Exchange rates hurt MTN

    Johannesburg, Mar 11 (I-Net Bridge) – South African telecommunications company MTN (MTN) on Thursday said that movements in exchange rates, mainly the rand and the Nigerian Naira, had a substantially negative impact on its results.
    The group reported a 16.6% decline in adjusted headline earnings per share to 754.3 cents for the year ended December 2009 from 904.4 cents a year ago. Basic HEPS declined to 803.2 cents from 836.5 cents a year ago. Excluding the impact of the functional currency losses, adjusted HEPS increased by 8.5% to 878.9 cents, it said.
   Revenue was up 9.2% to 111.9 billion rand as group subscribers grew 28% to 116 million, indicating a continuing demand for mobile services in countries where mobile penetration is still relatively low, the company said.
   “Had there been no change in currency rates during the year, reported revenues at year end would have been 11 percentage points higher, and EBITDA 12 percentage points above those reported,” it said.
    MTN noted that the rand closed 21% stronger at R7.39 to the US Dollar on 31 December 2009, compared to the closing rate of R9.35 in the previous year, R9.49 in March 2009 and R7.72 in June 2009.
    “Translation of earnings affected by movements in the various local currencies to the US dollar was compounded in the second half of the year by the strong rand,” it said.
    Net finance costs increased by 203% to 5.8 billion rand for the year. “This was mainly due to the rand/US dollar exchange rate which, significantly affects a large proportion of MTN’s assets and liabilities denominated in a currency other than the entities’ reporting currency,” MTN said.
    These foreign-denominated assets and liabilities resulted in a functional currency loss for the period of 3.2 billion rand compared to the 2.4 billion rand foreign currency gain at the end of December 2008 – a swing of 5.6 billion rand, the group said.
    “Much of the loss is attributable to foreign currency denominated loans, receivables and cash balances in Mauritius. In addition, the put option effect on the income statement was a credit of 701 million rand (June 2009: 1 billion rand credit and December 2008: 1.2 billion rand debit), mainly as a result of the depreciation in the NGN/US dollar exchange rate,” MTN
concluded.

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