Wrap Text
Group Interim Results for the six months ended 30 September 2012
Telkom SA SOC Limited
(Registration number 1991/005476/06)
JSE share code: TKG
ISIN: ZAE000044897
19 November 2012
Telkom SA SOC Limited
Group Interim Results
for the six months ended 30 September 2012
The information contained in this document is also available on Telkom's investor relations website: www.telkom.co.za/ir
Telkom SA SOC Limited is listed on the JSE Limited. Information may be accessed on Reuters under the symbols TKGJ.J and
on Bloomberg under the symbol TKG.SJ. Information contained on Reuters and Bloomberg is provided by a third party and is
not incorporated by reference herein. Telkom has not approved or verified such information and does not accept any liability
for the accuracy of such information.
TABLE OF CONTENTS
Index
1 Overview 4
2 Operational data 5
3 Operational overview 6
4 Strategic focus 6
5 Financial performance 7
Provisional condensed consolidated financial statements 13
Special note regarding forward looking statements
Many of the statements included in this document, as well as oral statements that may be made by us or
by officers, directors or employees acting on behalf of us, constitute or are based on forward looking
statements.
All statements, other than statements of historical facts, including, among others, statements regarding
our mobile and other strategies, future financial position and plans, objectives, capital expenditures,
projected costs and anticipated cost savings and financing plans, as well as projected levels of growth in
the communications market, are forward looking statements. Forward looking statements can generally
be identified by the use of terminology such as "may", "will", "should", "expect", "envisage", "intend", "plan",
"project", "estimate", "anticipate", "believe", "hope", "can", "is designed to" or similar phrases, although the
absence of such words does not necessarily mean that a statement is not forward looking. These forward
looking statements involve a number of known and unknown risks, uncertainties and other factors that
could cause our actual results and outcomes to be materially different from historical results or from
any future results expressed or implied by such forward looking statements. Among the factors that could
cause our actual results or outcomes to differ materially from our expectations including but not limited
to those risks identified in Telkom's most recent annual report which are available on Telkom's website:
www.telkom.co.za/ir
We caution you not to place undue reliance on these forward looking statements. All written and oral
forward looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety
by these cautionary statements. Moreover, unless we are required by law to update these statements, we will
not necessarily update any of these statements after the date of this document, either to conform them to
actual results or to changes in our expectations.
The information contained in this document is also available on Telkom's investor relations website:
www.telkom.co.za/ir
Telkom SA SOC Limited is listed on the JSE Limited. Information may be accessed on Reuters under the symbols
TKGJ.J and on Bloomberg under the symbol TKG.SJ. Information contained on Reuters and Bloomberg is
provided by a third party and is not incorporated by reference herein. Telkom has not approved or verified such
information and does not accept any liability for the accuracy of such information.
GROUP SALIENT FEATURES FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
- ADSL subscribers increased 5.8% to 841,831.
- Calling plan subscribers increased 5.7% to 843,491.
- Internet all access subscribers decreased 7.3% to 516,423.
- Managed data network sites increased 8.3% to 40,284.
- Active mobile subscribers of 1,495,083 with a blended ARPU of R68.62
- Operating revenue down 1.5% to R16.1 billion.
- Voice usage revenue decreased 10.2% to R4.4 billion.
- Voice subscriptions revenue increased 0.8% to R3.9 billion.
- Data revenue increased 3.0% to R5.2 billion.
- Mobile revenue increased 198.3% to R898 million.
- Operating expenses increased 1.6 % to R15.6 billion.
- Fixed-line operating expenses increased 4.9% to R12.3 billion.
- EBITDA margin decreased to 22.5% from 26.9%.
- Basic earnings per share decreased 64.5% to 30.2 cents.
- Headline earnings per share from continuing operations decreased
by 80.6% to 37.2 cents.
- The Group generated free cash flow of R1.5 billion, the same as the
previous period.
Financial highlights
Please see PDF for Graphs.
1. OVERVIEW
Johannesburg, South Africa – 19 November 2012, Telkom SA SOC Limited (JSE: TKG) today announced Group interim results
for the six months ended 30 September 2012.
The results reflect Group profit before tax of R547 million. This is R523 million or 48.9% lower than the previous reporting
period mainly due the impact of the provision for the penalty imposed by the Competition Tribunal, higher employee
expenses due to annual salary increases and lower fixed-line revenue, partially offset by lower mobile termination rates and
no impairment charge.
Revenue continues to reflect the impact of fixed mobile substitution that has become more prevalent over the last few
years being partially offset by growth in revenue from our own mobile offering and limited revenue growth in fixed-line data.
Lower prices on data due to competitive offerings continue to negate the volume growth experienced in this area.
Segment structure
The Group's reporting segments are business units that are separately managed. The Group consists of two reportable
segments. The fixed-line segment provides fixed-line access and data communications services through Telkom South Africa.
The mobile segment provides mobile voice services, data services and handset sales through 8•ta.
The "other" category is split geographically between International and South Africa. The International category provides
internet services outside South Africa, through the iWayAfrica Group. The South African category includes Trudon Group,
Swiftnet, Data Centre Operations and the Group's corporate centre.
Statement by Nombulelo Moholi, Group Chief Executive Officer:
Strategically, Telkom has reached a pivotal cross road. Telkom is engaged in constructive dialogue with its key stakeholders to
chart a successful way forward.
While we also anticipate government providing an understanding of the policy direction; we will remain focused on achieving
our current business strategy.
The results for the half-year to September 2012 reflect the on-going challenging environment for fixed-line incumbents.
Headline earnings from continuing operations declined 80.6% to 37.2 cents from 191.7 cents in the prior reporting period
largely due to the impact of the provision for the penalty handed down by the Competition Tribunal. Revenue declined
marginally by 1.5% to R16.1 billion with the pressure experienced in the traditional fixed-line business through lower fixed-
line traffic revenue being partly offset by the growth of mobile revenue. We are encouraged by the improvement in the
mobile business, which showed a 198.3% improvement in revenue largely as a result of increased ARPUs and number of
revenue generating subscribers.
Operating expenses for the Group increased 1.6% to R15.6 billion due to the provision for the penalty imposed by the
Competition Tribunal. Our margins declined from 26.9% to 22.5% compared to the prior reporting period. Our capital
structure remains strong with cash balances of R4,829 million and net debt of R2,700 million.
While the industry landscape remains challenging for the Group we are determined to strengthen our competitiveness,
improve our operating model and carefully manage our financial resources.
Our focus will remain on utilising internally generated funding for capital expenditure planned over the next year.
2. OPERATIONAL DATA
Six months ended
30 September
2012 2011 %
Fixed-line
ADSL subscribers(1) 841 831 795 419 5,8
Calling plan subscribers 843 491 797 827 5,7
Closer subscribers 814 888 767 121 6,2
Supreme call subscribers 28 603 30 706 (6,8)
WiMAX subscribers 3 168 3 364 (5,8)
Internet all access subscribers(2) 516 423 556 886 (7,3)
Fixed access lines ('000)(3) 3 894 4 073 (4,4)
Post-paid 2 465 2 513 (1,9)
Post-paid – ISDN channels 761 767 (0,8)
Pre-paid 571 675 (15,4)
Payphones 97 118 (17,8)
Fixed-line penetration rate (%)(4) 7,5 7,9 (5,1)
Revenue per fixed access line (ZAR) 2 413 2 402 0,5
Total fixed-line traffic (millions of minutes) 9 273 9 797 (5,3)
Managed data network sites 40 284 37 181 8,3
Telkom Company employees(5) 21 217 20 953 1,3
Fixed access lines per employee(5) 184 194 (5,4)
Telkom Mobile
Active subscribers(6) 1 495 083 993 764 50,4
Pre-paid 1 121 967 736 363 52,4
Post-paid 373 116 257 401 45,0
Base stations constructed 2 067 1 399 47,7
Employees(7) 436 267 63,3
ARPU (Rand)(6) 68,62 66,36 3,4
Pre-paid 23,12 21,65 6,8
Post-paid 169,30 286,09 (40,8)
Churn % – pre-paid 52 41 (26,8)
Other International
iWayAfrica
Active subscribers(8) 21 064 23 326 (9,7)
Employees8 433 494 (12,3)
Customer per employees(8) 49 47 3,5
Other South African
Trudon employees 527 528 (0,2)
Swiftnet employees 114 114 –
1. Excludes Telkom internal lines and includes business, consumer, corporate, government and wholesale customers.
2. Includes Telkom Internet ADSL, ISDN, WiMAX and dial-up subscribers.
3. Excludes Telkom internal lines.
4. Penetration rate is based on the 2011 Census population statistics. Prior year information has been restated.
5. Based on number of Telkom Company employees, excluding subsidiaries. Telkom Company headcount includes 346 temporary
(2011: Nil) workers that were appointed as permanent employees during the period.
6. Based on a subscriber who has participated in a revenue generating activity within the last 90 days. During the period we
changed the definition of a revenue generating activity to exclude recharge events as the revenue is deferred until actual usage
occurs. The comparative period's ARPU was restated accordingly.
7. Included in Telkom Company employees.
8. Excluding UUNet joint venture partner's subscribers and employees.
3. OPERATIONAL OVERVIEW
Voice revenue
Voice revenues declined 5.4% to R8,266 million as a result of lower minutes of use due to mobile substitution, migration
of customers to calling plans and, to a lesser extent, lower tariffs. Most categories of voice revenue declined and we expect
traditional voice revenue to continue declining.
Interconnection revenue
Interconnection revenue increased 1.1% to R843 million reflecting an increase in international interconnection tariffs. There
is a plethora of capacity in the international connectivity market and prices are expected to continue declining.
Broadband and data revenue
Total data revenue increased 3.0% to R5,210 million as a result of higher data sales, which were partly offset by lower margins.
ADSL subscribers increased 5.8% to 841,831 when compared to the 30 September 2011 reporting period. We are enabling
our target offering through high speeds and caps which include consistently greater value for the same price and an uncapped
offerings.
We have simplified and streamline our product offerings and communication. Additionally we offered the first converged
products to the market during July. We have taken steps to increase our retail footprint and to improve our billing systems.
Operating expenses
Operating expenditure increased 1.6% to R15,630 million. This was largely as a result of the provision for the penalty
handed down by the Competition Tribunal and the average annual salary increases of 6.5%. This was partially offset by
the R445 million goodwill impairment of iWayAfrica included in the comparative period and a decrease in payments to
other operators due to the decrease in mobile termination rates.
4. STRATEGIC FOCUS
Our strategy remains to:
- Lead in data and broadband and in Fixed Mobile Convergence;
- Grow Telkom Business revenue by diversifying the service portfolio;
- Building a successful mobile business;
- Regain market competitiveness in the consumer market;
- Consolidate our position as wholesaler of choice;
- Focus on profitable market segments and services; and
- Enhance operational efficiency.
It is against the above strategic imperatives that we wish to report back on the key business highlights during the past six
months to 30 September 2012:
Telkom Business highlights:
- Solid sales performance and healthy pipeline of deals;
- Continued excellence in project delivery and service levels to Corporate customers;
- Return to growth of data revenues;
- Launched FMC commercial bundles offering pre-packaged voice, data and combo deals; revised pricing on bundle
offers;
- Traction in IT and Cloud services portfolio;
- New fibre offers launched;
- Developed retention bundles at the low end of the broadband product base and repositioned ISP portfolio; and
- Steady progress made with the expansion of African Services capability.
Telkom Consumer highlights:
- Roll out of the 40 Telkom Express stores and 30 3rd Party retail channels;
- NGNEC pilot launched;
- Customer service experience improvements
- Flexible and Simplified Broadband service;
- Simplified customer interface processes;
- Resolving 85% of billing disputes within 3 days; and
- Simplified self-service portals (Internet; IVR; SMS).
Telkom Mobile highlights:
- Prepaid subscribers increased 52.4% to 1.1 million since September 2011;
- 2.2% market share (0.9% September 2011);
- Improved on net voice (65.4%) and data (93.6%) traffic volume;
- Improved product offerings: Prepaid offer (8•ta more), Unlimited voice and smartphone facelift bundles;
- Progress on innovation and first to market in areas such as:
- Unlimited voice;
- Google Freezone;
- Free Wi-Fi in cabs; and
- Data applications for Android devices.
Wholesale and Networks highlights
- Renewed focus on customer service delivery implementing geographical and customer service differentiation;
- Network transformation on track;
- First Telkom traffic successfully activated on WACS; and
- Strong growth in services provided to our Wholesale customers.
The above business highlights, demonstrate the actions taken by Telkom to execute on its strategic imperatives.
5. FINANCIAL PERFORMANCE
GROUP OPERATING REVENUE
Six months ended
30 September
In ZAR millions 2012 2011 %
Fixed-line 14 867 15 345 (3,1)
Mobile 898 301 198,3
Other International
iWayAfrica 185 175 5,7
Other South African
Trudon 600 639 (6,1)
Swiftnet 59 65 (9,2)
Data Centre Operations 691 695 (0,6)
Corporate centre 35 21 66,7
Eliminations (1 189) (854) 39,2
Total 16 146 16 387 (1,5)
Group operating revenue decreased by 1.5% to R16,146 million (30 September 2011: R16,387 million) in the six months ended
30 September 2012. The decrease is mainly due to lower fixed-line voice usage revenue, partially offset by an increase in mobile
revenue. The decrease in voice usage is mainly due to the continued substitution of fixed-line traffic by mobile traffic.
The increase in eliminations is mainly as a result of R257 million bulk minutes purchased by the fixed-line segment from the
Telkom mobile segment for the convergence strategy.
Fixed-line operating revenue
We have changed the fixed-line revenue presentation to align to internal business focus areas. Prior year numbers have been
restated to reflect the new presentation format.
Six months ended
30 September
In ZAR millions 2012 2011 %
Fixed-line revenue
Voice 8 266 8 738 (5,4)
Usage 4 408 4 909 (10,2)
Subscriptions 3 858 3 829 0,8
Interconnection 843 834 1,1
Domestic 292 311 (6,1)
International 551 523 5,4
Data 5 210 5 057 3,0
Data connectivity 2 761 2 657 3,9
Leased line facilities 1 160 1 143 1,5
Internet access and related services 798 791 0,9
Managed data network services 464 442 5,0
Multi-media services 27 24 12,5
Customer premises equipment sales and rentals 503 536 (6,2)
Sales 156 199 (21,6)
Rentals 347 337 3,0
Other 45 180 (75,0)
Total 14 867 15 345 (3,1)
Operating revenue from the fixed-line segment decreased by 3.1% to R14,867 million (30 September 2011: R15,345 million)
primarily due to lower voice usage revenue, partially offset by an increase in data revenue due to higher leased line revenue
received from 8•ta and growth in ADSL revenue.
Voice revenue decreased 5.4% to R8,266 million (30 September 2011: R8,738 million) largely as a result of lower usage
volumes mainly due to continued mobile substitution partially offset by higher subscriptions revenue due to tariff increases.
International interconnection revenue increased by 5.4% to R551 million (30 September 2011: R523 million) largely as
a result of higher tariffs on mobile international interconnection and switched hubbing, partially offset by lower volumes.
Domestic interconnection revenue decreased 6.1% primarily due to a decrease in volumes on mobile incoming calls.
Data revenue increased 3.0% to R5,210 million (30 September 2011: R5,057 million) mainly due to R173 million received
from our mobile business for leased lines (2011: R74 million), which is eliminated on consolidation and an increase in
volumes as a result of a 5.8% growth in our ADSL subscriber base.
GROUP OTHER INCOME
Six months ended
30 September
In ZAR millions 2012 2011 %
Fixed-line 111 109 1,8
Mobile – 51 –
Other International
iWayAfrica 7 4 75,0
Telkom International 27 10 170,0
Other South African
Trudon 14 20 (30,0)
Swiftnet 3 2 50,0
Corporate centre 76 101 (24,8)
Eliminations (74) (79) (6,3)
Total 164 218 (24,8)
Other income includes profit on the disposal of investments, property, plant and equipment and intangible assets, royalty
income as well as interest received from debtors. Mobile other income in the prior period relates to a donation of two base
station controllers received.
GROUP OPERATING EXPENSES
Six months ended
30 September
In ZAR millions 2012 2011 %
Employee expenses 4 738 4 542 (4,3)
Payments to other operators 2 458 2 653 7,4
Selling, general and administrative expenses 3 567 3 124 (14,2)
Service fees 1 472 1 476 0,3
Operating leases 442 397 (11,3)
Depreciation, amortisation, impairments and write-offs 2 953 3 190 7,4
Total 15 630 15 382 (1,6)
Group operating expenses increased by 1.6% to R15,630 million (30 September 2011: R15,382 million) in the six months
ended 30 September 2012, primarily due to the provision for the penalty handed down to Telkom by the Competition
Tribunal and the average annual salary increase of 6.5%. This was partially offset by the R445 million goodwill impairment
of iWayAfrica included in the comparative period and a decrease in payments to other operators due to the decrease in
mobile termination rates.
Operating expenditure contribution per segment
Six months ended
30 September
In ZAR millions 2012 2011 %
Fixed-line 12 283 11 710 (4,9)
Mobile 1 651 1 493 (10,6)
Other International
iWayAfrica 234 657 64,4
Telkom International 64 15 (326,7)
Other South African
Trudon 359 372 3,5
Swiftnet 58 58 –
Data Centre Operations 556 547 (1,6)
Corporate centre 1 667 1 415 (17,8)
Eliminations (1 242) (885) (40,3)
Total 15 630 15 382 (1,6)
Fixed-line, mobile and corporate centre's operating expenses are discussed in detail below.
The decrease in iWayAfrica's operating expenses is due to the R445 million impairment included in the prior period.
The increase in eliminations is mainly as a result of R257 million bulk minutes purchased by the fixed-line segment from the
Telkom mobile segment for the convergence strategy.
Fixed-line operating expenses
Six months ended
30 September
In ZAR millions 2012 2011 %
Employee expenses 3 597 3 492 (3,0)
Salaries and wages 2 969 2 815 (5,5)
Benefits 841 873 3,7
Workforce reduction expenses 6 6 –
Employee-related expenses capitalised (219) (202) (8,4)
Payments to other network operators 2 137 2 395 10,8
Payment to mobile operators 1 296 1 614 19,7
Payment to international operators 516 493 (4,7)
Data commitments 156 136 (14,7)
Payment to fixed-line operators 169 152 (11,2)
Selling, general and administrative expenses 2 127 1 701 (25,0)
Materials and maintenance 1 033 981 (5,3)
Marketing 312 210 (48,6)
Bad debts 117 91 (28,6)
Other 665 419 (58,7)
Service fees 1 615 1 562 (3,4)
Property management 696 645 (7,9)
Consultants and security 919 917 (0,2)
Operating leases 331 315 (5,1)
Buildings 89 79 (12,7)
Equipment 6 7 14,3
Vehicles 236 229 (3,1)
Depreciation, amortisation, impairments and write-offs 2 476 2 245 (10,3)
Depreciation 2 074 1 869 (11,0)
Amortisation 351 270 (30,0)
Write-offs 51 106 51,9
Total 12 283 11 710 (4,9)
Fixed-line expenditure increased 4.9% in the six months ended 30 September 2012, to R12,283 million (30 September 2011:
R11,710 million), primarily due to selling, general and administrative expenses, higher depreciation, and employee expenses,
partially offset by lower payments to mobile operators.
Employee expenses increased by 3.0% in the six months ended 30 September 2012, primarily due to the average annual
salary increase of 6.5%.
Payments to mobile operators decreased 19.7% largely due to the reduction in mobile termination rates.
Selling, general and administrative expenses increased by 25.0% primarily as a result of R257 million bulk minutes
purchased from Telkom mobile for the convergence strategy, higher maintenance expenditure on a programme to integrate
independent business systems, higher marketing due to more sponsorships and higher bad debts due to the reversal
of the provision, in the prior year, of certain wholesale debtors. Internal payments to Telkom mobile are eliminated on
consolidation.
Service fees increase by 3.4% primarily attributable to higher property utility costs driven by increased electricity tariffs.
Depreciation increased 10.3% as a result of the review of the useful lives of property, plant and equipment given the current
focus on the modernisation of the network.
Mobile operating expenses
Six months ended
30 September
In ZAR millions 2012 2011 %
Employee expenses 152 90 (68,9)
Payments to other network operators 191 169 (13,0)
Selling, general and administrative expenses 789 984 19,8
Service fees 292 136 (114,7)
Operating leases 61 39 (56,4)
Depreciation, amortisation, impairments and write-offs 166 75 (121,3)
Total 1 651 1 493 (10,6)
Employee expenses increased as a result of a 63.3% increase in headcount to 436 employees from 267 employees.
The increase in payments to other operators is driven by an increase in traffic to other networks.
Selling, general and administrative expenses decreased 19.8% as a result of a decrease in sales and acquisition cost as we
refocus our strategy.
Operating leases increased 56.4% as a result of an increase in site acquisitions.
Depreciation, amortisation, impairments and write-offs increased as a result of the additional investment in the mobile network.
Corporate centre operating expenses
Six months ended
30 September
In ZAR millions 2012 2011 %
Employee expenses 625 628 0,5
Selling, general and administrative expenses 550 149 (269,1)
Service fees 374 464 19,4
Operating leases 12 9 (33,3)
Depreciation, amortisation, impairments and write-offs 106 165 35,8
Total 1 667 1 415 (17,8)
Selling, general and administrative expenses increased significantly due to the inclusion of a provision for the penalty imposed
by the Competition Tribunal.
Service fees decreased 19.4% as a result of a lower spend on consulting fees during the period.
EBITDA PER SEGMENT (before eliminations)
Six months ended
30 September
In ZAR millions 2012 2011 %
Fixed-line 5 171 5 989 (13,7)
EBITDA margin (%) 34,8 39,0
Mobile (587) (1 066) 44,9
EBITDA margin (%) (65,4) (354,2)
Other International (57) (17) (235,3)
EBITDA margin (%) (30,8) (9,7)
Other South African (852) (446) (91,0)
EBITDA margin (%) (61,5) (31,4)
Eliminations (42) (47) 10,6
Total 3 633 4 413 (17,7)
INVESTMENT INCOME
Investment income consists of interest received on short-term investments and bank accounts. Investment income increased
by 34.2% to R149 million (30 September 2011: R111 million) as a result of higher cash balances.
FINANCE CHARGES AND FAIR VALUE MOVEMENTS
Finance charges include interest paid on local and foreign borrowings, amortised discounts on bonds and commercial
paper bills, fair value gains and losses on financial instruments and foreign exchange gains and losses on foreign
currency denominated transactions and balances. Foreign exchange and fair value gains decreased 47.8% to R60 million
(30 September 2011: R115 million). Lower exchange rate gains were incurred on the mark to market valuation of forward
exchange contracts as a result of the sharper weakening of the Rand against major currencies in the prior period. This was
partially offset by a higher fair value gain on assets held by the Cell Captive, a special purpose vehicle used to fund the post-
retirement medical aid liability. The interest expense decreased 9.8% to R342 million (30 September 2011: R379 million)
mainly as a result of lower interest rates.
TAXATION
The consolidated tax expense from continuing operations decreased to R325 million (30 September 2011: R568 million).
The consolidated effective tax rate for the six months ended 30 September 2012 was 59.4% (30 September 2011: 53.1%).
The high effective tax rate is mainly as a result of the non-deductable provision for competition tribunal penalty in the
current period and non-deductable impairment of the loan to Multi-Links and impairment of the investment and loans to
iWayAfrica in the prior period.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
The Group's capital structure remains strong. Debt, after financial assets and liabilities, from continuing operations decreased
by 41.4% to R2,700 million from R4,605 million as at 30 September 2011 resulting in a debt to EBITDA ratio of 0.4 times
at 30 September 2012 and 0.5 times at 30 September 2011. On 30 September 2012, the Group had cash balances of
R4,829 million (30 September 2011: R2,580 million).
The Group's current assets exceeded current liabilities by R2.3 billion (30 September 2011: R59 million).
FREE CASH FLOW
Six months ended
30 September
In ZAR millions 2012 2011 %
Cash generated from operations before dividends paid 3 595 2 987 20,4
Add back: Multi-Links operating cash flows – 75 (100,0)
Less: Cash flows from investing activities (2 085) (1 629) 28,0
Add back: Multi-Links cash flows from investing activities – 21 (100,0)
Free cash flow 1 510 1 454 3,9
Free cash flow increased 3.9% in the period despite lower EBITDA and higher capital expenditure. This is mainly as a result
of higher non-cash expenditure.
GROUP CAPITAL EXPENDITURE
Group capital expenditure which includes spend on intangible assets, increased by 17.6% to R2,123 million
(30 September 2011: R1,805 million) and represents 13.1% of Group operating revenue (30 September 2011: 11.0%).
Six months ended
30 September
In ZAR millions 2012 2011 %
Fixed-line 1 496 1 152 (29,9)
Mobile 521 558 6,6
Other International
iWayAfrica 2 4 50,0
Other South African
Trudon 48 44 (9,1)
Swiftnet 14 23 39,1
Data Centre Operations 14 4 (250,0)
Corporate centre 28 20 (40,0)
Total 2 123 1 805 (17,6)
Fixed-line capital expenditure
Six months ended
30 September
In ZAR millions 2012 2011 %
Baseline 956 747 (28,0)
Network evolution 344 237 (45,1)
Sustainment 89 57 (56,1)
Effectiveness and efficiency 14 64 78,1
Support 80 35 (128,6)
Regulatory and other 13 12 (8,3)
Total 1 496 1 152 (29,9)
Fixed-line capital expenditure, which includes spending on intangible assets, increased by 29.9% to R1,496 million (2011:
R1,152 million) and represents 10.1% of fixed-line revenue (September 2011: 7.5%).
Baseline capital expenditure of R956 million (September 2011: R747 million) was largely for the deployment of technologies
to support the growing data services business, links to the mobile cellular operators and expenditure for access line deployment
in selected high growth commercial and business areas. The increased expenditure for the period can be attributed to growth
in the IP Network and Customer Specific Solutions.
Expenditure on network evolution of R344 million (September 2011: R237 million) was mainly for the pilot phase rollout
of the Next Generation Network to modernise the legacy voice network and to provide high speed ADSL service in selected
areas and address the associated operational and business support systems.
The sustainment category expenditure of R89 million (September 2011: R57 million) was largely for the replacement
of obsolete power systems as well as the replacement and modernisation of the access and core network.
The decrease in the effectivenesss and efficiency category was mainly due to expenditure on performance management
systems in the prior period not recurring.
The support capital expenditure of R80 million (September 2011: R35 million) is mainly for provision of new buildings and
building extensions in support of network growth and for the compliance upgrading of existing equipment buildings, including
the associated AC power and air-conditioning.
The expenditure on regulatory requirements of R13 million (September 2011: R12 million) is primarily to institute regulatory
changes to customer-facing functions.
TABLE OF CONTENTS
Index
Condensed consolidated interim statement of profit or loss and other comprehensive income 14
Condensed consolidated interim statement of financial position 15
Condensed consolidated interim statement of changes in equity 16
Condensed consolidated interim statement of cash flows 17
Notes to the condensed consolidated interim financial statements 18
Auditors' review report
Our auditors, Ernst & Young Inc. have reviewed the condensed consolidated interim financial statements. The unmodified
review report is available for inspection at the Company's registered office.
Board approval
The condensed consolidated interim financial statements were authorised for issue by the Board of Directors on
19 November 2012.
Preparer and supervisor of annual financial statements
These condensed consolidated interim financial statements were prepared by Mrs Dashni Sinivasan (Executive: Statutory
Reporting) and supervised by Mr Robin Coode (Group Executive: Accounting Services).
Condensed consolidated interim statement
of profit or loss and other comprehensive income
for the six months ended 30 September 2012
Reviewed Reviewed
30 September 30 September
2012 2011
Notes Rm Rm
Continuing operations
Total revenue 4 16 454 16 701
Operating revenue 16 146 16 387
Other income 164 218
Operating expenses 15 630 15 382
Employee expenses 5.1 4 738 4 542
Payments to other operators 5.2 2 458 2 653
Selling, general and administrative expenses 5.3 3 567 3 124
Service fees 5.4 1 472 1 476
Operating leases 5.5 442 397
Depreciation, amortisation, impairment and write-offs 5.6 2 953 3 190
Results from operating activities 680 1 223
Investment income 149 111
Finance charges and fair value movements 282 264
Interest 342 379
Foreign exchange and fair value movement (60) (115)
Profit before taxation 547 1 070
Taxation 6 325 568
Profit from continuing operations 222 502
Loss from discontinued operations 7 – (269)
Profit for the period 222 233
Other comprehensive income
Items that will be reclassified subsequently
to profit and loss
Exchange differences on translating foreign operations 10 50
10 50
Items that will not be reclassified subsequently
to profit and loss
Defined benefit plan actuarial losses (30) (44)
Defined benefit plan asset limitations (24) 3
Income tax relating to items that will not be
reclassified to profit and loss 15 11
(39) (30)
Other comprehensive (loss)/income
for the period, net of taxation 8 (29) 20
Total comprehensive income for the period 193 253
Profit attributable to:
Owners of Telkom 154 166
Non-controlling interest 68 67
Profit for the period 222 233
Total comprehensive income attributable to:
Owners of Telkom 125 186
Non-controlling interest 68 67
Total comprehensive income for the period 193 253
Total operations
Basic and diluted earnings per share (cents) 9 30.2 32.5
Continuing operations
Basic and diluted earnings per share (cents) 9 30.2 85.2
Condensed consolidated interim statement
of financial position
at 30 September 2012
Reviewed Audited
30 September 31 March
2012 2012
Notes Rm Rm
ASSETS
Non-current assets 41 484 42 362
Property, plant and equipment 35 405 36 155
Intangible assets 3 429 3 555
Investments 2 301 2 260
Deferred expenses 46 47
Finance lease receivables 234 244
Deferred taxation 11 8 53
Other financial assets 12 61 48
Current assets 11 809 10 206
Inventories 1 065 993
Income tax receivable 35 26
Current portion of finance lease receivables 131 128
Trade and other receivables 5 652 5 696
Other financial assets 12 4 362 2 195
Cash and cash equivalents 13 564 1 168
Total assets 53 293 52 568
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 29 831 29 707
Share capital 5 208 5 208
Treasury shares (771) (771)
Non-distributable reserves 1 968 1 887
Retained earnings 23 426 23 383
Non-controlling interests 396 434
Total equity 30 227 30 141
Non-current liabilities 13 514 12 718
Interest-bearing debt 15 6 123 5 897
Other financial liabilities 34 26
Employee-related provisions 16 5 047 4 880
Non-employee-related provisions 16 602 36
Deferred revenue 1 166 1 132
Deferred taxation 11 542 747
Current liabilities 9 552 9 709
Trade and other payables 4 325 4 291
Shareholders for dividend 22 23
Current portion of interest-bearing debt 15 1 433 1 289
Current portion of employee-related provisions 16 1 460 1 652
Current portion of non-employee-related provisions 16 139 240
Current portion of deferred revenue 1 892 1 995
Income tax payable 184 87
Other financial liabilities 94 129
Credit facilities utilised 13 3 3
Total liabilities 23 066 22 427
Total equity and liabilities 53 293 52 568
Condensed consolidated interim statement
of changes in equity
for the six months ended 30 September 2012
Reviewed Reviewed
30 September 30 September
2012 2011
Rm Rm
Balance at 1 April 30 141 30 022
Attributable to owners of Telkom 29 707 29 635
Non-controlling interests 434 387
Total comprehensive income for the period 193 253
Profit for the period 222 233
Other comprehensive income (29) 20
Exchange differences on translating foreign operations 10 50
Net defined benefit plan losses and asset limitations (39) (30)
Acquisition of subsidiaries and non-controlling interests (2) –
Dividend paid* (105) (814)
Balance at 30 September 30 227 29 461
Attributable to owners of Telkom 29 831 29 087
Non-controlling interests 396 374
* Dividend paid to the non-controlling interests of the Trudon Group.
Condensed consolidated interim statement
of cash flows
for the six months ended 30 September 2012
Reviewed Reviewed
30 September 30 September
2012 2011
Rm Rm
Cash flows from operating activities 3 490 2 175
Cash receipts from customers 16 146 15 914
Cash paid to suppliers and employees (12 161) (12 553)
Cash generated from operations 3 985 3 361
Interest received 243 311
Finance charges paid (243) (413)
Taxation paid (390) (272)
Cash generated from operations before dividend paid 3 595 2 987
Dividend paid (105) (812)
Cash flows from investing activities (2 085) (1 629)
Proceeds on disposal of property, plant and equipment
and intangible assets – 10
Additions to property, plant and equipment and intangible assets (2 085) (1 639)
Cash flows from financing activities (2 007) (1 046)
Loans raised 2 012 851
Loans repaid (1 715) (2 079)
Finance lease capital repaid (93) (87)
(Increase)/decrease in repurchase agreements** (2 272) 561
Decrease/(increase) in net derivatives 61 (292)
Net decrease in cash and cash equivalents (602) (500)
Net cash and cash equivalents at 1 April 1 165 1 773
Effect of foreign exchange rate differences (2) (6)
Net cash and cash equivalents at end of period* 561 1 267
* For September 2011 cash flow activities on discontinued operations refer to note 7.
** Repurchase agreements which have a short-term maturity averaging between 7 and 21 days form part of other financial
assets. The investment was made to take advantage of favourable interest rate. Refer to note 12. Including repurchase
agreements, cash and cash equivalents would have been R2,833 million (2011: R706 million).
Notes to the condensed consolidated
interim financial statements
for the six months ended 30 September 2012
1. Corporate information
Telkom SA SOC Limited (Telkom) is a company incorporated and domiciled in the Republic of South Africa (South
Africa) whose shares are publicly traded. The main objective of Telkom, its subsidiaries, associates and joint ventures
(the Group) is to supply telecommunication, broadcasting, multimedia, technology, information and other related
information technology services to the general public, as well as mobile communication services, in South Africa and
certain other African countries.
2. Basis of preparation and accounting policies
Basis of preparation
The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim
Financial Reporting and in compliance with the Listings Requirements of the JSE Limited and the South African
Companies Act, 2008.
The condensed consolidated interim financial statements are presented in South African Rand, which is the Group's
functional currency. All financial information presented in Rand has been rounded off to the nearest million.
The condensed consolidated interim financial statements are prepared on the historical cost basis, with the
exception of certain financial instruments initially (and sometimes subsequently) measured at fair value. The results
of the interim period are not necessarily indicative of the results for the entire year, and these reviewed financial
statements should be read in conjunction with the audited financial statements for the year ended 31 March 2012.
The preparation of the condensed consolidated interim financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Although these estimates are based on management's best knowledge of current events
and actions that the Group may undertake in the future, actual results may differ from those estimates.
Significant accounting judgements, estimates and assumptions
In preparing these condensed consolidated interim financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent
with those applied to the consolidated financial statements for the year ended 31 March 2012.
Significant accounting policies
The condensed consolidated interim financial statements have been prepared in accordance with the accounting
policies adopted in the Group's last annual financial statements for the year ended 31 March 2012, except for the
adoption of the amendments and new standards described below.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these
condensed consolidated interim financial statements.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the part of IAS 27 Consolidated and Separate Financial Statements, that deals with consolidated
financial statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 builds on existing principles
by identifying the concept of control as the determining factor in whether an entity should be included within the
consolidated financial statements of the parent company. The standard provides additional guidance to assist in
the determination of control where this is difficult to assess. Management assessed whether or not the Group has
control over its investees in accordance with the new definition of control and the related guidance set out in IFRS 10.
The standard does not have an impact on the Group as entities controlled by Telkom have not changed as a result of
adopting IFRS 10.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-Monetary Contributions
by Venturers. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be
classified. There are two types of joint arrangements under IFRS 11: joint operations and joint ventures. These two
types of joint arrangements are distinguished by parties' rights and obligations under the arrangements. Management
reviewed and assessed the legal form and terms of the contractual arrangements in relation to the Group's investments
in joint arrangements. The application of IFRS 11 has changed the classification of the Group's investment in the
Number Portability Company, which was classified as a jointly controlled entity under the previous standard and was
accounted for using the equity method. Under IFRS 11, the Number Portability Company is classified as an associate
and will continue to be accounted for using the equity method.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 specifies the minimum disclosures that are applicable to entities that have interests in subsidiaries, joint
arrangements, associates or unconsolidated structured entities. The objective of IFRS 12 is that entities should disclose
information that helps users of financial statements evaluate the nature of and risks associated with its interests
in other entities and the effects of those interests on their financial statements. The adoption of the new standard will
result in more extensive disclosures at year-end reporting.
IFRS 13 Fair Value Measurement
IFRS 13 provides a new definition of fair value and a single source of guidance for (almost) all fair value measurements
used in IFRS financial statements. The proposed disclosures increase transparency about fair value measurements,
including the valuation techniques and inputs used to measure fair value. The standard will have a potential
measurement impact on non-recurring non-financial assets and liabilities that are measured at fair value less cost
to sell (i.e. IFRS 5 and IAS 36) and fair value disclosure impact for IFRS 5. The impact will be assessed as soon as IFRS 5
and IAS 36 are triggered. The Group is already complying with the enhanced disclosures.
IAS 1 (amendment) Presentation of Financial Statements
The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a
single continuous statement or in two separate but consecutive statements. The amendments require additional
disclosures to be made in the other comprehensive income section such that items of other comprehensive income
are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss and (b) items
that might be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of
other comprehensive income is required to be allocated on the same basis. Entities also have the option of changing
the title of the ‘Statement of comprehensive income' to ‘Statement of profit or loss and other comprehensive income'.
Telkom opted to change the name accordingly. The amendments will result in a change in presentation but will have
no impact on the recognition or measurement of items in the financial statements. The relevant disclosures are
provided in the Statement of profit or loss and other comprehensive income.
The amendment clarifies the difference between voluntary additional comparative information and the minimum
required comparative information. The requirements for comparative information have been clarified in two
areas. Firstly when an entity voluntarily presents comparative information in excess of the minimum requirements,
the additional comparative information disclosed need not represent a full set of financial statements, but must
include notes. Secondly, when there is a change in accounting policy, retrospective restatement or reclassification,
an entity must present a third statement of financial position at the beginning of the preceding period, but need
not present notes for the opening statement (of financial position). The Group will apply the amendment when
appropriate.
IAS 27 (amendment) Separate Financial Statements
The revised IAS 27 supersedes the previous IAS 27 (2008). The standard requires an entity that prepares separate
financial statements, to account for the investments in subsidiaries, joint ventures and associates either at cost or in
accordance with IFRS 9. The adoption of the standard will not have an impact on the Group as the Group already
accounts for all investments either at cost or in accordance with IAS 39.
IAS 28 (amendment) Investments in Associates and Joint Ventures
The main purpose of revising the standard was to include consequential amendments of issuing a new standard,
IFRS 11 Joint Arrangements, which replaced IAS 31 Interests in Joint Ventures. The standard outlines how to apply,
with certain limited exceptions, the equity method to investments in associates and joint ventures. The standard
also defines an associate by reference to the concept of ‘significant influence', which requires power to participate
in financial and operating policy decisions of the investee but not joint control or control of those policies. As
a consequence of the amendment the Group changed the classification of the Number Portability Company from
Joint Venture to Associate. All Joint Ventures and Associates were previously accounted for according to the equity
method and this will not change.
Circular 3/2012 Headline Earnings
Two amendments were made to Circular 3/2009 Headline Earnings and consequently a replacement circular, Circular
3/2012 Headline Earnings, was issued. The first amendment made to the rule table ensures that the tax effects
of items excluded from headline earnings are also excluded from the calculation of headline earnings. The second
amendment relates to the compensation received from third parties for items of property, plant and equipment
that were impaired, lost or given up. The amendment ensures that the treatment of this compensation is excluded
from the calculation of headline earnings in order to achieve consistency with the manner in which the loss was treated
for headline earnings. The first amendment is immaterial on the Group. The Group self insures losses to a certain
maximum value. Compensation for losses from third parties is not material in the Group financial statements
The following new standards, amendments to standards and interpretations have been adopted and do not
have a material impact on the Group:
IFRS 1 Severe Hyperinflation – Amendments regarding severe hyperinflation provide guidance for entities emerging
from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial
statements for the first time (effective 1 July 2011).
IFRS 1 Removal of Fixed Dates for First-time Adopters. The amendments regarding the removal of fixed dates provide
relief to first-time adopters of IFRSs from reconstructing transactions that occurred before their date of transition to
IFRSs (effective 1 July 2011).
IFRS 7 Financial Instruments Disclosures – Amendments enhancing disclosures about transfers of financial assets
(effective 1 July 2011).
IAS 12 Income Taxes – Limited scope amendment (recovery of underlying assets) (effective 1 January 2012).
Standards and interpretations in issue not yet adopted and not yet effective
The new standards, amendments to standards and interpretations in issue have not yet been adopted and not
yet effective. All standards are effective for annual periods beginning on or after the stated effective date.
IFRS 7 Financial Instruments Disclosures – Amendments enhancing disclosures about offsetting of financial assets
and financial liabilities (effective 1 January 2013).
IFRS 7 Financial Instruments Disclosures – Amendments requiring disclosures about the initial application of IFRS 9
(effective 1 January 2015).
IFRS 9 Financial Instruments – Classification and measurement of financial assets and financial liabilities (effective
1 January 2015).
IAS 16 Property, Plant and Equipment – Classification of service equipment (effective 1 January 2013).
IAS 19 Employee Benefits (effective 1 January 2013).
IAS 32 Financial Instruments: Presentation – Amendments to clarify tax effect of distribution to holders of equity
instruments (effective 1 January 2013).
IAS 32 Financial Instruments: Presentation – Amendments to application guidance on the offsetting of financial
assets and financial liabilities (effective 1 January 2014).
IAS 34 Interim Financial Reporting – Interim financial reporting and segment information for total assets and total
liabilities (effective 1 January 2013).
3. Segment information
The Group's reporting segments are business units that are separately managed.
The Executive Committee assesses the performance of the operating segments based on a measure of operating profit.
Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury
function, which manages the cash position of the Group.
The Group consists of two reportable segments, namely Telkom Fixed-line and Telkom Mobile.
The Telkom Fixed-line segment provides fixed-line access, fixed-mobile and data communications services through
Telkom.
The Telkom Mobile segment provides mobile voice services, data services and handset sales through 8•ta.
The Other category is a reconciling item which is split geographically between International and South Africa.
The International category provides internet services outside South Africa, through the iWayAfrica Group.
The South African category includes the Trudon Group, Swiftnet, Data Centre Operations and the Group's Corporate
Centre.
30 September 30 September
2012 2011
Rm Rm
Consolidated operating revenue 16 146 16 387
Telkom Fixed-line 14 867 15 345
Telkom Mobile 898 301
Other 1 570 1 595
International 185 175
South African 1 385 1 420
Elimination of inter-segmental revenue (1 189) (854)
Consolidated operating profit 680 1 668
Telkom Fixed-line* 2 695 3 744
Telkom Mobile (753) (1 141)
Other (1 241) (887)
International (79) (38)
South African (1 162) (849)
Elimination of inter-segmental transactions (21) (48)
Reconciliation of operating profit, profit before tax
and discontinued operations:
Adjusted EBIT for reportable segments 680 1 668
Impairment of goodwill and property, plant and equipment – (445)
Operating profit 680 1 223
Investment income 149 111
Finance charges and fair value movement (282) (264)
Profit before taxation and discontinued operations 547 1 070
* Certain selling, general and administrative expenses for the prior period were reclassified from the fixed-line to the
mobile segment.
30 September 30 September
2012 2011
Rm Rm
4. Total revenue 16 454 16 701
Operating revenue 16 146 16 387
Other income (excluding profit on disposal of property,
plant and equipment and intangible assets) 159 203
Investment income 149 111
Operating revenue decreased mainly due to the reduction
in fixed-line voice traffic revenue partly offset by an increase
in mobile revenue.
5. Operating expenses 15 630 15 382
5.1 Employee expenses 4 738 4 542
The increase in employee expenses is mainly due to the
average salary increase of 6.5% as agreed with the unions
for the current financial year.
5.2 Payments to other operators 2 458 2 653
The decrease in payment to other operators is mainly due
to the reduction of mobile termination rates.
5.3 Selling, general and administrative expenses* 3 567 3 124
Selling, general and administrative expenses increased mainly
as a result of an increase in the provision for certain legal
matters and Next Generation Network (NGN) sub-contractors
costs and higher bad debts offset partly by lower mobile
direct costs.
* Included in selling, general and administrative expenses
is write-down of inventories to the value of R68 million
(September 2011: R51 million).
5.4 Service fees 1 472 1 476
5.5 Operating leases 442 397
Operating leases increased as a result of annual contractual
escalations and an increase in vehicle lease tariffs.
5.6 Depreciation, amortisation, impairment and write-offs 2 953 3 190
Depreciation of property, plant and equipment 2 461 2 251
Amortisation of intangible assets 436 339
Impairment of property, plant and equipment and
intangible assets – 445
Write-offs of property, plant and equipment and
intangible assets 56 155
The increase in depreciation is due mainly to the review
of the useful lives of property, plant and equipment, given
the current focus on the modernisation of the network.
The increase in amortisation was mainly due to an acceleration
on system software.
The impairment charge in the prior year relates to the
iWayAfrica Group goodwill.
The decrease in write-offs is due to the scrapping of assets
in the prior period due to technical obsolesence.
Notes to the condensed consolidated
interim financial statements (continued)
for the six months ended 30 September 2012
30 September 30 September
2012 2011
Rm Rm
6. Taxation 325 568
South African normal company taxation 470 536
Deferred taxation (145) (38)
Secondary Taxation on Companies (STC) – 69
Foreign taxation – 1
The decrease in deferred taxation is mainly due to the shorter
taxation write-off periods on property, plant and equipment.
The decrease in STC is due to no dividend being paid during
the period. The new withholding taxation on dividends is
effective for dividends declared on or after 1 April 2012
at a rate of 15%.
7. Discontinued operations
Multi-Links Telecommunications Limited (Multi-Links)
On 26 June 2011 the Telkom Board made a decision to sell
the entire issued share capital of Multi-Links to HIP Oils
Topco Limited. The Multi-Links business was classified
as held for sale on 26 June 2011. Multi-Links was disposed
of on 3 October 2011.
Analysis of the results of discontinued operations:
Revenue* – 159
Expenses* – (428)
Loss before taxation of discontinued operations – (269)
Taxation – –
Loss after taxation of discontinued operations – (269)
Pre-tax loss recognised on the re-measurement of assets
of disposal group to fair value less costs to sell** – –
Loss for the year from discontinued operations – (269)
* Revenue comprises operating revenue, other income
and investment income. Expenses comprises operating
expenses, finance charges and impairment of R198 million
in the prior year.
** The carrying amount and fair value less cost to sell are both
negative, thus limited to nil.
The net cash flows attributable to the operating, investing
and financing activities of discontinued operations
Operating cash flows – (75)
Investing cash flows – (21)
Financing cash flows – 143
Total cash inflow – 47
30 September 30 September
2012 2011
Rm Rm
8. Taxation effects of other comprehensive income
Taxation effects relating to each component of other
comprehensive income:
Items that will be reclassified subsequently
to profit and loss
Exchange differences on translating foreign operations 10 50
Net foreign currency translation differences for
foreign operations 10 50
Items that will not be reclassified subsequently
to profit and loss
Defined benefit plan actuarial losses (30) (44)
Taxation effect of defined benefit plan actuarial losses 8 12
Net defined benefit plan actuarial losses (22) (32)
Defined benefit plan asset limitations (24) 3
Taxation effect of defined benefit plan asset limitations 7 (1)
Net defined benefit plan asset limitations (17) 2
Other comprehensive (loss)/income for the period
before taxation (44) 9
Taxation effect of other comprehensive income
for the period 15 11
Other comprehensive (loss)/income for the period
net of taxation (29) 20
9. Earnings per share
Total operations
Basic and diluted earnings per share (cents) 30.2 32.5
Headline earnings and diluted headline earnings
per share (cents) 37.2 177.8
Continuing operations
Basic and diluted earnings per share (cents) 30.2 85.2
Headline earnings and diluted headline earnings
per share (cents) 37.2 191.7
Discontinued operations
Basic and diluted loss per share (cents) – (52.7)
Headline loss and diluted headline loss per share (cents) – (13.9)
Reconciliation of weighted average number of
ordinary shares:
Ordinary shares in issue 520 783 900 520 783 900
Weighted average number of treasury shares (10 190 084) (10 145 611)
Weighted average number of shares outstanding 510 593 816 510 638 289
Reconciliation of diluted weighted average number
of ordinary shares:
Diluted weighted average number of shares outstanding 510 593 816 510 638 289
Total operations
Reconciliation between earnings and headline earnings:
Profit attributable to equity holders of Telkom 154 166
Adjustments:
Profit on disposal of property, plant and equipment
and intangible assets (5) (15)
Impairment loss on property, plant and equipment
and intangible assets – 643
Write-offs of property, plant and equipment
and intangible assets 56 155
Taxation effects (15) (41)
Headline earnings 190 908
Notes to the condensed consolidated
interim financial statements (continued)
for the six months ended 30 September 2012
30 September 30 September
2012 2011
Rm Rm
9. Earnings per share (continued)
Continuing operations
Reconciliation between earnings and headline earnings:
Profit from continuing operations 222 502
Non-controlling interest (68) (67)
Earnings from continuing operations attributable to
equity holders of Telkom 154 435
Profit on disposal of property, plant and equipment
and intangible assets (5) (15)
Impairment loss on property, plant and equipment
and intangible assets – 445
Write-offs of property, plant and equipment
and intangible assets 56 155
Taxation effects (15) (41)
Headline earnings 190 979
Discontinued operations
Reconciliation between earnings and headline earnings:
Loss from discontinued operations attributable to
equity holders of Telkom – (269)
Impairment loss on property, plant and equipment
and intangible assets – 198
Headline loss – (71)
Dividend per share (cents) – 145,0
The calculation of dividend per share is based on dividends of RNil million (30 September 2011: R740 million
declared on 10 June 2011) and a number of ordinary shares on the date of dividend declaration of 510,593,816
(30 September 2010: 510,638,289). The reduction in the number of shares represents the number of treasury shares
held on date of payment.
The ordinary dividend has been considered with reference to Telkom's current and expected future challenges,
performance, debt and cash flow levels. The Board has decided that it is prudent to allow for more internally-generated
funding for the capital expenditures planned and has thus not declared a dividend. This will better position Telkom
to weather uncertainties as we advance our value building strategy.
30 September 31 March
2012 2012
Rm Rm
10. Capital additions and disposals
Property, plant and equipment 1 801 3 892
Additions 1 806 4 022
Disposals (5) (130)
Intangible assets 316 813
Additions 317 813
Disposals (1) –
The capital expenditure for the six months was largely
due to the deployment of the Next Generation Network,
mobile cellular services and baseline technologies.
30 September 31 March
2012 2012
Rm Rm
11. Deferred taxation (534) (694)
Deferred tax assets 8 53
Deferred tax liabilities 542 747
The deferred taxation liability mainly decreased due
to the shorter taxation write-off periods on property,
plant and equipment.
12. Other financial assets and liabilities
Non-current other financial assets 61 48
Total other financial assets 4 423 2 243
Held-to-maturity
Repurchase agreements 4 281 2 009
At fair value through profit or loss 142 234
Forward exchange contracts 74 193
Cross-currency swaps 68 41
Less: Current portion of other financial assets 4 362 2 195
Held-to-maturity
Repurchase agreements 4 281 2 009
At fair value through profit or loss
Forward exchange contracts 74 186
Cross-currency swaps 7 –
Repurchase agreements
Telkom manages a portfolio of repurchase agreements
with a view to generating additional investment income
on the favourable interest rates provided by
these transactions.
13. Net cash and cash equivalents 561 1 165
Cash shown as current assets 564 1 168
Cash and bank balances 159 713
Short-term deposits 405 455
Credit facility utilised (3) (3)
The decrease in cash and bank balances and short-term
deposits is mainly due to the repayment of the TL12 bond
of R1,060 million during the period partly offset by the
refinancing of Commercial Paper bills.
14. Financial risk management
Exposure to continuously changing market conditions has made management of financial risk critical for the Group.
Treasury policies, risk limits and control procedures are continuously monitored by the Board of Directors through its
Audit Committee.
The condensed consolidated interim financial statements do not include all financial risk management information
and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual
financial statements as at 31 March 2012.
14.1 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group is
exposed to liquidity risk as a result of uncertain cash flows as well as capital commitments of the Group.
Liquidity risk is managed by the Group's Treasury team in accordance with policies and guidelines formulated by the
Group's Executive Committee. In terms of its borrowing requirements, the Group ensures that sufficient facilities exist
to meet its immediate obligations.
Compared to the 2012 financial year-end, there was no material change in the contractual undiscounted cash out-
flows for financial liabilities.
The carrying amounts of financial instruments approximate fair value, with the exception of interest-bearing debt (at
amortised cost) which has a fair value of R8,638 million.
14.2 Fair value of financial instruments
Valuation techniques and assumptions applied for the purposes of measuring fair value:
The estimated net fair values as at the reporting date, have been determined using available market information and
appropriate valuation methodologies as outlined below. This value is not necessarily indicative of the amounts that
the Group could realise in the normal course of business.
Derivatives are recognised at fair value. The fair values of derivatives are determined using quoted prices or, where such
prices are not available, discounted cash flow analysis is used. These amounts reflect the approximate values of the net
derivative position at the reporting date. The fair values of listed investments are based on quoted market prices.
The fair values of the borrowings disclosed below are based on quoted prices or, where such prices are not available,
the expected future payments discounted at market interest rates. As a result they differ from carrying values.
The fair value of receivables, bank balances, repurchase agreements and other liquid funds, payables and accruals,
approximate their carrying amount due to the short-term maturities of these instruments.
14.3 Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method.
The different levels have been defined as follows:
a) Quoted prices in active markets for identical assets or liabilities (level 1).
b) Inputs other than quoted prices, that are observable for the asset or liability (level 2).
c) Inputs for the asset or liability that are not based on observable market data (level 3).
The following table presents the Group's assets and liabilities that are measured at fair value:
30 September 2012 Total Level 1 Level 2 Level 3
Rm Rm Rm Rm
Assets measured at fair value
Forward exchange contracts 74 – 74 –
Investment in Cell Captive 2 286 403 1 883 –
Transfer to level 1* – 1 883 (1 883) –
Cross-currency swaps 68 – 68 –
Liabilities measured at fair value
Interest rate swaps (78) – (78) –
Forward exchange contracts (50) – (50) –
31 March 2012 Total Level 1 Level 2 Level 3
Rm Rm Rm Rm
Assets measured at fair value
Forward exchange contracts 193 – 193 –
Investment in Cell Captive 2 248 518 1 730 –
Cross-currency swaps 41 – 41 –
Liabilities measured at fair value
Interest rate swaps (50) – (50) –
Forward exchange contracts (105) – (105) –
The fair value of the financial assets and financial liabilities are sensitive to exchange rates and interest rates
movements. The Rand depreciated against major currencies during September 2012 resulting in unrealised fair value
gains. The volatility of the exchange rates also had an impact on the fair values of these instruments.
* During the six-month period ended 30 September 2012, the Investment in Cell Captive's Coronation Absolute
Portfolio with a market value of R1,883 million was transferred from fair value level 2 to fair value level 1. The reason
for transfer is that the prices for each of the assets held in the absolute portfolio was obtained from recognised market
sources.
30 September 31 March
2012 2012
Rm Rm
15. Interest-bearing debt
Non-current interest-bearing debt 6 123 5 897
Local debt 4 882 4 649
Foreign debt 497 478
Finance leases 744 770
Current portion of interest-bearing debt 1 433 1 289
Local debt 1 194 1 060
Foreign debt 170 148
Finance leases 69 81
Repayments/refinancing/new issue
The TL12 bond of R1,060 million was repaid on maturity
during the period with funding from commercial paper bills.
The current portion of interest-bearing debt is expected
to be repaid from available operational cash flows and/or
the issue of new debt instruments.
Management believes that sufficient funding facilities will be
available at the date of repayment/refinancing.
16. Provisions
Non-current portion of provisions 5 649 4 916
Employee related 5 047 4 880
Non-employee related 602 36
Current portion of provisions 1 599 1 892
Employee related 1 460 1 652
Non-employee related 139 240
The increase in non-current employee-related provisions is
mainly due to the increase in the post-retirement medical aid
provisions as a result of medical inflation. The increase in
the non-employee-related portion is attributable to the
provision for certain legal matters.
The reduction of the current portion of employee-related
provisions is attributable to a six-month bonus provision.
17. Commitments
Capital commitments authorised 5 391 7 480
Commitments against authorised capital expenditure 2 709 827
Authorised capital expenditure not yet contracted 2 682 6 653
Capital commitments are largely attributable to
purchases of property, plant and equipment and software
(included in intangible assets).
Included in commitments against authorised capital
expenditure and authorised capital expenditure not yet
contracted for is R1,898 million (31 March 2012: R546 million)
and R563 million (31 March 2012: R1,160 million),
respectively, which relates to Telkom Mobile.
Management expects these commitments to be financed
from internally-generated cash and borrowings.
18. Contingencies
The contingencies must be read in conjunction with 31 March 2012 Group annual financial statements (pages 267
to 269).
COMPETITION MATTERS
Telkom is a party to a number of legal proceedings filed by several parties with the South African Competition
Commission (CC) alleging anti-competitive practices described below. Some of the complaints filed at the CC have
been referred by the CC to the Competition Tribunal (CT) for adjudication.
Should the CT find that Telkom committed a prohibited practice as set out in the Competition Act for each of
the cases, the CT may impose a maximum administrative penalty of 10% of Telkom's annual turnover in the
Republic of South Africa and its exports from the Republic of South Africa during Telkom's preceding financial year.
However, Telkom has been advised by external legal counsel that the CT has to date not imposed the maximum
penalty on any offender in respect of the contraventions being accused of.
The South African Value Added Network Services (SAVA) and Omnilink
This matter relates to the complaints filed by SAVA on 7 May 2002 and a complaint filed by Omnilink (in August 2002)
against Telkom at the CC, regarding certain alleged anti-competitive practices by Telkom. These complaints were
referred by the CC to the CT on 24 February 2004.
The CT handed down its ruling on 7 August 2012 and found Telkom guilty of the refusal to provide essential facilities
to VANS licensees and of requiring or inducing customers of VANS not to deal with the VANS. The CT made no findings
as regards the complaint of exclusionary conduct. As regards the complaint of price discrimination, the CT found
no contravention by Telkom on the basis that the CC did not lead sufficient evidence to prove that Telkom's
conduct caused consumer harm. The CT imposed a penalty of R449 million on Telkom, 50% of which was payable
within six months of the order and the remainder within 18 months of the order. On 29 August 2012, Telkom filed
a notice of appeal against the CT's ruling and the CC filed a notice of cross-appeal on 11 September 2012. Telkom
is endeavouring to file the record of appeal by 27 November 2012, after which the Competition Appeal Court (CAC)
will allocate a date for hearing of the matter.
Internet Solutions (IS)
IS filed a complaint at the CC in December 2007 (which was dealt with by the CC as part of the Multiple Complaints
Referral referred to below) alleging certain anti-competitive practices by Telkom.
Certain parts of this complaint were referred to the CT by the CC and these are dealt with in the Multiple Complaints
Referral reported on below. The non-referred parts of the complaint were self-referred by IS. Telkom raised various
exceptions in relation to certain aspects of the IS self-referral. IS brought an amendment application which ostensibly
addressed Telkom's exceptions. This application was heard by the CT on 26 June 2012 and dismissed with costs by
the CT on 2 July 2012. In August 2012 IS filed a notice of appeal to the CAC against the CT's order.
Competition Commission Multiple Complaints Referral
The CC served a notice of motion on Telkom in October 2009, in which it referred complaints against Telkom
filed by MWEB and IS as well as the Internet Service Providers Association (ISPA), MWEB, IS and Verizon, respectively,
to the CT. The CC alleged certain anti-competitive practices by Telkom. The matter is set down for trial during
June 2013. Telkom and the CC are busy with preparations for trial and, in this regard, the discovery process is nearing
completion.
Phutuma Networks (Pty) Limited (Phutuma)
Telkom was informed by the CC that a complaint was filed by Phutuma at the CC wherein Phutuma alledges that,
"Telkom has contravened section 8(c) of the Competition Act, as amended, by abusing its dominant position in
engaging in anti-competitive conduct in the telegraphic and telex maritime services market by unilaterally awarding
these services to Network Telex". The CC non-referred the complaint on 28 June 2010. However, Phutuma self-
referred its complaint to the CT on 20 July 2010, alleging that Telkom engaged in an exclusionary act by appointing
Network Telex in 2007 without any formal procurement process. Telkom filed its answer in which it raised certain
preliminary points, and Phutuma filed its reply. Telkom's preliminary points were upheld by the CT on 2 March 2011
and Phutuma's self-referral was dismissed with costs. Phutuma appealed this decision to the CAC and the appeal was
heard on 28 May 2012. The parties are still awaiting a ruling from the CAC.
MATTERS BEFORE ICASA
Phutuma Networks (Pty) Limited (Phutuma)
Phutuma filed a complaint against Telkom at the Complaints and Compliance Committee of ICASA (CCC) in
February 2010. After various amendments to the complaint sheet, Phutuma filed a final complaint sheet which
consisted of six complaints. Telkom responded to this amended complaint sheet on 7 December 2011 and Phutuma
filed its reply thereto on 19 January 2012. The matter, has been set down for hearing before the CCC from 15 to
18 April 2013.
End-User and Service Charter Regulations
Allegations have been made at the CCC regarding Telkom's alleged non-compliance with the requirements of the
End-User and Service Charter regulations relating to the clearance of reported faults. A hearing has taken place and
the CCC has ruled that Telkom is not in breach of the regulations and recommend that ICASA review the regulations
which, as they stand, are not capable of implementation. Telkom, however, has already initiated administrative review
proceedings seeking to set-aside the applicability of the regulations.
Neotel (Pty) Limited (Neotel)
On 2 December 2011, the CCC notified Telkom of having received ICASA's referral of notification of dispute.
A dispute was lodged by Neotel that broadly relates to Telkom's alleged refusal to lease its unbundled local loop (LLU)
constituting a portion of Telkom's electronic communication network.
The CCC heard arguments from both parties in the above matter in May 2012. At the culmination of proceedings,
the CCC ruled that Neotel's request to access Telkom's local loop was a valid request and that Telkom's response to
the same was inadequate. However, the CCC also ruled that there currently exists no regulatory framework to
give practical effect to LLU. In the circumstance the CCC has ordered that Telkom and Neotel reconsider the issue
and revert to ICASA within three months and that ICASA consider the matter within the context of its December 2011
LLU determinations. Telkom is in the process of instituting High Court proceedings to interdict ICASA from
implementing the CCC order and further to have the CCC order reviewed and set aside.
SUPPLIER DISPUTE
Radio Surveillance Security Services (Pty) Limited (RSSS)
During September 2011 RSSS served two summons on Telkom for the sum of R215,661,865.88 (including VAT) and
R9,913,782.00 (including VAT), respectively. In the summons for R215,661,865.88 RSSS alleged that Telkom was
indebted to it for the rendering and upgrading of 440 alarm systems to be M3010 compliant. Telkom had previously
purchased the alarm systems from RSSS.
The claim for R9,913,782.00 related to rentals, monitoring and maintenance costs for alarm systems which were
rented and/or purchased by Telkom from RSSS. Telkom defended both summons. During November 2011 RSSS
withdrew both actions against Telkom in terms of a settlement agreement. Subsequent to the withdrawal of
action RSSS disputed the grounds of the settlement agreement and reissued summons for the same amounts in
December 2011. The action instituted against Telkom for R9,913,782.00 was withdrawn recently after a settlement
agreement was concluded between the parties. Telkom is defending the action for R215,661,865.88 and has served
a notice of exception on RSSS.
HIGH COURT
Phutuma Networks (Pty) Limited (Phutuma)
On 20 August 2009 Phutuma served a summons on Telkom for damages arising from a tender published on
30 November 2007 for outsourcing of the Telex and Gentex services and for the provision of a solution to support
the maritime industry requirements. The tender was cancelled on 10 June 2009, without any award being made,
due to the expiration of the validity period. Phutuma has alleged that Telkom had awarded the tender to a third
party outside a fair, transparent, competitive and cost-effective procurement process. It has claimed damages
of R3,730,433,545.00, alternately R5,513,876,290.00, and further alternatively R1,771,683, 580.00 plus interest at
15.5%per annum to date of payment from April 2008, alternatively from 30 April 2009 being the date of notice
in terms of Act 40 of 2002, further alternatively from date of service of this summons plus costs of suite and further
and/alternative relief. The matter was originally set down for hearing from 24 October 2011 to 18 November 2011
in the North Gauteng High Court. Phutuma applied for an adjournment of the trial ‘sine die' which application was
granted subject to Phutuma paying costs which included Senior counsel's fees on trial for two days plus 50% of Senior
counsel's costs for preparation for trial. The matter has been set down for hearing on 20 May 2013.
Bihati Solutions (Pty) Limited (Bihati) and Merid Trading (Pty) Limited (Merid)
The matter arises from the award of a tender by Telkom in November 2008 after the validity period had expired.
Telkom successfully applied to the North Gauteng High Court to set aside its award. Bihati‘s application to the North
Gauteng High Court to review and set aside the Telkom Board's decision and for an order compelling Telkom to
commence with the negotiations in respect of the award, was dismissed with costs. Merid and Bihati were granted
leave to appeal against the judgements granted in favour of Telkom. The appeals which were set down in August 2012
were withdrawn by Bihati and Merid after they concluded confidential settlement agreements with Telkom.
ZTE Mzanzi South Africa (Pty) Limited (ZTE)
During 2011, Telkom awarded a tender to Huawei Technologies Africa and Alcatel-Lucent. In January 2012, an
unsuccessful bidder, ZTE, brought an interdict application on Telkom, in which it sought an order for an interim
interdict, to restrain and interdict Telkom from implementing the tender and concluding any service level agreements
with the successful bidders, pending the finalisation of the dispute resolution process between Telkom and ZTE.
In March 2012 the High Court granted the interim interdict in favour of ZTE. Telkom has filed an an application for
leave to appeal to the Supreme Court of Appeal, which was granted on 23 May 2012. Telkom has filed its notice of
appeal and copies of the record in the SCA. ZTE has until 16 November 2012 to file its opposing heads of argument.
African Pre-paid Services Nigeria Limited (APSN) v Multi-Links: Arbitration matter
Multi-Links, a previously wholly-owned subsidiary of Telkom in Nigeria, concluded a Super Dealer agreement with
African Pre-Paid Services (APS), in December 2008 in terms of which APS was appointed for an initial period of ten
years to sell, market and procure customers for Multi-Links range of products and services in Nigeria (the agreement).
On 29 May 2009, APS ceded and assigned all of its rights and obligations in terms of the agreement to APSN.
On 26 November 2010 APSN cancelled the agreement on the basis of an alleged repudiation by Multi-Links of the
agreement. On 13 June 2011 APSN launched arbitrational proceedings in South Africa (as per contract) against
Multi-Links claiming damages (nine claims) in the total sum of USD481,199,101.00. Multi-Links is defending the
matter and has filed a counterclaim in the amount of USD123 million. Telkom sold its shareholding in Multi-Links to
HIP Oils Topco Limited (HIP Oils) during October 2011. In addition, in terms of an indemnity contained in the sale and
purchase agreement between Telkom and HIP Oils concluded in August 2011, Telkom has indemnified Multi-Links/
HIP Oils for all amounts in excess of USD10 million in respect of the claim between APSN and Multi-Links. Recently APSN
filed an amendment in which it abandoned some of its claims and reduced its total claim to US$457,638,256.00. The
arbitration will be heard from 5 November to 14 December 2012.
OTHER
HIP Oils Topco Limited (HIP Oils)
With the sale of Telkom's shares in Multi-Links to HIP Oils, Telkom provided a taxation indemnity and a "creditors"
indemnity to HIP Oils and Multi-Links where such liability or obligation was incurred prior to 3 October 2011 and to
the extent that such liability was not disclosed or exceed the amounts set out in Schedule 4 (creditors list) to the
Sale and Purchase Agreement.
Consumer Protection Act (CPA)/National Consumer Commission (NCC)
On 25 August 2011 the NCC served compliance notices on Telkom for both fixed-line and mobile services to be
brought in line with CPA. The NCC alleges that Telkom's terms and conditions for fixed-line and mobile services
(8•ta) were, at that stage, not compliant with the CPA. Telkom has filed an objection to these compliance notices.
On 28 September 2011, Telkom submitted its revised terms and conditions to the NCC. Telkom is of the view that
the revised terms and conditions are in compliance with the provisions of the CPA. The NCC is not in agreement with
Telkom's interpretation of the CPA in respect of certain clauses of our standard terms and conditions. Telkom has
further amended those clauses to give the NCC more comfort and has implemented its revised/compliant terms and
conditions. Telkom has met with the NCC to ascertain how the matter can be settled.
Telkom has applied for a new date for set down but to date has not received a response from the Consumer Tribunal.
On 9 October 2012, Telkom made an application to the National Consumer Tribunal to consolidate the fixed line
and 8•ta matters. To date, the Tribunal has not advised as to the outcome of the application.
TAX MATTERS
The Group is regularly subject to an evaluation, by tax authorities, of its direct and indirect tax filings. The consequence
of such reviews is that disputes can arise with tax authorities over the interpretation or application of certain tax
rules applicable to the Group's business. These disputes may not necessarily be resolved in a manner that is favourable
to the Group. Additionally, the resolution of the disputes could result in an obligation to the Group.
30 September 30 September 31 March
2012 2011 2012
Rm Rm Rm
19. Related parties
Details of material transactions and
balances with related parties are as
follows:
With shareholders:
Government of South Africa
Related party balances
Trade receivables 413 355 371
Trade payables
Department of Communications (73) (374) (71)
Related party transactions
Revenue (1 988) (1 597) (3 064)
Individually significant revenue* (547) (550) (1 105)
City of Cape Town (33) (47) (84)
Department of Correctional Services (41) (35) (73)
Department of Health: Gauteng (24) (30) (63)
Department of Justice (52) (52) (104)
South African National Defence Force (31) (30) (59)
South African Police Services (265) (257) (522)
South African Revenue Services (19) (22) (41)
S.I.T.A. (Pty) Limited (82) (77) (159)
Collectively significant revenue* (1 441) (1 047) (1 959)
* The nature of the individually and
collectively significant revenue consists
mostly of data revenue.
At 30 September 2012, the Government of South Africa held 39.76% (March 2012: 39.76%) of Telkom's shares and
the Public Investment Corporation held 3.92% (March 2012: 3.92%) of Telkom's shares and a further 8.95% (March
2012: 8.95%) through Black Ginger 33 (Proprietary) Limited.
30 September 30 September 31 March
2012 2011 2012
Rm Rm Rm
With entities under common
control:
Major public entities
Related party balances
Trade receivables 17 15 11
Trade payables – (1) (1)
The outstanding balances are
unsecured and will be settled in cash
in the ordinary course of business.
Related party transactions
Revenue (222) (218) (383)
Expenses 126 106 223
Individually significant expenses 119 99 207
South African Post Office 48 47 95
Eskom 71 52 107
South African Broadcast Corporation – – 5
Collectively significant expenses 7 7 16
Rent received (13) (13) (26)
Individually significant rent received:
South African Post Office (11) (11) (22)
Collectively significant rent received (2) (2) (4)
Rent paid 13 11 21
Individually significant rent paid:
South African Post Office 9 7 13
Collectively significant rent paid 4 4 8
Key management personnel
compensation:
Related party transactions
Short-term employee benefits 96 76 188
Post-employment benefits 5 4 8
Equity compensation benefits 1 – 3
Termination benefits 16 – 6
Terms and conditions of transactions with related parties
Outstanding balances at period-end are unsecured, interest free and settlement occurs in cash. There have been no
guarantees provided or received for related party receivables or payables.
20. Subsequent events
Resignation of Chairman of the Telkom Board
On 9 September 2012, Mr Lazarus Zim has informed the Telkom Board of his retirement as Chairman and Director
with effect from 24 October 2012.
Resignation of Telkom Group Chief Executive Officer
Telkom announced on 5 November 2012 that the Group Chief Executive Officer, Ms Nombulelo Moholi, has notified
the Board of her intention to step down before the end of her contract period.
Resignation of Independent non-executive Directors
On 1 October 2012, Ms Jacky Huntley and Ms Julia Hope have informed the Telkom Board of their retirement as
directors with effect from 24 October 2012. Mrs NP Dongwana has informed the Telkom Board of her resignation
as director effective 2 November 2012.
Resignation of Company secretary
Ms Mmathotho Lephadi resigned as Company secretary of Telkom with effect from 31 October 2012. Ms Andisa Ditle
has been appointed acting Company secretary with effect from 1 November 2012.
Results of the Telkom Annual General Meeting regarding Directors' appointments
The ordinary resolution to appoint Dr Sibusiso Sibisi and Ms NP Mnxasana as directors and to re-elect Mr PCS Luthuli
and Mr Y Waja as directors was not passed by the requisite majority of shareholders. The ordinary resolution for
the election of Mr PCS Luthuli as member and chairperson of the Audit Committee and Ms NP Mnxasana as member
of the Audit Committee were withdrawn, given their non-appointment as directors.
Appointment of Chairman of the Telkom Board
On 16 November 2012 Telkom announced the appointment of Mr JA Mabuza as chairman of the Telkom Board with
immediate effect.
Appointment of Independent non-executive Directors
Telkom announced on 14 November 2012 that Mr Jabulane Albert Mabuza and Ms Kholeka Mzondeki, and on
16 November 2012 that Mr Leslie Maasdorp, have been appointed as Independent non-executive directors with
immediate effect.
Board update
Following the changes in the Board of Directors after the Annual General Meeting, the continuing directors are in the
process of reconstituting the Telkom Board, its committees as well as statutory committees.
Other matters
The directors are not aware of any other matter or circumstance since the financial period ended 30 September 2012
and the date of this report, or otherwise dealt with in the financial statements, which significantly affects the financial
position of the Group and the results of its operations.
www.telkom.co.za
Sponsor: UBS South Africa (Pty) Ltd
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