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Telkom SA Limited An overview of 2004

Telkom SA Limited An overview of 2004. The benefit of our performance. Telkom Delegation: Chief Executive Officer: Sizwe Nxasana Chief Executive Officer: Telkom Foundation: Nkethelenga Vokwana Group Executive: Regulatory & Public Policy : Nkenke Kekana Chief Financial Officer : Kaushik patel.

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Telkom SA Limited An overview of 2004

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  1. Telkom SA LimitedAn overview of 2004 The benefit of our performance

  2. Telkom Delegation:Chief Executive Officer: Sizwe NxasanaChief Executive Officer: Telkom Foundation: Nkethelenga VokwanaGroup Executive: Regulatory & Public Policy : Nkenke KekanaChief Financial Officer : Kaushik patel

  3. Contents • Overview of Telkom’s Financial Performance • Investing in South Africa • Investing in our customers • Investing in people • Investing in the future

  4. Section 1 Last year’s financial performance

  5. Delivering strong growth Excellent earnings growth Strong cash flow growth Headline earnings per share Operating free cash flow1 In ZAR cents In ZAR millions 123% 175% Year ended March 31 1. Operating cash flow (after net finance charges and taxation, before dividends) less investing cash flow

  6. Group financial highlights for 2004 • 9% group revenue growth • 40% group EBITDA margins • Group capex13% of revenues • Groupreturn on assets of 18% • Net debt to equity of 61% • Total dividendof 200 cents per share

  7. Our investments are paying off • Achievements are a result of our investment, over a long period in: • South Africa • Customers • People • The future • While our past investments enable us to grow, continuing investments will ensure a sustainable future • The ICT sector contributes 6% to the South African GDP

  8. Section 2 Our investment in South Africa

  9. Investing in South AfricaEmpowerment: Top Empowerment Company 2004 • Procurement spend from April 2001 to March 2004: • Black owned companies: R4.9 billion • Black empowered/influenced: R9.3 billion • 478 black owned/empowered and influenced-companies dependent on Telkom for business • 3000 companies employing over 600 000 people and 60% of whom depend on Telkom for business • Telkom’s Enterprise Development & Affirmative Procurement • ICT BEE Charter • Telkom has been actively involved, through the ICT Charter Working Group, on the drafting on the ICT BEE Charter

  10. Investing in South AfricaConnecting communities • Total access lines: more than 4,8 million • Prepaid fixed-lines: 855 406 • Total number of payphones: 175 178 • Working with Universal Service Area Licenced operators for universal access

  11. Investing in South AfricaCreating wealth • Total individual Khulisa shareholders: 54 260 • Total Khulisa shares: 4 465 686 • Total stokvels: 424 with 217 300 holding • Total shares through stokvels: 4 682 986

  12. Investing in South AfricaCreating wealth (continues) Khulisa offer Retail shares (General offer) Share price at close of business

  13. Investing in South AfricaCommunity Builder of the Year 2004 • Telkom Foundation spend: R40,5 million • Focus on: • Education & Training • Maths, science and technology • Example: North West Science Competition and science kits to Nyanga Senior Secondary School near Engcobo, Eastern Cape • ICT planning • Network computer laboratories with Internet • Example: Connecting 33 schools via V-Sat, including Matladi Project Shool in Limpopo • Empowerment • Women, children and people with disabilities • Example: Stop Women Abuse Helpline and Thlamelang School for the Physically Disabled • General projects • Disaster relief

  14. Investing in South AfricaBuilding the knowledge economy • Support Government’s objectives to create jobs and develop the economy • ICT Learnership & Graduate Progamme • In partnership with ISETT SETA • Call Centre Learnership: training 264 unemployed learners • Project Management Learnership: 100 Telkom employees • Graduate Development Programme: Internship @ Telkom during studies • Centres of Excellence & School of Accounting • Bursary schemes: R11 million to 787 participants

  15. Investing in South AfricaNational Pride • South African Olympic Team • South African Paralympic Team • Telkom Charity Cup • Proudly South African • Swimming South Africa • Provide infrastructure of 2004 National Elections

  16. Section 3 Our investment in customers

  17. Investing in our customersCreating a world class network • Extensive capital programme during period of exclusivity • Total fixed-line capital investment: R41.7 billion over 5 years • R27.9 billion for network modernisation and line roll-out • Network digitisation – 99.9% • State-of-the-art National Network Operations Centre (NNOC) • Integrated surveillance and management centre

  18. Investing in our customersCreating a world class network • Primary hosting site has no single point of failure • Capability of “standalone” operation   • Powered by dual, inline UPS generators • Protected by five levels of security • Handle any communications bandwidth specification required • Fully scalable systems environment

  19. Investing in our customersCustomer benefits Faults per 1000

  20. Investing in our customersSatisfying the need for data • Increased demand for data transmission and Internet access services

  21. Investing in customersA fresh look @ products • Lifestyle-enhancing, value-adding and improved-convenience packages • The benefit of partnerships: • Improved service offerings • Superior technology

  22. Prices are increased according to tariff regime – linked to CPI Tarifica findings: Telkom rates are highly competitive and amongst the most affordable in the world Rebalancing tariffs since 1997 Investing in customersValue for money Local 3-minute calls (Source: Tarifica, March 2004)

  23. Section 4 Our investment in people

  24. Investing in PeopleReflecting society • Current situation: • Total of black employees: 56% • Total black management: 35% • Total female management: 19% • Our EE targets:

  25. Investing in peopleReflecting society: Promotions • Promotions in 2003/04: 73% black • Recruitment in 2003/04: 83% black

  26. Investing in peopleReflecting society: Promotions • Promotions in 2003/04: 50% female • Up from only 14% in 1998

  27. Investing in peopleA skilled workforce • 1072 employees in leadership development programmes • Targeted Development Initiative aimed at females to accelerate technical development: 113 females in programme • Overall training in Telkom: • Total number of training days: 268 920 • On average, 8 training days per employee • R390 million spent on training during past financial year

  28. Investing in peopleCaring for our people • Initiated the Thuso Wellness Programme on 4 November • A result of Health Profile in 2003 • Committed to strengthen health management strategy • First initiative: Combatting HIV/Aids • Voluntary Counselling Testing and Treatment Programme • Already more than 2500 employees in pilot voluntary testing • Programme will be country-wide • Future: Extend to spouses and dependants on employee’s medical aid

  29. Investing in peopleMaking ownership possible • Conditional share plan: • Maximum of 4% of issued share capital will be made available to employees • Vesting after three years (over three-year period) • Share options (Diabo): • 2% at a strike price of R33.81 • Four tranches from September 2003 to March 2006

  30. Investing in peopleCreating alternative employment • Changing face of ICT landscape require different skills in different markets • Telkom’s Agency for Career Opportunities • Continuous consultation with unions

  31. Investing in peopleManaging staff numbers responsibly • Current financial year: 1 869 affected positions • Three-year predicted number: 4 181 affected positions • Possible reductions likely to be driven largely by natural attrition and voluntary packages • Past five years: only 6.1% of total staff losses as a result of retrenchments

  32. Investing in peopleBecoming an employer of choice • Measuring employee satisfaction to determine needs and areas of improvement • Develop and build on Corporate Culture to fit the requirements of our market • Create experience for customer through their interaction with our people

  33. Section 5 Our investment in the future

  34. Aggressive mobile rollout in DRC Market share at 47% Launched Vodacom Mozambique in Dec 2003 Opportunity for fixed-line to increase revenue from other African countries Traffic hubbing Network management Professional services Data services Expansion beyond the borders 93%growth in other African mobile customersIn thousands Year ended March 31,

  35. Accelerated managed liberalisation Further PSTS and reseller licences Licencing of SNO Amended Telecommunications Act Number portability VOIP (date to be determined by Minister) Legislation plan Carrier selection 2001 2002 2003 2004 2005 2006 Licencing of SNO Further PSTS and reseller licences Actual Carrier selection Number portability VOIP New policy announcements on 2 September 2004 are in accordance with Telecommunications Act as Amended 2001

  36. Investing in the futureOperating in a competitive landscape • Ministerial determinations: • Implementation of statutory provisions of Telecommunications Act • Guard against a “big bang” approach to liberalisation • Minor implications on existing regulatory framework • Convergence Bill • Expect the Bill to be tabled in 2005 • Urge for accelerated legislation • Expect to create clarity in future licencing regime

  37. Investing in the futureImpact of announcement on ICT sector • Viability of SNO and USALs • Consultation process • Interpretation of carrying of voice by VANs: may result in 300 potential public switched telephone service providers • Convergence legislation • Third National Operator and/or other serviced based licencees • Unclear how 2nd economy will benefit

  38. Concluding Remarks • Our achievements are a result of our investment, over a long period in: • South Africa • Customers • People • The future • Telkom is a large player in the ICT environment and has contributed, and will continue to do so, in addressing poverty alleviation and underdevelopment in SA

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