Venturing into new territories - MTC Namibia...of tremendous pressure on voice and SMS revenues....

Venturing into new territories

TABLE OF CONTENTS

Operational OverviewExecutive Committee

Chairman’s Report

Chief Executive Officer’s Report

Technology Environment

Commercial Overview

The Human Capital Environment

The Corporate Social Investment Programme

The Regulatory Environment

The Chief Financial Officer’s Report

The Board of Directors

Annual Financial Statements Directors’ Responsibilities and Approval

Independent Auditor’s Report

Directors’ Report

Statements of Profit or Loss and other

Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Accounting Policies

Notes to the Financial Statements

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6 – 7

8 – 9

12

14 – 17

18 – 19

20 - 21

22

24 – 30

32

36

37 – 38

39 – 41

42

43

44

45

46 – 55

56 – 88

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MTC Annual Report 2018

Sharing special moments

Executive Committee

Patience KanaleloHead: Corporate Legal Services and Company Secretary

Licky ErastusChief Technology Officer

Tim Ekandjo Chief Human Capital and Corporate Affairs Officer

Thinus Smit Acting: CEO and CFO

Andre de Jager Acting: Chief Commercial Officer

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Chairperson’s Report

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The year 2017/2018 was another excellent year for MTC. Financially, we delivered improved returns to our shareholders. I am pleased to announce that we declared dividends of N$374.3 million, and our EBITDA grew by 6.63%, while net profit after tax grew by 13.53%. These magnificent results were collectively achieved by a committed leadership team, dedicated MTC staff and loyal customer base that continues to put their trust in the MTC brand.

Our flagship project called 081Every1 has produced positive results. In the first phase, we have commited to erect 111 new towers in all 14 regions. We are serious about the

commitment we made, which is to achieve 100% population coverage. We are looking forward to the completion of phase 1 and phase 2 in which we will erect another 120 sites countrywide. After 29 years of Independence, and 24 years of MTC’s existence, it is our view that no Namibian must be without mobile nor internet connection irrespective of whether they are in urban or rural Namibia.

Elvis NashilongoChairman

The year 2017/2018 was year for MTC. Financiaimproved returns to our sI am pleased to announcedividends of N$374.3 milligrew by 6.63%, while ngrew by 13.53%. These mwere collectively achieveleadership team, dedicatloyal customer base thattheir trust in the MTC bra

Our flagship project calproduced positive resultswe have commited to erin all 14 regions. We are

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Our focus on data remains a key priority, and that is why we have continued investing in expanding our network capacity to take advantage of the high data appetite in the market. With the assistance from our technical supplier, we were once again able to push the boundaries with the successful trial of LTE on 1.8GHz and 2.1Ghz frequency bands by deploying 4T6S. This helped us reduce congestion, increase spectral efficiency and improve user experience without requiring additional spectrum and most certainly bringing us closer to realizing 5G in the foreseeable future.

For the first time in our history, we introduced 4G to Pre-Paid customers, all thanks to our predictive customer analysis, which enabled us to predict the future needs of our customers.

The Board would like to thank every MTC customer for their contribution towards another successful year.

Board of Directors

1. Elvis Nashilongo Chairman

2. Lorna Mbwale Director

3. Tulimeke Munyika Director

4. Steve Galloway Director

This connection enables a range of life-enhancing services such as mobile financial services, mobile agriculture and mobile health. This will assist the GRN with financial and social inclusion of all Namibians.

Chief Executive Officer’s Report

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During the year under review, the Namibian economy and general conditions have proven challenging for MTC. The drought and economic recession forced MTC to re-strategize regarding the service offerings to customers. Disposable income has come under pressure and the financial control on Post-paid subscribers forced MTC to increase offers to avoid high bad debts.

MTC delivered an encouraging financial performance for the financial year 2018. This growth was mainly as a result of the traditional connections. MTC embarked on the OsmartPhona project to ensure that customers started utilising the 4G network and additional functionalities of a smart phone. This has enabled the subscribers to become inclusive of the technology ecosystem.

Key regulator challenges over the past year include the following: Annual licence fees, spectrum allocation and number range levies. These had an impact on the results reported. Managing regulatory issues and improving the relationship continues to be on the agenda of Management. Exco will continue with this effort in the next financial year

The strategic directions of MTC are two fold; namely supply of quality and dated infrastructure, which forms the foundation of digitalization that enables local and global customers to benefit from the information ecosystem. Secondly, to focus on customer experience which goes beyond customer service, to ensure that MTC delivers to the need of the customer and not only servicing the customer. MTC changed its Vision and Mission statements after the financial year-end to underline this. The vision of MTC is to be the digital enabler that meets customer needs. MTC will not only be the telecommunication provider of choice as per the previous mission statement, but will fulfil the total need of the customer on the digital platform.

MTC values the commitment by post-paid subscribers and ensures connectivity to the world via numerous roaming agreements in place.

Social responsibilityMTC embarked, amongst other projects, on 081Every1 to include all Namibians.Important National benefits, that cannot be quantified in actual numbers, are the following:

- As part of the power supply to the sites, MTC are in discussions with the power utility companies to not only supply the tower with power, but also to the communities in the surrounding areas. This will avoid spending double for the same purpose.

Thinus SmitActing: Chief Executive Officer

“

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- Supply of connections via mobile networks, especially 3G and 4G, form the foundations for a digital economy.

- This connection enables a range of life-enhancing services such as mobile financial services, mobile agriculture and mobile health. This will assist the GRN with financial and social inclusion of all Namibians.

- As per the latest GSMA report “The private sector and policy makers need to jointly address the key barriers to mobile connectivity, particularly around incentives for infrastructure investment, affordability, digital skills, the gender gap”. With this project MTC and the GRN address the issue and have put a workable solution in place.

- Furthermore, the report indicated that mobile connectivity will assist nations to achieve the United Nations’ Sustainable Goals. The top five UN’s SDG’s that are addressed by mobile connectivity are the following:

Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all

Goal 13: Take urgent action to combat climate change and its impacts

Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable

Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

Despite MTC’s best efforts, power supply to our new sites remain hugely challenging.

Company PerformanceMTC Statement of Financial Position and Statement of cash flows remain strong. This contributes to the executing of the MTC strategy without any external financing. MTC delivered improved returns to the shareholder including the declaration of dividends of N$ 374.3 million for the year under review. The EBIDTA grew by 6.63% and Net profit after tax by 13.53%. This was achieved by a growth in Revenue, good cost control which included the non-accrual of the annual licence fees to the amount of N$ 35 million. All contributions deducted from the employees were paid over on time. (Medical Aid, Pension Fund and PAYE). The company fulfilled all its obligations regarding payments to the Inland Revenue.

Executive Committee

1. Thinus Smit Acting: CEO & CFO

2. Licky Erastus Chief Technology Officer

3. Patience Kanalelo Head: Corporate Legal Services

4. Tim Ekandjo Chief Human Capital & Corporate Affairs Officer

Customer focusMTC will strive and put emphasis on delivering exceptional customer experience. Customers have become the foundation of the MTC’s strategy. Taking into account the values of the company, which are integrity, customer centricity, stakeholder inclusivity and innovation, it sets the foundation for the delivery of a satisfying experience. The project to upgrade the 2G to 3G network, especially in rural areas, will continue. This is not only to connect customers, but also to improve their lives. This project underlines the main National goals as per the National Development Plan.

Human capitalMTC employees form the tool-kit for delivering the strategy of customer experience. The strategic aim is to be the employer of choice via diverse culture and suitable remuneration. Training programmes are offered to enable employees to function better at their jobs.

MTC continues with emotional intelligence programmes to build capacity within its own human capital.

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Innovatingto bring people closer

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Technology Environment

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The telecommunication industry is going through a transformational phase of development to be more customer centric and technologically future proof. MTC initial strategic goal was to provide mobile voice services which marked the first wave of the information era. The second wave was the internet era which started approximately around the year 2000. MTC realigned its strategies in response to the web and e-commerce boom era.

After 2006, smart phones, mobile applications and cloud services began taking shape and this marked the third wave of transformation in the telecommunications industry. Today’s global societies are demanding seamless connectivity to everywhere and to everything that will catalase economic growth. This evolution necessitates the need for MTC to realign its strategies. With MTC’s launch of Cloud and high speed broadband services after the financial year end, it has committed to meet nation broadband targets as set in the HPP, NDP5 and Vision 2030. In pursuit of becoming more customer centric, MTC understands that customers are looking for more than just a connection. MTC is realigning its strategies to focus more on providing customer centric solutions tailor made to give value in their lives. As MTC’s operations continue to expand, more emphasis is placed on reliable and readily available analytics to assist MTC in understanding its customer and their demands.

Various highlights for the year:

• Increased rural 3G coverage by 401 sites spread across Namibia;• Activated 4G technology for Prepaid Subscribers;• Successfully launched 4.5 LTE on 6 sectors for Windhoek high LTE user sites;• MTC expanded the national coverage and increased capacity by erecting a total of 22 new base stations throughout Namibia;• Introduction of Content Services and Reverse Billing Services.

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Connecting customers to opportunities

Commercial overview

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The year was again a good Commercial year for MTC. Worldwide there is a trend of tremendous pressure on voice and SMS revenues. Data revenues showed growth year on year, whereas the demand for data ever increasing. MTC focused on growing our subscription revenues, both for post-paid, but also with pre-paid in the form of the Aweh product suite as well as various bundle offerings. In June 2018 we launched additional bundles for customers that make use of post-paid subscriptions as well as Aweh customers.

Products & ServicesMTC continued to offer various products to our customers for the year. During the December 2017 festive season we offered Smartphone devices at affordable prices via our MobileHomes and our Dealer network. As the demand for data is growing, we continued to offer various campaigns on our data products such as NetMan and Data bundle for pre and post-paid customers. We held two SMS campaigns this year, one we gave away N$ 50,000 per day and the other we parted with 19 bakkies (pickup trucks) in a campaign in the second part of the year.

The 20th June 2018 marked the start of a remarkable journey to which MTC embarked to strengthen its value added service offerings by introducing a simple yet extraordinary service which offers next-generation world-class digital content services to subscribers. This service target segments ranging from high-value, WAP-enabled subscribers to interactive live content within a USSD session or SMS services securely and easily.

Smartphone users can enjoy browsing the news, catch up on the latest trends, get weather results, horoscopes and much more rich multimedia content such as music and video streaming, interactive web services and the latest games. Subscribers get access to a variety of premium local and international sport content including live scores, news, match updates, rankings and more. Revenue from these service reached N$ 5,702 million by the end of September 2018.

With the aspect of SMS and USSD which maximizes content penetration to the MTC subscriber base by including a richly populated USSD and SMS content menu for quick, on-the-go content that keeps users informed about what matters most to them. These text content covers various subject matters such as:

• News, Weather, Event and Sport Updates• Romance and Spiritual Guidance• Love and Life Advice• Career and business advice• Gossip, Facts, Trivia and Humour• And so much more

Various highlights for the year:

• Post-paid subscriber base showed a small amount of growth for the year growing less than 1%

• Pre-paid subscriber base was more positive and increased with 1.3%

• Total subscriber base increased 1.2%

• Post-paid subscription revenue increased by 7.38% • Overall revenue increase of 3.19%

• Pre-paid subscription revenue grew by 13% and pre-paid subscriptions forms 49% of total Mobile Pre-paid revenue. Pre-paid revenue growth was 2.82%

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RoamingMTC is proud to be one of the Mobile Network operators that actively contribute and attend the meetings regarding the Home and Away project that was launched in 2012 by the Communications Regulator’s Association of Southern Africa (CRASA) supported by Communications Regulatory Authority of Namibia (CRAN). It was agreed that the SADC Home and Away Roaming Project should be implemented in three (3) phases:

• Phase 1: Liberalization, Transparency, Information and Data Collection;• Phase 2: Roam Like at Home (RLAH) - international retail rates plus a fixed mark up; Now completed and• Phase 3: Cost based Roaming Price Regulation.

A meeting was held in Gaborone, Botswana between SADC network operators, Regulators, CRASA, and the consultants, to share the project plan for Phase 3. The rationale for Phase 3 is that introducing a cost model should highlight actual roaming costs and therefore allow fairer wholesale and retail roaming markets. Indeed, a fine understanding of incurred costs should enable NRAs to better assess the situation in this respect within and between MNOs, in order to implement an appropriate regulation eventually for the benefit of the region’s end users, its economy and welfare.

Events & Roadshows and RetailIn a continuous effort to drive customer loyalty and bringing services closer to rural areas, MTC is committed to attend various Regional shows. The main objective remains, contributing to the local economy, drive handsets sales, ensure data configuration to enable the customer to use various Data applications that contributes to increase Data ARPU. The Windhoek tourism Expo provided the platform to launch LTE service for our Pre-paid customers. The pre-paid LTE drive (conversion of 3G pre-paid customers to LTE pre-paid customers) continued with the Regional Roadshows in the various regions in Namibia.

Highlights of the Trade Expo’s• Tourism Expo launched 4G pre-paid;• Ongwediwa Trade Expo, MTC awarded as winner of the ICT Category award;• Okakarara Trade Expo, MTC sponsored the Pensioners day and local horse racing event that draw in huge crowds between 4 and 21 June 2018, where 19 Marginalized villages/ towns were visited, bringing MTC services closer to the rural communities; and • The highlight of the Roadshows was visit to Impalilla Island, this was a 1st for MTC as the most remote corner of Namibian nation took part in the 081Evey1 Roadshow.

DistributionOur distribution network is an invaluable extension of MTC and provide more reach into Namibia and support our customers, sometimes in the most remote areas of our country.

Fruitful discussions were held with strategic partners, including the Association of Service Station Owners and the Namibia Chamber of Commerce and Industry to take up distribution opportunities of our products and services in towns such as Arandis, Karibib, Omaruru, Otavi, Opuwo, Okakarara, Impalila Island, Stampriet, Berseba and Bethanie.

All the Field Service Consultants attended an intensive 4 Day course titled Facilitate Learning, a South African based leading provider of Education Training Courses and Programmes called VeryCoolIdeas offered the training. This intervention empowered our Field Service Consultants to be competent in facilitating training for the POP Dealers on MTC Products and Services. This in turn will ensure that our customers will have an excellent customer experience in our dealer channels. Sales promotions were held to promote current campaigns as well as contract renewals and activations in the following regions:

• Hardap: Schlip; • Karas: Karasburg; Rosh Pinah; • Omaheke: Talismanus; Okondjatu; Aminius; • Erongo: Omaruru; Otjozondjupa: Ovitoto, Otavi, Grootfontein, Okakarara; • Kavango West: Nkurenkuru • Zambezi: Katima Mulilo; • Oshikoto: Omuthiya; and • Omusati: Oshikuku and Onamatanga.

Commercial overview

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Marketing and BrandingMTC’s Marketing and Branding department supports the full commercial team with various product launches, campaigns, roadshow events, and trade fair events. As the team supports so many functions within MTC, and are the custodian of the brand. One very successful event in particular that made 19 customers very happy was the “Recharge and Win” campaign, which was open to both post-paid and pre-paid customers. The campaign encouraged customers to recharge with any MTC recharge voucher in order to gain automatic entry into a draw, where they could stand a chance of winning one of 19 bakkies. Both traditional and digital platforms were used to promote the campaign. The handover of the 19 bakkies was held in Windhoek, the Capital of Namibia.

One of the main events on our calendar is the Ongwediva Trade Fair. This year we were awarded with the “Best Exhibitor in Information Communication Technology” at the Trade Fair. With the aim of bringing the brand closer to the people this year, we created the 081Everyone village. The village had kapana, spaza and MTC shops to cater to the show visitors and exhibitors. MTC also had a live broadcast by Radio Energy from the stand.

Key AccountsA corporate event themed “How to lead by inspiration and inspire to lead,” organized by the Key Accounts Department along with the Marketing team took place during the Ongwediva Trade Fair period, and marked the first of many corporate events of its kind to be arranged for the corporate customers of MTC.Our Key Accounts Department invited 50 of their corporate clients from the north to a corporate breakfast where five prominent and successful businessmen and women (also from the north) gave advice to the SME’s and entrepreneurs on how to be a successful business owner.

As part of our drive to continuously improve, an independent Customer Satisfaction survey is conducted every quarter. The aim is to establish the level of satisfaction of our customers mainly those whom have interacted with the customer serving departments within the relevant period. Results recorded from the Customer Satisfaction Survey for the Key Account Department:

Sep 2018 81.84%

June 2018 78.52%

February 2018 75.11%

December 2017 71.66

The following overall results were recorded from the Customer Satisfaction Survey during the 2017/2018 financial year:

September 2018 85.03%

June 2018 85.17%


The following overall results were recorded for the 2017/2018 Outbound Customer Survey report:

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Customer ServiceMTC Customer service is a continuous process of self-assessment, improvement, and reassessment. Our employees are dedicated to meeting the needs of our customers in the quickest response time possible. We continuously strive to meet our service delivery goal of ensuring all email, telephone, and mail inquiries are responded to or resolved within 24–48 hours. In instances where a resolution requires additional time, it is our customer service practice to still make contact with the customer by phone or email to acknowledge that we have received their inquiry and are working towards a prompt resolution. Our customers deserve and appreciate the peace of mind knowing that their voice has been heard and their concerns are being addressed in a timely manner. The MTC Call Centre agents achieved an overall percentage of 89% for the 2018 financial year. In September 2018, they achieved 89%, in June 89% and 89% in February 2018.

On Wednesday 28 March 2018, MTC was bestowed two Service Excellence Awards by the Chartered Institute of Customer Management:

• Best Call Centre; and • Overall Best Service Award.

September 2018 93.61%

June 2018 90.30%


The Human Capital Environment

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OverviewOur employees, also referred to as “MTC Ambassadors” continue to be the very pillars around which we built our brand success, because they form the basis of our strategy. We therefore continue to place huge emphasis on people development as a key strategy to business success. Everything at MTC revolves around our Ambassadors, who understand why we exist and not how much profits we wish to make. We believe that by taking good care of our people, they will take good care of our business and our customers. That is why we call all our employees MTC Ambassadors, because they represent the aspirations and values of our brand 24/7 through their hearts and minds and passion to make the connection.

Talent ManagementCentral to our people development strategy is our Talent Management program which enables us to develop a suitable pipeline of talented ambassadors for now and the future. MTC has invested over N$5 million in this programme that helps us develop skills for the future, motivate, train, attract and retain key talent. Our retention strategy is one of the most aggressive in Namibia, as we fend off the war for talent and skills globally. We continue to invest in Training and Development of our ambassadors and have spent an amount of N$ 4 million in 2018 to upskill all our ambassadors.

The tailor made Leadership Development programme which was introduced in 2018 continued running smoothly for all our Managers and Supervisors to empower them with the latest trends and skills in leadership to the value of N$ 2.4 million.

ScholarshipsMTC’s scholarship programme continues to respond to Namibia’s dire need for the intake and experiential learning of graduates. In 2018, MTC continued its scholarship program and invested an amount of N$ 600,000 in scholarships to 6 students studying in various fields. Of significant importance is that over 95% of our graduates are guaranteed a permanent position at MTC upon completion of their studies. To date, several of our graduates have worked themselves up the ladder with some being Managers and the first being promoted to a General Manager in 2017.

In addition to that, we also look after our own Ambassadors and provide them with either an interest free study loan and/or full internal bursaries to allow them to study towards undergraduate and postgraduate qualifications.

The Institute of People Management of NamibiaMTC has remained the principal sponsor of the Institute of People Management Conference for the 8th consecutive year. The 2018 conference attracted a record number of over 259 delegates from across Namibia and once again led the people management agenda by discussing pertinent People Management and Leadership issues affecting Namibia. MTC is proud of this investment, because we contribute and provoke debate on national issues that will influence people management policies and practices. We do not believe in championing world class people management excellence alone, we believe that if best practices can be shared with as many companies, it can only be to Namibia’s benefit.

ndn

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Staff Engagement Forum:MTC’s Ambassadors believe that they have the power to ensure and guarantee a conducive and safe industrial relations environment. This is achieved through the Staff Engagement Forum (SEF) that champions relations between employees and management to ensure that it remains balanced, respectful and transparent at all times. The SEF is involved in all staff related activities, which include salary increases, staff opportunities and benefits, development and engagement. Our strategy to guarantee a sound industrial relations environment is based on the premise of respect for one another, transparency, consistency and continuous open engagement and communication.

Health & Safety:Spearheaded by our Auxiliary Department in the HR Department, Health and Safety continues to receive top priority and an area considered non-negotiable. We are proud to announce that with a fleet of 79 vehicles and over 130 company vehicle operators, no serious accidents or fatalities were reported in 2018 which is a remarkable achievement and testimony to our commitment for safety on our roads and at the workplace.nclude

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on the premise of respect for one another, transparency, consistency and continuous open engagement and communication.

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8 which is a remarkable achievement and testimony to our commitment for safety on our roads and at the workplace.

The Corporate Social Investment Programme

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OverviewMTC has cemented its status as the leading socially responsible corporate Namibian citizen with a total N$ 34 million investment in sponsorships and corporate social investment in the areas of Sports, ICT, Education, Arts and Culture and Health. In the past year, MTC took a deliberate decision to separate its sponsorship policy from its CSI policy in order to give its CSI activities more attention. This lead to the establishment of the Board CSI Committee.

Namibian Chamber of CommerceMTC is the founding member of the Namibia Chamber of Commerce and Industry (NCCI) and has been the main sponsor of its Annual General Meeting and Gala dinner for the past 9 years consecutively. Our involvement with the NCCI ensures that we make a contribution to SME’s to grow the Namibian economy and offer opportunities to develop their businesses.

SportIn 2017, MTC continued its sponsorship to the MTC Namibia Premier league and committed to sponsor the league for the next 3 years to the tune of N$ 46.5 million. This sponsorship totals N$ 10.8 million over 3 years. The annual Dr Hage Geingob Cup sponsorship continues on an annual basis to the value of N$ 1.5 million, the Dr Sam Nujoma Marathon to the amount of N$ 180,000 and the MTC Namibia Sports Commission Awards to the value of N$ 650,000. Our involvement in sport is based on the premise that sport unite people and enables the youth to engage in meaningful social activities, allowing them to realise their dreams. Of significant importance was that we continue to secure world and regional belts in boxing.

Namibian Annual Music AwardsIn 2018, MTC once again hosted Africa’s leading national awards ceremony, the Namibian Annual Music Awards for 8th consecutive time in Swakopmund. With an annual investment of N$ 7.4 million, the NAMA brand has become a recognisable African and global brand broadcasting across various global networks, including TraceTV and SoundCity reaching a global potential audience of over 50 million viewers.

The Namibian Annual Music Awards continues to grow and is without a doubt the best organised event on the African continent, giving Namibian artist a platform to shine on the international music scene and making an immense contribution to arts and culture in Namibia. Last year MTC committed another 3 years to this event that will see us having spearheaded it for a total of 11 years.

p y co secutively. Our involvement with the NCCI ensures that wemake a contribution to SME’s to grow the Namibian economy and offer opportunities to develop their businesses.

b a. Last year MTC committed another 3 years to this event that will see us having spearheaded it for a total of 11 years.

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MTC Care ProjectThe MTC Care project which is a MTC staff driven social initiative continues to support worthy and needy communities. Beneficiaries in 2018 included various Old Age Homes, the SPCA, Santa Shoebox and Welfare organisations and the SOS Children’s Village in Khomasdal. Through this philanthropic gestures, MTC employees are able to put a human face to the brand by showing gratitude while making the connection with a human touch.

Local Trade Fairs & ExhibitionsThe success of MTC rests largely on its interactions and appreciation of the communities and the areas in which we operate, hence why we have continued to empower the various Trade Fairs and Exhibitions across the country. Our aim is to encourage and stimulate growth and town and regional level. MTC also sees this as a way to support entrepreneurship and stimulate growth and innovation. Our total investment in Trade Fairs and Exhibitions in 2018 amounted to over N$ 2.8 million supporting over 90% of all Trade Fairs in Namibia.

MICT-Annual ICT SummitMTC was once again the main sponsor of Namibia’s ICT Summit organised by the Ministry of Information, Communications and Technology. This industry high level summit brings together leaders in the global ICT industry and has over the years drawn more than 800 industry players from around the globe for intense business to business networking.

Corporate Social InvestmentWith a renewed focus on Corporate Social Investment, MTC embarked on key projects aimed at social and economic development in 2018. The N$ 1 billion dollar 081Every1 project which will see MTC realise nearly 100% population coverage is one such key project. With this project, MTC will bridge the divide between urban and rural areas when it comes to internet connectivity, bring electricity to rural areas as well as economic and social development.

MTC also donated an amount of N$ 100,000 to the MTC Care initiative to assist them with their outreach programs.

ydrawn more than 800 industry players from around the globe for intense business to business networking.

The Regulatory Environment

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MTC was awarded with a Public Mobile Cellular License by the Namibia Communications Commission, as gazetted on 29 March 2007. In terms of this license MTC had authority only to provide mobile telecommunications services.

The telecommunication industry evolved and the governing legislation was repealed and substituted by the Communications Act no 8 of 2009. MTC has been under the regulation of the Communications Regulatory Authority of Namibia (CRAN) since May 2011 and its license was substi-tuted with a Class Comprehensive ECS and ECNS license, essentially a service and technology neutral license, on 20 March 2012. This means that MTC has a license to provide any and/or a range of telecommunications services. Since inception and to date 23 such licenses have been awarded. MTC welcomes the competition and is of the view that this can only be in the interest of the consumer.

It goes without saying that the regulatory environment impacts the operations of MTC. During this financial year (1 October 2017 to 30 Sep-tember 2018) the following decision made by CRAN could greatly impact MTC:

• CRAN made a decision to curtail number portability (the ability to retain your phone number when switching between operators) only to mo-bile services on 30 August 2018 despite all indications and all prior discussions at public consultative meetings indicating that it would include both fixed and mobile services in the interest of fair competition. This decision impacts MTC’s future growth plans with regard to the offering of fixed (fibre) and fixed like services and therefore MTC has filed an application to CRAN for its reconsideration.

MTC remains committed to provide various services (mobile and fixed) to Namibia and to evolve in its offerings to the nation.

It goes without saying that the regulatory environment impacts the operations of MTC. During this financial year (1 October 2017 to 30 Sep-tember 2018) the following decision made by CRAN could greatly impact MTC:

• CRAN made a decision to curtail number portability (the ability to retain your phone number when switching between operators) only to mo-bile services on 30 August 2018 despite all indications and all prior discussions at public consultative meetings indicating that it would include both fixed and mobile services in the interest of fair competition. This decision impacts MTC’s future growth plans with regard to the offering of fixed (fibre) and fixed like services and therefore MTC has filed an application to CRAN for its reconsideration.

MTC remains committed to provide various services (mobile and fixed) to Namibia and to evolve in its offerings to the nation.

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Expanding business networks

Growth in data traffic have increased in response to the ever growing demand, this growth however have not been matched in revenue due to the continued drive from MTC to provide its customers with better value for money products and services.

Voice revenues are declining steadily, which is in line with the trends which are being reported globally.

Chief Financial Officer’s Report

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Mobile Telecommunications Limited Group (“MTC”) has, despite current economic pressure, maintained satisfactory performance for the financial year ended 30 September 2018.

The year under review was characterised by weakening economic conditions driven by the persistent drought conditions in the country. MTC customers have been affected by these conditions and therefore MTC itself have felt the effects of the slowing economy.

Another contributing factor to the weakening economic conditions relate to the weakening Rand compared to other global currencies, as well as the uncertain political situation in South Africa, which has a direct impact on the Namibia Dollar.

In our drive toward customer focus and a memorable customer experience, MTC has introduced new products and services aimed at supporting our customers throughout these difficult times by providing better value for money products and services. This drive has not contributed to a distinct increase in revenues, but has contributed to the retention of customers to the MTC Brand.

The satisfactory results for the year are attributable to customer retention strategies being successfully implemented as well as cost management which is applied to ensure efficient and conscientious spending of stakeholder funds.

EBITDA increased with 6.63% in 2018 (2017: 7.49%) from N$ 1 402.8 million in 2017 to N$ 1 495.8 million in 2018.Net profit after tax increased with 13.53% in 2018 (2017: 22.79%) from N$ 711 million to N$ 808 million in 2018.

RevenueThe revenue increased by 3.19% from N$ 2 420.9 million to N$ 2 498.2 million. The impact of the 7% average increase applied in July 2017 was partially responsible for the increase in revenue which covered a 12 month period compared to the 3 months in 2017.

The split between the revenue classes remained unchanged for the year under review due to the substantially unchanged subscriber numbers.

60%

50%

40%

30%34%

57%

4% 3%1% 2%

20%

10%

0%

60%

50%

40%

30%34%

57%

4% 3%1% 2%

20%

10%

0%

Revenue 2017

Revenue 2018

Post-paid

Pre-paid

Roaming

Handsets

Interconnects

Others

Post-paid

Pre-paid

Roaming

Handsets

Interconnects

Others

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CashflowMTC have seen a significant increase in cash holdings for the year ended 30 September 2018. This is mainly due to delays in certain projects as a result of various unforeseen circumstances. All excess cash is invested in approved money market or unit trust accounts to maximise returns on investment. We have taken great care to ensure the investments reflect the low risk portfolio as per the Investment mandate from our Board of Directors. In 2018, finance income earned increased by 59.6% from N$ 37.5 million to N$ 59.9 million. The average return for 2018 was 8.11% compared to 7.21% in 2017.

Avg Int0

1000

800

600

400

200

2013

314.1

5.87%

5.56%

4.17%

6.81%

7.21%

8.11%

278.0

370.6

442.6

599.9

879.1

17.611 6.45 13.53 27.70 37.5759.97

2014 2015 2016 2017 2018

Interest Earned

Cash Balance


26


Operating ExpenditureOver the recent 3 financial years cost efficiency has become more critical for MTC to maintain its margins and to ensure that the performance of the company remains satisfactory. The strong focus on innovation remains, the goal being affordable excellence.

Total operational expenditure increased with 10.2% in 2018, with the largest increase attributable to the increase in sales and marketing expenditure of 47.7% in 2018. This area remains important to ensure the visibility of the brand to drive customer retention.

Personnel costs increased with 10.1% in 2018, which indicates MTC’s continued investment in Human Capital to drive forward the strategy of the company.

As a result of focused negotiations and relationships with suppliers, MTC have seen a reduction in direct costs of 14.2% in 2018.

7%

27.8%

23.4%

6.0%

13.8%

20.6%

Direct cost

Sales and marketing

General and admin

Personnel cost

Depreciation and amortisation

Change in inventoriesof finished goods

Cost Breakdown 2018

Direct cost

Sales and marketing

General and admin

Personnel cost

Depreciation and amortisation

Change in inventoriesof finished goods

Cost Breakdown 2017

8.6%

28.4%

27.3%

4.0%

13.1%

18.7%

EBIDTAEBIDTA remains an important value when considering the cash margin of a company in relation to its operational efficiency.

Superior customer experience (especially in the data age) and reducing operational expenditure remains value drivers for the company.

MTC maintained superior profitability in 2018, with an EBITDA margin of 59.9% reported for the financial year ended 30 September 2018 compared to a margin of 57.9% in 2017. This increase comes despite the increase in the company’s capital expenditure with 25%.

Contributors to the increased value and EBITDA margin are the company’s cost efficiency and cost conscious culture.

27


Revenue Vs EBIDTA

Revenue Vs EBIDTA

Revenue EBITDA – Accounting

0

3000

1000

1500

2000

2500

500

2013

1831.8

1007.0

2081.82250.5 2323.5

2420.9

1402.8

2498.2

1495.8

1138.2 1178.31305.0

2014 2015 2016 2017 2018

EBITDA%

60.0%

65.0%

55.0%

50.0%

45.0%

40.0%2013

55.0% 54.7%

52.4%

56.2%57.9%

59.9%

2014 2015 2016 2017 2018

TaxationThe income taxation paid of N$ 348.7 million increased by 6% from the previous financial year. The effective tax rate decreased from 31.13% to 30.72% as a result of movement from tax exempt dividends received. The reason for the increase in income taxation paid relates to the increase in the revenues and the decrease in deductible expenditure for the period under review.


28


Income tax paid

Income Tax Paid – per annum

Income Tax Paid – Accumulated

2000.0

2500.0

3000.0

3500.0

1500.0

1000.0

500.0

0.02013

250.9 249.2 246.5 244.1

328.7348.7

1645.8 1895.0

2141.52385.6

2714.3

3063.0

2014 2015 2016 2017 2018

Net ProfitDespite the reigning economic conditions in the world and Namibia, MTC maintained a strong net profit after tax for 2018. The company reported an increase of 13.5% on net profit after tax from N$ 711.4 million in 2017 to N$ 807.685 million for the year ended 30 September 2018. This serves as proof of good execution on the overall company strategy. This increase still comes from the introduction of a 7% average increase on subscription fees of MTC products in July 2017, together with the ever-growing uptake of data services through the use of smartphones and roll out of 081Every1 project to bring more connectivity to Namibia. The increase in revenue was complimented by the decrease in operational costs, due to increased culture of cost consciousness and lean strategy for overall increased efficiency.

DividendsA dividend of N$ 224.243 million was declared on 6 December 2018. This declaration of dividends remain on the basis of the decision made by the shareholders in 2017 to only pay dividends amounting to 50% of nett profit after tax, in line with the dividend policy, which is in place. The reduction in the dividends paid percentage is the enabler for MTC to finance the 081Every1 project, to ensure 100% population coverage is achieved in line with the strategy of the Harambee Prosperity plan.

29


Dividends Paid

Dividends Paid – per annum

Dividends Paid – Accumulated

4000.0

5000.0

6000.0

3000.0

2000.0

1000.0

0.02013

384.0

2012

341.0 462.0 522.0 481.0

488.5

374.3

2241.9

2625.9

3087.9

3609.9

4090.9

4579.4

4953.8

2014 2015 2016 2017 2018

Capital Investments2018 has seen MTC increasing its Capital Investment by 25.4% from N$ 479 million to N$ 600.5 million. 2018 saw the inception of the 081Every1 project as well as continued radio network infrastructure upgrades and capacity upgrades. MTC remains committed to serve our customers through a quality network in line with the mission and vision of MTC. The 081Every1 project is continuing proof of our commitment to inclusion for all, based on the Harambee Prosperity Plan of the Government of Namibia. MTC reinvested 74% of net profit after tax for the financial year under review.


30


Net profit after tax Total Capex Intangible assets

400.0

500.0

600.0

700.0

800.0

900.0

300.0

200.0

100.0

0.02013

384

.04

27.6

424

.4

384

.04

27.6

424

.4

263.

638

5.7

49

1.4

303.

54

87.

95

79.4

271.8

479

.071

1.4

269

.56

00

.58

07.

7

2014 2015 2016 2017 2018

Capital Investment as %

Capital expenditure per year

80%

100%

120%

60%

40%

20%

0.02013

101% 102%

78%

84%

67%

74%

2014 2015 2016 2017 2018

31


Transforming the future

The Board of Directors

32


Tulimeke MunyikaDirector

Lorna MbwaleDirector

Steve GallowayDirector

Elvis NashilongoChairman

MOBILE TELECOMMUNICATIONS LIMITED(Registration number 94/458)

ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2018

Directors’ Responsibilities and Approval 36

Independent Auditor’s Report 37 - 38

Directors’ Report 39 - 41

Comprehensive Income 42

Statements of Financial Position 43

Statements of Changes in Equity 44

Statements of Cash Flows 45

Accounting Policies 46 - 55

Notes to the Annual Financial Statements 56 - 88

GENERAL INFORMATION

Directors EE Nashilongo

LP Mbwale

S Galloway

TM Munyika

Nature of business and principal activities Provision of cellular network and related services in Namibia

Secretary Patience Kanalelo

Country of incorporation and domicile Namibia

Registered office Corner of Hamutenya Ndadi & Mose Tjitendero Street

Olympia

Windhoek

Namibia

Auditors Deloitte & Touche

Bankers Bank Windhoek Limited

First National Bank of Namibia Limited

Standard Bank Namibia Limited

Nedbank Limited

Nampost Savings Bank

Company registration number 94/458

Holding company Namibia Post and Telecommunications Holdings Limited

incorporated in Namibia

Mobile Telecommunications Limited(Registration number 94/458)Annual Financial Statements for the year ended 30 September 2018

34


INDEX

Page

Directors’ Responsibilities and Approval 36

Independent Auditor’s Report 37 - 38

Directors’ Report 39 - 41

Statements of Profit or Loss and Other Comprehensive Income 42

Statements of Financial Position 43

Statements of Changes in Equity 44

Statements of Cash Flows 45

Accounting Policies 46 - 55

Notes to the Annual Financial Statements 56 - 88


35


The directors are required in terms of the Companies Act, No 28 of 2004 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the group and the company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards and the Companies Act of Namibia. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and the Companies Act of Namibia and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the group and company annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the group and company’s cash flow forecasts for the year to 30 September 2019 and, in light of this review and the current financial position, they are satisfied that the group and company has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the group and company’s annual financial statements. The annual financial statements have been examined by the group and company’s external auditors and their report is presented on pages 37 to 38.

The annual financial statements set out on pages 39 to 88, which have been prepared on the going concern basis, were approved by the board of directors on 6 December 2018 and were signed on their behalf by:

EE Nashilongo TM Munyika

DIRECTORS’ RESPONSIBILITIES AND APPROVAL


36



37


INDEPENDENT AUDITOR’S REPORT

To the member of Mobile Telecommunications Limited

Report on the Audit of the Consolidated and Separate Financial Statements

Opinion

We have audited the consolidated and separate annual financial statements of Mobile Telecommunications Limited as set out on pages 39 to 88, which comprise the statements of financial position as at 30 September 2018, and the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes and the directors’ report.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Group as at 30 September 2018, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of Namibia.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group in accordance with the independence requirements applicable to performing audits of financial statements in Namibia which is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Part A and B) (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the requirements applicable to performing audits in Namibia. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

The directors are responsible for the other information. The other information comprises general information and the directors’ responsibilities and approval set out on pages 34 and 36 respectively as well as the annual report, which is expected to be made available to us after the date of this report. The other information does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Consolidated and Separate Financial Statements

The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Namibia, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

INDEPENDENT AUDITOR’S REPORT (continued)


38


Responsibilities of the directors for the Consolidated and Separate Financial Statements (continued)

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error,

design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,including any significant deficiencies in internal control that we identify during our audit.

Deloitte & Touche Registered Accountants and AuditorsChartered Accountants (Namibia)ICAN practice number: 9407

Per J CronjéPartner

PO Box 47, Windhoek, Namibia6 December 2018

Partners: E Tjipuka (Managing Partner) RH Mc Donald H de BruinJ Cronjé A Akayombokwa AT Matenda J Nghikevali G Brand*M Harrison**Director

Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited

The directors herewith submit their report which forms part of the annual financial statements of the company and the group annual financial statements for the financial year ended 30 September 2018.

1. Nature of businessMTC conducts business as a registered telecommunications provider. The principal nature of the business is to invest in the telecommunications infrastructure of Namibia for provisioning of total communication solutions to the customer base. Although MTC is an autonomous Namibian company, it also provides international telecommunication solutions through direct liaison with providers of telecommunication services worldwide.

The nature of the business did not change during the year under review.

The following business activities are conducted through controlled entities:

• Jurgens Thirty Four (Pty) Ltd - Letting of property

• Windhoek General Administrators (Pty) Ltd - Dormant

• MTC Social Responsibility Trust - Trust established to harness resources for establishing and maintainin infrastructure with the principal focus on the care, welfare and support for children or orphans who can not rely on the support of their parents and are homeless. The trustees have previously decided to unwind the trust from 30 June 2009 onwards. Before this process was completed the process was halted pending a change in the mandate of the trust to focus on larger corporate social responsibility matters. As at 30 September 2018 the trust had no assets or liabilities to report (2017: Nil).

2. Financial resultsThe group and company’s results of operations are set out on page 42.

The financial position of the group and company are set out in the statements of financial position on page 43.

The group recorded a net profit after tax for the year ended 30 September 2018 of N$ 807 689 000. This represented an increase of 14% from the net profit after tax of the prior year of N$ 711 405 000.

The company recorded a net profit after tax for the year ended 30 September 2018 of N$ 802 355 000. This represented an increase of 13% from the net profit after tax of the prior year of N$ 711 819 000.

Group and company revenue increased by 3% from N$ 2 420 896 000 in the prior year to N$ 2 498 160 000 for the year ended 30 September 2018

The increase in group and company revenue is as a result of the growth in subscriber base as well as the launch of a number of campaigns to stimulate increased usage by customers.

Subscriber base - number of active subscribers 2018 2017Pre-paid 2 293 210Post-paid 160 787Total 2 453 997

DIRECTORS’ REPORT


39


2 323 424161 193

2 484 617

3. Share capitalThe authorised and issued share capital remained unchanged during the year under review. Details of the authorised, issued and unissued share capital at 30 September 2018 are set out in note 17 to the financial statements.

The entirety of the share capital of Samba DutchCo B.V. was acquired by Namibia Post and Telecommunications Holdings on 3 May 2018. On 5 September 2018 the shareholding of Samba DutchCo B.V. was tranferred to Namibia Post and Telecommunications Holdings.

Shareholding 2018 2017Namibia Post and Telecommunications Holdings Limited 100 % 66 %Samba DutchCo B.V. - % 34 %Total 100 % 100 %

4. Dividends Distributed 2018 2017 N$’000 N$’000Declared 7 December 2017, paid 16 January 2018 197 400 -Declared 29 June 2018. paid 30 July 2018 176 935 -Declared 6 December 2016, paid 30 December 2016 - 112 200Declared 6 December 2016, paid 31 December 2016 - 217 800Declared 30 June 2017, paid 28 July 2017 - 53 890Declared 30 June 2017, paid 31 July 2017 - 104 610 374 335 488 500

5. Dividend declared subsequent to year endOn 6 December 2018, a dividend of N$ 224 243 000 was declared, but has not yet been paid out to the shareholders at the date of these financial statements.

6. Insurance and risk managementThe group follows a policy of reviewing the risks relating to assets and possible liabilities arising from business transactions with its insurers on at least an annual basis. Wherever possible assets are automatically included. There is also a continuous asset risk control programme, which is carried out in conjunction with the group’s insurance brokers. All risks are considered to be adequately covered, except for political risks, in the case of which as much cover as is reasonably available has been arranged.

7. Capital expenditureFor the year under review, capital expenditure approved was N$ 1 070 million (2017: N$ 524 million) which included capital expenditure carried forward from the previous financial year. The capital expenditure incurred was N$600 million (2017: N$ 479 million), which was funded out of internal cash generated from operations, with the main aim to ensure capacity in the existing network and extensive coverage within Namibia. The capital expenditure incurred was less than the approved expenditure due mainly to unforeseen delays in capital projects.

8. Property, plant and equipmentThere was no change in the nature or use of the group’s and company’s property, plant and equipment, except for buildings which was previously classified as owner occupied now being leased to a third party and therefore this property was transferred to investment property.

9. SubsidiariesDetails of material interests in subsidiary companies are presented in the group annual financial statements in note 13.

40


DIRECTORS’ REPORT


10. DirectorateThe directors in office at the date of this report are as follows:

Directors Office Designation NationalityEE Nashilongo Chairperson Non-executive NamibianLP Mbwale Director Non-executive NamibianS Galloway Director Non-executive NamibianTM Munyika Director Non-executive Namibian

There have been no changes to the directorate for the year under review.

11. Subsequent eventsThe directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

12. SecretaryThe company secretary is Mrs Patience Kanalelo.

Business address: Corner of Hamutenya Ndadi & Mose Tjitendero StreetOlympia Windhoek Namibia

41



DIRECTORS’ REPORT

Group Company

2018 2017 2018 2017

Note(s) N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

Revenue 3 2 498 160 2 420 896 2 498 160 2 420 896

Other income 3 960 1 598 3 988 1 920

Total income 2 502 120 2 422 494 2 502 148 2 422 816

Changes in inventories of finished goods (99 105) (122 499) (99 105) (122 499)

Direct costs (332 938) (388 181) (332 938) (388 181)

Sales and marketing (84 919) (57 491) (84 919) (57 491)

General and administration (196 742) (185 791) (196 459) (185 635)

Personnel costs (292 626) (265 740) (292 626) (265 740)

Depreciation 9 (188 178) (170 572) (188 170) (170 490)

Amortisation 12 (207 195) (233 349) (207 195) (233 349)

Profit from operations 3 1 100 417 998 871 1 100 736 999 431

Finance income 4 59 966 37 570 59 957 37 567

Fair value adjustments 5 534 - - -

Finance costs 5 (111) (24) (111) (24)

Profit before taxation 1 165 806 1 036 417 1 160 582 1 036 974

Taxation 7 (358 121) (325 012) (358 227) (325 155)

Profit for the year 807 685 711 405 802 355 711 819

Other comprehensive income - - - -

Total comprehensive income for the year 807 685 711 405 802 355 711 819

Profit attributable to:

Owners of the parent 807 685 711 405 802 355 711 819

Total comprehensive income attributable to:

Owners of the parent 807 685 711 405 802 355 711 819

Earnings per share

Per share information

Basic and diluted earnings per share (Cents) 8 3 230.76 2 845.62 3 209.42 2 847.28

Dividend paid per share information

Interim (Cents) 8 789.60 634.00 789.60 634.00

Final (Cents) 8 707.74 1 320.00 707.74 1 320.00

1 497.34 1 954.00 1 497.34 1 954.00

STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME


42


Group Company

2018 2017 2018 2017

Note(s) N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

Assets

Non-Current Assets

Property, plant and equipment 9 1 004 857 864 985 1 004 832 862 722

Investment property 11 7 764 - - -

Intangible assets 12 561 578 502 771 561 578 502 771

Investments in subsidiaries 13 - - 4 026 3 688

Long term deposit 23 1 525 63 930 1 525 63 930

1 575 724 1 431 686 1 571 961 1 433 111

Current Assets

Inventories 14 57 366 113 035 57 366 113 035

Trade and other receivables 15 179 935 185 413 179 911 185 392

Current tax receivable 2 365 - 2 345 -

Cash and cash equivalents 16 879 075 599 861 878 931 599 740

1 118 741 898 309 1 118 553 898 167

Total Assets 2 694 465 2 329 995 2 690 514 2 331 278

Equity and Liabilities

Equity

Share capital 17 25 000 25 000 25 000 25 000

Retained income 1 915 005 1 481 655 1 910 432 1 482 412

1 940 005 1 506 655 1 935 432 1 507 412

Liabilities

Non-Current Liabilities

Deferred taxation 18 278 504 255 000 279 157 255 547

Current Liabilities

Trade and other payables 19 330 284 398 929 330 253 398 888

Deferred revenue 20 145 672 157 688 145 672 157 688

Current tax payable - 11 723 - 11 743

475 956 568 340 475 925 568 319

Total Liabilities 754 460 823 340 755 082 823 866

Total Equity and Liabilities 2 694 465 2 329 995 2 690 514 2 331 278

43



STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2018

Group

Balance at 1 October 2016 25 000 1 258 750 1 283 750

Profit for the year - 711 405 711 405

Other comprehensive income - - -

Total comprehensive income for the year - 711 405 711 405

Dividends - (488 500) (488 500)

Total contributions by and distributions to owners of company - (488 500) (488 500)

recognised directly in equity





Dividends - (374 335) (374 335)



Balance at 30 September 2018 25 000 1 915 005 1 940 005

Note 17

Company





Dividends - (488 500) (488 500)







Dividends - (374 335) (374 335)



Balance at 30 September 2018 25 000 1 910 432 1 935 432

Note 17

Share CapitalN$ ‘000

Retained IncomeN$ ‘000

Total EquityN$ ‘000

44


STATEMENTS OF CHANGES IN EQUITY


Group Company

2018 2017 2018 2017

Note(s) N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

Cash flows from operating activities

Cash receipts from customers 2 503 641 2 369 281 2 503 641 2 369 624

Cash paid to suppliers and employees (1 022 624) (924 720) (1 022 300) (924 566)

Cash generated from operations 21 1 481 017 1 444 561 1 481 341 1 445 058

Interest income 59 966 37 570 59 957 37 567

Finance costs (111) (24) (111) (24)

Tax paid 22 (348 704) (328 662) (348 704) (328 662)

Net cash from operating activities 1 192 168 1 153 445 1 192 483 1 153 939

Cash flows from investing activities

Purchase of property, plant and equipment 9 (289 550) (203 722) (289 550) (203 681)

Proceeds on disposal of property, plant and equipment 1 755 735 1 755 735

Purchase of other intangible assets 12 (247 002) (244 262) (247 002) (244 262)

Net movements in loan to subsidiary - - (338) (605)

Construction deposit paid 23 (1 505) (63 930) (1 505) (63 929)

Net cash from investing activities (536 302) (511 179) (536 640) (511 742)

Cash flows from financing activities

Dividends paid (374 335) (488 500) (374 335) (488 500)

Total cash movement for the year 281 531 153 766 281 508 153 697

Cash at the beginning of the year 599 861 442 605 599 740 442 553

Net foreign exchange differences (2 317) 3 490 (2 317) 3 490

Total cash at end of the year 16 879 075 599 861 878 931 599 740

45


STATEMENTS OF CASH FLOWS


1. Significant accounting policies The principal accounting policies applied in the preparation of these consolidated and separate annual financial statements are set out below. These accounting policies are consistent with the previous period.

1.1 Basis of preparation The annual financial statements set out on pages 35 to 83 have been prepared on the going concern basis in accordance with, and in compliance

with, International Financial Reporting Standards (“IFRS”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations issued and effective at the time of preparing these annual financial statements and the Companies Act, No 28 of 2004.

The annual financial statements have been prepared on the historic cost convention, unless otherwise stated in the accounting policies which

follow and incorporate the principal accounting policies set out below. They are presented in Namibia Dollars (N$ ‘000), which is the group and company’s functional currency.

These accounting policies are consistent with the previous period.

1.2 Statement of compliance

The financial statements of the company and group have been prepared in accordance with International Financial Reporting Standards (IFRS’s) as issued by the International Accounting Standards Board (IASB) and the requirements of the Companies Act of Namibia. References to “ the group “ includes the company, unless stated otherwise.

1.3 Consolidation

Basis of consolidation The consolidated annual financial statements incorporate the annual financial statements of the company and all subsidiaries. Subsidiaries are

entities (including structured entities) which are controlled by the group.

The group has control of an entity when it is exposed to or has rights to variable returns from involvement with the entity and it has the ability to affect those returns through use its power over the entity.

The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal.

Adjustments are made when necessary to the annual financial statements of subsidiaries to bring their accounting policies in line with those of the group.

All inter-company transactions, balances, and unrealised gains on transactions between group companies are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

46


ACCOUNTING POLICIES


1.4 Significant judgements and sources of estimation uncertaintyThe preparation of the group’s consolidated financial statements in conformity with IFRS requires management, from time to time, to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are based on experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Certain accounting policies have been identified as involving particularly complex or subjective judgements or assessments, as follows:

Critical judgements in applying accounting policiesThe critical judgements made by management in applying accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognised in the financial statements, are outlined as follows:

Key sources of estimation uncertainty

Trade receivablesThe group assesses its trade receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from the financial asset.

The impairment (or loss allowance) for trade receivables is calculated on a portfolio basis, except for individually significant trade receivables which are assessed separately. The impairment test on the portfolio is based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio.

Impairment testingThe group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. When such indicators exist, management determine the recoverable amount by performing value in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating unit to which the asset belongs.

Factors taken into consideration in reaching such an decision include the economic viability of the asset or economic unit of assets.

Useful lives and residual values of property, plant and equipmentManagement assess the appropriateness of the useful lives and residual values of property, plant and equipment at the end of each reporting period and may vary depending on a number of factors. In assessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

When the estimated useful life of an asset differs from previous estimates, the change is applied prospectively in the determination of the depreciation charge.

Intangible assetsIntangible assets are amortised over their finite useful lives, The carrying amount of intangible assets is reviewed annually and adjusted for impairment if their is any indication that it may be impaired.

Sources of estimation uncertaintyThere are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that management have assessed as having a significant risk of causing material adjustment to the carrying values of the assets and liabilities within the next financial year, except for the assumptions and key sources of estimation uncertainty with regard to retention bonuses as disclosed in note 19.

47


ACCOUNTING POLICIES


1.5 Investment property Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that are associated with

the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably.

Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.

Fair value Subsequent to initial measurement investment property is measured at fair value.

A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises.

1.6 Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried

at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets are recognised if any future economic benefits are expected and those benefits could be reliably measured. Intangible assets consist of software licences.

The amortisation rate used is: 2018 2017 per annum per annum Computer software 8 - 70.59% 8 - 70.59% Network software 7 - 33.33% 7 - 33.33% Customer bases 6.67 - 66.67% 7.69 - 66.67% Licences 20% 20%

The useful lives of intangible assets are assessed as either finite or indefinite. Intangibles with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation expense is recognised in profit or loss in the statement of profit or loss and other comprehensive income.

The amortisation period and the amortisation method is reviewed at each financial year end. Changes in the expected useful life of the assets are accounted for by changing the amortisation period, as appropriate, and treated as changes in accounting estimates. Refer to note 10 for the effect of this review on the current annual financial statements.

48


ACCOUNTING POLICIES


1.7 Property, plant and equipmentAn item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the group, and the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost. Cost includes all of the expenditure which is directly attributable to the acquisition or construction of the asset, including the capitalisation of borrowing costs on qualifying assets and adjustments in respect of hedge accounting, where appropriate.

Expenditure incurred subsequently for major services, additions to or replacements of parts of property, plant and equipment are capitalised if it is probable that future economic benefits associated with the expenditure will flow to the group and the cost can be measured reliably. Day to day servicing costs are included in profit or loss in the year in which they are incurred.

Major spare parts and stand by equipment which are expected to be used for more than one year are included in property, plant and equipment.

Property, plant and equipment is subsequently stated at cost less accumulated depreciation and any accumulated impairment losses, except for land which is stated at cost less any accumulated impairment losses.

Depreciation is calculated so as to write off the cost of property, plant and equipment on a straight-line basis, over the estimated useful life of the asset to its residual value. Land is not depreciated. Capital work-in-progress is not depreciated as these assets are not yet available for use. Depreciation rates used are:

2018 2017 per annum per annum Buildings - 5% Computer and prepaid equipment 8.28 - 100% 2.28 - 100% Network equipment 4.0 - 85.71% 4.6 - 60% Motor vehicles (excl. Land cruisers) 16 - 25% 16 - 25% Motor vehicles 9.6 - 25% 9.6 - 25% Furniture and fittings 5.26 - 26.09% 2.26 - 26.09 % Leasehold improvements 16.67 - 46.15% 16.67 - 46.15% Staff handsets 50 - 100% 50 - 100% Projects 50% 50% The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ

from previous estimates, the change is accounted for prospectively as a change in accounting estimate. Refer to note 10 for the effect of this review on the current annual financial statements.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Each significant component included in an item of property, plant and equipment is separately recorded and depreciated. The depreciation rates corresponds to the estimated average useful lives of the respective assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in the statement of profit or loss and other comprehensive income.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in the statement of profit or loss and other comprehensive income in the year the item is derecognised.

General and special purpose buildings are generally classified as owner occupied. They are held at cost and depreciated as property, plant and equipment and not regarded as investment properties.

49


ACCOUNTING POLICIES


1.8 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of such

asset. All other borrowing costs are recognised as an expense when incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

1.9 Investments and other financial assets Financial assets within the scope of “IAS 39: Financial Instruments recognition and measurement” are classified as financial assets at fair value

through profit or loss, loans and receivables, held to maturity investments and available for sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The group determines the classification of its financial assets on initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end. At year end the group’s financial assets consist of loans and receivables and financial instruments at fair value through profit or loss.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After

initial measurement loans and receivables are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in profit or loss in the statement of profit or loss and other comprehensive income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Fair value The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at

the close of business on the reporting date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis or other valuation models.

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial

recognition at fair value through profit or loss.

Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by IAS 39. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with net changes in fair value recognised as finance costs in profit and loss. Financial assets designated upon initial recognition at fair value through profit and loss are designated at their initial recognition date and only if the criteria under IAS 39 are satisfied.

1.10 Impairment of financial assets The group assesses at each reporting date whether a financial asset or group of financial assets is impaired.

Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of

the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss in the statement of profit or loss and other comprehensive income.

50


ACCOUNTING POLICIES


1.10 Impairment of financial assets (continued)The group first assesses whether objective evidence of impairment exists individually for financial assets that are significant, and individually or collectively for financial assets that are not significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss in the statement of profit or loss and other comprehensive income, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

In relation to trade receivables a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

1.11 Financial liabilitiesAll financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable cost. Financial liabilities are measured at amortised cost where a maturity date exists, or cost if no maturity date exists.

Subsequently amortised cost is calculated on the effective interest rate method. Gains and losses on subsequent measurement are taken to profit or loss in the statement of profit or loss and other comprehensive income.

1.12 Derecognition of financial assets and liabilities

Financial assetsThe Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either• the Group has transferred substantially all the risks and rewards of the asset, or• the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

1.13 Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if: There is a currently enforceable legal right to offset the recognised amounts and There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

1.14 Cash and cash equivalentsCash and short-term deposits in the statement of financial position comprise cash at banks and at hand and short term deposits with an original maturity of three months or less. Cash and cash equivalents are classified as loans and receivables and are subsequently recognised at amortised cost.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

51


ACCOUNTING POLICIES


1.15 Inventories Inventories are valued at the lower of cost and net realisable value. Cost is incurred in bringing each product to its present location and condition

are accounted for by using the weighted average cost per item purchased during the financial year. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

1.16 Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow

of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss and other comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Defined contribution plans Contributions in respect of defined contribution plans are recognised as an expense in the year to which they relate.

1.17 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.

All other leases are classified as operating leases.

Group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the group’s net investment in the leases.

Finance lease income is allocated to the accounting periods so as to reflect a constant periodic rate of return on the group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the lease payments and recognised on a straight-line basis over the lease term.

Group as lessee Assets held under finance leases are initially recognised as the assets of the group at their fair value at the inception of the lease or, if lower, at

the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they incurred.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

52


ACCOUNTING POLICIES


1.18 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably

measured. Revenue is measured at the fair value of the consideration receivable, excluding discounts, rebates, and other sales taxes or duty. The group invoices independent service providers for the revenue billed by them on behalf of the group, when the deliverables are used.

The following specific recognition criteria must also be met before revenue is recognised:

Post-paid products Post-paid products may include deliverables such as a SIM-card, a handset and a fixed period service and are defined as arrangements with

multiple deliverables. The arrangement consideration is allocated to each deliverable based on the fair value of each deliverable on a standalone basis as a percentage of the aggregated fair value of the individual deliverables.

Based on usage commencing on activation date. Unused airtime is deferred in full and recognised in the month of usage or on termination of the contract by the subscriber.

Revenue allocated to the identified deliverables in each revenue arrangement and the cost applicable to these identified deliverables are recognised based on the same recognition criteria of the individual deliverable at the time the product or service is delivered:

• Revenue from post-paid packages, which includes activation, SIM-cards and phone, is recognised over the period of the contract; • Revenue from SIM-cards, representing activation fees, is recognised upon activation of the SIM-card by the postpaid customer; • Revenue from handsets is recognised when the product is delivered; • Monthly service revenue received from the customer is recognised in the period in which the service is rendered; and • Airtime revenue is recognised on the usage basis.

Pre-paid products Pre-paid products may include deliverables such as a SIM-card, a handset and airtime and are defined as arrangements with multiple deliverables.

The arrangement consideration is allocated to each deliverable based on the fair value of each deliverable on a standalone basis as a percentage of the aggregated fair value of the individual deliverables.

Revenue allocated to the identified deliverables in each revenue arrangement and the cost applicable to these identified deliverables are recognised based on the same recognition criteria of the individual deliverable at the time the product or service is delivered:

• Revenue from SIM-cards, representing activation fees, is recognised upon activation of the SIM-card by the prepaid customer; • Airtime revenue is recognised on the usage basis. The unused airtime is deferred in full; and • Deferred revenue related to unused airtime is recognised when utilised by the customer.

Upon termination of the customer contract, all deferred revenue for unused airtime is recognised in revenue.

Deferred revenue and costs related to unactivated starter packs, which do not contain any expiry date, are recognised in the period when the probability of these starter packs being activated becomes remote.

Data service revenue Revenue net of discounts, from data services is recognised when the company has performed the related service and depending on the nature

of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the company as commission for facilitating the service.

Sale of equipment Revenue from equipment sales are recognised when the product is delivered and acceptance has taken place. Revenue from equipment sales to

third party service providers is recognised when delivery is accepted. No rights of return exist on sale to third party service providers.

53


ACCOUNTING POLICIES


1.18 Revenue recognition (continued)

Interconnect and international revenue Interconnect and international revenue is recognised on the usage basis.

Interest Revenue is recognised as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash

receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

Rental income Rental income arising from operating leases of the base stations and other equipment are recognised on a straightline basis over the lease terms.

1.19 Tax

Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to

the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred tax Deferred tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and

liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.

In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Current and deferred tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss and other comprehensive income.

54


ACCOUNTING POLICIES


1.19 Tax (continued)

Value added tax Revenues, expenses and assets are recognised net of the amount of value added tax except: • where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the

value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables that are stated with the amount of value added tax included.

The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

1.20 Translation of foreign currencies Transactions in foreign currencies are initially recorded at the functional currency spot rate ruling at the date of the transaction. Monetary

assets and liabilities denominated in foreign currencies are re-translated at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item.

The functional currency of the group is Namibia Dollar.

55


ACCOUNTING POLICIES


2. New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year In the current year, the group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

Standard/Interpretation: Effective date: Expected impact: Years beginning on or after • Amendments to IFRS 12: Annual Improvements to IFRS 2014 - 2016 cycle 1 January 2017 The impact of the

standard is not material. • Amendments to IAS 7: Disclosure initiative 1 January 2017 The impact of the

standard is not material. • Amendments to IAS 12: Recognition of Deferred Tax Assets 1 January 2017 The impact of the for Unrealised Losses standard

is not material. There has not been any significant impact as a result of adopting these standards.

2.2 Standards and interpretations not yet effective The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the

group’s accounting periods beginning on or after 1 October 2018 or later periods:

Standard/ Interpretation: Effective date: Expected impact: Years beginning on or after

• Amendments to IFRS 10 and IAS 28: Sale or Contribution 1 January 2019 The impact of the standard of Assets between an Investor and its Associate or Joint is not material. Venture • Amendments to IFRS 3 Business Combinations: Annual 1 January 2019 Unlikely there will be a Improvements to IFRS 2015 - 2017 cycle material impact

• Amendments to IFRS 11 Joint Arrangements: Annual 1 January 2019 Unlikely there will be a Improvements to IFRS 2015 - 2017 cycle material impact • Amendments to IAS 12 Income Taxes: Annual 1 January 2019 Unlikely there will be a Improvements to IFRS 2015 - 2017 cycle material impact

• Amendments to IAS 23 Borrowing Costs: Annual 1 January 2019 Unlikely there will be a Improvements to IFRS 2015 - 2017 cycle material impact • Uncertainty over Income Tax Treatments 1 January 2019 Unlikely there will be a material impact • IFRS 16 Leases 1 January 2019 Impact is currently being assessed • IFRS 9 Financial Instruments 1 January 2018 Unlikely there will be a material impact • IFRS 15 Revenue from Contracts with Customers 1 January 2018 Impact is currently being assessed. Refer to detail below: • Amendments to IFRS 15: Clarifications to IFRS 15 Revenue 1 January 2018 Unlikely there will be a from Contracts with Customers material impact: Refer to detail below:

56


NOTES TO THE ANNUAL FINANCIAL STATEMENTS


2. New Standards and Interpretations (continued)

57




IFRS 15: Revenue from contracts with customers

IFRS 15: Revenue from contracts with customers, was issued in May 2014 and subsequent amendments, ‘Clarifications to IFRS 15’, were issued in

April 2016. IFRS 15, as amended, is effective for accounting periods beginning on or after 1 January 2018. IFRS 15 sets out the requirements for

recognising revenue and costs from contracts with customers and includes extensive disclosure requirements; although management’s assessment

is ongoing, the implementation of IFRS 15 is expected to have a significant impact on the group and company’s reporting of revenue and costs as

follows:

Deliverables in contracts with customers that qualify as separate ‘performance obligations’ will be identified and the contractual transaction

price receivable from customers must then be allocated to the performance obligations on a relative stand-alone selling price basis. The performance

obligations identified will depend on the nature of the individual customer contracts, but might typically be identified for mobile handsets, other

equipment provided to customers and for services provided to customers such as mobile access. Stand alone selling prices will be based on

observable inputs. Revenue will be recognised either at a point in time or over time when the respective performance obligations in the contract

are delivered to the customer;

Currently revenue allocated to deliverables is restricted to the amount that is receivable without the delivery of additional goods or services;

this restriction will no longer be applied under IFRS 15. The primary impact on revenue reporting will be that when the group or company sells

subsidised devices together with airtime service agreements to customers, revenue allocated to equipment and recognised at contract inception,

when control of the device typically passes to the customer, will increase and revenue subsequently recognised as services are delivered during the

contract period will reduce.Where additional up-front unbilled revenue is recorded for the sale of devices, this will be reflected in the consolidated

statement of financial position as a contract asset and this will also result in the derecognition of the customer base intangible asset; and

Expected credit losses will be recorded in respect of amounts due from customers, if significant. The recognition of contract assets under IFRS 15

may result in an increase in credit loss charges recorded in future periods.

Determining stand-alone selling price for allocating revenue between performance obligations where contracts contain multiple performance

obligations. Judgement will be required to determine whether a stand-alone selling price exists and if no stand-alone selling price exists estimation

will be required to determine the appropriate revenue allocation; and

Judgements relating to the reporting of revenue and costs on a gross or net basis.

In applying IFRS 15, and in determining the accounting impacts described above, the group and company will be required to make material

judgements. The most significant judgements are expected to be:

The group and company will adopt IFRS 15 with the cumulative retrospective impact reflected as an adjustment to equity on the date of adoption.

The assessment of the opening impact remains ongoing.

Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

3. Profit from operations

Profit from operations for the year is stated after accounting for the following:

Revenue 2 498 160 2 420 896 2 498 160 2 420 896Contract 849 844 832 363 849 844 832 363Connection fees 2 700 2 926 2 700 2 926Call charges 171 687 197 553 171 687 197 553Monthly subscription fees 598 330 557 213 598 330 557 213Other income 77 127 74 671 77 127 74 671Pre-paid 1 411 915 1 373 170 1 411 915 1 373 170Starter packs 8 007 8 778 8 007 8 778Call charges 1 396 448 1 357 198 1 396 448 1 357 198Other income 7 460 7 194 7 460 7 194Roaming income 99 239 86 155 99 239 86 155Contract (6 729) 10 096 (6 729) 10 096Visitors 105 968 76 059 105 968 76 059

Handset and accessories sales 65 693 70 050 65 693 70 050Interconnect income 25 743 18 227 25 743 18 227Bulk sms revenue 37 130 32 786 37 130 32 786Site rental 8 596 8 145 8 596 8 145

Income from subsidiariesManagement fees - Jurgens 34 (Pty) Ltd - - 501 456ExpensesAuditors remuneration - external auditors 2 438 1 859 2 404 1 825Fees for statutory audit 2 044 1 859 2 010 1 825Fees for other services 394 - 394 -

Bad debts written off 24 510 29 293 24 510 29 293Bad debts recovered (12 178) (12 980) (12 178) (12 980)Loss / (profit) on exchange differences 557 (1 350) 557 (1 350)Depreciation on property, plant and equipment 188 178 170 572 188 170 170 490(Loss) on disposal of plant and equipment (2 379) (2 895) (2 379) (2 895)Amortisation - Intangible assets 207 195 233 349 207 195 233 349

Operating lease chargesPremises • subsidiary - Jurgens 34 (Pty) Ltd - - - 100 • shareholder - NPTH Limited 22 243 18 565 22 243 18 565 • unrelated parties 14 697 9 470 14 697 9 470

• other 604 784 604 784Radio sites and other 31 741 29 759 31 741 29 759

69 285 58 578 69 285 58 678

Fees for services - consulting fees 1 699 951 1 699 951

58




Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

3. Profit from operations (continued)

Personnel costs 292 626 265 740 292 626 265 740- salaries and wages 252 998 230 399 252 998 230 399- pension fund contributions 14 887 13 325 14 887 13 325- medical aid contributions 13 816 9 969 13 816 9 969- staff training 3 718 5 691 3 718 5 691- other staff cost 7 207 6 356 7 207 6 356

Number of employees at year end 593 577 593 577

4. Investment income

Interest incomeFrom investments in financial assets:Loans and receivables 59 966 37 570 59 957 37 567

5. Finance costs

Trade and other payables 111 24 111 24

6. Directors’ emoluments and key management remuneration

Executive director:- emoluments as executive - 3 674 - 3 674 - 3 674 - 3 674Non-executive directors:- fees as directors 881 804 881 804Total directors’ emoluments 881 4 478 881 4 478

Key management (excluding directors)Short-term employee benefits 21 949 21 727 21 949 21 727Long-term employee benefits 1 097 1 086 1 097 1 086 23 046 22 813 23 046 22 813

59




Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

7. Taxation

Major components of the tax expense

CurrentNamibian income tax - current period 334 616 305 281 334 616 305 281

DeferredOriginating and reversing temporary differences 23 505 19 731 23 611 19 874

358 121 325 012 358 227 325 155Reconciliation of the tax expenseReconciliation between applicable tax rate and average effective tax rate.Applicable tax rate 32.00 % 32.00 % 32.00 % 32.00 %Fair value adjustment (0.05)% - % - % - %Exempt dividends (3.75)% (1.45)% (3.76)% (1.45)%Other differences 2.52 % 0.58 % 2.63 % 0.58 %

30.72 % 31.13 % 30.87 % 31.13 %

8. Earnings per share

Basic earnings per shareFrom continuing operations (c per share) 3 230.76 2 845.62 3 209.42 2 847.28

Basic and diluted earnings per share of the group was based on earnings of N$ 807 689 000 (2017: N$ 711 405 000) and a weighted average number of ordinary shares of 25 000 000 (2017: 25 000 000).

Basic and diluted earnings per share of the company was based on earnings of N$ 802 355 000 (2017: N$ 711 819 000) and a weighted average number of ordinary shares of 25 000 000 (2017: 25 000 000).

Reconciliation of profit or loss for the year toBasic earningsProfit or loss for the year attributable to equity 807 685 711 405 802 355 711 819holders of the parentAdjusted for:

Diluted earnings per share is equal to earnings per share because there are no dilutive potential ordinary shares in issue.

60




Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

8. Earnings per share (continued)

Headline earnings and diluted headline earnings per share

Headline earnings per share (c) 3 218.13 2 857.20 3 218.93 2 858.86

Reconciliation between earnings (loss) andheadline earnings (loss)Basic earnings 807 685 711 405 802 355 711 819Adjusted for:Loss on disposal of plant and equipment 2 379 2 895 2 379 2 895Fair value adjustments (5 534) - - - 804 530 714 300 804 734 714 714

Reconciliation between diluted earnings (loss)and diluted headline earnings (loss)Diluted earnings 807 685 711 405 802 355 711 819Adjusted for:Loss on disposal of plant and equipment 2 379 2 895 2 379 2 895Fair value adjustments (5 534) - - - 804 530 714 300 804 734 714 714Dividends per shareInterim (c) 789.60 634.00 789.60 634.00Final (c) 707.74 1 320.00 707.74 1 320.00



61


9. Property, plant and equipment

Group 2018 2017Cost or Accumulated Carrying value Cost or Accumulated Carrying value

revaluation depreciation N$’000 revaluation depreciation N$’000 N$’000 N$’000 N$’000 N$’000 Buildings - - - 3 329 (1 099) 2 230Leasehold improvements 38 294 (35 072) 3 222 39 560 (36 359) 3 201Computer and pre-paid 112 179 (91 943) 20 236 115 295 (86 085) 29 210equipmentVehicles, furniture and 67 785 (42 997) 24 788 66 141 (41 576) 24 565fittingsNetwork equipment 1 894 537 (1 040 144) 854 393 1 684 121 (903 955) 780 166Capital - Work-in-progress 102 218 - 102 218 25 613 - 25 613Total 2 215 013 (1 210 156) 1 004 857 1 934 059 (1 069 074) 864 985

Company 2018 2017 Cost or Accumulated Carrying value Cost or Accumulated Carrying value revaluation depreciation N$’000 revaluation depreciation N$’000 N$’000 N$’000 N$’000 N$’000 Leasehold improvements 38 294 (35 072) 3 222 39 560 (36 359) 3 201Computer and pre-paid 112 179 (91 943) 20 236 115 295 (86 085) 29 210equipmentVehicles, furniture and 67 744 (42 981) 24 763 66 100 (41 568) 24 532fittingsNetwork equipment 1 894 537 (1 040 144) 854 393 1 684 121 (903 955) 780 166Capital - Work-in-progress 102 218 - 102 218 25 613 - 25 613Total 2 214 972 (1 210 140) 1 004 832 1 930 689 (1 067 967) 862 722

62




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10. Change in accounting estimate

In the current year the residual values and estimated useful lives of all categories of property, plant and equipment as well as Intangible assets were reassessed in accordance with IAS 16 Property, plant and equipment and IAS 38 Intangible assets. This resulted in a change in the estimated remaining useful life of property plant and equipment and intangible assets.

The financial impact of the change in the estimated remaining useful lives was a decrease of the current year depreciation and amortisation charges, resulting in an increase in current year profit before taxation of N$11.109 million (2017: profit before taxation increased by N$ 6.220 million).

The decrease in the current year charges for depreciation and amortisation due to the change in the estimated useful lives will result in effectively increasing the charges in future periods and therefore effectively decrease profit before taxation for those future periods.

The financial impact of this change in the accounting estimate for the future periods are not disclosed per future financial period since this is considered to be impracticable.

11. Investment property

Group 2018 2017Valuation Accumulated Carrying value Valuation Accumulated Carrying value

N$’000 depreciation N$’000 N$’000 depreciation N$’000N$’000 N$’000

Investment property 7 764 - 7 764 - - -

Reconciliation of investment property - Group - 2018

Opening Transfer from Fair value Closing balance property, adjustments balance N$’000 plant and N$’000 N$’000 equipment N$’000 Investment property - 2 230 5 534 7 764

Investment properties comprise sectional title unit 6 (186m2) and unit 9 (210m2) of United Buildings, Erf 7640, Windhoek.

A register containing the information required by paragraph 22(3) of Schedule 4 of the Namibian Companies Act is available for inspection at the registered office of the company.

Details of valuationOn 22 September 2015 a valuation was performed by a registered valuator. The method used to determine the market value was the median of: the comparable sales value, capitalised value and net replacement value of the whole property included in the Body Corporate, should all the units agree to be included into a joint venture for possible future developments.

Amounts recognised in profit and loss for the yearRental income from investment property 473 - - -Direct operating expenses from rental generating property (793) - - -Cumulative change in fair value recognised in 5 534 - - -profit or loss on a sale of investment property froma pool of assets in which the cost model is usedinto a pool in which the fair value model is used 5 214 - - -



65


12. Intangible assets

Group 2018 2017Cost Accumulated Carrying value Cost Accumulated Carrying value

N$’000 amortisation N$’000 N$’000 amortisation N$’000N$’000 N$’000

Licenses 8 670 (2 141) 6 529 9 270 (924) 8 346Computer software 221 442 (133 482) 87 960 215 495 (107 625) 107 870Network software 540 555 (219 216) 321 339 437 636 (198 974) 238 662Customer bases 296 678 (150 928) 145 750 285 946 (138 053) 147 893Total 1 067 345 (505 767) 561 578 948 347 (445 576) 502 771

Company 2018 2017 Cost Accumulated Carrying value Cost Accumulated Carrying value N$’000 amortisation N$’000 N$’000 amortisation N$’000 N$’000 N$’000 Licenses 8 670 (2 141) 6 529 9 270 (924) 8 346Computer software 221 442 (133 482) 87 960 215 495 (107 625) 107 870Network software 540 555 (219 216) 321 339 437 636 (198 974) 238 662Customer bases 296 678 (150 928) 145 750 285 946 (138 053) 147 893Total 1 067 345 (505 767) 561 578 948 347 (445 576) 502 771

66




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Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

13. Investment in subsidiaries

The following table lists the entities which are directly controlled by the group.

Company

Name of company % % Carrying Carrying holding holding amount 2018 amount 2017 2018 2017Jurgens Thirty Four (Pty) Ltd 100.00 % 100.00 % 4 026 3 688Windhoek General Administrators (Pty) Ltd 100.00 % 100.00 % - - 4 026 3 688

The intercompany loan, has no fixed repayment terms and does not bear interest.

Attributable to Mobile TelecommunicationsLimitedJurgens Thirty Four (Pty) Ltd - Aggregate (loss) profit after tax - - (202) 1 127

14. Inventories

Network consumables 1 967 79 511 1 967 79 511Subscriber identity modules 10 997 10 069 10 997 10 069Handset and accessories 44 402 23 455 44 402 23 455 57 366 113 035 57 366 113 035Inventory carried at net realisable value 9 644 16 673 9 644 16 673

The amount of write-down of inventories recognised as an expense is N$765 158 (2017: N$4 631 643).

15. Trade and other receivables

Prepayments and deposits 37 598 32 552 37 598 32 552Interconnect debtors 1 589 24 1 589 24Customers to the mobile network after provisions 126 634 144 585 126 634 144 585Other receivables 14 114 8 252 14 090 8 231 179 935 185 413 179 911 185 392

The carrying amount of trade and other receivables approximates their fair value.

Reconciliation of provision for impairment of trade and other receivables

Opening balance (13 170) (15 485) (13 170) (15 485)Additional impairment provision (23 470) (27 001) (23 470) (27 001)Amounts utilised during the period 24 510 29 316 24 510 29 316 (12 130) (13 170) (12 130) (13 170)Trade receivables are generally on 30 - 60 days terms.



69


Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘00016. Cash and cash equivalents

Cash and cash equivalents consist of:

Bank balances 71 638 95 638 71 494 95 517Short-term deposits 807 437 504 223 807 437 504 223 879 075 599 861 878 931 599 740

Cash at bank earns interest at floating rates based on daily bank deposit rates. Cash and cash equivalents comprisescash held by the group and short-term bank deposits with an original maturity of three months or less. The carryingamount of these assets approximate their fair value.

17. Share capital

Authorised25 000 000 Ordinary shares of N$ 1.00 each 25 000 25 000 25 000 25 000 Issued25 000 000 Ordinary shares of N$1.00 each 25 000 25 000 25 000 25 000

18. Deferred taxation

The movement on the deferred taxation account is as follows:Balance at beginning of year (255 000) (235 268) (255 547) (235 673)Taxation recognised in profit or loss (23 504) (19 732) (23 610) (19 874)At end of year (278 504) (255 000) (279 157) (255 547)

Comprising

Deferred income tax assetsIncome received in advance 51 013 54 744 51 013 54 744Provisions 6 269 5 301 6 269 5 301Straightlining of leases 9 584 7 846 9 584 7 846Unrealised forex profit - 667 - 667Deferred taxation balance from temporary 66 866 68 558 66 866 68 558differences other than unused tax lossesTotal deferred taxation asset 66 866 68 558 66 866 68 558

Deferred income tax liabilitiesCapital allowances (333 159) (311 077) (333 812) (311 624)Inventories (630) (2 993) (630) (2 993)Prepayments (11 018) (9 488) (11 018) (9 488)Unrealised forex loss (563) - (563) -Total deferred taxation liability (345 370) (323 558) (346 023) (324 105)

Deferred taxation liability (345 370) (323 558) (346 023) (324 105)Deferred taxation asset 66 866 68 558 66 866 68 558Total net deferred taxation liability (278 504) (255 000) (279 157) (255 547)



70


Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

19. Trade and other payables

Trade payables 147 883 153 634 147 839 153 614VAT 17 503 17 068 17 579 17 117Accruals 162 520 225 940 162 457 225 870Other payables 2 378 2 287 2 378 2 287 330 284 398 929 330 253 398 888

Payables are non-interest bearing and are normally settled on 30-day terms.

The company accumulates 13% of a staff member’s average cost to company package over five years of service and pays 70% and 30% of the accumulated value out to that employee after the fifth and seventh year of service respectively, provided the employee reached a performance score of 70% or higher in each of the five years. As this expense is dependent upon an uncertain future occurrence, the provision made reflects only an estimate.

The retention bonus cycle repeats itself from year six.

The carrying amount of trade and other payables approximates their fair value.

The reconciliation between the opening balanceand closing balance of the retention bonusincluded in accruals is as follows:Opening balance at beginning of the year 4 853 1 555 4 853 1 555Paid during the year (4 932) (1 567) (4 932) (1 567)Accrued for current year 2 476 4 865 2 476 4 865Closing balance at end of the year 2 397 4 853 2 397 4 853

20. Deferred revenue

At the beginning of the year 157 688 163 603 157 688 163 603Airtime sold during the year 1 570 363 1 533 051 1 570 363 1 533 051Airtime utilised during the year (1 582 379) (1 538 966) (1 582 379) (1 538 966)At the end of the year 145 672 157 688 145 672 157 688

Current liabilities 145 672 157 688 145 672 157 688Total 145 672 157 688 145 672 157 688



71


Group Company

2018 2017 2018 2017

N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

21. Cash generated from operations

Profit before taxation 1 165 806 1 036 417 1 160 582 1 036 974Adjustments for:Depreciation and amortisation 395 373 403 921 395 365 403 839Net loss on disposal of property, plant and equipment 2 379 2 895 2 379 2 895(Profit) / loss on foreign exchange 2 317 (3 490) 2 317 (3 490)Interest received - investment (59 966) (37 570) (59 957) (37 567)Finance costs 111 24 111 24Fair value adjustments (5 534) - - -Operating expenditure transferred from work in progress 45 18 45 18Changes in working capital:Inventories 55 669 (49 364) 55 669 (49 364)Trade and other receivables 5 478 (53 211) 5 481 (53 192)Trade and other payables (68 645) 150 836 (68 635) 150 836Deferred revenue (12 016) (5 915) (12 016) (5 915) 1 481 017 1 444 561 1 481 341 1 445 058

22. Tax paid

Balance at beginning of the year (11 723) (35 104) (11 743) (35 124)Current tax for the year recognised in profit or loss (334 616) (305 281) (334 616) (305 281)Balance at end of the year (2 365) 11 723 (2 345) 11 743 (348 704) (328 662) (348 704) (328 662)

23. Commitments and contingencies

Capital commitments

Commitments at year end in respect of capital expenditure:

Approved and contracted forNetwork expansions 541 119 564 761 541 119 564 761Retail stock 14 069 7 291 14 069 7 291 555 188 572 052 555 188 572 052

Approved and not contracted forNetwork expansions 239 910 158 214 239 910 158 214Retail stock 164 233 152 709 164 233 152 709Other - property, plant and equipment 208 569 187 460 208 569 187 460 612 712 498 383 612 712 498 383

This expenditure will be financed from cash generated from normal business operations.



72


23. Commitments and contingencies (continued)

Operating leases – as lessee (expense)

Future minimum rentals payable under non-cancellable Premisesoperating leases are as follows as of 30 September:Group and Company Radio sites Offices/Shops Total 2018 N$ ‘000 N$ ‘000 N$ ‘000Within one year 27 002 33 213 60 215After one year but not more than five years 118 212 132 714 250 926More than five years 64 141 27 141 91 282 209 355 193 068 402 423

Premises

Group and Company Radio sites Offices/Shops Total 2017 N$ ‘000 N$ ‘000 N$ ‘000Within one year 29 203 8 019 37 222After one year but not more than five years 129 443 11 397 140 840More than five years 570 201 - 570 201 728 847 19 416 748 263

Other commitments

Construction depositsAt 30 September 2018 the group had entered into commitments relating to the network expansion project and 081Every1 project. Deposits paid before 30 September 2018 relating to work-in-progress on these projects amounted to N$ 1.525 million.

The construction deposit balance at 30 September 2017 of N$ 63.930 million related to payments for the network expansion project and 08Every1 project. The phase of the projects to which these payments related were completed in the 2018 financial year and the full deposits were transferred to the relevant capital account before 30 September 2018.

Other contingenciesWe note that despite instructions from the ultimate shareholder to delay the listing of MTC on the Namibian Stock Exchange, the CRAN ruling requiring MTC to list by 5 March 2019 has not yet been amended or withdrawn. Management does not anticipate this to have a impact on operational activities.

License feeThe directors note that the supreme court has ruled the current license fee regime unconstitutional and not enforceable from the date of the concurring high court ruling on the matter. The directors fully expect the regulator to implement an amended license fee regime to be implemented in the 2019 financial year.

24. Retirement Benefit Information

The company operates a defined contribution scheme, the MTC Pension Fund (registration number 25/7/7/390), providing benefits based on the contributions of an employee and is administered by Alexander Forbes. This fund is registered under and governed by the Namibian Pension Funds Act, 1956 as amended. The fund will be valued every two years. The members of the fund can elect to contribute 7% or the maximum of 14 %, which will be matched by the employer by the % elected of the members’ pensionable salaries. All contributions of the company are charged to profit and loss in the statement of comprehensive income as incurred. Employer contributions for the year are disclosed in note 3. The fair value of the fund’s investments as at the funds’ year end at 31 March 2018 were N$199 496 197 (2017: N$175 778 251).

In addition to the pension fund, the company also operates a group life scheme covering 100% of the total number of employees in cases of death

and/ or permanent disability.



73




74


24. Retirement Benefit Information (continued)

The group does not currently bear and is in no way contractually liable for the cost of funding post-retirement medical aid benefits. The contribution to the Medical Aid Fund, should an employee choose to continue membership of the scheme on retirement, is payable by the retiree.

A statutory actuarial valuation was performed on 31 March 2017 and the valuation reported that the fund was in a sound financial position.

25. Bank overdraft

The company has unsecured overdraft facilities at First National Bank Namibia totaling N$ 1 million (2017: N$ 1 million). The facility has expired at year end, but is currently under review. The EFT (same day service) at Standard Bank Namibia is N$ 5 million (2017: N$ 5 million), whilst the Debit and Credit Run facility is N$ 30 million (2017: N$ 30 million) from Standard Bank Namibia.

The group has an pre-settlement FEC facility at First National Bank Namibia of N$ 20 million (2017: N$ 20 million) and a FEC Trading facility at Standard Bank Namibia of N$ 40 million (2017: N$ 40 million).

26. Financial risk management objectives and policies

The group’s principal financial liabilities, other than derivatives, comprise shareholder’s loans and trade payables. The group has no interest bearing borrowings. The main purpose of these financial liabilities is to raise finance for the group’s operations. The group has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations. The main risks arising from the group’s financial instruments are foreign currency risk, credit risk and liquidity risk.

There has been no significant change during the financial year, or since the end of the financial year, to the types of financial risks faced by the group, the approach to measurement of these financial risks or the objectives, policies and processes for managing these financial risks.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

Foreign currency risk managementForeign currency risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The group incurs currency risk as a result of the following transactions which are denominated in a currency other than Namibia Dollar or South African Rand: purchases of equipment, consulting fees and borrowings. The currencies which primarily give rise to currency risk are the US Dollar (USD); Euro (EU); Swiss Francs (CHF) and British Pound (GBP). At 30 September 2018, the group has not hedged any (2017: none) of its foreign currency creditors for which firm commitments existed at the reporting date.

The group and the company normally pay all foreign amounts due close to order / delivery date. Group CompanyForeign exchange losses / (gains) recognised 2018 2017 2018 2017in the statements of comprehensive income: N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

Realised loss / (gain) 2 317 (3 490) 2 317 (3 490)Unrealised (gain) / loss (1 760) 2 140 (1 760) 2 410

The following table details the group’s sensitivity to the below-mentioned percentage strengthening and weakening in the functional currency against the relevant foreign currencies. This percentage is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates.

The sensitivity analysis includes only outstanding foreign-denominated monetary items and adjusts their translations at the period end for the specified percentage change in foreign currency rates.

26. Financial risk management objectives and policies (continued)

For the same percentage weakening of the functional currency against the relevant currency, there would be an equal and opposite impact on the profit before taxation.

There were no changes in the methods and assumptions used in preparing the foreign currency sensitivity analysis. Group Company

Effect on profit before tax of amounts included 2018 2017 2018 2017in trade payables at year end: N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

USDEffect on profit before taxIncrease of 5% in USD exchange rate (2 881) (4 405) (2 881) (4 405)Decrease of 5% in USD exchange rate 2 881 4 405 2 881 4 405

EuroEffect on profit before taxIncrease of 5% in Euro exchange rate (197) (772) (197) (772)Decrease of 5% in Euro exchange rate 197 772 197 772

Swiss FrancsEffect on profit before taxIncrease of 5% in Swiss Francs exchange rate (294) (94) (294) (94)Decrease of 5% in Swiss Francs exchange rate 294 94 294 94

GBPEffect on profit before taxIncrease of 5% in GBP exchange rate (2) - (2) -Decrease of 5% in GBP exchange rate 2 - 2 -

Group and Company 2018 Conversion 2017 Conversion At year end the following foreign currency N$ ‘000 rate at N$ ‘000 rate at 30 denominated amounts were included in trade September Septemberpayables, for which no forward cover was taken: 2018 2017United States Dollars 57 628 14.15 88 097 13.51Euro 3 938 16.45 15 435 15.96Swiss Francs 5 875 14.51 1883 13.95British Pounds 47 18.48 9 18.11

At year end the following foreign currencydenominated amounts were included in roamingdebtors, for which no forward cover was taken:United States Dollars 1 060 14.15 1 318 13.51



75




76



Credit risk management

Credit risk is related to the risk of a third party failing with its contractual obligations resulting in a financial loss to the group.

The group trades only with recognised, creditworthy third parties. It is the group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant. In addition to this reputable financial institutions are used for investing and cash handling purposes. The maximum credit exposure is the carrying amount as disclosed in Note 15. There are no significant concentrations of credit risk within the group.

With respect to credit risk arising from the other financial assets of the company, which comprise cash and cash equivalents and short tem deposits with well known reputable Namibian banks, the company’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these balances.

There has been no significant change during the financial year, or since the end of the financial year, to the group’s exposure to credit risk, the approach to the measurement or the objectives, policies and processes for managing this risk.

Financial assets exposed to credit risk at year end were as follows:

Financial instrument Group - 2018 Group - 2017 Company - Company -N$ ‘000 N$ ‘000 2018 2017

N$ ‘000 N$ ‘000Cash and cash equivalents 879 075 599 861 878 931 599 740Trade and other receivables - Namibia 127 330 135 047 127 306 135 026Trade and other receivables - non-Namibian 15 007 17 814 15 007 17 814Investment in subsidiary - - 4 026 3 083

No terms of financial assets were renegotiated.

With respect to trade and other receivables that are neither past due nor impaired, there are no indications as of the reporting date that the debtors will not meet their payment obligations.

Neither past due nor impaired 134 618 131 496 134 594 131 475Past due but not impaired:between 30 and 60 days 6 831 18 367 6 831 18 367between 60 and 90 days 672 2599 672 2 599more than 90 days 216 399 216 399Net carrying amount 142 337 152 861 142 313 152 840


Liquidity risk managementThese risks may occur if the sources of funding, including operating cash flows, credit lines and cash flows obtained from financing operations, do not match with the group’s financing needs, such as operating and financing outflows, investments, shareholder remuneration and debt repayments.

The group has minimised its risk of illiquidity by ensuring that it has adequate banking facilities and reserve borrowing capacity as well as forecasting and managing available cash reserves.

The group monitors its risk to a shortage of funds using monthly management accounts and general cash flow projections.

The table below summarises the maturity profile of the group’s financial liabilities at 30 September based on contractual undiscounted payments.

Group 2018 On demand Less than 3 3 to 12 1 to 5 years > 5 years N$ ‘000 months months N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000Trade and other payables - 312 780 - - -

2017 On demand Less than 3 3 to 12 1 to 5 years > 5 years N$ ‘000 months months N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000Trade and other payables - 355 904 - - -

Company 2018 On demand Less than 3 3 to 12 1 to 5 years > 5 years N$ ‘000 months months N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000Trade and other payables - 312 674 - - -

2017 On demand Less than 3 3 to 12 1 to 5 years > 5 years N$ ‘000 months months N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000Trade and other payables - 355 813 - - -

Capital managementThe primary objective of the company’s capital management is to ensure that it maintains a strong credit rating in order to support its business and maximise shareholder value.

The capital structure of the group consists of debt, cash and cash equivalents and equity.

The company manages its capital structure and makes adjustments to it, in light of changes in economic conditions.

To maintain or adjust the capital structure, the company may issue new shares or obtain additional funding from its shareholders.

No changes were made in the objectives, policies and processes during the years ended 30 September 2018 and 30 September 2017.

The group is not subject to externally imposed capital requirements.



77


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86


28. Fair value information

The fair values of all financial instruments are substantially the same as the carrying values reflected in the statements of financial positions, for both the group and the company.

Fair value hierarchyThe group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets of liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Valuation techniques:Forward contracts are valued by marking to market the forward contract with the exchange rate prevalent on each day in an active market.

Trade and other receivables are valued at amortised cost using the effective interest rate method, which substantially equals their fair value.

Trade and other payables are valued at amortised cost using the effective interest rate method, which substantially equals their fair value.

The long term liability is discounted at the effective discount rate applicable to the risks associated with this financial instrument.

As at 30 September 2018, the group did not hold any financial instruments measured at fair value (2017: Nil).

29. Related parties

Related party relationships exist between the company and its subsidiaries, fellow subsidiary, shareholders and key management. All transactions with related parties occurred under terms no less favourable than those arranged with third parties.

SubsidiariesDetails of income and expenditure relating to subsidiaries and investments in subsidiaries are disclosed in notes 3 and 13 respectively. No interest is charged on loans to subsidiaries.

Key managementThe key management personnel of the company comprise the directors and the general managers. Amounts paid to key management are disclosed under directors’ emoluments and key management remuneration in note 6.

ShareholdersThe shareholders of the company are noted in the directors’ report. The only significant transactions related to the shareholders are rentals paid, management fees paid and interconnect fees paid to the shareholders.

Fellow subsidiaryThe company has an interconnect agreement with fellow subsidiaries regarding call traffic between the two companies and rent fibre optic lines for its operations from a fellow subsidiary.

RelationshipsHolding company Namibia Post and Telecommunications Holdings Limited

Subsidiaries Refer to note 13

Group Company 2018 2017 2018 2017 N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

Related party balances

Loan accounts - Owing (to) by related parties:Jurgens Thirty Four (Pty) Ltd - - 3 569 3 230

Balance receivable from fellow subsidiaries:Telecom Namibia 4 224 197 4 224 197Nampost Courier 87 52 87 52

Balance receivable from shareholder:Namibia Post and Telecommunications Holdings 9 8 9 8

Balance payable to fellow subsidiaries:Nampost Courier (9 601) (2 586) (9 601) (2 586)Telecom Namibia (10 720) (1 513) (10 720) (1 513)Powercom (212) - (212) -



87




88


Group Company 2018 2017 2018 2017 N$ ‘000 N$ ‘000 N$ ‘000 N$ ‘000

29. Related parties (continued)

Related party transactions

Property, plant and equipment purchased fromfellow subsidiaries:Telecom Namibia 2 811 18 000 2 811 18 000

Management fees paid:OI Investomentos Internacionais - 259 - 259

Rent paid to related parties:Namibia Post and Telecommunications Limited 30 310 28 925 30 310 28 925Jurgens Thirty Four (Pty) Ltd - - - 100

Lease line paid to (received from) fellowsubsidiaries:Telecom Namibia 29 006 35 490 29 006 35 490

Postage and courier charges paid to fellowsubsidiaries:Nampost Namibia 5 377 7 927 5 377 7 927

Telephone and fax paid to fellow subsidiaries:Telecom Namibia 431 329 431 329

Pre-paid sales to Nampost NamibiaSales (300 142) (328 029) (300 142) (328 029)Dealer discount 48 219 52 130 48 219 52 130Net sales (251 923) (275 899) (251 923) (275 899)

Net site rentals paid to (received from) fellowsubsidiaries:Telecom Namibia (8 622) (8 188) (8 622) (8 188)Powercom (10 698) - (10 698) -

Net interconnect fees paid to (received from)fellow subsidiaries:Telecom Namibia 6 075 1 798 6 075 1 798

Other Transactions:WACS Payment - Telecom Namibia 6 830 4 027 6 830 4 027

30. Approval of annual financial statements

These annual financial statements have been approved by the Board of Directors on 6 December 2018.

NOTES

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90


NOTES

Venturing into new territories - MTC Namibia...of tremendous pressure on voice and SMS revenues....

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