Contents Group overview 2 3 4 6 7 8 10 1 4 6 8 10 15 18 32 Financial highlights Operational highlights Telkom Group at a glance
Highlights 1 Our vision: to be a leading communications company with a heart for our people Telkom has again displayed the abil
2 Financial highlights 7% increase in operating revenue Group revenue (ZAR billion) 43 11% increase in free cash flow Operating
Operational highlights 3 Fixed-line data revenue (ZAR million) 5,810 2005 Data 5,023 » 32% growth in managed data network sites
4 Telkom Group at a glance Shareholders at March 31, 2005 Government The Government of the Republic of South Africa is the larg
5 Segment contribution1 March 31, 2005 Revenue EBITDA Operating profit Fixed-line: Mobile: 1 After eliminations 72% 28% Fixed-l
6 Strategic delivery A focused strategic direction Telkom has made significant progress in the year ended March 2005 on all thr
Future strategic direction 7 Moving forward, Telkom’s basic strategy retains its relevance and remains in place. Telkom will re
8 Looking forward to 2006 Group revenue (ZAR million) 40,484 43,117 Deliver solid growth in group revenue 37,322 Telkom aims to
9 2003 4,042 Cash flow for 2006 will be impacted by higher cash taxes and higher capital spend. However, Telkom will seek to co
10 Market overview The Macro economic environment Employment The South African population which is based on Statistics South Af
11 Equity markets The Telkom share performed strongly over the period, benefiting from investor enthusiasm for emerging markets
12 Market overview continued Telkom NYSE share price versus volumes traded Year ended March 31, 2005 100 80 60 20,000 15,000 10
13 The South African telecommunications industry The fixed-line market The number of fixed lines in service decreased by a comp
14 Market overview continued The mobile market GSM mobile services were launched in South Africa in 1994, with licences granted
15 services, application services, broadcasting services and radio frequency spectrum licences. Existing licences are expected
16 Market overview continued revenue for Telkom. The first such payment was made in July 2004. Vodacom’s USF obligation was on
Chairman’s review 1 Nomazizi Mtshotshisa Chairman Playing a leading role The progress Telkom has made since its partial privati
2 Chairman’s review continued In view of Government’s plan for growth, Telkom remains strategically important to South Africa.
3 only such as greater accuracy and reliability of financial disclosures, but also material improvements in internal processes,
4 Board of directors « Non-executive chairman Nomazizi Mtshotshisa (61) Bachelor of Curis Appointed to the Board on August 1, 2
Non-executive directors 5 Thenjiwe Chikane (39) Bachelor of Commerce. Bachelor of Accounting Science (Honours). CA (SA) » Appoi
6 Chief officers Sizwe Nxasana » Nombulelo Moholi » Kaushik Patel » Reuben September »
7 Telkom’s management ensures that they are part of the local community and are responsible for keeping in touch with the needs
8 Management team Johan Maré (50) Managing Executive: Operations Support Systems National Diploma in Technology Telecommunicati
9 Motlatsi Nzeku (43) Managing Executive: Procurement Services Bachelor of Science (Mathematics and Physics) Bachelor of Engine
10 Chief executive officer’s review Sizwe Nxasana Chief Executive Officer The business in balance I am pleased to report to sta
11 Telkom continued to build strength and flexibility into its financial base. In the year under review, strong operating cash
12 Chief executive officer’s review continued 58,532 and Internet customers grew 49.4% to 225,280, of which 10.2% are broadband
13 Focus was given to ensuring the wellbeing of employees over the year and a comprehensive employee health programme was intro
14 Chief executive officer’s review continued These achievements have been underpinned by a consistent strategic approach. Telk
Sustainability report 15 Introduction This integrated sustainability report sets out a comprehensive review of Telkom’s policie
16 Sustainability report continued Stakeholder engagement Customers • Telkom has 11 call centres for customer-related issues, w
17 Society and Communities • The Telkom Foundation manages a range of projects targeted at the transformation of disadvantaged
18 Corporate governance The Board is committed to ensuring that the affairs of the Company are conducted with integrity and in
19 The following key areas have been identified as areas of non-compliance with King II, and are being addressed as explained b
20 Corporate governance continued Area of non-compliance The Audit Committee: its composition and responsibilities Explanation
21 Compliance with Sarbanes-Oxley and NYSE corporate governance rules The Sarbanes-Oxley Act of 2002 was passed in the United S
22 Corporate governance continued Key differences between NYSE corporate governance listing rules and Telkom practice NYSE Telk
23 Key differences between NYSE corporate governance listing rules and Telkom practice NYSE Composition The Audit Committee mus
24 Corporate governance continued Key differences between NYSE corporate governance listing rules and Telkom practice NYSE Noti
25 Directors’ attendances of Board meetings Scheduled Number of meetings1 Attendance Directors that resigned during the year JP
26 Corporate governance continued Audit and Risk Management Committee (ARMC) The ARMC comprises four non-executive directors. A
27 Members’ attendance of Audit and Risk Management Committee meetings Scheduled Number of meetings1 Attendance MP Moyo (Chairm
28 Corporate governance continued Members’ attendance of Human Resources Review and Remuneration Committee meetings Number of s
29 Committee. The CEO is the Chairman of the Executive Committee. The Executive Committee consists of seven members. Decisions
30 Corporate governance continued are applied by trained, skilled personnel with an appropriate segregation of duties through c
31 Telkom Audit Services (TAS) plays a central role in assurance around financial and operational controls, and assists managem
32 Risk management Telkom recognises the wide range of risks to which it is exposed. It is therefore a strategic objective of T
33 Risk factors Stakeholders are advised to consider the summarised risks described below in conjunction with other information
34 Risk management continued addressing a number of significant matters have not yet been issued. The interpretation of existin
Black economic empowerment 35 Central to Telkom’s strategic focus is the ability of the majority of South Africans to participa
36 Black economic empowerment continued The DTI BEE scorecard, with associated weightings, is as follows: Description Equity ow
37 The formal adoption of the ICT Charter has taken longer than initially expected. However, Telkom believes that the acceptanc
38 Black economic empowerment continued develop and implement an economic empowerment programme aimed at ensuring participation
39 Review of progress In the year to March 31, 2005, Telkom made strong progress in most aspects of BEE, and largely met its ta
Looking forward Telkom is cognisant of the importance of self-analysis in assessing the ongoing efficacy of its BEE strategy –
41 Procurement spend March 31, 2005 11% 62% Spend on BEE as a % of total procurement spend Spend on SMMEs as a % of total procu
42 Human capital management This report deals with Telkom Company employees only. The Company endeavours to be the primary gene
43 an Employment Equity National Committee that consults with organised labour on aspects of employment equity as required by t
44 Human capital management continued Telkom’s estimated employment equity performance compared to the ICT draft charter is as
45 benchmarked against market best practice. The HRRRC is satisfied that fair remuneration practices are followed, and that exe
46 Human capital management continued • reducing the number of days that may be accumulated from 90 (in 1996) to 25 working day
47 members of the Fund. Based on the fair value of plan assets calculation at March 31, 2005, the retirement fund was in a surp
Creating a 25-hour day Telkom’s vision of being a leading communications company demands not only a spiral of increased product
49 participated in the learnership programme. A total of 264 unemployed people, all registered with the Department of Labour, a
50 Human capital management continued Training resources at a glance • 358 training and development specialists • 392 classroom
51 The CoE programme was launched in 1997 and is growing local telecommunications and information technology skills. It also yi
52 Human capital management continued Centre of Excellence involvement Year ended March 31, 2004 2005 Number of CoE’s 15 Total
53 Institutions, Research Areas and Industry Partners Institution Tshwane University of Technology – (Pretoria) University of N
54 Safety, health and environment This year saw new milestones being achieved in Telkom’s integrated Safety, Health and Environ
55 During the 2006 financial year, a revised SHE Learning and Development strategy will be compiled which will have an increasi
56 Safety, health and environment continued Safety incident trends (number of incidents) Sick absenteeism rate 22 18 3.5 3.4 3.
57 Physical health Sick leave diagnosis data was collated and analysed to identify specific trends with regard to injury on dut
comprehensive support and care strategy going forward, having spent R7.7 million on the HIV programme. Prevalence rates Accordi
59 ensures that all employees, including those in remote rural areas, have 24-hour access to support in an atmosphere of confid
60 Safety, health and environment continued complies with the prescribed regulations and has incorporated stringent disposal pr
61 Comparative totals for energy consumption Giga Joule (GJ) 2,553,884 2,516,846 Comparative totals for C02 (Metric tonnes) 681
62 Corporate social investment Telkom’s Corporate Social Investment (CSI) includes the activities of the Telkom Foundation as w
63 support teachers in using the supplement to enhance classroom teaching and learning. This year, the project was extended thr
64 Corporate social investment continued groups of women and youth who are master weavers, using a contractor that collects unu
65 with rural communities to bring about change through a multi-faceted approach in dealing with the consequences of HIV/AIDS;
66 Corporate social investment continued Sponsorships Telkom has a clear sponsorship strategy, centred on a programme of nation
Operational review 67 Fixed-line communications Subscriptions and connections Telkom is focused on connecting and reconnecting
68 Operational review continued in both the 2005 and the 2004 financial years due to a decrease in the number of postpaid PSTN
69 With the growth in traffic carried on the mobile networks, a need was identified for the deployment within these networks of
70 Operational review continued Global services Telkom’s portfolio of global international products consists of a number of dif
71 Wireless data application services. Telkom owns 100% of Swiftnet, which operates under the name Fastnet Wireless Service. Fa
72 Connecting South Africa to the www Telkom Internet service’s timeline Jan TelkomInternet is launched with a R79 per month se
73 Price. Growth in ADSL customers to approximately 60,000, has TelkomInternet blocks Jan 4,073 350 email viruses TelkomInterne
74 Operational review continued Traffic tariffs For calls from fixed-line customers to mobile users, the customer is billed the
75 Interconnection tariffs Telkom’s current interconnection tariffs are set out in interconnection agreements negotiated and ag
76 Operational review continued The monthly tariffs for ADSL services were reduced as of March 31, 2005 and are scheduled to be
77 and services to these customers primarily through corporate account managers, supported by a team of specialists in the fiel
78 Operational review continued stations. To further this goal, Telkom targets and enters into nationwide contracts with multi-
79 Service quality, installation and repair times 2003 Installation Average time to install residential voice (days) Average ti
80 Operational review continued National Network Operations Centre (NNOC) Telkom has a state-of-the-art NNOC, capable of monito
81 access multiplexers, serving 58,532 customers as of March 31, 2005, an increase from 20,313 customers as of March 31, 2004 a
82 Keeping an eye on Telkom’s network The National Network Operations Centre (NNOC), supported by the Information Technology Se
Page 1:
Telkom SA Limited
Page 2:
Contents Group overview 2 3 4 6 7 8 10 1 4 6 8 10 15 18 32 Fina
Page 3:
Highlights 1 Our vision: to be a leading communications company
Page 4:
2 Financial highlights 7% increase in operating revenue Group r
Page 5:
Operational highlights 3 Fixed-line data revenue (ZAR million)
Page 6:
4 Telkom Group at a glance Shareholders at March 31, 2005 Gover
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5 Segment contribution1 March 31, 2005 Revenue EBITDA Operating
Page 8:
6 Strategic delivery A focused strategic direction Telkom has m
Page 9:
Future strategic direction 7 Moving forward, Telkom’s basic str
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8 Looking forward to 2006 Group revenue (ZAR million) 40,484 43
Page 11:
9 2003 4,042 Cash flow for 2006 will be impacted by higher cash
Page 12:
10 Market overview The Macro economic environment Employment Th
Page 13:
11 Equity markets The Telkom share performed strongly over the
Page 14:
12 Market overview continued Telkom NYSE share price versus vol
Page 15:
13 The South African telecommunications industry The fixed-line
Page 16:
14 Market overview continued The mobile market GSM mobile servi
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15 services, application services, broadcasting services and ra
Page 18:
16 Market overview continued revenue for Telkom. The first such
Page 19:
Chairman’s review 1 Nomazizi Mtshotshisa Chairman Playing a lea
Page 20:
2 Chairman’s review continued In view of Government’s plan for
Page 21:
3 only such as greater accuracy and reliability of financial di
Page 22:
4 Board of directors « Non-executive chairman Nomazizi Mtshotsh
Page 23:
Non-executive directors 5 Thenjiwe Chikane (39) Bachelor of Com
Page 24:
6 Chief officers Sizwe Nxasana » Nombulelo
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7 Telkom’s management ensures that they are part of the local c
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8 Management team Johan Maré (50) Managing Executive: Operation
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9 Motlatsi Nzeku (43) Managing Executive: Procurement Services
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10 Chief executive officer’s review Sizwe Nxasana Chief Executi
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11 Telkom continued to build strength and flexibility into its
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12 Chief executive officer’s review continued 58,532 and Intern
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13 Focus was given to ensuring the wellbeing of employees over
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14 Chief executive officer’s review continued These achievement
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Sustainability report 15 Introduction This integrated sustainab
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16 Sustainability report continued Stakeholder engagement Custo
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17 Society and Communities • The Telkom Foundation manages a ra
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18 Corporate governance The Board is committed to ensuring that
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19 The following key areas have been identified as areas of non
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20 Corporate governance continued Area of non-compliance The Au
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21 Compliance with Sarbanes-Oxley and NYSE corporate governance
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22 Corporate governance continued Key differences between NYSE
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23 Key differences between NYSE corporate governance listing ru
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24 Corporate governance continued Key differences between NYSE
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25 Directors’ attendances of Board meetings Scheduled Number of
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26 Corporate governance continued Audit and Risk Management Com
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27 Members’ attendance of Audit and Risk Management Committee m
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28 Corporate governance continued Members’ attendance of Human
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29 Committee. The CEO is the Chairman of the Executive Committe
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30 Corporate governance continued are applied by trained, skill
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31 Telkom Audit Services (TAS) plays a central role in assuranc
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32 Risk management Telkom recognises the wide range of risks to
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33 Risk factors Stakeholders are advised to consider the summar
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34 Risk management continued addressing a number of significant
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Black economic empowerment 35 Central to Telkom’s strategic foc
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36 Black economic empowerment continued The DTI BEE scorecard,
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37 The formal adoption of the ICT Charter has taken longer than
Page 56:
38 Black economic empowerment continued develop and implement a
Page 57:
39 Review of progress In the year to March 31, 2005, Telkom mad
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Looking forward Telkom is cognisant of the importance of self-a
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41 Procurement spend March 31, 2005 11% 62% Spend on BEE as a %
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42 Human capital management This report deals with Telkom Compa
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43 an Employment Equity National Committee that consults with o
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44 Human capital management continued Telkom’s estimated employ
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45 benchmarked against market best practice. The HRRRC is satis
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46 Human capital management continued • reducing the number of
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47 members of the Fund. Based on the fair value of plan assets
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Creating a 25-hour day Telkom’s vision of being a leading commu
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49 participated in the learnership programme. A total of 264 un
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50 Human capital management continued Training resources at a g
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51 The CoE programme was launched in 1997 and is growing local
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52 Human capital management continued Centre of Excellence invo
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53 Institutions, Research Areas and Industry Partners Instituti
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54 Safety, health and environment This year saw new milestones
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55 During the 2006 financial year, a revised SHE Learning and D
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56 Safety, health and environment continued Safety incident tre
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57 Physical health Sick leave diagnosis data was collated and a
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comprehensive support and care strategy going forward, having s
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59 ensures that all employees, including those in remote rural
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60 Safety, health and environment continued complies with the p
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61 Comparative totals for energy consumption Giga Joule (GJ) 2,
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62 Corporate social investment Telkom’s Corporate Social Invest
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63 support teachers in using the supplement to enhance classroo
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64 Corporate social investment continued groups of women and yo
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65 with rural communities to bring about change through a multi
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66 Corporate social investment continued Sponsorships Telkom ha
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Operational review 67 Fixed-line communications Subscriptions a
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68 Operational review continued in both the 2005 and the 2004 f
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69 With the growth in traffic carried on the mobile networks, a
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70 Operational review continued Global services Telkom’s portfo
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71 Wireless data application services. Telkom owns 100% of Swif
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72 Connecting South Africa to the www Telkom Internet service’s
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73 Price. Growth in ADSL customers to approximately 60,000, has
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74 Operational review continued Traffic tariffs For calls from
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75 Interconnection tariffs Telkom’s current interconnection tar
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76 Operational review continued The monthly tariffs for ADSL se
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77 and services to these customers primarily through corporate
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78 Operational review continued stations. To further this goal,
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79 Service quality, installation and repair times 2003 Installa
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80 Operational review continued National Network Operations Cen
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81 access multiplexers, serving 58,532 customers as of March 31
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82 Keeping an eye on Telkom’s network The National Network Oper
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