Telkom Presentation to Parliament 22 October 2002

1. Telkom Presentation to Parliament22 October 2002

2. Agenda • Introduction - Mr. Chose Choeu • Performance Review - Ms Nombulelo Moholi • Financial Highlights - Mr. Anthony Lewis • Legislation & Regulations Mr. Victor Moche • Concluding Remarks - Ms. Nombulelo Moholi Question and Answer Session

3. Introduction Telkom Chairman - Ms Nomazizi Mtshotshisa

4. Chief Executive Officer Sizwe Nxasana Executive management Chief Strategic Officer Chief Operating Officer Chian Khai Tan Shawn McKenzie Chief Technical Officer Chief Financial Officer Chief Sales & Marketing Officer Pinky Moholi Reuben September Anthony Lewis

5. Telkom Foundation Chief Executive Officer Mrs Nkhetheleng Vokwana

6. Performance Review Nombulelo Moholi

7. Segment Business line Legal entity Wireline Fixed-line (Voice & Data) Telkom Telkom Directory Services Directories Wireless Vodacom Mobile Swiftnet Wireless data Group operational structure

8. Six line roll-out targets

9. Ten service quality targets

10. Highlights in 2002 • Completed licence obligations on 7 May 2002 • Substantially completed tariff rebalancing • Renegotiated interconnection agreements • Group operating cash flow grew by 10% to R8.7bn • Group revenues grew by 8% to R34.0bn • Group capex decreased by 7% • EPS grew by 17% to 338.9 cents

11. Achievements • World class network • Launch of Afrolinque (SAT-3/WASC/SAFE) • Vodacom acquired 51% interest in a company holding a GSM licence in Democratic Republic of Congo • Vodacom acquired a licence in Mozambique and established a new company with 98% shareholding • Switched hubbing and transit traffic growth of 70% • ISDN channels growth of 25% • Prepaid subscriber growth of 47% • Payphone unit growth of 10% • Launched ADSL in August 2002 • Advanced preparations of IPO

12. Financial Highlights Anthony Lewis

13. Group revenue Group Revenue (Rm) at 31 March Group revenue growth over past three years is as a result of: • Increased fixed-to-mobile traffic revenues • Increased data connectivity • Increased mobile subscribers and revenue 31 March 2002 SA GAAP, audited After inter-company eliminations

14. Segment contribution Operating profit 31 March 2002 Revenues 31 March 2002 SA GAAP, audited After inter-company eliminations SA GAAP, audited After inter-company eliminations

15. Fixed-line segment (Rm) Revenue increase of 5% Operating profit decrease of 9.5% Capex (Rbn) decrease of 15% Total assets(Rbn)1increase of 9% SA GAAP, audited, before inter-company eliminations 1. Excluding investments, financial and tax assets

16. Fixed-line revenue 7.8% 5.2% SA GAAP, audited Before inter-company eliminations Fixed-line revenue

17. Revenue 33 970 31 457 8 EBITDA 10 493 9 862 6 Depreciation and amortisation (5 243) (4 987) 5 EBIT 5250 4875 8 Investment income 580 617 (6) Finance charges (3 066) (3 041) 1 Minority interests Net income for year Taxation (792) 57 1 915 (742) 1 641 68 7 17 (16) PAT 1972 1709 15 Group income statement 31 March(Rm) 2002 2001 % change

18. Strategic Review Victor Moche

19. Key Legislation impacting Telkom • Telecommunications Amendment Act of 2001 • Regulation of Interception of Communications and Provision of Communication related Information Bill • Promotion of Access to Information Act • SITA Amendment Bill • Electronic and Communications Transactions Act • Electronic Communications Security (Pty) Ltd Bill

20. Telecoms Amendment Act 2001 • Managed liberalisation • Facility-based competition • Licencing of new operators • A second network operator (SNO) • An international “carrier of carriers” licence (Sentech) • A multimedia licence (Sentech) • Under serviced area licences (SMME) • Edu-net Discount Rate

21. Competitive Environment SENTECH SNO SMME’s Telkom Competitors PTN’s Cellular 2005? VANS

22. Regulations: Carrier Pre-Selection • Carrier pre-selection to be phased in by no later than 31 December 2003? • Assumed that most per operator and per subscriber set-up costs (including maintenance costs) and all system set-up costs are recovered. • Costs may not be fully recovered. • Significant additional CAPEX required • Premature introduction will discourage infrastructure build-out

23. Interconnection with SMMEs • Draft Regulations and corrections have been published • Asymmetrical termination charges with a minimum differential of 30% in favour of USAL for national long distance services • Symmetrical termination charges for telecoms services within licensed area • Symmetrical termination charges to mobile cellular operators

24. Regulation of Interception of Communications and Provision of Communications Related Information Bill Synopsis of Bill To regulate authorised interception and monitoring of communications for national security and law enforcement and to prohibit telecommunications that cannot be monitored. Impact on Telkom • Period and storage of information • Costs and Cost Recovery • Prescription of Tariffs & Technology • Collection of Consumer Details

25. Promotion of Access to Information Act Synopsis of the Act To give effect to constitutional right of access to any information held by the State and any other person that is required for the exercise and protection of any rights. Impact on Telkom • Compile information manuals (as public & private) • Appointment of information officers • Telephone directory entries • Information to the Human Rights Commission

26. SITA Amendment Bill Synopsis of Bill To improve service delivery to the public and to promote the efficiency of departments and organs of state through the use of IT Impact on Telkom • SITA Exclusivity on authentication • SITA Monopoly on Govt PTNs • Cost effective and efficient service?

27. Electronic Communications and Transactions Act • Synopsis of Bill To facilitate and regulate electronic communications and transactions. To entrench the legitimacy, trust, security and integrity of electronic communications and transactions whilst at the same time safeguarding the interests of consumers against commercial malpractice and exploitation • Impact on Telkom • Delayed provisioning of services – cooling off period • Effects of the Interception and Monitoring Act – ID verification • Increased administration of critical databases • Cost of compliance with regulations – infrastructural and procedural rules

28. Electronic Comms Security (Pty) Ltd Synopsis of the Act To ensure the protection and security of government electronic communications. Impact on Telkom • Encroachment on PSTS domain • Licensing and tariffs at variance with Telecommunications Act • Equity in other companies – industrial bias • Application of the Bill to private sector – critical communications infrastructure • Verification and approval of electronic communication products and services by Comsec

29. Major Costs-Implication Legislation and Regulation • E-Rate • Free Calls • Number Portability • Carrier Pre-selection • Frequency Spectrum • Universal Service Fund Contribution • Rate Regime/Price Control • COA/CAM Compliance • USAL Interconnection • Regulation of Interception of Communications and Provision of CRI – Storage & Hardware

30. Conclusion Nombulelo Moholi

31. Strategic goals and objectives • Our two primary strategic goals continue to focus overall priorities within the group • Increase shareholder value • Position the group for increased competition • Key strategic objectives support long-term goals • Expand integrated service offerings • Grow and successfully compete in core markets • Achieve greater customer satisfaction • Improve corporate performance • Continue to invest in employees

32. Positioned for the future • Telkom is ready to operate in a more competitive environment • We have a world-class network • We are creating a competitive culture • We have strong international partners • We are constantly improving the customer experience • We have what it takes to be the communications provider of choice • We continue to reduce costs and achieve greater efficiencies to derive higher returns for shareholders

33. Questions

35. 3 Minute local call Source Tariffica

36. Residential connection Is Telkom Out of Line?

37. Three-minute long distance call Is Telkom Out of Line?

38. Satisfied Customer Top 3 Box Scores % Satisfied

39. Non-current assets 43 689 39 832 10 Current assets 11 325 12 716 (11) Total assets 55 014 52 548 5 Capital and reserves 17 398 14 797 18 Interest-bearing debt 23 818 24 960 (5) Provisions and deferred taxation 3 031 2 939 3 Current liabilities 10 431 9 734 7 Equity and liabilities¹ 55 014 52 548 5 Group balance sheet 31 March(Rm) 2002 2001 % change 1. Minority interest included

40. Governments have conflicting objectives from liberalisation which must be balanced Create healthy competition Improve “public good” • Continued incumbent profitability • Viable and sustainable Second Network Operator • Expanded access • Reduced consumer prices with improved service • Employment growth, transformation and new business opportunity • Increased foreign investment • Provision of leading edge services Competition and the Public Good

41. Critical Success Factors • Sustainable profitable sector for incumbent and new operators • Ensure SNO has opportunity to obtain critical mass • Appropriate application of regulatory tools to create the right market structure • Regulatory framework must be transparent and predictable • Regulatory framework must have clear and consistent guidelines Regulatory Environment