on voice revenues, evolving customer needs for high quality data and more complex and competitive market environments. This will reset and position the business for future growth in a rapidly evolving sector.
• As part of the review, the following key areas will be addressed:
• An advanced analytics unit will be established to support the business to drive network quality and high-speed data connectivity especially in key locations with high demand, provide compelling segmented offerings to consumers and enterprises, improve customer service and increase targeted smartphone uptake.
• Operating efficiencies and improving customer service remain a priority with a focus on the service channels productivity through digitisation and leveraging Mobile Money as a distribution channel. Continued network optimisation and improved opex management, including the implementation of zero-based budgeting, will also contribute to improving efficiencies.
• The Group will continue to explore opportunities to create value through leveraging its extensive infrastructure across Africa and the Middle East.
• Improving the way of work through increased co-ordination between different parts of the business is key to the success of this strategy.
• The Group will embark on a process of housing new revenue streams, particularly Digital services, outside the core business. This will allow for more agility and greater flexibility to accelerate growth in these areas. New revenue streams are expected to increase their contribution to revenue over the next 12-18 months.

  The Group will also continue to seek value-accretive expansion opportunities in selected geographies across Africa and the Middle East.

  MTN's investments in towers with IHS Holding Limited are evidenced by our substantial ownership interest in INT Towers Limited and our direct investment in IHS. IHS continues to grow and develop its business with leading market positions in 5 markets and has recently led in-market consolidation in Africa through its acquisition of Helios Towers Nigeria. IHS is now the largest independent tower operator in EMEA by tower count and the tenth largest independent tower company in the world, with more than 24,000 towers. IHS is extremely well positioned for future growth and build-out from 3G upgrades and the move to LTE across its key markets. MTN will benefit from IHS' strong growth, IHS will also help us accelerate our network expansion in markets such as Nigeria further improving the benefits and services for our customers.

  MTN aims to list MTN Nigeria on The Nigerian Stock Exchange during 2017 and has established a management task team with the responsibility to guide the company towards such a listing. The proposed listing is subject to suitable market prevailing circumstances and conditions and the appropriate approvals from relevant regulators and other stakeholders.

  MTN Ghana will proceed with the localisation of 35% of its shares during the course of 2016. This is a requirement of winning the auction for a 4G/LTE licence earlier this year.

  We are confident that by year-end we would have successfully completed our proposed management changes. In 2017, we will have a permanent and refreshed senior management team to take the Group forward.

  In Nigeria, following the reinstatement of regulatory services, we expect to improve our competitiveness in this market and anticipate an improved performance for the remainder of the year. Data growth will also benefit from the increased investment in 3G and LTE networks in key cities and the utilisation of the recently acquired spectrum.

  We anticipate a positive growth trend in South Africa, supported by a strong focus on customer service and improving the network quality, capacity and speed. Data growth will continue to be underpinned by our on-going significant investment in 3G and LTE.

  The continued easing of sanctions in Iran and its related economic uplift offers significant opportunities to expand services particularly in the digital space, benefiting from MTN's strong position and a youthful population. MTN continues to work towards remitting some of its cash amounting to approximately R15,4 billion from MTN Irancell, although this a complex process.

  In November 2016, MTN's Broad-Based Black Economic Empowerment (BBBEE) vehicle, MTN Zakhele will unwind. Upon unwinding, MTN Zakhele shareholders will be given the option to receive cash, MTN shares or potentially re-invest into a new scheme. MTN is currently reviewing various options to create a new scheme to maintain its BBBEE ownership credentials in line with the BBBEE codes.

  The Group has declared an interim dividend of 250 cps. The FY 2016 minimum dividend, as previously noted at the Group's FY2015 results, is anticipated to be 700cps. This takes into consideration the impact of the Nigerian regulatory fine and the limited US dollar liquidity in Nigeria. The minimum dividend remains at the discretion of the board. Should operating conditions improve materially, we would look to declare a higher dividend than advised.

Net Subscriber additions 2016 guidance

Capex 2016 guidance

To lead the delivery of a bold, new Digital World to our customers

The Group continues to focus on growing non-voice revenue given the rapid evolution of telecommunications into a data-led industry. Revenue is no longer driven by subscriber numbers but rather by consumer spending patterns towards data and digital services. MTN is more agile and innovative and has a deeper understanding of customer needs, enabling it to compete effectively.

GROUP CONSUMER

The Group Consumer division's focus for the period was to integrate customer analytics across the operations to meet customers' changing needs. Improving analytics is a key priority for the Group with substantial room for improvement and will form part of the strategic review the Group is currently undergoing.

During the period a number of global value propositions were introduced. 'MTN Go', a bundle plan focusing on driving the transition to data, was launched in six markets and 'MTN Hello World', a global roaming proposition, was launched in ten markets.

The Group's net promoter score (NPS) improved from 24% in December 2015 to 27% in June 2016, closing the gap with its competitors. This was mainly driven by improvement on the network, value offerings and brand image. Improving NPS remains a key focus.

GROUP DIGITAL SERVICES

Group Digital Services continued to expand its e-commerce, digital media and mobile financial services across Africa and the Middle East, leveraging MTN's core competencies of a strong brand, knowledge of and access to customers, scale and distribution. MTN recorded strong growth in digital services revenue, supported by lifestyle and Mobile Financial Services. MTN recently launched Games Club, our premium gaming proposition and continued to gain strong momentum on its music offerings as one of the major distributors of digital music in Africa.

MTN Mobile Money registered customers increased by 5,0% to 36,5 million across 15 countries and increased revenue by 40,8%* to R1 289 million when compared to June 2015. Active customers increased by 18,0%, supported by a strong performance from MTN Uganda, MTN Ghana, MTN Rwanda and MTN Benin. Revenue growth was supported by focused customer engagement and a common, more agile platform enabling converged campaigns and incentives. MTN continues to focus on advanced financial services such as remittance services, micro-lending and saving offerings and recorded 160 000 agents.

AIH and MEIH, MTN's e-commerce joint ventures, continue to deliver good growth. While performance in the AIH business was negatively impacted by the macro-economic slowdown in Nigeria, MEIH continued to gain strong momentum. Unit economics in both businesses continued to improve. AIH recorded approximately 3 million customers, and approximately 2,5 million transactions and 1,3 million leads on its classified business in the six-month period. In addition, MEIH comprises seven companies in the Middle East, with approximately 600 000 customers and 3,3 million transactions during the period. IIG, our Iranian e-commerce business, gained strong momentum, supported by its taxi-hailing business benefiting from a youthful population and high smartphone penetration.

The TravelStart business, in which MTN acquired a 37,3% indirect interest through Amadeus, recorded 259 000 bookings during the period.

ENTERPRISE BUSINESS UNIT (EBU)

In the six-month period, EBU continued to align operations to become the ICT partner of choice for corporate, multinational, SME and public sector customers. While there is a clear opportunity in this market, the EBU function continues to operate in a competitive environment with little traction gained. The Group, as part of its strategic review, will embark on a process aimed at accelerating growth in this area.

We continued to focus on the MTN Business Cloud, a hybrid platform using Windows Azure Pack, which is available across all MTN operating companies offering infrastructure, platforms and databases as services. MTN Business has also extended its Cloud Delivery Platform to provide various independent software vendor solutions, particularly to SMEs in four markets. MTN Business invested in the rollout of Global MPLS (multiple protocol label switching) across 27 points of presence together with centralised global monitoring and reporting services. In addition, MTN Business has launched dedicated internet services to its clients in 11 markets. It also extended its Pan African Internet of Things platform to Ghana and Cameroon during the period.

Financial review

Revenue

Group revenue increased 14,0% to R78 878 million for the six-month period. This was positively impacted by the average exchange rate movement of the rand against the naira when compared to the previous corresponding period. Over the period, the average rand weakened against all our major revenue contributing currencies, declining 22,3% against the US dollar and 18,5% against the naira. In addition, the rand weakened 16,0% against the Iranian rial, 21,9% against the Ghanaian cedi, 21,8% against the Central African franc, 11,7% against the Ugandan shilling and 20,0% against the Sudanese pound. The rand strengthened 36,6% against the Syrian pound.

On an organic basis, Group revenue increased by 1,5%*. WECA revenue decreased by 2,5%* and remains the largest contributor to total Group revenue at 59% at the end of June 2016. SEA grew revenue by 7,6%* and contributed 32% to total Group revenue while MENA increased revenue by 1,9%* and contributed 9% to total Group revenue.

The lower-than-expected revenue growth was negatively impacted by a decline in revenue growth in Nigeria (down 4,8%*), Cameroon (down 8,7%*), Ivory Coast (down 3,9%*) and Uganda (down 2,3%*). Regulatory challenges and aggressive competition negatively impacted revenue growth in these markets. This was partly offset by higher revenue growth in South Africa and Ghana, which increased by 5,1% and 18,9%* respectively. South Africa's increase in revenue was driven by higher handset sales and data revenue growth during the period while Ghana's healthy revenue growth was attributable to competitive voice and data offerings. Sudan and Syria also supported growth in total Group revenue and increased revenue by 15,7%* and 10,5%*, respectively.

Total outgoing voice revenue declined by 5,4%* and contributed 57% to total Group revenue while data revenue increased by 19,7%* and contributed 25% to total Group revenue. Incoming voice revenue declined by 2,7%* and contributed 10% to total Group revenue. Device revenue increased 36,5%* and contributed 5% to total Group revenue. SMS and other revenue comprise the remaining 3% of total Group revenue. SMS revenue decreased 22,0%*.

Outgoing voice revenue was negatively impacted by a decline in Nigeria (down 5,6%*) and South Africa (down 6,1%). Nigeria was impacted by the subscriber disconnections related to the subscriber registration process and the withdrawal of regulatory services until the beginning of May 2016. The decline in South African revenue was negatively impacted by a 48 hour network outage in February 2016 and increased churn in the post-paid segment due to competition. While average voice traffic increased 7,9%, the Group US dollar effective voice tariff in constant currency terms declined 12,2%*. This was largely due to free minutes offered as an incentive to win-back disconnected subscribers and price competition in the majority of the key markets.

Data revenue growth was supported by healthy double-digit growth in the majority of operations despite a continued reduction in data pricing as a result of competition. Data traffic increased 135,3% while the effective data tariff declined 46,9%* (in constant currency US dollar terms). This was partly offset by a decline in data revenue in Nigeria (down 2,7%*) as a result of stringent regulatory restrictions when charging 'out-of-bundle' data rates.

Digital revenue contributed 32,1% to total Group data revenue, supported by healthy growth in Mobile Financial Services and an increased uptake of content services. These include entertainment, religious and educational services.

Costs

Group operating costs excluding the impact of the Nigerian regulatory fine, hyperinflation and tower profits increased by 27,4% to R49 605 million. This was impacted by average exchange rate movements of the rand against the operating currencies, which had a negative impact of R1,8 billion.

On an organic basis, total Group costs increased by 22,8%*. WECA increased its costs by 9,1%* and contributed 52% to total Group costs while SEA increased its costs by 37,2%* and contributed 36% to total Group costs. MENA increased costs by 1,9%* and contributed 10% to total Group costs. Head office costs contributed 2% to total Group costs.

Once-off costs included professional fees of R1 324 million and PPE impairment in South Sudan of R2 632 million*. Excluding these costs incurred, costs increased by 12,6%*. During the period R1 324 million* costs were incurred on a range of professional services relating to the negotiations that led to a reduction of R34 billion in the Nigerian regulatory fine.

The increase in total costs was mainly as a result of higher costs in Nigeria (up 11,3%*). This was largely impacted by US dollar-denominated exposure mainly associated with the previously concluded tower transactions, rent and utilities related to build-to-suit sites, as well marketing and distribution costs related to the subscriber registration process. MTN South Africa costs were higher by 14,0%, impacted by the increase in network-related costs associated with the network expansion during the period. In South Sudan, the impairment on PPE of R259 million had a significant impact on SEA costs.

Total direct network operating costs increased 33,3%* and contributed 25% to total costs while device costs increased by 33,5%* and contributed 12% to total costs. Interconnect and roaming costs increased 2,3%* and contributed 15% to total costs while staff costs increased 7,6%* and contributed 10% to total Group costs. Selling, distribution and marketing costs increased marginally and contributed 19% to total Group costs. Government and regulatory costs declined 5,3%* and contributed 6% to total Group costs while other operating costs increased 93,9%* and contributed 13% to total Group costs.

The increase in direct network operating costs was due to aggressive 3G and LTE network expansion in key markets, higher rent and utilities costs and foreign-denominated expenses mainly in Nigeria. The increase in device costs was mainly a result of higher volumes of smartphones sold in South Africa.

EBITDA

Reported Group EBITDA decreased 38,4%** to R18 882 million**. This was negatively impacted by the accrual for the Nigerian regulatory fine (R10 499 million**) following the agreed settlement on 10 June 2016. The deferred profit from the sale of towers in Ghana (R18 million**) and an adjustment for hyperinflation (R90 million**) positively impacted Group EBITDA.

Excluding these, EBITDA decreased by 3,3% to R29 273 million. This was positively impacted by foreign exchange movements of 23% of which South Sudan made up 8,7%.

On an organic basis, EBITDA declined by 25,9%*. WECA EBITDA declined by 14,0%* and contributed 70% to total EBITDA. SEA's EBITDA decreased by 47,3%* and contributed 25% to EBITDA while MENA increased EBITDA by 1,9%* and contributed 8% to total EBITDA. Head office negatively impacted EBITDA by 3%.

Organic EBITDA was negatively impacted by once-off costs in the period. In addition, organic EBITDA was negatively impacted by a decline in Nigeria (down 16,9%*) and South Africa (down 11,1%). MTN Nigeria's decline in EBITDA was as a result of the second tranche transfer of passive infrastructure into the TowerCo as well as US dollar-denominated expenses associated with the TowerCo and build-to-suit sites. MTN South Africa's EBITDA was negatively impacted by higher device costs and an increase in network-related costs following aggressive expansion of its 3G and LTE rollout. MTN Ghana (up 16,3%*), MTN Syria (up 94,9%*) and MTN Sudan (up 23,0%*) supported total Group EBITDA. This was attributable to efficient cost control in Ghana, Cameroon and Sudan despite the depreciation of local currencies against the US dollar. The growth in MTN Syria's EBITDA was mainly due to the decrease in revenue share to 30% from 50% following the conversion of the build-operate-transfer (BOT) licence into a full licence.

Excluding the impact of the Nigerian regulatory fine, tower profits and hyperinflation, the Group recorded a 6,6 pp decline in its EBITDA margin to 37,1%, largely impacted by lower margins in Nigeria and South Africa and the once-off costs reported in the period.

Depreciation and amortisation

Depreciation increased by 22,3% (8,1%*) to R10 858 million impacted by higher depreciation charges in South Africa as a result of higher capex in 2015. Amortisation costs increased by 17,2% (3,9%*) to R2 152 million, driven by higher spend on software in previous years and the goodwill impairments in Guinea Conakry (R402 million) and Afrihost (R202 million).

Net finance costs

Net finance costs amounted to R5 461 million compared to R2 320 million recorded in the previous comparable period. This was due to an increase in net foreign exchange losses to R3 606 million from R1 481 million in the prior period, impacted by unfavourable exchange rates at the end of the period, in particular the depreciation of the Nigerian naira against the US dollar and the Iranian rial against the rand. An increase in net interest paid to R1 855 million from R839 million paid in the previous comparable period also contributed to the increase in net finance costs. The increase in the net interest expense is due to the higher net debt of R49 257 million** compared to R17 161 million** reported in the comparable period.

Net foreign exchange losses include:

• Forex losses in Mauritius of R1 078 million relating mainly to the Iran receivables;

• Forex losses in Nigeria of R1 124 million incurred on US dollar-denominated intercompany loans and third party payables (R2 034 million of the losses on third party US dollar loans have been deferred in equity following the application of net investment hedge accounting);
• Forex losses of R408 million in South Sudan on third party US dollar payables;
• Forex losses of R395 million in Sudan mainly on settlement of third party trade payables; and
• Forex losses of R178 million in South Africa on foreign exchange contracts relating to foreign payables in respect of the purchase of handsets.

Following the significant depreciation of the Sudanese pound, MTN South Sudan's foreign currency translation reserves included in equity amounted to approximately R3 billion at 30 June 2016. Should the Group decide to exit this operation, this amount will be recycled to the income statement as a loss.

Share of results of joint ventures and associates after tax

Joint ventures and associates reported a loss of R1 692 million** compared to a gain of R2 027 million** in the previous comparable period. This included a charge of R1 039 million** incurred by Iran mainly relating to the subsequent depreciation and amortisation of previously hyper-inflated assets that were historically written up under hyperinflation reporting. Iran hyperinflation accounting was discontinued effective 1 July 2015. Losses of R2 463 million** from the Nigerian TowerCo were mainly as a result of foreign exchange losses (R2 282 million**) on US dollar-denominated loans and short-term losses from AIH, MEIH and IIG (R494 million**).

Tax

The Group's reported effective tax rate decreased to negative 309,5%** from 31,0%** in the previous comparable period, impacted by the Nigeria regulatory fine and hyperinflation. Excluding this impact, the effective tax rate increased to 49,2% from 32,9% in the previous comparable period. Lower profit before tax was due to the reported losses in joint ventures and associates, which impacted profit before tax, the higher ratio of withholding tax and denied assessed losses in Guinea Conakry and South Sudan as well as by a range of professional services relating to the negotiations that led to a reduction of R34 billion in the Nigerian regulatory fine. If the loss before tax is further analysed and adjusted for the effects of losses from joint ventures and associates, South Sudan unrealised forex losses, the Guinea Conakry goodwill impairment, the South Sudan PPE impairment and a range of professional fees relating to the Nigerian regulatory fine, the Group effective tax rate decreases to 33,0%.

The Group's taxation charge decreased by 24,6% (25,0%*) to R4 694 million for the period. This was a result of lower profit before tax and a higher deferred tax credit due to increased unrealised foreign exchange losses on US dollar-denominated intercompany loans and third party payables in Nigeria.

Earnings/losses

The Group reported a basic headline loss per share of 271 cents** largely impacted by the Nigerian regulatory fine expense (474 cents**), hyperinflation (20 cents**), and losses incurred on the Group's investments in Rocket (27 cents**) and tower companies (136 cents**). The headline figure was further impacted by forex losses (135 cents**) and by a range of professional services relating to the negotiations that led to a reduction in the Nigerian regulatory fine (73 cents**). Excluding these impacts, HEPS declined 11,7% to 594 cents. The attributable loss per share was 301 cents** from attributable earnings per share of 653 cents in the comparative period.

Cash flow

Cash inflows generated from operations decreased by 9,2%** to R23 870 million** mainly as a result of the Nigerian regulatory fine payments of R5,9 billion** during the period. Cash capex of R14 024 million** included the purchase of 4G spectrum in Ghana (R973 million**), Nigeria licence spectrum (R1 billion**) and the LTE and fibre licence in Congo Brazzaville (R289 million**).

Capital expenditure

Capex increased 27,4%** to R13 850 million**, of which R1 241 million was related to foreign currency movements.

Financial position

Net debt increased to R49 257 million** compared to net debt of R31 635 million** reported at the end of December 2015. The Group reported a net debt/EBITDA ratio of 0.83 excluding the Nigerian regulatory fine. The net debt position at the end of the period was mainly impacted by the following:

• Nigerian regulatory fine payment R5 870 million**;
• Group dividend paid to shareholders of R15 212 million**;
• Dividends paid to minority shareholders of R790 million**;
• An increase in capital expenditure and licences to R16 112 million**;
• Investments made in Amadeus (TravelStart), the Autopage acquisition and cash paid to AIH on capital calls of R1 702 million**;
• Net interest of R2 313 million**; and
• Lower cash generated from operations.

Operational review

SEA

• Subscribers remained flat at 52,8 million
• Revenue increased by 7,6%*
• Data revenue increased by 21,8%*

South Africa

• Subscribers decreased by 2,6% to 29,8 million
• Revenue increased by 5,1%
• Service revenue increased by 0,7%
• Data revenue increased by 19,2%
• EBITDA margin declined by 5,5 pp to 30,1%

MTN South Africa reported a lower-than-expected performance, negatively impacted by network outages in some areas, competition and economic pressure impacting consumer spending. The result was supported by good growth in data usage benefiting from aggressive smartphone device sales and continued efforts to improve 3G and LTE network quality. The operation's subscriber base declined 2,6% to 29,8 million. The pre-paid and post-paid segments declined by 2,7% to 24,7 million and 2,1% to 5,1 million, respectively.

Total revenue increased by 5,1% to R19 841 million mainly as a result of higher data and device revenue growth. This was partly offset by a 6,1% decline in outgoing voice revenue. Service revenue, which excludes device revenue, remained relatively flat. Data revenue increased by 19,2%, contributing 34,1% to total revenue. The number of smartphones on the network increased by 18,4% to 9,3 million (restated to align with the Group definition) while megabytes per user increased 53,8% for the period. Device sales in the previous comparable period were impacted by the industrial strike action and supply chain challenges.

Digital revenue gained momentum and contributed 13,5% to data revenue. This was attributable to additional services being offered, including international content. EBU continued to operate in a competitive environment. During the period the operation entered into a sales agreement to dispose of its 50,02% stake in Afrihost (Proprietary) Ltd.

The EBITDA margin declined by 5,5 pp to 30,1% mainly as a result of increased device costs relating to higher volumes sold and the impact of network-related costs as a result of the continued rollout of 3G and LTE sites.

Capex for the six months amounted to R4 773 million with the rollout of 369 co-located 3G sites and 284 LTE sites. The operation continued to improve quality and capacity of the network in key cities to cater for increased data traffic. In addition, 175 sites were connected to fibre. Fibre to the home connections remain a priority with approximately 10 000 homes passed, of which 40% were rolled out during the period.

On 15 July 2016, the national regulator, Independent Communications Authority of South Africa (ICASA) published an invitation to apply for high demand spectrum, in the 700MHz, 800Mhz and 2.6GHz spectrum bands. ICASA expects to conclude the licensing by the end of March 2017. There are four lots on offer with a reserve price of R3 billion. MTN has been analysing the invitation and is actively preparing documentation to meet the deadline for enquiries relating to the Information Technology Act (ITA). MTN has noted, with interest, media reports that the Minister of Telecommunications and Postal Services intends to challenge ICASA regarding the abovementioned ITA and MTN will continue to monitor the developments.

Other SEA - across the rest of the region subscribers increased by 3,6% to 23,1 million for the period. This was mainly underpinned by good growth in Uganda.

MTN Uganda increased its subscriber base by 10,8% for the six months to 9,9 million following the disconnection of subscribers reported in the second half of 2015. This was supported by customer acquisitions through voice bundle propositions and the continued success of MTN Zone, resulting in market share growth to 52,7%.

Total revenue declined by 2,3%* mainly as a result of a decline in both outgoing and incoming voice revenue impacted by the implementation of the One Network Area, the decline in mobile termination rates and the impact of the disconnections in the second half of 2015. Data revenue increased by 22,7%* and contributed 32,8% to total revenue. This was supported by data bundles, including successful shorter-duration bundles.

Digital revenue contributed 70,5% to data revenue, supported by local content services including MTN Play. MTN Mobile Money customers decreased 24,4% to 7,2 million mainly as a result of the disconnections during the subscriber registration process in the second half of 2015.

MTN Uganda's EBITDA margin decreased by 6,0 pp to 30,0%, impacted by higher network operating costs and associated US dollar-denominated expenses, as well as higher transmission costs following the rollout of a 3G and LTE network. Higher marketing and distribution costs were incurred mainly as a result of the launch of 3G and 4G services.

Capex decreased by 42,1%* to R364 million, impacted by a delay in the supply chain process. During the period, 195 co-located 3G and 100 LTE sites were rolled out.

WECA

• Subscribers decreased by 1,0% to 105,5 million
• Revenue decreased by 2,5%*
• Data revenue increased by 13,8%*

Nigeria

• Subscribers decreased by 3,7% to 58,9 million
• Revenue decreased by 4,8%*
• Data revenue decreased by 2,7%*
• EBITDA margin declined by 7,5 pp to 49,8%

MTN Nigeria continued to experience a challenging operating environment impacted by the disconnection of the final batch of subscribers in compliance with the subscriber registration process during the period. The operation was also impacted by the inability to offer competitive prices as a result of the suspension of regulatory services until May 2016, when the operation obtained the necessary approval to offer competitive pricing plans and promotions. Tough economic conditions further negatively impacted consumer spending. MTN Nigeria increased market share to 46,2%, despite the decline in its subscriber base by 3,7% to 58,9 million (including 568 000 Visafone subscribers).

Total revenue declined by 4,8%* as a result of lower outgoing voice revenue and lower data revenue. These were impacted by regulatory requirements to seek permission to charge 'out-of-bundle' data rates, multi-SIMs and delays in competitive offerings. Data revenue declined by 2,7%* and contributed 19,3% to total revenue. The number of smartphones on the network increased by 11,2% to 16,0 million.

Digital revenue continued to gain momentum and contributed 51,7% to data revenue. This was supported by good growth in music and other lifestyle content services.

The number of registered accounts on MTN Nigeria's Mobile Money offering, Diamond Yellow, increased by 5,0% to 6,5 million.

The EBITDA margin declined by 7,5 pp to 49,8%, impacted by the transfer of the second tranche of passive infrastructure into the TowerCo as well as US dollar-denominated expenses associated with the TowerCo and build-to-suit sites. This was further impacted by a 13,8%* increase in marketing costs relating to the subscriber registration process as well as a range of professional services fees incurred to the settlement of the regulatory fine.

Over the six month period, 428 3G sites and 507 LTE sites were rolled out. The operation experienced some delays in the network re-planning as well as delays with equipment purchases as a result of foreign exchange limitations. Capex for the period increased by 78,9%* to R2 534 million. Improving the quality of the 3G co-located network and the rollout of LTE remains a priority. During the period, the operation purchased additional LTE spectrum for a consideration of R1 billion.

Other WECA - the remainder of the region increased its subscriber base by 2,8% to 46,6 million driven by solid growthin Ghana and satisfactory growth in Cameroon.

MTN Ghana delivered a strong performance and grew its subscriber base by 8,1% to 17,6 million. This was supported by the launch of LTE services, the first operator to do so, as well as attractive value propositions, which contributed to market share growth to 53,8%.

Total revenue increased by 18,9%*, supported by strong growth in data and outgoing voice revenue. Data revenue grew by 68,0%* and contributed 38,5% to total revenue supported by data bundles, including 4G data bundles, benefiting from superior data network quality and increased smartphone penetration. Smartphones on the network increased by 21,7% to 3,6 million.

Digital revenue showed healthy growth, underpinned by attractive lifestyle content bundles and good momentum gained in mobile financial services. Digital revenue contributed 47,9% to data revenue. MTN Mobile Money subscribers increased by 23,3% to 7,0 million, supported by international remittances.

The EBITDA margin declined 0,9 pp to 38,8% mainly as a result of higher transmission costs and the impact of foreign-denominated expenses following the depreciation of the cedi, as well as high inflation.

Capex increased by more than 100%* to R1 646 million with a key focus on the rollout of LTE sites. The operation added 110 co-located 3G and 435 LTE sites during the period. Capex includes the 4G licence acquired in H2 15.

MTN Cameroon increased its subscriber base by 5,0% to 9,6 million despite the subscriber registration process, which was relatively well managed and supported by aggressive subscriber registration campaigns. Market share grew to 57,4% as a result of improved network quality, expansion of the LTE footprint and increased smartphone penetration.

Total revenue declined by 8,7%* mainly as a result of a decline in outgoing voice revenue impacted by price competition and free minutes used in relation to the subscriber registration process. However, data revenue increased by 49,5%* and contributed 18,8% to total revenue. This was supported by increased 3G device penetration and the rollout of 3G and LTE networks. Smartphones on the network increased by 34,1% to 2,6 million.

Digital revenue contributed 21,7% to data revenue. MTN Mobile Money registered subscribers increased by 21,1% to 2,4 million while active subscribers increased by more than 100%, supported by a Mobile Money brand campaign to increase activity.

MTN Cameroon's EBITDA margin increased by 0,2 pp to 38,0%. This was supported by strong cost optimisation and a substantial reduction in transmission costs due to the use of the WACS cable.

Capex decreased 6,9%* to R1 121 million with a focus on 3G and LTE network rollout and quality. During the period the operation rolled out 189 co-located 3G sites and 64 LTE sites.

MTN Ivory Coast reported a decline in its subscriber base of 1,3% to 8,2 million, negatively impacted by the subscriber registration requirements and aggressive competition.

Total revenue decreased by 3,9%* mainly due to lower outgoing voice revenue impacted by a decrease in minutes from a lower subscriber base. This was partially offset by a 13,4%* increase in data revenue, which contributed 17,1% to total revenue. This was supported by the introduction of new segmented data bundles and an increase in 3G and LTE coverage. Growth in data revenue was also attributable to a switch from WiMax devices to LTE TDD devices.

Digital revenue contributed 50,2% to data revenue, driven by an increase in digital services offered. MTN Mobile Money continued to make good progress and increased registered subscribers by 10,4% to 3,2 million.

The EBITDA margin decreased by 0,6 pp to 36,0%.

Capex increased 57,1%* to R842 million with a strong focus on 3G and LTE network rollout. During the period, the operation rolled out 151 co-located 3G sites and 343 LTE sites.

MENA

• Subscribers increased by 1,1% to 74,1 million
• Revenue increased by 1,9%* (excluding Iran)
• Data revenue increased 44,5%*(excluding Iran)

Other MENA - in the remainder of the region, the subscriber base declined marginally by 0,4% to 26,8 million.

MTN Sudan increased its subscriber base by 4,2% to 8,8 million driven by targeted marketing campaigns. Total revenue increased by 15,7%* mainly as a result of strong data revenue growth. Data revenue increased by 78,3%* and contributed 27,7% to total revenue as a result of increased data users. Data users increased 4,8% to 4,4 million. Digital revenue contributed 19,4% to data revenue. The EBITDA margin decreased by 1,9 pp to 35,4%. Capex amounted to R549 million for the six-month period.

MTN Syria reported a 2,4% decrease in its subscriber base to 5,8 million despite operating in a very challenging environment. Total revenue increased by 10,5%* mainly supported by outgoing voice and data revenue. Data revenue increased by 16,9%* and contributed 28,8% to total revenue. The EBITDA margin increased by 12,3 pp to 28,6% mainly supported by the decrease in revenue share to 30% from 50% following the conversion of the BOT licence and cost optimisation. Capex in the six-month period amounted to R191 million.

IRAN (JOINT VENTURE, EQUITY ACCOUNTED, 49%)

• Subscribers increased by 2,0% to 47,3 million
• Revenue increased by 8,7%*
• Data revenue increased 65,3%*
• EBITDA margin decreased by 2,4 pp to 37,7%

MTN Irancell delivered a sound performance despite a highly competitive environment and regulatory pressure on data tariffs. Subscribers increased by 2,0% to 47,3 million mainly as a result of attractive segmented voice and data offerings, data bundles and a quality 3G and LTE network experience.

Total revenue increased by 8,7%* driven by increased data revenue growth partly offset by a decline in outgoing voice revenue of 4,6%*. Outgoing voice revenue was negatively impacted by the continuous substitution of data services. Data revenue increased by 65,3%* underpinned by increased smartphone penetration, a strong 3G and LTE network as well as improved customer experience. The number of smartphones on the network increased 25,8% to 25,8 million. At the end of the period, data revenue contributed 40,6% to total revenue while outgoing voice revenue contributed 38,5%.

Digital revenue contributed 32,6% to data revenue, supported by strong growth in local lifestyle content-based usage.

The EBITDA margin decreased by 2,4 pp to 37,7% as a result of increased transmission costs associated with the data network expansion, rent and utilities as well as marketing costs related to 3G and LTE campaigns.

The operation increased capex by 24,8% to R4 721 million. During the period it added 1 783 co-located 3G sites and 851 LTE sites.

Annexure

1 Represents the exclusion of the impact of hyperinflation and the relating goodwill impairment of certain of the Group's subsidiaries (MTN Sudan and MTN Syria) and the Group's joint venture in Iran, being accounted for on a hyperinflationary basis in accordance with International Financial Reporting Standards (IFRS) on the respective financial statement line items affected. During 2015, the Iranian economy was assessed to no longer be hyperinflationary and hyperinflation accounting was discontinued effective 1 July 2015.

2 Represents the exclusion of the financial impact relating to the sale of tower assets during the financial period on the respective financial line items impacted, which include:

Tower sales profits for the period related to the Ghana release of deferred profit of R18 million (H1 15: The re-measurement of the contingent consideration receivable from the Nigeria tower transaction (tranche 1) of R339 million and the Ghana release of deferred profit of R13 million)

3 Represents the impact of the Nigerian regulatory fine subsequent to conclusion of the settlement agreement on the respective financial line items impacted, which include:

The re-measurement impact when the settlement agreement was entered into on 10 June 2016, constituting the difference between the balance of the provision recorded on this date (after taking into account interest accrued from the beginning of the financial period up to 9 June 2016) and the present value of the financial liability arising on this date in accordance with IFRS (included in the EBITDA line);

The unwinding of the finance costs over the period due to the recognition of provision/ financial liability at the present value of the future payments (included on the finance cost line);

The minority impact on the items noted above.

As the Group will continue in its strategy to monetise its passive infrastructure, similar tower sale transactions may continue going forward. In addition, the impact of hyperinflation on the Group's results will continue for as long as certain of the Group's operations are considered to be operating in hyperinflationary economies or the Group's net assets include historic adjustments for hyperinflation that have not yet been fully depreciated or amortised through profit or loss. Going forward, the impact of the Nigerian regulatory fine will be limited to the unwinding of the finance cost element of the future payments over the settlement period, net of minority interests.

Declaration of interim ordinary dividend

Notice is hereby given that a gross interim dividend of 250 cents per share for the period to 30 June 2016 has been declared payable to MTN shareholders. The number of ordinary shares in issue at the date of this declaration is 1 844 049 073 (including 10 206 255 treasury shares).

The dividend will be subject to a maximum local dividend tax rate of 15% which will result in a net dividend of 212,50 cents per share to those shareholders who bear the maximum rate of dividend withholding tax of 37,50 cents per share. The net dividend per share for the respective categories of shareholders for the different dividend tax rates is as follows:

0% 250 cents per share

5% 237,50 cents per share

7.5% 231,25 cents per share

10% 225,00 cents per share

12.5% 218,75 cents per share

15% 212,50 cents per share

These different dividend tax rates are a result of the application of tax rates in various double taxation agreements as well as exemptions from dividend tax.

MTN Group Limited's tax reference number is 9692/942/71/8. In compliance with the requirements of Strate, the electronic settlement and custody system used by the JSE Limited, the salient dates relating to the payment of the dividend are as follows:

Last day to trade cum dividend on the JSE Tuesday, 23 August 2016

First trading day ex dividend on the JSE Wednesday, 24 August 2016

Record date Friday, 26 August 2016

Payment date Monday, 29 August 2016

No share certificates may be dematerialised or re-materialised between Wednesday, 24 August 2016, and Friday, 26 August 2016, both days inclusive. On Monday, 29 August 2016, the dividend will be transferred electronically to the bank accounts of certificated shareholders who make use of this facility.

In respect of those who do not use this facility, cheques dated Monday, 29 August 2016 will be posted on or about that date. Shareholders who hold dematerialised shares will have their accounts held by the Central Securities Depository Participant or broker credited on Monday, 29 August 2016.

The board of directors confirms that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution.

- Issued by MTN Group Corporate Affairs

About the MTN Group

Launched in 1994, the MTN Group is a leading emerging market operator, connecting subscribers in 22 countries in Africa, Asia and the Middle East. The MTN Group is listed on the JSE Securities Exchange in South Africa under the share code: 'MTN.' As of 30 June 2016, MTN recorded 232.6 million subscribers across its operations in Afghanistan, Benin, Botswana, Cameroon, Cote d'Ivoire, Cyprus, Ghana, Guinea Bissau, Guinea Republic, Iran, Liberia, Nigeria, Republic of Congo (Congo-Brazzaville), Rwanda, South Africa, Sudan, South Sudan, Swaziland, Syria, Uganda, Yemen and Zambia. Visit us at, www.mtnbusiness.com and www.mtn.com

Twitter: @MTNGroup

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