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Telkom - Vodacom trading update for the period ended June 30, 2006

Release Date: 26/07/2006 08:30
Code(s): TKG
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Telkom - Vodacom trading update for the period ended June 30, 2006 Telkom SA Limited (Registration Number 1991/005476/06) ISIN ZAE000044897 JSE and NYSE Share Code TKG ("Telkom") Vodacom trading update for the period ended June 30, 2006 Vodacom Group (Proprietary) Limited ("Vodacom" or "Vodacom Group") (unlisted), in which Telkom has a 50.0% holding, today announced a quarterly update for the three months ended June 30, 2006. As at June 30, 2006, Vodacom Group recorded 25.2 million customers across its networks operating in South Africa, Tanzania, the Democratic Republic of the Congo, Lesotho and Mozambique, reflecting a 7.3% increase in the three months since March 31, 2006. The growth in the customer base is a result of high gross customer connections of 3.5 million for the quarter. The Group"s other non South African operations comprised 4.9 million customers, or 19.3% of the total customer base. South Africa South Africa includes the operations of Vodacom South Africa, Smartphone SP (Pty) Limited, Smartcom (Pty) Limited and Cointel VAS (Pty) Limited. South Africa increased its customer base by 6.4% since March 31, 2006 to 20.4 million customers in an increasingly competitive market. South Africa"s customer base comprises 2.5 million contract customers and 17.8 million prepaid customers, reflecting increases of 5.3% and 6.3% since March 31, 2006, respectively. South African ARPU declined to R121 per month for the three months to June 30, 2006, compared to R139 per month for the twelve months which ended March 31, 2006. South Africa defines an active customer as a SIM card that had a revenue generating activity in the three months leading up to the reporting date. Up to mid June 2006 calls forwarded to voicemail was regarded as a revenue generating activity, and such SIM cards classified as active customers. An analysis of the customer base, based on statistical sampling, has revealed that a material number of SIM cards have calls forwarded to voicemail as its only revenue generating activity. The majority of such messages are never retrieved by the customer. It is estimated that these SIM cards have an ARPU of less that R1 per month which is below the cost of maintaining such SIM cards on the network. It is therefore not justifiable to keep such SIM cards on the network. South Africa has therefore decided to change its definition of an active customer to exclude calls forwarded to voicemail from the definition of a revenue generating activity. Such SIM cards would be disconnected from the network after being inactive for a 215 consecutive day period in accordance with the business rules of the company. The retrieval of a voice message by a customer is classified as a revenue generating activity. Based on statistical analyses it is estimated that approximately 3.5 million affected pre-paid SIM cards, included in the customer base on June 30, 2006, will be deleted by December 31, 2006. It is also expected that normal monthly churn from July 2006 onwards would increase as a result of the activity rule change. The impact of the activity rule change will have an immaterial impact on revenue, but it would have the effect of increasing prepaid ARPU for the period. South Africa customers, year-to-date ARPU and churn as at June 30, 2006 compared to March 31, 2006 are as follows: South Africa March 31, 2006 June 30, 2006 % change Customers (thousands) 19,162 20,380 6.4 Contract 2,362 2,488 5.3 Prepaid 16,770 17,834 6.3 Community services 30 58 93.3 telephones ARPU (ZAR) 139 121 (12.9) Contract 572 526 (8.0) Prepaid 69 61 (11.6) Community services 1,796 1,154 (35.7) telephones Churn (%) 17.7 27.6 9.9 pts Contract 10.0 10.8 0.8 pts Prepaid 18.8 29.9 11.1 pts Other non South African operations Vodacom"s other non South African operations increased their total customer base by 11.6% since March 31, 2006 to 4.9 million customers. Satisfactory customer growth was achieved in all Vodacom"s other non South African operations, most notably Mozambique with a 19.2% increase in its customer base. Vodacom"s other non South African operations" customers, year-to-date ARPU and churn as at June 30, 2006 compared to March 31, 2006 are as follows: Other non South African March 31, 2006 June 30, 2006 % change operations Vodacom Tanzania Customers (thousands) 2,091 2,289 9.5 Contract 7 11 57.1 Prepaid 2,081 2,275 9.3 Public phones 3 3 - ARPU (ZAR) 67 51 (23.9) Churn (%) 28.5 32.9 4.4 pts Other African operations Vodacom Congo Customers (thousands) 1,571 1,768 12.5 Contract 14 15 7.1 Prepaid 1,538 1,730 12.5 Public phones 19 23 21.1 ARPU (ZAR) 86 81 (5.8) Churn (%) 28.1 29.5 1.4 pts Other non South African March 31, 2006 June 30, 2006 % change operations (continued) Vodacom Lesotho Customers (thousands) 206 221 7.3 Contract 3 3 - Prepaid 200 215 7.5 Public phones 3 3 - ARPU (ZAR) 78 75 (3.8) Churn (%) 22.3 19.6 (2.7 pts) Vodacom Mozambique Customers (thousands) 490 584 19.2 Contract 8 9 12.5 Prepaid 482 575 19.3 ARPU (ZAR) 36 26 (27.8) Churn (%) 32.2 28.9 (3.3 pts) Johannesburg 26 July 2006 Sponsor: UBS Warburg Date: 26/07/2006 08:30:08 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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