Document 0 21 023 2010

Telkom AR front.
qxp 8/12/09 6:18 PM Page 1
Telkom Annual Report 2009 1
We are...
one of Africa’s largest integrated
communication service providers.
We aim...
to be Africa’s preferred ICT solutions provider.
edge
and resources to
create a powerful
Group
overview
c o m m u n i c a t i o n s p l a t f o rm Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
for more information please visit our

website at www.telkom.co.za
Telkom AR front.qxp 8/12/09 6:18 PM Page 2
2 Telkom Annual Report 2009
Telkom Group structure and revenue contribution as at March 31, 2009
Telkom SA
Our fixed-line segment is our largest business. Telkom South Africa provides fixed-line subscription and connection, traffic, interconnection,
data and internet service
Trudon – 64.9%
Trudon (Pty) Ltd, formerly known as TDS Directory Operations, provides Yellow and White page directory services, an electronic directory
service, 10118 “The Talking Yellow Pages”, and an online web directory service.
Multi-Links – 100%
Multi-Links Telecommunications Limited is one of Nigeria’s pioneer private telephone operators. As one of the leading providers of
telecommunications solutions in Nigeria, Multi-Links was one of the first to locally introduce the CDMA technology.
Telkom acquired the remaining 25% interest in Multi-Links on January 21, 2009, thereby increasing its ownership of Multi-Links to 100%.
Africa Online – 100%

Africa Online is an internet service provider (ISP) in Africa. As one of the largest Pan-African ISP in sub-Saharan Africa, Africa Online offers
a wide range of services to suit a variety of customer needs. With operations in Cote d’Ivoire, Ghana, Kenya, Namibia, Swaziland,
Tanzania, Uganda, Zambia and Zimbabwe, Africa Online is positioned to provide individuals and organisations with scalable solutions
based on each client’s specific needs.
Joint venture – Vodacom Group – 50%

Vodacom Group (Pty) Ltd is a leading mobile communications company in South Africa, providing mobile communications services as of
March 31, 2009 to 39.6 million customers in South Africa, Tanzania, Lesotho, the Democratic Republic of the Congo and Mozambique.
Vodacom has an estimated market share of 53% in South Africa.
Telkom concluded the sale and unbundling of its interest in Vodacom after year end.
Swiftnet – 100%
Swiftnet (Pty) Ltd trades under the name FastNet Wireless Services. FastNet provides synchronous wireless access on Telkom’s X.25
network, Saponet-P, to its customer base. Services include retail credit card and check point of sale terminal verification, telemetry, security
and fleet management.
Telkom’s Board of directors has decided to dispose of Swiftnet.
Telkom Media – 75%

Telkom Media is the holder of a commercial satellite and cable subscription broadcasting licence, which allows it to operate both a satellite
pay-TV service and an IPTV service in South Africa.
On May 4, 2009, Telkom sold its 75% interest in Telkom Media to Shenzhen Media South Africa (Pty) Ltd.
Telkom shareholding as at March 31, 2009
Government Black Ginger 33 Public Investment

The government of the (Pty) Ltd Corporation
Republic of South Africa is Black Ginger 33 (Pty) Ltd is The Public Investment
the largest shareholder in a wholly owned (100%) Corporation (PIC) is an
Telkom, holding 39.8% of subsidiary of the Public investment management
the Company’s issued share Investment Corporation company wholly owned by
capital. The government is holding 8.9% of the the government. It invests
the Class A shareholder. Company’s issued share funds on behalf of public
capital. Black Ginger 33 is sector entities. The PIC holds
the Class B shareholder. 6.7% of the Company’s
issued share capital.
Group
overview
Elephant Telkom Treasury Free float

Consortium Stock The free float of 33.6%
Management
The Elephant Consortium is Rossal No 65 (Pty) Ltd holds makes up the remainder of review
a Black Economic 11,646,680 shares, 2.2% the Company’s issued share

Empowerment group, which of the Company’s issued capital. Included in the free Sustainability
review
through Newshelf 772 (Pty) share capital which were float are 11,570,245
Ltd holds 7.2% of Telkom’s purchased for the Telkom shares held by 91,625
issued share capital. Conditional Share Plan. retail shareholders Performance
review
Acajou Investments (Pty) Ltd representing 2.2% of the
holds 8,143,556 shares, Company’s issued share
Financial
1.6% of the Company’s capital. statements
issued share capital.

Company
Financial
Information
Group Strategy – The evolution of Telkom
Defend profitable revenue
• Maintain fixed-line
net revenue. • Improve competitiveness through tariff
rebalancing.
• Retain leading
fixed-line market • Build customer retention initiatives that entice
share. customers to stay with Telkom.
• Increase annuity • Build customer loyalty by providing superior

revenue as a value propositions that position Telkom as the
percentage of total service provider of choice.
fixed-line operating • Convert revenue streams to annuity revenue.
revenue.
Grow profitable revenue through broadband and converged services
• Expand our broadband footprint.

• Increase bandwidth to offer higher bandwidth
• Increase broadband
applications.
penetration.
• Deliver superior data • Provide converged information,
speed and quality communications and technology solutions to
through fixed-line the enterprise market and enable the digital
network. home in the consumer market.
• Increase converged • Bundle content to provide added value in
services revenue. subscription and pay-as-you go models.
• Partnerships with content • Target the medium to large business segment
providers. to meet their demand for end-to-end solutions.
• Improve market share in
• Satisfy customer demand for converged one-
information technology
stop solutions for communications and
services sector.
information technology infrastructure
• Expand domestic data requirements.
centre operations.
• Develop improved value propositions through
• Improve innovation
customer understanding enabled by the
capability.
customer centricity programme.
• Grow organically and
through acquisitions. • Enhance availability to successfully partner
with others where synergistic opportunities
exist.
Grow profitable revenue through wireless voice and mobile data services
Transform fixed-line business to incorporate key

value-added services, including mobile
converged voice services.
• Provide integrated
bundled offerings. Build a cost-effective wireless voice and mobile
data network in selected areas to offer:
• Combine with mobility
to enhance fixed-line • Wireless access in campus environments,
offering. gated communities, security complexes and
other developments.
• Mobile data services.
• Fixed and nomadic wireless voice services.
Grow profitable revenue internationally
Become a Pan-African integrated service

provider, offering:
• International communications and internet
• Increase revenue
connectivity.
and long-term
profitability from • Hosting and managed data services.
acquired African • Wireless voice and mobile broadband Group
subsidiaries and solutions. overview
international
services. Leverage synergies across the Telkom Group to
grow revenue from subsidiaries – organically Management
review
and through acquisitions.
Introduce converged fixed and mobile service
Sustainability
in the Nigerian market through Multi-Links. review
Performance
review
Financial
statements
Company
Financial
Information
Financial review summary

Continuing operations
Solid revenue growth EPS & HEPS

The 3.3% growth in fixed-line revenue to The decrease in both headline and basic earnings per
R33.7 billion contributed to the Group’s overall share reflects increasing operating expenses, once-off
6.9% revenue growth to R35.9 billion. impairments of Multi-Links and Africa Online and
increased finance charges and fair value movements.
Operating revenue Annuity revenue

Rm Rm
40
R35,940m 8
35
(R33,611m) 7
Strong growth in data
30
revenues, higher revenue
6
R7,387m
25
from interconnection and
5
(R6,917m)
20 4
calling plans, partially off- Telkom continues to be
15 3 successful in tying in large
set by lower traffic. Multi-
10 Links delivered strong 2 corporate customers to
5 revenue growth as a result 1 term and volume discount
0 of subscriber growth. 0 plans.
07 08 09 07 08 09
Data revenue Operating expenditure

Rm Rm
10 30 000
9
R9,310m 8
25 000
(R8,308m) 7
20 000
R29,895m
Higher demand for data 6 (R25,014m)
5 15 000
services, including ADSL, an Operating expenses
4
increase in internet access 10 000 increased across all
3
and related services and segments and were affected
2
5 000
managed data network 1 by a number of once-off
services. 0 0 items.
07 08 09 07 08 09
Operating profit Headline earnings per share

Rm
cents
10
1 400
9
1 200
8
7 R6,388m 1 000
6 (R9,069m) 557.0 cents 800
5
Excluding the Multi-Links (1,028.9 cents)
4 600
impairment of R1.8 billion Decrease in headline
3
the South African business 400
2 earnings reflects decrease
1 performed well in the current in operating profit and 200
0 high inflationary environment. increased finance charges. 0

07 08 09
07 08 09
Operational review summary
Quality, value for money products delivering strong

growth
93% ADSL coverage 27.3% increase

93% of our exchanges are ADSL in calling plan
enabled. They consist of 4,000 subscribers
digital subscriber line access The Telkom Closer packages have
multiplexers, serving approximately performed well, increasing by 27.6%
548,015 customers, which to 575,812 plans. Supreme call
represents a growth of 33.0%. packages, targeted at the business
segment, have increased by 14.4%
to 14,778 packages and PC
bundles have increased 48.3% to
11,336.
58% increase in Do 7.4% increase in

Broadband packages wholesale internet
Do Broadband subscribers leased lines
increased 58.1% to 188,540. The growth in broadband
Our current Broadband line has stimulated the demand for
penetration rate is 15%. leased lines. Wholesale internet
leased lines increased 7.4% to
24,204 lines.
57% self-install ADSL 141 W-CDMA base

Group
packages stations selectively overview
Our self-install option is very deployed

popular and had a positive Telkom has commenced the
Management
impact on ADSL installation deployment of a W-CDMA review
times. wireless local loop network in
the 2100MHz band.
Sustainability
review
ADSL subscribers (000) Managed data network sites Supreme Call subscribers Do Broadband subscribers
(000) (000) (000) Performance
600 30 16 200 review
14 180
500 25
160
12
140 Financial
400 20
10 statements
120
300 15 8 100
6 80
200 10 Company
60 Financial
4 Information
40
100 5
2 20
0 0 0 0
07 08 09 07 08 09 07 08 09 07 08 09
Equity markets
The financial year ended March 31, 2009 was characterised by extreme volatility in global stock markets and currencies as a result of
the sub-prime crisis. Despite these difficulties we managed to conclude:
• The sale of our 15% share in Vodacom to Vodafone Plc for the excellent price of
R22.5 billion. In addition, the remaining 35% share in Vodacom was unbundled
directly to shareholders. Details of the transaction can be found in the performance
review.
• As a result of this transaction Telkom was able to pay a special dividend of R19.00 per
share to its shareholders.
• In addition, Telkom declared an ordinary dividend of R1.15 and a special dividend of
R2.60 in respect of the 2009 financial year.
Telkom remains committed to returning cash to shareholders and growing shareholder value.
Market performance
JSE Limited NYSE
(ZAR per ordinary share) (USD per ADS)
year ended March 31 year ended March 31,
2008 2009 2008 2009
Closing price 131.20 105.49 65.43 44.93

Highest price 195.02 107.37 113.00 45.03
Market capitalisation (millions) 68,327 54,937 8,519 5,850
JSE share price vs volume traded NYSE share price vs volume traded
160 20 000 000 85 250
80
150 17 500 000
75
200
140 15 000 000 70
Share price (USD)
65
Share price (R)
130 12 500 000 60 150

Volume
Volume
55
120 10 000 000
50
110 7 500 000 45 100
40
100 5 000 000 35
50
30
90 2 500 000
25
80 0 20 0
Mar 08 Jun 08 Aug 08 Nov 08 Jan 09 Mar 09 Mar 08 Jun 08 Aug 08 Nov 08 Jan 09 Mar 09
Share price (R) Volume Share price (US$) Volume
JSE share price relative to SA indices NYSE share price relative to major international stock
market indices
FTSE 250 Telcos -25.2
Telco index -15.5 Telkom US$ -31.3
Nasdaq -32.9
Telkom -19.6
FTSE Global Telcos -34.6
All share -31.2 S&P Telecoms -36.8
DJI -38.0
S&P 500 -39.7

Industrials -32.4
FTSE 350 Telcos (in USD) -46.1
-50
-60
-40
03-
-20
-10
0
-10
-40
-30
-20
% %
The telecommunications industry
Conclusion of Vodacom transaction gives Telkom
freedom to compete
Overview
Telkom is an integrated communications service provider offering
bundled voice, data, broadband and internet services with its
service offerings expanded to business and residential customers.
Competition in the South African fixed-line communications market

is intense and is increasing as a result of the Electronic
Communications Act and determinations issued by the Minister of
Communications.
The new licensing framework included in the Act has resulted in the
market becoming more horizontally layered with a large number
of separate licences being issued for electronic communications
network services, electronic communications services, broadcasting
services and radio frequency spectrum and, as a result, this will
substantially increase competition in Telkom’s fixed-line business.
In the areas where we currently face competition, and expect to

compete for public switched telecommunications services, Telkom
competes primarily on the basis of customer service, quality,
dependability and price. In addition, we intend to introduce new Group
overview
products, services and tariff structures to enable us to maintain and
grow revenue.
Management
Fixed-line voice competition review
In September 2004, South Africa’s Minister of Communications
granted an additional licence to provide switched tele-
communications services to Neotel, a company that was 30% Sustainability
review
owned by Transtel Telecoms, a division of Transnet Limited, and
Esitel, which is beneficially owned by the South African
government and other strategic equity investors, including a 26% Performance
review
shareholding owned by TATA Africa Holdings (Pty) Ltd, a member
of the TATA Group, a large Indian conglomerate with information
and communications operations. On March 19, 2008, Neotel
Financial
announced that the Competition Tribunal of South Africa had statements
approved its acquisition of Transtel without any conditions.

Subsequently, TATA Africa Holdings (Pty) Ltd acquired the
Company
government’s 30% equity, extending its equity in Neotel to 56%. Financial
Information
Neotel started providing services to large corporations and other
licensees at the start of the 2007 calendar year and on April 25,
2008, announced that the first of its consumer products were
The telecommunications industry (continued)
All existing licences have been
conver ted
available to limited parts of Johannesburg individual ECNS and individual ECS including licence fees to be paid, minimum
and Pretoria. licences for a public entity’, inviting services to be provided to customers and
Broadband Infraco to submit applications other service obligations, will be contained
As a result of an amendment to the
for these licences. in regulations, some of which have been
Electronic Communications Act to enable
promulgated and some of which are in the
state investment and licensing in the sector, The process to issue additional licences to
process of being promulgated.
the government created an infrastructure small business operators for the purpose of
company, Broadband Infraco (Pty) Ltd, in providing telecommunications services in Telkom’s licence fee under the public
2007, to provide inter-city bandwidth at underserviced areas with a teledensity of less switched telecommunications service
cost based prices to Neotel and, later, to than 5% started in 2005. To date, the licence amounted to 0.1% of its annual
the rest of the industry, which added further Minister of Communications has identified revenue generated from the provision of the
competition to Telkom’s communications 27 underserviced areas and ICASA has licensed public switched telecommuni-
network. Broadband Infraco will also be issued licences to seven successful bidders cations services. This provision was
involved in some of the undersea cable with the Minister issuing invitations to apply retained following the conversion to the
projects. for licences in an additional 14 areas. ECS and ECNS licences. However, in
terms of a regulation published on April 1,
Licences All existing USAL licences, including 2009, Telkom’s annual licence fees for
On October 29, 2008, the Minister of Telkom’s, have been converted into ECS ECS and ECNS were set at 1.5% of gross
Communications published for public and ECNS licences, and all future licences profit from licensed activities, defined as
comment, a draft policy direction for this category will be issued as ECS and total revenue obtained from the provision of
which would direct ICASA to grant ECNS licences. licensed services, less total costs directly
Broadband Infraco individual Electronic incurred in the provision of such services.
These licences provide the authorisation to
Communications Services (ECS) and As a result, there may be a material
construct, maintain and operate an
Electronic Communications Network increase in Telkom’s annual licence fee.
electronic communications network and
Services (ECNS) licences.
provide ECNS and ECS. All the obligations On March 25, 2009, the telecommuni-
On March 13, 2009, ICASA published contained in Telkom’s public switched cations industry put forward proposals to
an ‘invitation for a public entity to apply for telecommunications service licence, ICASA regarding a Service Charter
Telkom is in the process of challenging the proposed

new licence fee regulation
regulation that stipulated standard levels of service. The standards

stipulated in the regulation are extremely demanding and, the The 2010 Telkom ‘hotseat’
communications industry has made representation to ICASA. On This is the control room – the ‘hotseat’ – for our 2010 World
July 24, 2009, ICASA has repeated the previous Service Charter Cup soccer national transport network. From here, our highly
regulation and published a new regulation that implements many skilled team will direct all incoming and outgoing
of the recommendations made by the industry. transmissions for the duration of the tournament.
Other licences
In August 1995, Telkom’s subsidiary, Swiftnet, was granted a tele-
communications licence and a radio frequency spectrum licence
for the provision of:
• The construction, maintenance and operation of a national

wireless data network and the provision of wireless data
telecommunications services; and
• Interconnection with Telkom’s network.
In terms of the licence agreement, Swiftnet was required to have

at least a 30% black economic empowerment (BEE) shareholding.
In spite of Telkom entering into an agreement in 2007 to sell 30%
of Swiftnet to the Radio Surveillance Consortium, a group of
empowerment investors, an agreement that received Competition
Commission approval, ICASA did not approve the transaction. As
a result, Swiftnet was in breach of its licence.
Swiftnet, assisted by Telkom, has subsequently had two meetings

with ICASA on this matter and ICASA has indicated that currently
there is no agreement within the industry as to acceptable BEE
shareholding percentages for all licensees. ICASA also indicated
that the shareholding issue for the Swiftnet licence would have to
be in line with the BEE values applicable to other similar licensees.
Swiftnet received a new licence from ICASA on January 16, 2009

Group
which stipulated that the company still needed to secure a 30% overview
BEE shareholding. However, ICASA has said that in the 2010

financial year it will be reviewing the equity shareholdings of all
licensees, after which it is anticipated that all licensees will be Management
review
given sufficient time to meet their equity shareholding requirements.
Telkom’s Board of directors has decided to dispose of Swiftnet,
and Telkom is currently seeking potential purchasers that would Sustainability
review
comply with Swiftnet’s BEE requirements.
Carrier pre-selection
The now repealed Telecommunications Act mandated that fixed-line Performance
review
operators were required to implement carrier pre-selection to enable
customers to choose and vary their fixed-line telecommunications
carrier for long distance and international calls. These provisions Financial
statements
were retained in the Electronic Communications Act and on June
24, 2005, regulations were published for the implementation of
carrier pre-selection in two phases (the implementation of call-by-call Company
Financial
pre-selection and fully automatic pre-selection, to be implemented Information
and provided within two months and 10 months, respectively, of
them being requested by another operator). Telkom had already
conditioned its exchanges to handle call-by-call carrier pre-selection
The telecommunications industry (continued)
Telkom has made significant progress in
rebalancing its fixed-line tariffs...
by December 31, 2003. Telkom has met includes multi-line porting, secure file including lines of 2 Mbps of capacity and
with Neotel to discuss its request for transfer protocol access to third parties and the rental and installation of business
implementing carrier pre-selection. operational software upgrades on the exchange lines.
central reference data base.
Until Neotel’s interconnection systems and Approximately 57% of Telkom’s operating
its inter-operator process and systems to The set-up and per-operator costs are revenue in the year ended March 31,
support carrier pre-selection become typically the largest cost components of 2008 was included in this basket,
available, Telkom cannot fully implement implementing number portability. Similar to compared to approximately 54% in the
carrier pre-selection. However, Telkom carrier pre-selection, there is a risk of not fully year ended March 31, 2009.
does not believe it can meet the 10 months recovering system set-up costs. The
deadline for automatic carrier pre- implementation of these requirements in a
selection. timely manner, could result in Telkom’s
business being disrupted and cause its net
Number portability
profit to decline and the implementation of
The Telecommunications Act mandated that
these requirements will likely further increase
number portability, to enable customers to
competition and cause churn rates to
retain their fixed-line and mobile telephone
increase.
numbers if they switch between fixed-line
operators or between mobile operators, be Fees and tariffs
introduced. These provisions were retained Telkom has made significant progress in
in the Electronic Communications Act. rebalancing its fixed-line tariffs with a view
A framework number portability regulation to focusing more on the relationship
was published at the end of 2004 that between the actual costs and tariffs of
generically provides for the introduction of subscriptions and connections and traffic in
fixed-to-fixed and mobile-to-mobile number order to more accurately reflect underlying
portability. Telkom is required to implement costs and to be more competitive.
number portability in blocks of 10,000 Regulations made under the repealed

numbers within two months after Neotel Telecommunications Act, but which are still
launches such retail services and individual in effect, imposed a price cap (3.5%
number portability within 12 months of below inflation, effectively implying a
receiving a request from Neotel. Telkom continuous real decrease in prices) on a
has received a request from Neotel to basket of Telkom’s specified services. These
implement both block and individual include installations; pre-paid and post-
number portability and Telkom and Neotel paid line rentals; local, long distance and
implemented number portability in blocks international calls; fixed-to-mobile calls;
of 10,000 and 1,000 numbers in May public payphone calls; ISDN services; its
2009. After several delays mobile number Diginet product and its Megaline product.
portability phase one was launched on A similar cap applies to a sub-basket of
November 11, 2006. Phase 2, which those services provided to residential
was implemented during April 2007, customers, including leased lines up to and
Independent benchmarking of Telkom’s pricing – Tarifica review, 4th quarter 2008

Telkom continues to manage its pricing actively in order to continually offer enhanced value to our customers. We intend to educate all
our customers as to the global attractiveness of our pricing and the value offered by the fixed-line service. Telkom’s mobile offering will
follow the lead of the fixed-line in terms of competitive pricing. Below find a selection of Tarifica’s findings.
Local peak (3 minute)

Source: Tarifica 4th quarter 2008
0.25
0.20
0.15
a - Euros
0.10
0.05
0.00
Slovak Republic
Cyprus
Malta
Slovenia
Germany
Iceland
Telkom
Bulgaria
Luxembourg
Estonia
Hungary
Turkey
Croatia
Italy
Latvia
Denmark
Average
Netherlands
Sweden
Spain
Lithuania
Finland
Norway
Ireland
UK (BT)
France
Poland
Switzerland
Portugal
Greece
Czech Republic
Austria
Belgium
Romania
Local off peak (3 minute)
0.20
0.15
a - Euros
0.10
0.05
0.00
Ireland
UK (BT)
Slovak Republic
Malta
Telkom
Cyprus
Luxembourg
Turkey
Croatia
Bulgaria
Lithuania
Slovenia
Romania
Austria
Denmark
Netherlands
Poland
Switzerland
Estonia
Germany
Czech Republic
Latvia
Average
Iceland
Italy
Hungary
Spain
France
Norway
Portugal
Sweden
Belgium
Finland
Greece
Group
overview
Management
review
To adjacent country Peak (3 minutes)
1.0
Sustainability
review
0.8
Performance
a - Euros
0.6 review
0.4
Financial
statements
0.2
Company
0.0 Financial
Turkey
Cyprus
Sweden
Norway
Switzerland
Netherlands
Iceland
Romania
Slovenia
Telkom
Denmark
France
Luxembourg
Bulgaria
Austria
Poland
Czech Republic
Latvia
Slovak Republic
Finland
Average
Malta
Spain
Estonia
Hungary
Ireland
Greece
Belgium
Italy
Portugal
Croatia
Germany
UK (BT)
Lithuania
Information
Croatia
Austria Switzerland
Lithuania
Independent benchmarking of Telkom’s pricing – Tarifica review, 4th quarter 2008
UK (BT) Czech republic

UK (BT)
Ireland
Portugal Portugal
Denmark
Finland Poland
Malta
Hungary France
Norway
Greece
Belgium
Cyprus
Italy
Latvia Netherlands
Latvia
Spain Austria
Belgium
Finland (Elisa) Italy
Estonia
Italy
UK (BT)
Denmark
Poland
Malta Spain
Slovenia
Average Ireland
Portugal
Bulgaria Croatia Germany
Spain Sweden Romania
Ireland Hungary Average
Czech Republic Average
Luxembourg
Slovak Republic Lithuania
Sweden
Poland Belgium
Greece
Austria Germany
Cyprus
Luxembourg Luxembourg
Slovenia France Denmark
Page 14
France Estonia Turkey

Romania Netherlands Bulgaria
Iceland Bulgaria
Hungary
Slovak Republic
Netherlands

6:18 PM
Finland

Greece
Sweden
Telkom Annual Report 2009
Norway
Telkom
Business: Installation
Residential: Installation
Norway
Malta
64 kbits / 50kms
Switzerland
Switzerland
Romania Telkom
8/12/09
Telkom
Czech Republic Latvia
Cyprus
Iceland
Iceland
Turkey
Turkey
Germany Croatia
Telkom AR front.qxp
150
120
90
60
30
600
500
400
300
200
100
0
1.5
1.2
0.9
0.6
0.3
0.0
a - Euros
a - Euros a - Euros
14
management team
with experience to
guide the Group
Management review
rated
Chairman’s review 16
Chief Executive Officer’s review 20
Chief Financial Officer’s review 24
Board of directors 28
Chief officers 30
Management team 31
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Chairman’s review
We have
strengthened
the Board, our structures and processes
to ensure Telkom’s transformation
The year under review was characterised The socio-economic environment
by the sale of Vodacom, a fast and This period is marked by the shrinking local
substantively changing competitive local economy, growing activism of our
landscape, and our efforts to grow in other shareholders and stakeholders, the socio-
parts of the African continent. To ensure economic challenges and new political
consistent growth in value for our leadership.
shareholders, among our strategic priorities,
Bold and creative leadership is required to
my first year in Telkom was to bring stability
create employment, and intervene in the
to the organisation; the second a
education, health, housing and security
strengthening of the Board; and the third
sectors. These socio-economic factors will
must embed the ongoing transformation of
strain corporations and increase the focus
the new Telkom to defend, grow, and
on companies as good corporate citizens.
deliver, competitively. While it has been a
Pressure on the government to further reduce
demanding period for the Telkom Board,
communication costs and widen services to
we have been preparing for our most
boost the economy and public services will
Shirley Lue Arnold challenging year, which lies ahead.
increase. Reporting on sustainability and
Chairman
Restructuring Telkom SA Limited environment impacts is also being more
This demands Telkom’s organisational strongly demanded. Telkom is addressing
It is with great regret that we structures and operational systems become these issues and our efforts are detailed
said a final farewell to the more responsive, adaptive and much elsewhere in this report.
quicker in delivering innovative and quality
former Minister of The South African Gross Domestic Product
services. More detail on the strategic
Communications Dr Ivy (GDP) dropped 1.5% in the six months to
priorities and restructuring of the company is
Matsepe-Casaburri, who March 2009, with the mining, manufac-
provided by Reuben September in his
turing and automotive industries being
passed away on April 6, CEO review.
particularly hard hit. In addition, in the first
2009. She was a great source
The change is fundamental to our strategy quarter of 2009, formal employment fell by
of strength to us and we will to grow our market share in South Africa 90,000. The rand remained under
miss her wise counsel. and build a strong footprint across the pressure with the resultant impact on the
African continent. It is vital to Telkom’s economy and we believe that until world
survival to continually retire obsolete legacy markets revive, the overall macro-economic
systems and bureaucracies as we review scenario remains parlous.
our performance and restructure to meet
our challenges.
Group
overview
The regulatory environment 99.9% of our telephone access lines were using three satellite operators – Intelsat,
The regulatory environment remains connected to digital exchanges. SES-Newskies and Hellas Sat.
Management
challenging as the telecommunications Our national network operations centre Progress continues with the roll-out of the review
regulator, ICASA, continues to implement provides our corporate and global Next Generation Network (NGN). The
the Electronic Communications Act. Until all customers with managed data networking NGN will give us significant advantages
Sustainability
the new regulations are promulgated, an services and our investment in a third over mobile operators through increased review
element of uncertainty will bedevil all upgrade of the South Atlantic Tele- ability to carry traffic, provide superior
operators. Telkom remains committed to communications Cable – 3 West African quality services and compete on price.
working with ICASA for the greater good submarine cable/South Africa Far East – Changing market dynamics Performance
review
of the South African telecommunications has increased fibre optic transmission To counter the continued decrease in voice
industry. capability between South Africa and revenues through the shift to mobile
international destinations. Our supply units, we are aggressively expanding our Financial
The technological environment statements
contract for the development of the EASSy broadband footprint to offer and host
Our fully digital fixed-line network provides
submarine cable system will link eight higher bandwidth applications such as
service to every major urban area in South video services. Our enhanced ADSL
countries from Sudan to South Africa. Company
Africa, giving Telkom a competitive edge offering enables our customers to access a Financial
Information
over other communications service The acquisition of satellite bandwidth from host of broadband value-added services.
providers selling value-added voice and Intelsat in the Atlantic and Indian Ocean ADSL subscribers increased by a pleasing
data services. At the end of March 2009, regions provides services on eight satellites 33% over the previous financial year.
Chairman’s review (continued)
explore
We continue to
all avenues that will provide

us with growth
Our strategic direction, the implementation Chief Financial Officer of AngloCoal, on Africa during the year under review. An
of Telkom’s new structure and the increasing September 1, 2008. additional R832 million is expected to be
challenges of the competitive and spent in the 2010 and 2011 financial
The change in our articles of association
regulatory environment are explained more years. FIFA’s president, Sepp Blatter has
allowed our new Chief Financial Officer,
fully in the Chief Executive Officer’s review. been most complimentary about Telkom’s
Peter Nelson, to join the Board on
services (see box alongside). A major spin-
Management continues to identify December 8, 2008.
off of the project is that all the equipment
opportunities for growth, particularly in sub-
Detailed curriculum vitae can be viewed on used will benefit local and other
Saharan Africa. pages 28 and 29. communities.
The Vodacom transaction Empowerment Appreciation
The conclusion of the sale of 15% of our While we remain a champion of Broad A special note of appreciation must go the
shares in Vodacom to Vodafone and the Based Black Economic Empowerment Telkom Board members for their tireless
unbundling of the remaining 35% to (BBBEE) with excellent performances in commitment to Telkom under demanding
shareholders after year end allows us to some areas (10 out of 10 for management conditions, our employees, and all our
enter the South African mobile market and control and 19.1 out of 20 for preferential customers.
provide fully converged services. Telkom is procurement), our overall BBBEE status is
now a smaller company which allows us to relatively low – a level 6 contributor at the Telkom has remained, through even more
put more focus on our key growth areas. last verification. A new BBBEE strategy will difficult times in our history as one of South
be implemented to rectify this situation. See Africa’s leading ICT companies, and the
The Board
page 58. Board and Executive will continue to
In the year under review, Mark Lamberti
provide value to our shareholders and
resigned on June 3, 2008 and the PIC Confederations Cup and the 2010
service to the country as a strategic
representative, Athol Rhoda, resigned Soccer World Cup
national asset.
on July 3, 2008. I would like to thank them A significant accolade for the year under
both for their commitment and support. review was being appointed FIFA’s main
Brian Molefe replaced Athol Rhoda as the partner for the development of fixed-line
PIC’s representative. network infrastructures for these major
sports events. Some R118 million was
We were pleased to welcome Peter
invested in the necessary equipment and Shirley Lue Arnold
Joubert, director of companies, on August
cabling for the soccer stadia around South Chairman
12, 2008, and David Barber, former
On target for 2010
‘For the first time ever, the FIFA World Cup will kick off on African soil. This is an
exciting, historic moment for Africa, and YOU are the people making it happen. For
me, it will be the realisation of a dream. I have seen what football means to Africa.
With so many talented and outstanding African players, coaches, clubs and national
teams it is fitting that the 2010 FIFA World Cup should find a home on this continent.
I have felt South Africa’s enormous enthusiasm – from the blue-collar worker to the top executive. This country has a phenomenal spirit,
and I am privileged to share in the hope and inspiration that the 2010 FIFA World Cup is bringing to your people. You have shown
the world that South Africa can achieve wonders, and there is no doubt in my mind that you will be ready.
Telkom is ideally placed to make this a FIFA World Cup to be remembered. You are making history. Not only is this the first time the
tournament is being hosted in Africa, but it is also the first time the event will be broadcast in high definition. With the huge volume
of voice and data traffic that will be moving through the FIFA event network, your work is critical in facilitating the successful broadcast
of the event.
Group
overview
Management
review
Telkom is on target for meeting the FIFA Confederations Cup 2009 requirements. And the completion of the Sustainability
review
network will allow Telkom to meet its requirements for 2010. This is how I know Telkom can deliver.
Your efforts not only guarantee the smooth running of the games, but also build an infrastructure that will benefit
Performance
your country long after we are gone. This is the kind of legacy we hope the 2010 FIFA World Cup will leave review
in Africa, and you are delivering an enormous gift, not just to us, but also to your own people.
I have seen what this nation can do – the spirit of Ubuntu that pulls you together. With teamwork you can
Financial
achieve anything and Telkom is no different. I have every confidence in you, the Telkom staff, to make this the statements
greatest FIFA World Cup we have ever seen’ – Sepp Blatter.
Company
Financial
Information
Chief Executive Officer’s review
evolve with the changing trends,

meet the demand
The ICT market is never static, unknown and competitive markets, highly
characterised as it is by fluidity, change volatile currency fluctuations, infrastructure
and on-going innovation and those factors and technology challenges. But, expensive
aptly summed up the year under review. as they were, we have learned our lessons
and we are ready to capitalise on the
Following the sale of Vodacom at what I
opportunities going forward.
believe was an exceptional price given the
market conditions, and returning substantial In South Africa, our on-going drive to
capital to our shareholders, and the sale of enhance the Next Generation Network
our 75% stake in Telkom Media to (NGN) continues to deliver significant
Schenzen Media, we are now poised to benefits and gives us a substantial
compete more aggressively in the competitive edge in providing our
telecommunications market. Our defend customers with a full suite of converged ICT
and grow strategies are on track and, services. In particular, given the fact that
following our restructuring, we are better we can now enter the mobile market, the
placed to manage our resources more NGN’s leading edge technologies will
Reuben September
effectively and efficiently. enable us to carry increased traffic,
Chief Executive Officer
provide superior service and compete on
Our South African operations remain our price in a market where quality and
In South Africa, our on-going core business and cash flow generator and efficiency is key.
I am pleased to report that we achieved
drive to enhance the Next Financial overview
good growth in our bundled calling plan
Generation Network (NGN) Our operating revenue from continuing
products – Telkom Closer and Supreme
continues to deliver benefits Call – and significant growth in our
operations grew by 6.9% to R35.9 billion
and gives us a competitive in the year under review. Operating profit
broadband products. We once again
from continuing operations declined by
edge in providing our achieved double digit growth from our
29.6% to R6.4 billion and cash generated
customers with a full suite data revenue, up 12.1% to R9.3 billion for
from operations before dividends paid fell
of converged Information, the year.
by 9.6% to R14.8 billion.
Communication and In Africa, our footprint now covers almost
The Group EBITDA margin decreased from
Technology (ICT) services. the entire continent, with the exception of
39.3% to 32.5% in the year under review,
North Africa, which gives us the
mainly because of an EBITDA loss of
opportunity to extend our services to a very
R226 million recorded by Multi-Links and
fast-growing market. We took our holding
higher fixed-line operating expenditure
in Multi-Links Nigeria up to 100% and,
which reduced the fixed-line EBITDA
post the year end, we acquired MWEB
margin to 25.8% as at March 31, 2009
Africa, including AFSAT, from Naspers.
compared to 36.3% as at March 31,
However, on the debit side, our initiatives 2008. The South African business, however,
in Africa to date have been most performed relatively well, and excluding
challenging, with high start-up costs, the Multi-Links, Telkom Media and Africa
Online impairments, the fixed-line EBITDA R9.3 billion. Data connectivity revenue Defend profitable revenue
margin would have been 32.3%. increased to R5.0 billion, up 10.9% and Our key objectives are to improve our
internet access revenues increased by 29.6% competitiveness in areas where competition
We experienced a 45.9% decrease in
to R1.5 billion. Our managed network is expected to intensify by use of tariff
headline earnings per share to 557 cents a
services and VPN revenues were up by rebalancing, building customer retention,
share and declared an ordinary dividend of
s,
22.3% to R891 million. We intend to continue building customer loyalty and converting
115 cents per share and a special dividend
to exploit the competitive edge our high-quality revenue streams to annuity revenue.
of 260 cents per share, a decrease of
network gives us in the corporate data market.
43.2% from the ordinary dividend of Pricing is a key element and our tariff
660 cents per share declared in the 2008 Cost management is a key element in rebalancing will focus mainly on the
financial year. The dividend was paid to creating shareholder value, particularly as relationship between the actual costs and
shareholders on July 20, 2009. competition continues to erode our revenue tariffs of line rentals and traffic so we can
base. As a result of the vicious inflationary compete in a liberalised communications
Total traffic revenue decreased by 3.9% to
environment; expenses incurred by the market. We aim to protect our margins and
R15.3 billion, with local traffic revenue
Vodacom transaction; an R85 million increase the per second billing benefits as
decreasing 10.8% to R3.6 billion and long
impairment of Africa Online; the R254 million part of our bundled packages.
distance revenue decreasing by 9.6% to
impairment of Telkom Media and the
R2.0 billion, primarily because of the • Differentiating retail list prices from
R1.8 billion impairment of Multi-Links, our
continuing fixed to mobile substitution. value-based offerings.
fixed-line operating expenses rose by
Our quest is to convert customers from
The Telkom Closer packages performed 19.6% to R29.8 billion.
usage-based products to adopting
well, growing by 27.6% to 575,812 plans Employee expenses rose to R8 billion, an calling plans and bundles.
and Supreme call packages, targeted at increase of 8.1%; selling, general and
the business segment, grew by 14.4% to • Value-based calling packages and
administrative expenses were up 68.8% to
14,778 packages. Our PC bundles showed bundles.
R6.6 billion; service fees rose 14.4% to
a 48.3% growth to 11,336 packages and Our intention is to deliver value to our
R2.8 billion and payments to other
we continued successfully to tie in large customers and thus improve retention
operators increased 9.2% to R7.5 billion,
corporate customers to term and volume and loyalty. We will bundle call minutes
with operating leases decreasing by 1% to
discount plans. with access line rental in an attractive
R613 million. Depreciation, amortisation,
subscription-based value proposition to
impairment and write-offs increased by
Annuity revenue streams, excluding line
deliver greater value to our customers.
16.8% to R4.4 billion. Headline earnings
installations, reconnection fees and customer
from continuing operations decreased • Converting revenue to annuity-based Group
premises equipment sales, grew by 6.8% overview
45.9% to 557 cents per share for the year revenue.
to R7.4 billion and we will seek to continue
ended March 31, 2009. The reduced This will help us offset declining usage-
to convert revenue streams to annuity
earnings can be attributed to the significant based revenue and boost annuity
revenues, largely through bundling call Management
impairments contained in operating review
revenue.
minutes with access line rental in attractive
expenses and negative foreign exchange
subscription-based value propositions. Our • Rebalancing prices of data services.
and fair value movements of R1.1 billion
current line penetration of bundled products We will pass on the benefits of Sustainability
resulting from the depreciation of the rand review
is 41.7%. By 2013/14, we are targeting increased network efficiencies to
and the naira against the US dollar.
a penetration of 56%. customers so we can defend our market
Strategic overview share and revenue.
Broadband and converged services Performance
Our core strategy is to defend and grow review
performed very well with a 33% growth in • Differentiated attributes of our offerings.
profitable revenue, while managing costs.
ADSL subscribers to 548,015. There was We will emphasise the offerings that
We will aim to differentiate ourselves from
a 58.1% increase in Do Broadband customers value so that we can Financial
competitors by moving from a provider of statements
subscribers to 188,540. Internet all-access compete on more than just price.
basic voice and data connectivity to
subscribers grew to 423,196, an increase
become Africa’s preferred information, Build customer retention
of 18.2%. Company
communications and technology service We will continue to launch initiatives to Financial
Information
In line with our strategy of growing our data provider offering fully converged voice, attract customers to stay with us and focus on
business, data revenues (including broad- data, video and information technology customer centricity through implementing
band) increased a very pleasing 12.1% to services. value and needs-based customer
Chief Executive Officer’s review (continued)
segmentation. Additionally, we will concen- as mobile converged voice services and been initiated with the objective of
trate on fostering long-term relationships with by building a wireless voice and mobile transforming us into a leading Pan-African
enterprise and wholesale customers through data network in areas that use less communications company. Delivering on
volume and term agreements. vulnerable access technologies, which will this requires a compelling and focused
reduce the theft of copper cables and transformation programme. This programme
Build customer loyalty
improve service levels. We will also enter consists of various initiatives including
We will continue to position Telkom as the
into, among other things, a roaming defending our market share, seeking new
service provider of choice through superior
agreement in the areas where we choose revenue and businesses, implementing a
value propositions and constant product and
not to build our own network. structure that enables clear profit and loss
service innovations. We will also upgrade
accountability, as well as ensuring that our
our customer communication programme. To implement this strategy we have
business processes and work practices
obtained access to the 1800MHz and
Grow profitable revenue through deliver upon our strategic intent.
2100MHz spectrum bands to utilise 2G
broadband and converged services
and 3G technologies in pursuit of our voice This is aimed at achieving certain key
Profitable revenue growth in our broadband
and mobile data services. By focusing on financial targets, such as improving our
and converged services area will be driven
higher value customer segments and EBITDA by increasing the return on our
by continuing to increase converged services
technologies that enable roaming across assets, making effective capital
revenue; pursuing partnerships with content
networks that use different mobile expenditure investments, as well as
providers to enhance our products;
technologies, we can offer wireless access improving our cash flow. We intend to do
aggressively seeking to improve our market
to, amongst others, campuses, gated this by significantly improving revenue
share in the information technology services
communities and security complexes and through our strategic initiatives, capturing
sector and improving our innovation
provide mobile data services and operating expenditure efficiencies,
capabilities.
fixed/nomadic voice services. focusing on expenditure in areas where we
We are in no doubt that the next can increase our return on assets and
Our move to offering a fully fledged mobile
battleground of the convergence between critically challenging capital expenditure
service depends on the outcome of a
telecommunications and IT will be in the planned for the next few years.
market research programme and a roaming
data management environment. We have
agreement we are currently negotiating with We embarked on the initiative towards the
one of the finest National Network
the South African mobile operators. At this end of the year under review and our
Operating Centres in the world and we
stage, we will not commit to any capital inspirational objective is creating a new
will use it to provide our customers with
expenditure before completion of the Telkom. It is a bold, new journey for the
cost-effective solutions that support their
comprehensive market study. Group and its scope and importance is
total ICT needs. We expect to stimulate the
such that it will roll out over two years. It is
use of bandwidth over our network through Grow profitable revenue internationally
a phased and planned programme that
our data centre business. Telkom aims to increase revenue and long-
will transform our Group’s culture and the
term profitability from our African
Several products, including Metro LAN, way we do business. It will ensure full profit
subsidiaries we have acquired and from
have been introduced to strengthen our and loss accountability throughout the
the international services we provide. We
data communications service capabilities organisation and will enable us to focus on
will become a Pan-African integrated
and improve our integrated communications efficient resource management and cost
service provider that offers international
service offerings in response to increased containment. Our financial objective is a
communications and internet connectivity, 10% reduction in operating expenses by
demand for higher bandwidth in the
hosting and managed data services and the financial year ending 2011/2012.
corporate and global segment.
wireless voice and mobile broadband Currently we are conducting a Group-wide
Grow profitable revenue through solutions. We have the opportunity to survey to analyse our current culture and
wireless voice and mobile data services leverage synergies from Telkom South give employees the opportunity to provide
By providing customers with an integrated Africa into our Africa subsidiaries, their views on what our culture should look
bundled offering with superior speeds and capitalise on strategic partnerships, for like. I believe that this is essential if we are
quality through our fixed-line network, example, with AT&T, and advance data to have a firm foundation on which to build
combined with mobility when required, we services into a growing market in Africa. the remainder of the process.
can grow profitable revenue.
Executing our strategy Underpinning the programme is the four
This we can do by transforming our fixed- We will execute our strategy through the ‘Rs” strategy:
line business to incorporate services such Telkom Renaissance initiative which has
• Remodelling – reaching for new revenue MWEB Africa The ordinary dividend of 115 cents per
streams in current and new markets. Our geographic expansion strategy is share declared for the 2009 financial year
geared to establishing us as a regional provides the new targeted base established
• Reorganising – fashioning a structure
voice and data player via a range of by the Board for the determination of future
that enables clear profit and loss
hosting services, managed solutions, and dividends for Telkom as a stand-alone entity.
accountability and focus in a
mobile voice and wireless broadband The level of dividend payments going
performance-oriented environment. services. To this end, in addition to Multi- forward will be based on a number of
• Revitalisation – renewing the entire Links, we purchased MWEB Africa and factors, including the consideration of the
Group and reinforcing a positive ‘make 75% of MWEB Namibia for approximately financial results, capital and operating
it happen’ attitude among all our R498 million. As of March 31, 2009, expenditure requirements, the Group's
people. MWEB Africa had a customer base of debt level, interest coverage, internal cash
20,175 with operations in Nigeria, Kenya, flows, prospects and available growth
• Re-engineering – ensuring that our Tanzania, Uganda, Namibia and opportunities.
business processes, allocation of Zimbabwe and an agency arrangement in
Appreciation
resources and work practices deliver on Botswana. This acquisition, together with our
As ever, on behalf of the Executive
our strategic intent. investment in Africa Online, gives us the
Committee, I extend my sincere gratitude to
ideal opportunity to service multi-national
We are re-building the organisation into a the Telkom Board of directors for the
and corporate customers across Africa,
world class team. guidance and insights its members have
particularly in the data products field, which
provided. I must also thank the executive
Multi-Links we believe will deliver enormous future
team and all our employees for their
As mentioned earlier in my report, we growth. The memorandum of understanding
dedication and commitment in executing
acquired the remaining 25% of Multi-Links signed with AT&T will further enhance our
our defend and grow strategies. Thanks
in January 2009 for US$130 million. The ability to service multi-national and corporate
also to our customers for their continued
company did not perform well in the last customers throughout the continent.
and valued support.
financial year with a net loss for the period Prospects
Conclusion
ending March 31, 2009 of R1.76 billion. Telkom’s strategy is designed to deliver
In summing up the year I am reminded of
We acknowledge that we under-estimated sustainable, profitable growth going
something one of our call centre operators in
forward and is benchmarked against
the competitiveness of the Nigerian market Cape Town said about her job: ”You have
global best practice. The creation of
and failed to execute on the building and to take the good with the bad and, overall,
shareholder value is the underlying driver of
management of our distribution channels. the good outweighs the bad.” And that was
every decision made. Telkom’s Board of
Turning Multi-Links’ performance around is the year under review. Tremendous pressures
directors and management team believes
our number one priority, given the extent of on all fronts; a lot of angst around the
that the share price has not been reflecting Group
our investment and the enormous Vodacom deal – externally and internally – overview
the underlying value of the fixed-line
opportunity the Nigerian market provides. the on-going fight against the cable thieves,
business and they are committed to
US$100 million has been budgeted for the etc. But then we had the restructuring of the
rectifying this.
2009/10 financial year for the completion business, a force for good, and the Management
review
of an additional 1,645 km build and Over the next few years, we will be opportunity, via our appointment by FIFA, to
584 km swop of optic fibre cable for the focusing on transforming the business to design and provision the infrastructure for the
deal with competition; concentrating on Confederations Cup and 2010 Soccer
DWDM/SDH network. It is anticipated that Sustainability
delivering innovative products and services World Cup stadia, to show the world just review
the network will connect 80 DWDM/SDH
to our customers; expanding our network how good we are. The fact that our diverse
sites, covering all major cities in Nigeria,
and bedding down our growth drivers. customer base includes the majority of the
providing us with additional bandwidth
country’s large corporates also contributed to Performance
connectivity for voice and data customers. We expect that over the next three years, review
competition will continue to constrain the ‘good’ part of the year.
In addition, 227 cell towers are to be
erected and another 300 commissioned on revenue growth and, in a transforming Telkom is now poised to maximise value for
third party leased tower infrastructure during industry like ours, targets are inherently all our shareholders. Financial
statements
the year. Seven new customer service risky, particularly in the later years, and
centres are planned to facilitate and support investors should not place undue reliance
on such targets. Increased revenues from
the network growth. Company
our data, broadband and converged Financial
Information
We expect Multi-Links to be EBITDA business and our recently acquired
positive in 2010/11 and to be cash flow subsidiaries are projected to mitigate the Reuben September
positive by 2011/12. impact of increased competition. Chief Executive Officer
Chief Financial Officer’s review
The roll-out of our mobile network is

expected to enable us to provide
connectivity
cost-ef fectively
It is my pleasure to present Telkom’s around Multi-Links’s performance is vital to
financial review for the year ended Telkom given the extent of the Group’s
March 31, 2009. It has been a challenging investment and the enormous opportunity
year and despite difficult economic the Nigerian market provides.
conditions, Telkom managed to deliver
The roll-out of our mobile network is
value to shareholders by declaring a
expected to enable us to provide
special dividend of R19 per share upon
connectivity in a more cost effective
conclusion of the Vodacom transaction
manner in rural and high cable theft areas.
after year end and declaring an ordinary
Next Generation Network and mobile
dividend of R1.15 per share and special
technology also allows us to replace
dividend of R2.60 per share in June 2009.
expensive to maintain legacy equipment.
Faced with competition eroding our We continue with the renegotiation of all
revenue base, cost management continues supplier contracts and constructive
to be a key element in creating shareholder engagement with labour unions. We are
value. Combined with the inflationary reviewing our IT investment strategy in
Peter Nelson
environment affecting our operating order to ensure optimum levels of spend in
Chief Financial Officer
expenses, a number of once-off items line with our strategy and network
impacted Group earnings including: investment. Inventories and capital work-in-
progress are receiving considerable
• R691 million cost relating to the attention as we seek to lower just-in-time
Vodacom BEE deal; levels of investment and to monetise any
• R462 million impairment of Multi-Links; excessive levels of assets.
• R409 million fair value loss on the Telkom is targeting an operating cost
acquisition of the additional 25% in reduction of 10% over the following three
Multi-Links; financial years. The Telkom Board is
focusing on improving the cost efficiency
• R204 million foreign exchange loss on
and free cash flow profile of the Company.
the acquisition of Gateway by
It has reduced the initial five year capital
Vodacom;
expenditure budget by 40% to R34 billion
• R177 million expenses relating to the and is targeting lower levels of inventory.
Vodacom transaction;
The Telkom Group added Multi-Links as a
• R39 million impairment of Africa new segment to its financial reporting for
Online; and the 2009 financial year. As a result, the
Telkom Group’s four reporting segments for
• R454 million deferred tax credit on the
the 2009 financial year are fixed-line,
Vodacom transaction.
Multi-Links, mobile and other. The other
In addition, Multi-Links reported a segment includes Telkom’s Trudon, formerly
R1.76 billion loss before eliminations known as TDS Directory Operations, and
during the 2009 financial year. Turning Africa Online, subsidiaries. The information
in this annual report has been updated to increased by 3.3% to R33,659 million due Finance charges and fair value
reflect the above changes to Telkom’s to growth in data revenues, higher revenue movements
reporting segments. Telkom currently from interconnection and subscription- Finance charges include interest paid on
expects its Telkom SA, Telkom International based calling plans, partially offset by local and foreign borrowings, amortised
and Telkom Data Centre businesses will lower traffic revenue. Multi-Links’s operating discounts on bonds and commercial paper
constitute distinct reporting segments in the revenue increased 124.9% due to a bills, fair value gains and losses on
2010 financial year due to the 209.3% growth in its subscriber base. financial instruments and foreign exchange
implementation of its new organisational gains and losses on foreign currency
Telkom’s defend and growth strategies are
structure, which became effective as of denominated transactions and balances.
on track. We have achieved good growth
April 1, 2009. Finance charges and fair value movements
in our bundled calling plan products,
increased by 82.7% to R2,843 million
Telkom concluded the disposal and sale of Telkom Closer and Supreme Call, and
(March 31, 2008: R1,556 million) in the
Vodacom, its mobile segment that provided strong growth in our broadband products.
mobile services through its 50% joint venture year ended March 31, 2009, primarily
Data revenue continues to achieve double
interest in Vodacom, effective as of April due to a 12.2% increase in interest
digit growth, delivering a 12.1% revenue
20, 2009. In addition, Telkom’s Board of expense to R1,732 million (March 31,
growth to R9,310 million for the year
directors has decided to dispose of 2008: R1,543 million) mainly as a result
ended March 31, 2009.
Swiftnet, a wholly owned subsidiary that of the 38.7% increase in the Group’s net
provides wireless data services, and Group operating expenses debt to R23,047 million (March 31,
determined to abandon its Telkom Media Group operating expenses increased by 2008: R16,617 million). In addition to the
subsidiary. The Telkom Group’s 19.5% to R29,895 million (March 31, increase in the interest expense, net fair
consolidated financial statements and 2008: R25,014 million) in the year ended value and foreign exchange rate
information included herein reflects the movements resulted in a loss of
March 31, 2009, due to a 19.6%
restatement to Telkom’s consolidated R1,111 million for the year ended
increase in operating expenses in the fixed-
financial statements in prior years as a result March 31, 2009 (March 31, 2008:
line segment to R29,849 million (before
of these events to disclose the effect of
inter-segmental eliminations) and a R13 million). The increase in the loss was
discontinued operations and the disposal of
157.1% increase in operating expenses in mainly attributable to foreign exchange
the subsidiaries held for sale as follows:
losses incurred by Multi-Links on foreign
Multi-Links to R2,422 million (before inter-
• Income statement data for all the denominated loans and creditors’ balances
segmental eliminations). Fixed-line operating
periods have been restated to reflect our as a result of the devaluation of the Naira
expenses increased due to increased selling,
50% share of Vodacom’s results, our as well as the mark to market valuation of
general and administrative expenses,
100% share of Swiftnet’s results and our the Multi-Links put option. Group
payments to other network operators, overview
75% share of Telkom Media’s results as
discontinued operations in accordance depreciation, amortisation, impairment and Taxation
with IFRS5; and write-offs, employee expenses and service Consolidated taxation expense from
continuing operations decreased by Management
fees. The increase in Multi-Links’s operating review
• Balance sheet data for only the year
expenses was primarily due to increased 37.3% to R1,660 million (March 31,
ended March 31, 2009 reflects our
cost of sales and associated subsidies as a 2008: R2,647 million) in the year ended
50% share of Vodacom’s results and our
result of increased sales volumes, March 31, 2009. The consolidated Sustainability
100% share of Swiftnet’s results as review
increased advertising and promotional effective taxation rate for the year ended
discontinued operations in accordance
expenditure and an increase in expatriate March 31, 2009 was 44.6% (March 31,
with IFRS5.
fees as a result of an increase in staff 2008: 34.5%). Telkom company’s effective Performance
The discussion of the business below has taxation rate was 8.9% (March 31, 2008: review
seconded from Telkom during the year.
been revised from previous years to reflect 24.6%). The lower effective taxation rate
the changes to Telkom’s segments and its Investment income for Telkom Company in the year ended
discontinued operations. Financial
Investment income consists of interest March 31, 2009 was mainly due to the statements
Group operating revenue received on short-term investments and deferred taxation asset that was raised on
Group operating revenue increased by bank accounts. Investment income the capital gains tax base cost of the 15%
Company
6.9% to R35,940 million (March 31, increased by 7.7% to R181 million investment in Vodacom which is held for Financial
Information
2008: R33,611 million) in the year ended (March 31, 2008: R168 million), largely sale that will be utilised in the future capital
March 31, 2009. Fixed-line operating as a result of increased short-term deposits gains tax liability of the sale transaction,
revenue, before inter-segmental eliminations, and interest rates. partially offset by the R1,843 million
Chief Financial Officer’s review (continued)
impairment of the Multi-Links investment, a Group cash flow provisioning and fulfilment, assurance and
R254 million impairment of the Telkom Cash flows from operating activities customer care, hardware technology
Media loan and R85 million impairment of increased by 7.8% to R11,432 million upgrades on the billing platform and
the Africa Online investment at company (March 31, 2008: R10,603 million), performance and service management and
level. primarily due to a lower dividend paid in property optimisation. During the year
respect of the 2008 financial year and ended March 31, 2009, R603 million
Profit for the year and earnings per
lower taxation payments partially offset by (March 31, 2008: R841 million) was spent
share on the implementation of several systems.
higher finance charges. Cash flows utilised
Profit attributable to the equity holders of
in investing activities increased by 20.6% Multi-Links’s capital expenditure, which
Telkom decreased by 47.7% to
to R17,005 million (March 31, 2008: includes spending on intangible assets,
R4,170 million (March 31, 2008:
R14,106 million), primarily due to higher increased by 112.7% to R2,791 million
R7,975 million) in the year ended capital expenditure in the Multi-Links and (March 31, 2008: R1,312 million) and
March 31, 2009. A major contributor to mobile segments and the acquisition of represents 146.9% of Multi-Links’s revenue
the decrease was the net loss of Gateway by Vodacom. Cash flows from (March 31, 2008: 155.3%) and was due
R1.76 billion reported by Multi-Links. financing activities includes loans raised of to the continued investment to improve
Group basic earnings per share from R18,168 million, partially offset by loans geographic coverage and increase
repaid of R10,212 million. capacity for both the voice and data
continuing operations decreased 57.7% to
407.4 cents per share (March 31, 2008: Group capital expenditure networks.
963.7 cents) and Group headline Group capital expenditure, which includes Mobile capital expenditure, which includes
earnings per share from continuing spend on intangible assets, increased by spending on intangible assets, increased
operations decreased by 45.9% to 11.2% to R13,234 million (March 31, by 3.2% to R3,569 million (March 31,
557.0 cents per share (March 31, 2008: 2008: R11,900 million) and represents 2008: R3,460 million) and represents
1,028.9 cents). 36.8% of Group revenue (March 31, 12.9% of mobile revenue (March 31,
2008: 35.4%). 2008: 14.4%) and was due to the
Group balance sheet
continued investment to improve geographic
Net debt, after financial assets and Fixed-line capital expenditure, which
coverage and increase capacity for both the
liabilities, including discontinued includes spending on intangible assets,
voice and data networks.
operations, increased by 38.7% to decreased by 1.5% to R6,690 million
R23,047 million (March 31, 2008: (March 31, 2008: R6,794 million) and Other capital expenditure consists of
R16,617 million) resulting in a net debt to represents 19.9% of fixed-line revenue additions to property, plant and equipment
EBITDA ratio of 1.2 times from 0.8 times at (March 31, 2008: 20.9%). Baseline and intangible assets for our subsidiaries
capital expenditure of R3,343 million Trudon (Pty) Ltd, formerly known as TDS
March 31, 2008. On March 31, 2009,
(March 31, 2008: R4,039 million) was Directory Operations, Swiftnet (Pty) Ltd,
the Group had cash balances of
largely for the deployment of technologies Africa Online Ltd and Telkom Media (Pty)
R1,931 million (March 31, 2008:
to support the growing data services Ltd. Other capital expenditure decreased to
R1,134 million). Net debt, after financial
business (including the ADSL footprint), links R184 million (March 31, 2008:
assets and liabilities of continuing
to the mobile cellular operators and R334 million) and represents 13.8% of
operations, was R15,497 million with a
expenditure for access line deployment in other revenue (March 31, 2008: 29.1%).
net debt to EBITDA ratio of 1.3 times.
selected high growth commercial and
Prospects
Telkom Company issued new local bonds, residential areas. The continued focus on
Telkom’s strategy is designed to deliver
the TL12 and TL15 with a nominal value of rehabilitating the access network and
sustainable, profitable growth going
R1,060 million and R1,160 million, increasing the efficiencies and reducing
forward and is benchmarked against
respectively as well as syndicated loans redundancies in the transport network as
global best practice. The creation of
with a nominal value of R4,100 million well as the initiation of the fixed-wireless
sustainable shareholder value is the
during the year ended March 31, 2009. roll-out contributed to the network evolution
underlying driver of every decision made.
The Company issued commercial paper bills and sustainment capital expenditure of
Telkom’s Board of directors and
with a nominal value of R11,025 million for R1,488 million (March 31, 2008:
management team believe in the cost
the year ended March 31, 2009 of which R1,369 million).
efficiencies and cash flows of the fixed-line
commercial paper bills with a nominal value Telkom continues to focus on its operations business and are committed to addressing
of R9,849 million were repaid by support system investment with current this while we invest for growth in new
March 31, 2009. emphasis on workforce management, areas of business.
Capital expenditure for the Group is operational requirements, the Group’s debt African and global investors. Telkom
expected to range between 20% and 23% level, interest coverage, internal cash intends to maintain a level 1 American
of revenue over the next financial year. flows, prospects and available growth Depositary Receipt programme to facilitate
opportunities. over-the-counter trading in the United States
In the long term the targeted net debt to
of America.
EBITDA ratio is expected to be below New York Stock Exchange Listing
1.4 times. However, in the shorter term, Given the current global economic climate Conclusion
debt levels will be considerably lower and the business imperative for Telkom to With a year of unprecedented global
given the retention in part of the proceeds reduce its cost base, the Board has financial conditions behind us, I certainly
from the sale of 15% of Vodacom. look forward to the challenges of the year
decided to delist from the New York Stock
ahead. The management team is committed
Targets in a transforming industry such as Exchange. Maintaining a listing in the
to turning the performance of Multi-Links
ours are inherently risky, particularly in later United States is expensive and takes
around, reducing operating and capital
years and investors should not place undue considerable management time. The
expenditures and continuing to deliver value
reliance on such targets. Our ability to meet methodology employed and discipline
to our shareholders. I remain confident in
such targets is subject to a number of risks gained from compliance with the our ability to meet these challenges.
and uncertainties and there could be no Sarbanes-Oxley reporting requirements will
assurance that we could meet such targets. be retained, where appropriate, to ensure
strict corporate governance compliance
The level of dividend going forward will be
and transparent financial reporting.
based on a number of factors including the
consideration of the financial results, Telkom is comfortable that the JSE provides Peter Nelson
available growth opportunities, capital and sufficient access to capital from both South Chief Financial Officer
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Board of directors
SHIRLEY LUE ARNOLD

Chairman
Shirley Lue Arnold was appointed Chairman and non-executive director
on November 1, 2006. Holder of a BA degree and a Certificate in
Education, Ms Arnold is a former non-executive director of Peermont Global
Limited and Ernst & Young South Africa. Currently she is a member of the
Chairpersons Forum, Gordon Institute of Business, the Independent Directors’
Initiative and the Institute of Directors in South Africa. She is a trustee of the
Thutuka Bursary Fund (SAICA) and the Maths Centre and is a patron of the
Student Sponsorship Programme.
REUBEN SEPTEMBER
With 32 years’ experience in the IT and telecommunications industry, Reuben
September was appointed acting Chief Executive Officer in April 2007;
appointed to the Board in May 2007 and appointed CEO of Telkom in
November 2007. He has worked in various engineering and commercial
positions at Telkom since 1977, including Managing Executive of Technology
and Network Services; Chief Technical Officer and Chief Operating Officer
and also served as a director of Vodacom. Mr September has a BSc in
electrical and electronic engineering from the University of Cape Town and is a
member of the Professional Institute of Engineers of South Africa (ECSA).
PETER NELSON
Peter Nelson, BComm, BAcc (Honours), CA,
was appointed to the Board on December 8,
2008. Previously he was the Chief Financial
Officer of Netcare. Mr Nelson has also
served at board level for a number of major
corporations for the past 20 years, including
BMW, Mondi Paper and Pretoria Portland
Cement.
Government, independent and PIC representatives
KEITUMETSE MATTHEWS
Government representative
Appointed to the Board in June
2006, Ms Matthews is a
businesswoman and former Chief
Legal Advisor for the South African
Broadcasting Corporation (SABC)
and a former special advisor to the
Minister of Communications. She
has a BA (Hons) degree and is a
Barrister-at-Law.
SIBUSISO LUTHULI
Independent
Mr Luthuli, managing director of Ithala BRAHM DU PLESSIS
Limited since 2004, was appointed to
the Telkom Board in July 2005. Independent
A qualified chartered accountant (CA), Brahm du Plessis was appointed to the Board in
Mr Luthuli holds a BComm degree and December 2004. A practising advocate at the
a post graduate diploma in Johannesburg Bar since 1987, Advocate Du Plessis,
accountancy. He is non-executive who holds BA and LLB degrees from the University of
Chairman of Cipla Medro SA and a Stellenbosch and an LLM degree from the University
member of the KwaZulu-Natal of London, is a member of Advocates For
Provincial Government audit Transformation and has served as a member of the
committee. Johannesburg Bar Council.
More than100 years DR EKWOW

SPIO-GARBRAH
of combined Government representative

Appointed to the Board in September 2007.
Dr Spio-Garbrah is the Chief Executive
telecommunications Officer of the London-based Commonwealth

Telecom Organisation and Ghana’s former
Minister of Communication and Education.
experience
He holds a BA (Hons), English from the
University of Ghana, a Graduate Certificate
in International Banking from the New York
University; a Graduate Diploma in Journalism
and Communication and an MA in
International Affairs from Ohio University and
an LLD (Honorary Doctorate in Laws) from
Middlebury University in the USA.
JACKIE HUNTLEY
Government representative
Ms Huntley who was appointed to the Board in September 2007, is an
attorney and senior partner at Mkhabela Huntley Adekeye Inc, one of the
major black law firms in South Africa. She has extensive experience in
commercial and corporate law, including telecommunications law. She holds
BProc and LLB degrees from the University of the Witwatersrand along with a
Management Advanced Programme certificate.
DR VICTOR LAWRENCE PETER JOUBERT

Government representative Independent
Dr Lawrence was appointed to the Mr Joubert was appointed to the Board in August
Board in September 2007, holds BSc, 2008. Previously he was the Chief Executive
MSc and PhD degrees in Electrical Officer and chairman of Afrox. He has served as
and Computer Engineering from the the chairman of numerous companies. He is the
University of London, is the Charles W current Chairman of BDFM Publishers and
Bachelor Chair Professor of Electrical Sandvik and is a director of SAA and Transnet
and Computer Engineering and and external advisor to General Motors SA. He
Associate Dean for Special Programs holds a BA degree from Rhodes University, a
at Stevens Institute of Technology. DPWM from Rhodes and has completed
Harvard Business School’s Advanced
Management Programme. Group
overview
DAVID BARBER
Management
Independent review
Appointed to the Board in September 2008,
Mr Barber is the former global Chief Financial Officer
of AngloCoal and former Chief Financial Officer for
the Anglo American Corporation of South Africa. Sustainability
review
Mr Barber is a chartered accountant (South Africa)
and FCA (England and Wales) and serves as an
independent non-executive director and member of
the audit committee for Murray & Roberts.
Performance
review
Financial
BRIAN MOLEFE statements
Public Investment Corporation representative
Appointed to the Board in July 2008, Mr Molefe is the Chief
Executive Officer of the PIC. A former deputy Director Company
General at the National Treasury and Chief Director: Financial
strategic planning in the office of the Premier of Limpopo, Information
Mr Molefe holds a Masters of Business Leadership and
BCom degrees from the University of South Africa. He also
has a post-graduate Diploma in Economics from London
University, School of Oriental and African Studies.
Chief officers
THAMI MSIMANGO NAAS FOURIE

Chief of Global Operations and Subsidiaries Chief of Strategy
Mr Msimango was appointed Managing Director of Telkom Mr Fourie was appointed Chief of Strategy in April 2008 having
International on April 15, 2009. Previously he served as Chief of acted in the position from November 2007. He joined Telkom in
Global Operations and Subsidiaries since November 1, 2007 and 1994. He is a former Managing Executive of Commercial Services
Chief Technical Officer from September 2005. He joined Telkom in and Executive of Marketing Services. He holds a BA, BDivinity and
1984 and held a number of senior positions, including Managing BAcc Science (Honours) degrees and has completed the advanced
Executive of Technology and Network Services and Executive executive programme of the Kellogg School of Business.
Technology, Direction and Integration.
CHARLOTTE MOKOENA OUMA RASETHABA

Chief of Human Resources Chief of Corporate Governance
Ms Mokoena, former Group Executive of Human Resources from Appointed Chief Corporate Governance Officer in November
December 2002 to October 2007, was appointed Chief of Human 2007, Advocate Rasethaba joined Telkom in 2006 as Group
Resources in November 2007. She holds a BA (Hons) degree in Executive of Regulatory and Public Policy. She is a former special
human resources development from the University of Johannesburg; director of Public Prosecutions at the National Prosecuting Authority.
a BSoc Sciences from the University of the North West and a post- She holds a BProc degree from the University of the North, an LLB
graduate diploma in training and performance management from (Hons) and Higher Diploma in Company Law from the University of
Leicester University in the UK. the Witwatersrand and an LLM from the University of Pretoria.
Management team
Age at Telkom Position

Name 30 June Portfolio Responsibilities appointment appointment
Marius Mostert 54 Network Infrastructure Responsible for network technology, 1973 2007
Provisioning strategy, planning, technical product
development and all associated network
infrastructure deployment.
Casper Kondo 48 Network Responsible for customer service 1993 2007

Chihaka Field Operations fulfilment and assurance network
restoration.
Pierre Marais 50 Network Core Responsible for the technical and 1976 2007
Operations operational management associated
with Telkom’s core network.
Zethembe Khoza 51 Contact Centre Responsible for managing all contact 1980 2007
Operations points in which customers contact
Telkom, such as call centres,
TelkomDirect shops, commercial
services and credit management.
Godfrey Ntoele 48 National Sales and Responsible for the national sales and 1997 2007
Marketing Operations marketing operations for Telkom’s retail
consumers and business enterprises and
direct sales to business customers and
government entities.
Bashier Sallie 41 Information Responsible for enterprise wide IT 1986 2007

Operations activities including infrastructure,
architecture, applications, support
and internet service providers.
Theo Hess 51 Capability Responsible for ensuring that Telkom has 1996 2007
Management the right groups of processes, relationships,
assets and resources that enable it to Group
deliver on its strategic objectives. overview
Amith Maharaj 34 Fixed Mobile Responsible for the development and 2008 2008
Convergence Services implementation of the mobile and Management
fixed-mobile converged business and review
technical strategy.
Thami Magazi 51 Multi-National Responsible for national and 2001 2007 Sustainability
review
Customers international sales revenue for multi-
national customers and also service and
project management to support both
Performance
national and multi-national sales review
teams. The portfolio directs Telkom’s
service delivery obligations for 2010
FIFA Soccer World Cup. Financial
statements
Alphonzo Samuels 43 Wholesale and Responsible for national and international 1984 2007
Marketing Operations wholesale revenue and customer
Company
relationship management. Financial
Information
Management team (continued)

Brenda Kali 55 Corporate Guided by the company’s business 2008 2008

Communications plan, vision and brand strategy,
the role of Corporate Communication
is to influence stakeholder behaviour
through effective, timely and measureable
communication making use of world-class
reputation management solutions.
Mike Mlengana 49 Corporate Development Responsible for implementing Telkom’s 1995 2005
international expansion strategy through
business development and merger and
acquisition activities across Africa and
other emerging markets.
Nicola White 37 Investor Relations Responsible for liaising with the investor 2006 2006
community which includes retail
shareholders, analysts and institutional
investors.
Nicolene Rossouw 40 Performance Centre Responsible for the Performance 1997 2007
(Acting) Centre in support of the company’s
customer centricity strategy, marketing
intelligence and to management the
business improvement function.
David Lupafya 36 Strategy (Acting) Responsible for Telkom Group strategy 2008 2008
Deon Fredericks 48 Accounting Services Responsible for financial accounting, 1993 2008
reporting and analysis, financial services,
external and regulatory reporting, capital
work in progress and asset management
Robin Coode 43 Corporate Finance, Overall responsible for taxation, treasury 1992 2008
Specialised Services and corporate investment with specific
focus areas that include share buy-back
evaluations, trustee responsibilities on
retirement funds and a merger and
acquisition role through strategy.
Stafford Augustine 40 Procurement Services Responsible for overall management 2007 2007
of procurement services encompassing
strategic sourcing management of
outsourced entities, corporate support
and BEE.

Mohammed Dukandar 37 Internal Audit Accountable for developing and 2009 2009
implementing internal audit strategies for
Telkom Group and its subsidiaries and
to ensure proper management of the
internal audit function. Ensure that
significant risks are understood and
managed by management and ensure
that significant risks are independently
and objectively reviewed periodically.
Anton Klopper 47 Legal Services Responsible for managing the provision 1991 2005
of legal advice and assistance to
various business units within Telkom.
Andrew Barendse 42 Regulatory Affairs Responsible for regulatory affairs which 2006 2007
include regulatory strategy and analysis,
regulatory compliance, regulatory pricing
and costing and protecting Telkom’s
regulatory rights.
Charmaine Houvet 36 Governance Responsible for improved governance 1991 2008

in the organisation through the design
and implementation of the Enterprise
Programme office and key company
governance process and policies.
Prelene Schmidt 38 CEO Telkom Responsible for all facets of the 1996 2008
Foundation (Acting) Telkom Foundation.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information

build
a par tnership
with communities,
creating synergies
that benefit
Sustainability review
Sustainability review 36
Corporate governance 42
Enterprise risk management 50
Black economic empowerment 58
Human capital management 62
Safety, health and environment 72
Corporate social investment 78
GRI content index 82
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Sustainability review
The modern corporation must meet the
expectations of a diverse range of stakeholders
As one of South Africa’s largest Company will completely renew itself in Throughout the year we refined our
corporations, Telkom’s public visibility is terms of markets, processes, skills, stakeholder management policy to ensure
enormous. Our activities impact on the lives capabilities and a new behaviour. Our goal systematic engagements with:
of every South African in one way or is to create a high performance company
• Employees
another and so our sustainability must be that is capable of executing our ‘defend and
• Customers
beyond reproach. grow’ strategy; a company that is
• Investors
characterised by profitability, sustainability
As the draft King Report III notes: “Although • Government
and an ability to realise its vision; a
a company is an economic institution, it • Regulators
company that is customer-focused with
remains a corporate citizen and therefore • Media
leading edge value solutions, and where the
has to balance economic, social and
creation of value through excellence is the • Suppliers
environmental value. The triple bottom line
norm and not the exception. • Unions
approach enhances the potential of a
• Civil society
company to create economic value…” To date, we have distinguished ourselves
as an entity that subscribes to the values of As a result, we achieved:
Telkom has long subscribed to this
good corporate governance but, we can Employees: A significant improvement in
philosophy and sustainability is a key driver
of our business strategy. It is a business do better. We can, like the Renaissance levels of employee engagement over the
opportunity for us, an opportunity we Period of the 14th to 16th centuries that our last three years via briefing sessions,
pursue with relentless vigour in all our initiative is named after, expand our vision training initiatives and electronic and print
operations. beyond the conventional and traditional, communication. In the year under review
and sustainability is a key focus area in this there was an on-going refinement in
Last year we reported that we continue to
regard. promoting a culture of engagement and
focus on the transformation of our business
and, to this end, in the latter part of the Stakeholder engagement internal communication channels. Greater
year under review we embarked on a The modern corporation must meet the prominence was given to face-to-face
focused internal transformation programme, expectations of a diverse range of communication, especially between top
Telkom Renaissance, a programme geared stakeholders and, as such, the leaders and the next management level, as
to ensuring that we become Africa’s management of stakeholder relationships is well as electronic communication from the
leading ICT service provider. It is, at least, not a nice to have but a critical must. CEO across the company.
a two year initiative during which time the
As one of South Africa’s largest corporations,

Telkom’s public visibility is enormous
Group
overview
Customers: Through our Customer Action, especially in the areas of economic proactive engagement and relationship
Centricity project we have seen growth, infrastructure development and the building. Management
provision of telecommunications for public review
improvements in customer call centre
Suppliers: The top company award in the
operations; our ability to keep our promises schools, was well received. Our success in
2008 Empowerdex Preferential Procure-
and the reaction time in identifying and engaging with government is evident in the
ment on overall spend survey. Sustainability
dealing with complaints. irrevocable support provided by review
government which resulted in the successful Unions: We continued to engage with the
Investors: An improvement in sharing with unions through the Restructuring Forum, a
conclusion of the Vodacom transaction.
them our strategic plans, operational purely consultative body where we share Performance
performance and financial results through Regulators: Regular submissions on new review
information with union leaders; the
one-on-one briefings; daily consultations; regulations and responses to enquiries to, Company Forum, the only decision-making
roadshows and the Investor Relations in particular, the Independent Com- structure on issues that require negotiations;
Financial
website. munications Authority of South Africa the National Employment Equity and Skills statements
(ICASA) and total compliance, where Development Forum and Task Teams which
Government: A substantial improvement in
technically possible, with all the regulatory consist of both management and union
our relations with national government as a Company
requirements in our operational areas. representatives and which deal with Financial
result of extensive consultations in which Information
specific issues.
emerging issues were pre-empted and Media: Media management was
promptly dealt with. In addition, our conducted in a structured manner guided Civil society: Traditionally, telecommuni-
support for the government’s Programme of by three focus areas: reactive engagement, cations companies and utilities are at the
Sustainability review (continued)
Group communication
and brand was
infused
with a renewed
sense of purpose
bottom of global reputation studies as they
face an uphill battle to communicate with
the public. As a result of this, we embarked
on a reputation study in May 2008 to
measure and analyse attitudes and
perceptions about us amongst various
stakeholder groups. In the year under
review approximately 3,700 interviews
were conducted. It was gratifying to note
that our reputation improved significantly,
albeit from a low base. There was
increased recognition in our key areas
of products/service; leadership and
governance and a significant improvement
in the perceptions of our corporate social
investment programme.
Going forward
In the 2009/10 financial year we will
focus on developing unambiguous
stakeholder value statements that detail our
promises to our stakeholders and, equally
importantly, internal scorecards for us to
check how we live up to those promises.
Group communication and brand

Group communication and brand was
infused with a renewed sense of purpose
following the appointment of one of South
Africa’s leading communications experts,
Brenda Kali, as Group Executive
responsible for this function.
Guided by the decision to integrate and

align communication processes and
practices with Telkom’s brand position and
values system to ensure greater credibility
amongst our stakeholders, we focused on
two specifics – the management of
stakeholder relationships and reputation,
and brand and image management.
• Interfacing with the media

While the media is an influential stakeholder in its own right, it is
also a vehicle through which we can communicate to our
d
broader stakeholder base. To this end, a dedicated media unit
was established to ensure we sent out a consistent message to
enhance our reputation and create greater brand awareness.
On the reactive front, the vast scope of our activities ensured a

very high level of media interest in the year under review. Media
enquiries ranged from our growth and expansion plans to cable
theft, the provision of broadband, regulatory issues, the evolution
of the network, our financial results, service delivery, customer
complaints and corporate governance.
As a result of our commitment to providing accurate and strategic

information to the media, our reputation took a turn for the better.
During the year under review, the value of proactive media

engagement was underscored in three areas – the 2010 Soccer
World Cup; the sale of our shares in Vodacom and the strategic
agreement with AT&T.
2010 World Cup

As FIFA’s main partner in the development of fixed-line network
infrastructure, we are responsible for providing infrastructure and
communication services. Our capabilities in this regard were
highlighted through media site visits and face-to-face interviews
with the key people in our 2010 project office.
The Vodacom transaction

Throughout the transaction process from November 2008 to
June 2009, journalists were given as much access as they
requested to our key top management team.
Group
The AT&T agreement overview
At the announcement of the strategic memorandum of

understanding, journalists had the opportunity to spend time with
Management
the role players from both companies. review
We pride ourselves not only on building strong relationships

between the media and our management team, but also on
Sustainability
enhancing the media’s knowledge of the IT industry as a whole. review
In the year under review we hosted a number of well attended

functions, including inviting key media to the Southern African
Telecommunication and Applications conference. Performance
review
• Connecting with our employees

In addition to refining our internal communication channels, we
Financial
provided effective and timeous communication to all employees statements
on the progress of our transformation programme, Telkom Renais-
sance. The programme’s specific communication was given a
Company
highlighted visual appearance to distinguish it from other Financial
Information
electronic communications and to emphasise the status of each
message. Weekly messages containing detailed information on
the project’s progress were issued and a tailor-made web site
Sustainability review continued
To reinforce the visibility of our involvement with the
World Cup
two giant footballs are being erected on two
prominent Johannesburg and Pretoria landmarks
was set up to enable employees to ask services and ‘from the desk of the CEO’ weekly E-news channel and an e-mail
questions, make suggestions and receive e-mails. based desktop broadcast system.
feedback.
On a more generic level, a number of We also put together a number of face-to-
As the torch bearer of the programme, the initiatives were launched during the face sessions at top and senior
CEO was highly active in all internal reporting period, for example a cross- management level where the Group’s
communications via our Skytrain interactive functional editorial committee for our strategy and business approach was
satellite-based network; our digital media Online print channel; the opening of a debated.
To ensure greater credibility amongst our

stakeholders we focused on two specifics
– the management of stakeholder
relationships and reputation, and brand
and image management.
Partnering with Human Resources

Group communication and brand played a pivotal role in
communicating Human Resource initiatives to employees. These
ranged from changes in employee benefits to the Renaissance
programme. Where necessary, the communications function was
supplemented by event management.
Brand and image management

In our view, the brand concept is much more than just logos and
products. It also promises an experience and a relationship. As a
result, in the year under review, the full spectrum of brand activities
was incorporated into the communication function.
Our brand has matured since Telkom was formed in 1991 and,
as a result, a process was initiated during the year to rebuild it and
create a fresh, innovative look and feel to give us a more modern,
vibrant and customer-focused brand.
To support this, a new Vision, Mission and Value (VMV) statement,

together with a VMV-wired concept, was developed to ensure that
our employees wholeheartedly embrace and accept the brand
and, in the process, deliver the brand promise to our customers.
2010 Soccer World Cup sponsorship

To reinforce the visibility of our involvement with the World Cup,
two giant footballs are being erected on two prominent
Johannesburg and Pretoria landmarks – the Hillbrow and
Lukasrand towers. As a further reminder of our commitment and
expertise, a number of TV commercials were produced and
broadcast.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Artist’s impression of the Lukasrand tower

Corporate governance
appointed by the government of South

Africa (the Class A shareholder) and one
non-executive appointed by Black Ginger
33 (the Class B shareholder).
There are four other non-executive directors

who are appointed at the company’s
annual general meeting and are
considered to be independent, as set out in
King II and the JSE Listings Requirements.
The executive directors on the Board are
the Chief Executive Officer and the Chief
Financial Officer. In line with best practice,
the roles of the Chairman and Chief
Executive Officer have been separated.
The Board is led by Ms ST Arnold, the
Chairman, while operational management
of the Group is the responsibility of
Mr RJ September, Chief Executive Officer.
In terms of the articles of association, the

non-executive directors appointed by the
Class A shareholder have a fixed term of
three years and may be re-elected to the
Board by those shareholders. The
Chairman has a term of one year and is re-
elected as Chairman for the ensuing year
by the Class A shareholder. The four
independent non-executive directors are
The Board takes overall responsibility for the Group and its role is to exercise leadership subject to retirement by rotation and re-
and judgement in directing it to achieve continued prosperity and to act in the best
election by shareholders at least every
interests of stakeholders.
three years in accordance with the articles
of association and JSE Listings
Compliance association. Most of the areas of non- Requirements.
The Telkom Board subscribes to and is fully compliance will be resolved by no later
The holders of the Class A and B ordinary
committed to sound business principles and than March 2011, when the provisions of
shares are the government of South Africa
practices of integrity and accountability, Telkom’s articles of association resulting in
and Black Ginger respectively. The only
and values of good corporate governance non-compliance with the Code fall away or
significant shareholder is the Class A
as espoused in the Code of Corporate earlier if the shareholding of a significant
shareholder who currently holds 39.8% of
Practices and Conduct of King II (the shareholder falls below certain stipulated
the issued ordinary shares in the company.
Code). In so doing, the directors recognise levels.
The significant shareholder has certain
the need to conduct the enterprise in
Chairman and Board of directors Board-reserved matters which are detailed
accordance with best corporate practices.
The Board takes overall responsibility for in the company’s articles of association.
The Board is of the view that Telkom the company and its role is to exercise Pursuant to the articles of association, whilst
complies in all material respects to the leadership and sound judgement in the government is a significant shareholder,
principles of the Code. While it directing it to achieve continued prosperity neither Telkom nor any of its subsidiaries
acknowledges the importance of good and to act in the best interests of may take action with respect to certain
governance, the Board is aware that stakeholders. reserved matters unless authorised by the
Telkom does not strictly comply with certain Telkom has a unitary Board comprising 12 Board. In addition, the authorising
principles set out in the Code. These areas directors. In accordance with Telkom’s resolution of the Board must have received
of non-compliance stem mainly from certain articles of association, five non-executives the affirmative vote of at least one of the
provisions in Telkom’s articles of including the Chairman have been directors appointed by the government.
The members’ resignations and appointments Board meetings

to the Telkom Board of directors during the Board meetings are held at least once a quarter. In addition to these meetings, whenever
year under review are as follows: circumstances dictate the necessity, special Board meetings are convened. During the year
under review, four scheduled Board meetings were held and 11 additional special Board
Resignations
meetings were convened. Details of attendance by each director including attendance at
MJ Lamberti 3 June 2008
committee meetings of the Board are set out in the table below. Certain members of senior
AG Rhoda 3 July 2008
management attend Board meetings when invited to make presentations on particular
Appointments company issues of interest to the Board. A majority of directors, one of whom must be a
B Molefe 3 July 2008 representative of the Class A shareholder, is required for a quorum for Board meetings.
PG Joubert 12 August 2008
DD Barber 1 September 2008 The following table presents the attendance of meetings held during the 2009 financial
PG Nelson 8 December 2008 year by directors:

Scheduled Special
Company Secretary Number of Number of
All directors have access to the advice and meetings1 Attendance meetings1 Attendance
services of the Group Company Secretary,
Non-executive
who is responsible for ensuring the proper
ST Arnold (Chairman) 4 4 11 11
administration of the board and corporate DD Barber 3 3 4 4
governance procedures. The Group B du Plessis 4 4 11 11
Company Secretary provides guidance to RJ Huntley 4 4 11 10
PG Joubert 3 2 5 4
the directors on their responsibilities within
MJ Lamberti 0 0 4 3
the prevailing regulatory and statutory
VB Lawrence 4 4 11 11
environment and the manner in which such PCS Luthuli 4 4 11 9
responsibilities should be discharged. KST Matthews 4 3 11 10
B Molefe 4 1 6 3
Details of the secretary’s business address AG Rhoda 0 0 5 4
and the company’s registered office are set E Spio-Garbrah 4 4 11 10
out on inside back cover.
Executive
Delegation of authority RJ September 4 4 11 11
PG Nelson 1 1 1 1
The ultimate responsibility for the Group’s
operations rests with the Board. The Board 1
The table represents the possible meetings based on the appointment and resignation dates of
Group
retains effective control through a well- members. overview
developed governance structure of Board
Executive committee Audit and risk committee (ARC)
committees which specialise in certain
This committee consists of the two executive The ARC is chaired by Mr PCS Luthuli, a
areas of the business. Certain authorities Management
directors that serve on the Board of non-executive director; it held four review
have been delegated to the Chief
directors and chief executives of the Telkom scheduled meetings and six special
Executive Officer to manage the day-to-day
Group. The Chief Executive Officer is the meetings during the financial year.
business affairs of the company. The Group Sustainability
Chairman of this committee and has the Mr Luthuli is considered an audit committee review
executives assist the Chief Executive Officer power of authority to, among other things: financial expert within the meaning of the
in discharging his duties and the duties of
• Implement approved business plans, requirements of the US Securities and
the Board when it is not in session.
annual budgets and all other matters Exchange Commission (SEC). He is a Performance
However, in terms of statute and the chartered accountant.
review
and issues relating to the achievement
company’s constitution, together with the
of Telkom’s obligations under its In terms of its charter, the ARC evaluates the
revised delegation of authority, certain
licences, including without limitations Group’s systems of internal and financial Financial
matters are still reserved for Board and/or statements
network expansion, equipment control; reviews accounting policies and
shareholder approval. procurement, tariff setting and financial information issued to the public;
Committees packaging, customer service and
reviews the performance of the internal and Company
The Board is assisted in discharging its marketing; and Financial
external auditors and determines the fees Information
duties through its committees. During the • Prepare, review and recommend to the payable to the external auditors. It also
year under review, the Board merged the Board the annual budgets and any determines and monitors the use of the
Investment and Strategy Committees. amendments thereto. external auditors for non-audit related
Corporate governance (continued)
Board committees
specialise in distinctive business areas
services. The committee examines, reviews Ms ST Arnold and Mr B du Plessis. A quorum Mr B du Plessis (Chairman)
financial results and recommends same to for a meeting is two members. Mr PG Joubert (independent)
the Board for approval. A quorum for a Ms KST Matthews
The committee makes recommendations to
meeting is two members. Mr E Spio-Garbrah
the Board on the composition of the Board,
As at March 31, 2009, the committee and the balance between executive, non- The HRRRC held four scheduled meetings
comprised four non-executive directors of executive and independent non-executive and one special meeting during the
which three are considered independent: directors with regard to all aspects of financial year. This committee, in
Mr PCS Luthuli (independent) diversity and experience. consultation with management, ensures that
Mr RJ Huntley the Group’s directors and senior executives
The committee is responsible for identifying
Mr DD Barber (independent) are fairly rewarded for their individual
and nominating candidates and formulating
Mr PG Joubert (independent) contribution to the Group’s performance. In
succession plans for the approval of the
fulfilling its duties, the HRRRC gives
The new terms of reference of the Board.
consideration to industry and local
committee were approved during the year.
In addition, the committee recommends to benchmarks to ensure that remuneration
At the time of the Chief Financial Officer’s the Board continuation (or not) of services packages remain competitive. Senior
appointment on December 8, 2008 the of any director who has reached the executives receive a salary, short-term
audit and risk committee satisfied itself of
retirement age as well as directors who are incentive and an allocation in terms of the
the appropriateness of his credentials,
retiring by rotation, for re-election. rules of the Conditional Share Plan.
professionalism, technical competency and
Medical and retirement benefits are also
experience. Investment and strategy committee
offered. Remuneration packages are
The investment and strategy committee,
The audit and risk committee will conduct a reviewed annually and performance
consists of Mr DD Barber (Chairman),
similar review on an annual basis as bonuses are linked both to individual
required by the JSE Listings Requirements. Dr E Spio-Garbrah, Mr RJ Huntley,
performance and to the performance of the
Mr RJ September, Mr PG Nelson and
The internal and external auditors have Group. Non-executive directors are paid
Dr VB Lawrence.
unlimited access to the Chairman of the fees for their services as directors of the
audit and risk committee. The function of the committee is to assist the Company and for their participation as
Board in evaluating investments, corporate members of the Board committees.
The audit and risk committee is satisfied
actions and key funding and financial
that Ernst & Young is independent in Board effectiveness
proposals.
accordance with section 270A of the An appraisal of the effectiveness of the
Corporate Laws Amendment Act, and Human resources review and Board was conducted externally during the
nominated the re-appointment of Ernst & remuneration committee (HRRRC) year. The appraisal was benchmarked
Young as registered auditors for the The committee consists entirely of non- against the strategic requirements of Telkom
2009/2010 financial year.
executive directors. Mr B du Plessis, an SA to ensure the capacity to deliver these
Nominations committee independent non-executive director, was requirements and strengthen the diversity
The nomination committee, which must have appointed as Chairman of the HRRRC as and sector expertise of directors. The
a minimum of three members and is chaired of June 2008. The HRRRC comprises the appraisal was positive and its
by an independent non-executive director, following non-executive directors, of which recommendation will be followed through
consists of Mr PCS Luthuli (Chairman), two must be independent: implementation.
Share dealings the requirements of Section 302 have been • Accept directly or indirectly any
In line with JSE Listings Requirements and met for the year ended March 31, 2009. consulting, advisory or other
the Group’s insider trading policy, compensation from the listed entity; and
In addition to the Sarbanes-Oxley Act, the
executives who wish to trade in Telkom
NYSE corporate governance rules, • Be an affiliated person of the listed
securities are required to obtain prior entity.
approved by the SEC, permit NYSE-listed
written approval from the Chairman of the
companies that are foreign private issuers, An affiliated person of an issuer is a person
Board and the Group Company Secretary
such as Telkom, to follow home-country who directly, or indirectly, through one or
before dealing in Telkom securities. The
practices in lieu of the requirements more intermediaries, controls, or is
Group operates closed periods as defined
applicable to listed US companies, subject controlled by or is under common control
in the JSE Listings Requirements. Additional
to certain exceptions. with the issuer.
closed periods are enforced, when
required, in terms of corporate activities as In particular, foreign private issuers must Rule 10A-3(b)(1)(iv)(E) of the US Securities
and when these occur. have an audit committee that satisfies the Exchange Act provides an exemption from
requirements of Rule 10A-3 under the the prohibition on being an affiliated
Compliance with Sarbanes-Oxley
The Sarbanes-Oxley Act of 2002 was Securities Exchange Act of 1934, as person of the issuer for an audit committee
passed in the United States of America to amended and must disclose the significant member of a foreign private issuer, who is
protect investors by improving the accuracy ways in which their corporate governance a representative or designee of a foreign
and reliability of corporate disclosures, practices differ from those followed by US governmental entity that is an affiliate of the
accounting practices and corporate companies under the NYSE listing foreign private issuer if the member is not
governance. Telkom, as a listed company standards. In addition, the CEO of a an executive officer of the foreign private
on the New York Stock Exchange (NYSE), foreign private issuer must promptly notify issuer.
registered in terms of the US Securities the NYSE in writing after any executive
Exchange Act of 1934, is required to officer of the listed company becomes
comply with the Sarbanes-Oxley Act. aware of any material non-compliance with
Telkom is committed to good corporate any applicable provisions of the NYSE
governance practices and compliance with corporate governance standards and
the Act as directed by the US Securities foreign private issuers must submit an
and Exchange Commission (SEC). annual and interim written affirmation to the
NYSE with regard to compliance with the
Telkom’s Sarbanes-Oxley steering committee
foregoing requirements and certain
represents divisions directly impacted by
changes to their audit committees. Group
the requirements of the Act. Working
overview
closely with line management, a Sarbanes- As a foreign private issuer the definition of
Oxley compliance team is responsible for independence of directors for Telkom is
ensuring that risks and controls that may only relevant to the audit committee and is Management
review
impact on the integrity of financial included in Rule 10A-3 of the US Security
reporting are properly documented, Exchange Act. This states that each
reviewed and reported on. The member of the audit committee must be a Sustainability
independent external auditor attested to member of the Board and should be review
and reported on management’s assessment independent as defined in Rule 10A-3

of the effectiveness of internal control over (b)(1)(ii) of the US Securities Exchange Act.
Performance
financial reporting for the year ended A member of an audit committee of a listed review
March 31, 2009.
issuer may not, other than in his capacity
The Chief Executive Officer and the Chief as a member of the audit committee, the
Financial
Financial Officer (CFO) have certified that Board, or any other Board committee: statements
Company
Financial
Information
Key differences between NYSE corporate governance listing rules and Telkom practice are:
NYSE rules Telkom practice
Board of directors
Composition The Board of directors should have a majority The majority of Telkom’s directors are non-executive
of independent directors. Four of the 12 directors are considered independent, based
on the King II definition of ‘independent’. Based on their
ordinary shareholding at March 31, 2009 and their
holding of the Class A and Class B shares respectively, the
government is entitled to appoint five directors to the Board,
while Black Ginger is entitled to appoint one director to the
Board.
King II defines an independent director as a non-executive
director who:
• Is not a representative of a share owner who has the

ability to control or significantly influence management;
• Has not been employed by the company or the Group,

of which it currently forms part, in any executive capacity
for the preceding three financial years;
• Is not a member of the immediate family of an individual

who is, or has been in any of the past three financial
years, employed by the company or the Group in an
executive capacity;
• Is not a professional advisor to the company or the

Group other than in a director capacity;
• Is not a significant supplier to, or customer of the

company or Group;
• Has not been a significant supplier to, or customer of the

company or Group;
• Has no significant contractual relationship with the

company or Group; and
• Is free from any business or other relationship that could

be seen to materially interfere with the individual’s
capacity to act in an independent manner.
Board committees
Committees Companies are required to establish an audit Telkom has an ARC, investment, and strategy committee,
required committee, a nominating or corporate nominations committee and HRRRC. For the description and
governance committee and a compensation composition of these committees and the members refer to
committee. Each of these committees must have pages 43 and 44. Board members who are not appointed
a written charter that addresses certain matters by the Class A and B shareholders are appointed by
specified in the NYSE listing standards, shareholders at the annual general meeting as stipulated in
including the committee’s purpose and Telkom’s articles of association. Telkom does not perform an
responsibilities and an annual performance annual performance evaluation of each committee.
evaluation of each committee.
NYSE rules Telkom practice
Board committees
Composition All of the required committees should be All the committees have non-executive directors as members.
composed entirely of independent non-executive However, not all non-executives are independent.
directors.
Audit committee
Written charter The audit committee must have a written charter The ARC has a written charter. The responsibilities of the
that addresses certain matters specified in the ARC are described in further details, on pages 43 and 44.
NYSE listing standards, including the In addition, Telkom’s audit and risk committee charter, as a
committee’s purpose, an annual performance listed issuer, complies with the Sarbanes-Oxley
evaluation and the duties and responsibilities of requirements.
the audit committee.
Composition The audit committee must include a minimum The ARC consists of four non-executive members of Telkom’s
of three members that satisfy the independence Board of directors, three of which are independent.
requirements of both the NYSE listing standards Pursuant to the Sarbanes-Oxley Act, each member of
and the Sarbanes-Oxley Act. Telkom’s ARC, as a non-US listed company, is a member of
the Board of directors. In addition, although one of the
members is appointed by the government, who may be
deemed to be affiliated persons of Telkom, such
appointments fall within the exception for the SEC
independence requirements.
Each of the members of the audit committee For members’ work experience refer to pages 28 to 29 under
must be financially literate. In addition, at Board of directors. The Chairman of Telkom’s ARC,
least one member of the audit committee Mr PCS Luthuli, who is a Chartered Accountant, is
must have accounting or related financial considered an audit committee financial expert within the
management skills. An audit committee financial meaning of item 16A of the requirements of Form 20-F in
expert within the meaning of the SEC rules terms of the definition in the Sarbanes-Oxley Act. The SEC
adopted pursuant to the Sarbanes Oxley Act has determined that the audit committee financial expert
satisfies this requirement. designation does not impose on the person with that
Group
designation any duties, obligations or liabilities that are overview
greater than the duties, obligations or liabilities imposed on

such person as a member of the audit committee in the
Management
absence of such designation. review
Disclosure and
Communication
Sustainability
Corporate Listed companies are required to adopt, and The corporate governance statement is available on the review
governance post on their websites, a set of corporate company’s website, www.telkom.co.za/ir.

guidelines governance guidelines and the charters of their
Performance
most important committees, including at least the review
audit, and, if applicable, compensation and
nominating committees. The guidelines must
address, among other things: director qualification Financial
statements
standards, director responsibilities, director access
to management and independent advisers,
director compensation, director orientation and Company
Financial
continuing education, management succession, Information
and an annual performance evaluation of the

Board of directors.
Telkom Audit Services (TAS) is an independent and

objective assurance and consulting function that
focuses on a balance between
value protection and value enhancement

Internal controls weaknesses, including processes that • Significant financial, managerial and
Our internal control environment is ascertain the level at which deficiencies operating information is accurate,
monitored by the ARC, which: are reported. Significant deficiencies and reliable and timely;
material weaknesses in internal controls are
• Ensures that risks are identified and • Employees’ actions are in compliance
reported to top management, the Board or
assessed. with policies, standards, procedures,
the ARC, and the external auditors.
applicable laws and regulations;
• Ascertains that all systems and
Telkom Audit Services (TAS)
processes to prevent and/or mitigate • Significant legislative or regulatory
TAS, in accordance with global best
these risks are monitored; and issues impacting on us are recognised
practices, is a value-adding, independent
and addressed appropriately; and
• Reviews the quality of reporting and and objective assurance and consulting
adherence to internal policies and other function, designed to add value to, and • An assessment is provided regularly of
governance best practices. improve our operations. Its mandate is to the adequacy and effectiveness of our
provide an independent assessment on the corporate governance, risk and control
Our organisational structure facilitates and
reliability of financial reporting, validate processes for controlling our activities
allows the flow of information upstream,
control systems and provide an oversight of and managing our risks.
downstream and across all business
management and overall business
activities. This is supported by formal To ensure the independence of TAS, the
activities, bringing a systematic, disciplined
mechanisms in place to communicate the Group Executive: Telkom Audit Services
approach to the evaluation and
responsibilities and expectations of reports functionally to the ARC Chairman
improvement of the effectiveness of risk
business activities at executive level. and administratively to the Chief Financial
management, internal controls and
Officer and has direct access to the Chief
Section 404 of the Sarbanes-Oxley Act corporate governance processes. In
Executive Officer. In this context, the ARC
requires that companies listed on the NYSE carrying out its mandate, TAS co-ordinates
with other control and monitoring functions oversees processes related to financial risks
annually evaluate and report on the
(enterprise risk management, compliance, and internal controls, financial reporting
effectiveness of their controls over financial
security, legal, ethics, environment and and the monitoring of internal and external
reporting. We submit progress reports at
external audit). auditing processes. In carrying out its
least quarterly to the ARC which then
duties, the team has unrestricted access to
reports to the Board. TAS is required to provide reasonable all Telkom functions, records, property and
assurance and to determine whether or not personnel.
Our internal audit function plays a key role
our control processes and systems are
in providing an objective view and
adequate and functioning to ensure that: The TAS team conducts audit work, or any
continuous assessment of the effectiveness
other task, in accordance with the internal
of the internal control systems throughout • Resources and assets are effective and
auditing standards set by the globally
the Group to both management and the efficiently used and adequately
recognised Institute of Internal Auditing
ARC. protected;
(IIA). This requires compliance with the
Mechanisms are in place that capture and • Risks are appropriately identified and Standards or Professional Practice of
report on identified internal control managed; Internal Auditing (SPPIA) and, in particular,
the codes of conduct and ethics that are promulgated from time to
time by relevant professional bodies and any other corporate The Network Operations Centre (NOC)
governance initiatives. Internal audit practices and activities are Our world-class campus in Centurion, outside Pretoria,
also benchmarked independently by an authoritative external party enables us to offer our customers an integrated solution to
as recommended by the SPPIA and required by the ARC. their network requirements. At its heart is the Network
Operations Centre (NOC). Developed from the best in
n
world-class practices and centres, it employs the latest
technologies and houses high level technical skills and
support teams. It offers full network monitoring, fault
management, configuration management, accounting
management, performance management and security
management 24 hours a day, seven days a week.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Enterprise risk management
We manage a variety of risks including financial,

political, regulatory and technology across the
African continent
S AT -3
Mauritainia
Mali
Ni ger
Se n e gal E AS S y
Gambia
Sudan
Burkina
Guinea
Benin
Nigeria S omal i a
Sierra Leone Togo
Ivory Ethiopia
Coast Ghana C e n t r a l A f r i c an
Republic
Liberia Cameroon
Equa.Guinea
Congo Uganda Keny a
S AT - 3 Gabon
D RC Ra w a n d a
Burundi
Tanzania E AS S y
Overlap of Primar y Operator s

of Africa Online and MWEB
Angola
Overlap of Multi-Links and MWEB
Zambia
Only Africa Online Operator s
Mozambique Madagascar
O v e rla p of Dis trib u tor s of Zimbabwe
Namibia
Africa Online and MWEB
Botswana
S AT -3
Only Africa Online Af filiates
(Par tneship with A -link)
S wazi l and EASSy
Telkom S A Limited
Lesotho
South Africa
S AT -3
Our Enterprise Risk Management (ERM) management framework, risk policy and Our various subsidiaries and service
strategy was comprehensively reviewed procedure deliverables were updated and organisations completed risk management
during the year, in particular the capturing approved by the Board. compliance plans and all Telkom SA policies
and reviewing of the high risks for were endorsed. In addition, all Telkom
A proposed risk reporting format for the
the business for the Telkom enterprise Group subsidiaries are now covered.
various risk committees was developed to
risk management committee (TERMC),
help the audit and risk committee (ARC) Enterprise risk management governance
together with the compilation of an
monitor ERM’s effectiveness across the We manage a variety of risks including
improved TERMC report.
Group and the Risk Portfolio was monitored financial; political; regulatory; technology;
As a result of certain gaps identified by on an on-going basis. human capital; operational; safety, health
KPMG’s risk maturity assessment, the risk and environment; security; strategic and
Enterprise risk management governance

Enterprise risk management at Telkom is guided and monitored by various committees that have adopted certain principles to assist them
in executing their respective enterprise risk management functions. The model below outlines the key enterprise risk management structures,
the key role-players and their roles and responsibilities.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Enterprise risk management (continued)
We practice a risk management approach

that triggers an
i n f o rm e d and dynamic approach

legal, across the African continent. These On a daily basis, risks are managed by a management performance and providing
are identified, measured and monitored number of committees (see chart), mainly an on-going high level risk assessment
through various control mechanisms. through the ARC, which reports to the to the Board. To ensure it fulfils its
Board. responsibilities, the ARC can access any
Our Board which sets the risk management
*Risk appetite is a framework which we use to measure information it needs.
standard and risk appetite* for the group is
the ‘amount of risk’ – on a broad level – which we are
supported by various committees whose prepared to accept in our pursuit of our strategic and
• Telkom enterprise risk management
responsibilities include: financial objectives. As part of our business strategy, it committee (TERMC)
helps management allocate resources across the various This is a dedicated risk management
• Reviewing and recommending to the service organisations to ensure that objectives are met.
committee appointed by the ARC to
Board risk management standards,
Responsibility and accountability implement an effective risk management
including risk control principles and
• The Board process that will optimise our risk taking.
overall risk measure.
The Board, through the ARC, is responsible
• Group management
• Reviewing the overall risk appetite and for the total risk management process and
The senior and line management teams of
profile of the Group. the formation of its own opinion on the
our service organisations are responsible
effectiveness of the process. The Board
• Reviewing significant changes in the risk for effective risk management.
approves the risk strategy in liaison with,
framework, risk policy and the various
and through recommendations of, the Enterprise risk management framework
procedures that support the risk strategy.
ARC. Risk is an unavoidable consequence of
• Reviewing the dashboard of strategic doing business but, managed correctly, it
risks that impact on us; and • Audit and risk committee (ARC)
can be an opportunity for us to operate
The ARC, which is empowered by the
• Reviewing reports on specific material competitively.
Board, operates within written guidelines
aspects of our risk governance and risk established by it. The ARC is responsible In our quest to be the leading customer and
management processes. for reviewing and monitoring our risk employee-centred ICT solutions service
Loss statistics for 2008/2009

2006/07 2007/08 2008/09
In the year under review our copper
cable losses amounted to R284.9 million
excluding outbound revenue losses which 8% 13% 15%
8%
is estimated at R907 million.
11%
10% 14%
7% 69% 68%
74% 3%
Copper cable Dect (CPE) Optic Damages (unknown third parties)

provider, we practice a risk management Statistics

approach that triggers an informed and 2006/07 2007/08 2008/09
dynamic response through the evaluation
Total incidents reported 9,279 7,954 7,216
and management of the many
Total cases investigated 8,863 7,838 7,116
opportunities and threats that permeate our
Total cases resolved 8,443 6,427 5,960
business environment.
Case types investigated
Protecting our assets
TARPS investigations
To minimise, and preferably prevent, fraud,
Asset theft 1,794 2,026 2,573
corruption and theft, we have a Telkom
Burglary 117 141 196
Asset and Revenue Protection Services
Business Code of Ethics 294 293 265
(TARPS) section in place. Its scope includes
Fraud 192 124 130
forensic services, a fraud committee and Line management requests 72 27 15
an anti-fraud policy statement. Payphones 224 157 112
Forensic services investigates all fraud- Reputational risk (Refund scam) 594 469 657
related activities; the committee, which Robbery 111 159 244
meets continuously, monitors all fraud- Security breaches 57 16 16
related activities and the policy statement Vehicle 96 39 19
implements fraud risk management. Forensic projects 3 – –
Although no major fraud incidents were Total TARPS investigations 3,554 3,451 4,227
reported in the year under review, asset Network Protection Services (NPS) investigations
theft losses increased by 27%, mainly as a Cable 3,399 3,198 2,018
result of information technology equipment Network fraud 786 716 690
compliance which highlighted past Solar panel theft 1,124 473 181
lost/stolen equipment at ‘unknown times’.
Total NPS investigations 5,309 4,387 2,889
The Telkom Crime Hotline 0800 124 000
Successes
The Hotline 0800 124 000, which takes
Number of arrests 1,250 1,079 568
calls from employees and the public
Number of convictions 156 165 128
regarding any Telkom-related alleged
unethical or criminal activities, was Group
overview
contracted out to an independent
administrator on January 1, 2009 in
compliance with the Sarbanes-Oxley Act Management
review
requirements. The administrator does,
however, forward all information to TARPS
for investigation.
Sustainability
review
As a result, employee trust in the line has
been rejuvenated in terms of anonymity. In
Cable theft has
addition, our Whistleblower policy was Performance
updated to ensure more effective support review
for the whistleblowing process.
Security services Financial

statements
We continue to use physical and technical
security services for physical access control to affect our operations
to all our sites and the protection of our Company
Financial
assets, and the provision of electronic Information
solutions for all our security needs and
requirements.
The Second Hand Goods Act
penalties
provides for stiff
including imprisonment
Cable statistics Cable theft
Total cable losses Cable theft has been a problem for the last
R millions 2006/07 2007/08 2008/09 10 years and increased at an alarming
rate. In the year under review our copper
Copper cable 227.1 194.6 190.6
cable losses amounted to R284.9 million
Dect (CPE) 31.8 20.0 9.2
excluding outbound revenue losses which
Optic fibre 25.7 31.6 40.0
is estimated at R907 million.
Damages 26.1 37.7 40.8
Payphone vandalism 15.0 5.8 4.3 Our main cable network and open wire
routes have been targeted by highly
Total 325.7 289.7 284.9
organised syndicates and, on our smaller
Cable theft repair costs cable routes, we have seen an increase in
R millions 2006/07 2007/08 2008/09 petty crime. The key drivers, we believe,
are the rising price of copper which, on
Copper 179.5 151.2 141.2
average, increased by 600% over the last
Fibre 5.5 7.9 10.2
five years, and the strong demand for the
Total 185.0 159.1 151.4 metal from international markets, in
particular China.
Estimated outbound revenue loss due to cable theft
R millions 2006/07 2007/08 2008/09 While the problem is not unique to us or,
indeed, South Africa, as evidenced by
Outbound revenue1 368.1 626.3 906.8
reports from, amongst other countries,
1
Estimates based on certain assumptions Zambia, Tanzania, Kenya, Great Britain
and the United States, it is impacting on
our performance as the resources used to
replace the stolen cable should actually
be used to roll out new infrastructure and
provide new services.
We have instituted a number our own

contingency measures – the investment of
millions of rands in security personnel; cable
alarms; placing cables underground;
replacing manhole covers with lockable lids,
closer working relationships with the South
African Police Services, Non-Ferrous Theft
Combating Committee and Business Against
Crime, amongst others – to combat the
problem.
In addition, we believe the amended

Second Hand Goods Act, whose aim is to
regulate the business of dealers in second hand goods in order to

combat the trade in stolen goods, will be a valuable tool in the Menlyn Park – the flagship of the new generation
fight against this problem. TelkomDirect stores
The Act provides for stiff penalties, including imprisonment, for Since its opening in December 2008, the TelkomDirect store
convicted metal thieves and scrap metal dealers. in Pretoria’s up-market Menlyn Park shopping centre has
proved to be a huge hit with customers, justifying our faith in
We are also lobbying to have copper declared in the same
category as diamonds and for charging cable thieves with launching this ‘third generation’ store offering to South
‘sabotage’ instead of ‘theft’. African consumers.
ent Telkom Business Continuity Management (BCM)

In 2002 we established the Telkom Business Continuity/Disaster
Open seven days a week from 09:00 to 19:00, the store
is one of the 136 we have in major shopping centres across
Recovery unit (Telkom BC/DR) which mainly focused on the the country.
readiness of our critical sites in case of a disaster or major incident.
It provides not only a range of goods from fixed mobile
In February 2008, we reviewed BC/DRs network-driven focus conversions (the phones of the future) to laptops, ADSL units,
and re-established the function as an enterprise-wide Business mobile phones, play stations and satellite navigation units,
Continuity Management organisation. Its focus areas are to
but also free technical support.
improve all disaster-related activities across the Group, ranging
from management to operations and systems. “Basically,” says store manager Thobeng Choeu, “we can
fix or help with anything that is software-related. No other
A key deliverable in the year under review was the
operator offers this service, making it a unique plus for
re-establishment of our BCM Institutional Capacity which resulted
in an improved BCM Governance, Additionally, we reviewed our Telkom.”
BCM company policy and charter, the implementation of a BCM With its ‘touch and feel’ ambience, the store is a superb
training programme – which 32.1% of Telkom managers and marketing tool for us as it showcases our new technologies
senior managers completed – the review of the BCM website
and technical expertise. A key customer ‘pull’ factor is the
and generic BCM awareness on all managerial levels. The
free doBroadband gaming facilities at the rear of the store.
establishment and implementation of operational business
Here youngsters – and adults – can play a range of games
continuity plans was also a key deliverable.
to their heart’s content.
Going forward
Our key focus areas for the year ahead are: Says Thobeng: “Because of the tactile experience, many
customers end up buying the games and play stations”.
• Implement, through a phased approach, the revised ERM
strategy and align it to an enterprise-wide view of all risks.
Group
overview
• Upgrade our risk management training programme.
• Align corporate governance and ERM to the draft King III code.
Management
• Conduct compliance risk assessments in terms of the agreed review
framework.
• Present the first critical element in the determination of our risk

Sustainability
appetite – the draft Risk Bearing Capacity (RBC) – to TERMC. review
• Create an independent division by separating ERM from the

ARC, but ensuring that audit is still an integral part of our overall
Performance
risk management; and review
• A significant enhancement of the quality of ERM reporting to the

Board, business units and subsidiaries.
Financial
We will also continue to improve our communication to internal statements
and external stakeholders through a review and further

development of our risk management processes. Our risk
Company
management database will also be re-examined to ensure we Financial
Information
provide timeous, current, accurate and accessible information to
our stakeholders.
Risk factors investments outside of South Africa, not be able to pay dividends and our
You should carefully consider the risks which could adversely affect our operations and financial condition
described below in conjunction with the businesses and cause our financial could be adversely affected.
other information and the consolidated condition and net income to decline.
• Continuing rapid changes in
financial statements of the Telkom Group
• The number of commercially attractive technologies could increase competition
and the related notes included elsewhere in
acquisition and investment opportunities or require us to make substantial
this annual report before making an
for our fixed-line and mobile businesses additional investments in technologies
investment decision with regard to Telkom’s
on the African continent is limited. and equipment, which could reduce our
ordinary shares or ADSs.
Moreover, the consummation of return on investment and net profit.
Risks related to our business acquisitions and investments may be
• If we continue to experience high rates
• We may be affected by global unsuccessful, which could have a material
of theft, vandalism, network fraud,
economic and financial conditions adverse effect on our future growth.
payphone fraud and lost revenue due to
which could cause our growth rates,
• The growth in the mobile market in non-licensed operators in our fixed-line
operating revenue, net profit and
South Africa has resulted in an increase business, our fixed-line fault rates could
dividends to decline.
in the number of Telkom calls terminating increase and our operating revenue
• Any changes to our mobile strategy or on mobile networks as opposed to and net profit could decline.
our inability to successfully implement our fixed-line network. Telkom’s net • Delays in the development and supply of
such strategy and organisational interconnect margins and net profit communications equipment may hinder
changes, could cause our growth rates, could decline if this trend continues. the deployment of new technologies and
operating revenue, net profit and
• If we are not able to continue to services and cause our growth rates and
dividends to decline.
improve and maintain our management net profit to decline.
• If we are not able to turn around information and other systems, we could • Actual or perceived health risks relating
the financial performance of our Multi- be subject to losses and inaccuracies in to mobile handsets, base stations and
Links subsidiary, our Group’s financial our financial reporting, our ability to associated equipment and any related
condition could decline. provide accurate and comprehensive publicity or litigation could make it
• Increased competition in the South operating information and to compete difficult to find attractive sites for base
African communications market may may be harmed and our share price stations and impact our ability to grow
result in a reduction in overall average could decline. our 3G mobile network business, and
tariffs and market share and an increase • If we lose key personnel or if we are reduce our customer base, average
in costs in our fixed-line business, which unable to hire and retain highly usage per customer and net profit.
could cause our growth rates, operating qualified employees and partners, our Risks related to Telkom’s ownership by
revenue and net profit to decline and
business operations could be disrupted the government of South Africa and
our churn rates to increase.
and could impact on our ability to major shareholders
• Increased competition in the South compete successfully. • Telkom’s major shareholders are entitled
African data communications market to appoint the majority of Telkom’s
• If Telkom is not able to successfully grow
may adversely impact our growth rates, directors and exercise control over
revenues, profits and cash flows from its
operating revenue and net profit. Telkom’s strategic direction and major
existing and new businesses to replace
corporate actions.
• We may not be successful in revenues, profits and cash flows
implementing our strategy of transforming previously received from Vodacom, • The government of the Republic of South
from basic voice and data connectivity Telkom may not be able to pay Africa may use its position as
to fully converged solutions offering dividends and service its debt and shareholder of Telkom and policymaker
integrated voice, data, video and internet could be required to lower or defer for, and customer of, the telecommuni-
services and managing costs through our capital expenditures, dividends and cations industry in a manner that may
restructuring programme, which could debt reduction, which could cause the be favourable to our competitors and
adversely impact our ability to maintain trading prices of Telkom’s ordinary unfavourable to us.
profitability by growing and protecting shares and ADSs to decline.
Risks related to regulatory and legal
revenue, while managing costs.
• We have negative working capital, matters
• There are significant political, which may impair our operating and • The regulatory environment for the
economic, regulatory, taxation and financial flexibility and require us to telecommunications industry in South
legal risks associated with our African defer capital expenditures and we may Africa is evolving and regulations
addressing a number of significant portability or are unable to implement trading prices of Telkom’s ordinary
matters have not yet been made. The these requirements in a timely manner, shares and ADSs, to decline.
interpretation of existing regulations, the our business operations could be
• Should the country continue to
adoption of new policies or regulations disrupted and our net profit could
experience high occurrences of power
that are unfavourable to us, or the decline. The implementation of carrier
outages, Telkom’s operational capacity,
imposition of additional licence pre-selection and number portability will
expenses and revenues will be affected
obligations and fees on us, could also likely further increase competition
and its operating revenue and net profit
disrupt our business operations and and cause our churn rates to increase.
could decline.
could cause our net profit and the
• The implementation of the Regulation of
trading prices of Telkom’s ordinary • The high rates of HIV infection in South
Interception of Communications and
shares and ADSs to decline. Africa could cause the size of the South
Provisions of Communication-Related
African communications market and our
• Our tariffs are subject to approval by Information Act, or RICA, could be
growth rates, operating revenue and net
the regulatory authorities, which may costly and may negatively impact the
profit to decline.
limit our flexibility in pricing and could ability of Telkom to register customers
reduce our revenues and net profit. and may require us to disconnect • Significant labour disputes, work
existing customers, causing our stoppages, increased employee expenses
• Any payments to Telcordia Technologies
penetration rates, growth rates, revenue as a result of collective bargaining and
Incorporated, or Telcordia, in the
and net profit to decline. the cost of compliance with South
damages phase of its arbitration
African labour laws could limit our
proceedings against Telkom, will be • If Telkom is required to comply with the
required to be funded by Telkom from operating flexibility and disrupt our
provisions of the South African Public
cash flows or the incurrence of debt, fixed-line business operations and
Finance Management Act, 1 of 1999,
which could have a material adverse reduce our net profit.
or PFMA, and the provisions of the
effect on its financial condition and • South African exchange control
South African Public Audit Act of 2004,
results of operations. restrictions could hinder our ability to
or PAA, Telkom could incur increased
• We are parties to a number of legal expenses and its net profit could decline make foreign investments and procure
and arbitration proceedings, including and compliance with the PFMA and foreign denominated financing.
complaints before the South African PAA could result in the delisting of Risks related to ownership of Telkom’s
Competition Commission. If we lose Telkom’s ordinary shares from the JSE. ordinary shares and ADSs
these legal and arbitration proceedings, • The future sale of a substantial number
• Our total property taxation expense
we could be prohibited from engaging of Telkom’s ordinary shares or ADSs
could increase significantly and our net
in certain business activities and could could cause the trading prices of
profit could decline as a result of the Group
be required to pay substantial penalties Telkom’s ordinary shares and ADSs to overview
enactment of the South African Local
and damages, which could cause our decline.
Government: Municipal Property Rates
revenue and net profit to decline and
Act, 6 of 2004. • Your rights as a shareholder are
have a material adverse impact on our Management
governed by South African law, which review
business and financial condition. Risks related to the Republic of South
differs in material respects from the
• If we are required to unbundle the local Africa
rights of shareholders under the laws of
loop, or are unable to negotiate • Fluctuations in the value of the rand and Sustainability
other jurisdictions. review
favourable terms and conditions for the inflation rates in South Africa could have
provision of interconnection services a significant impact on the amount of • It may not be possible for you to effect
and facilities leasing services or ICASA Telkom’s dividends, the trading prices of service of legal process, enforce
Performance
finds that we have significant market Telkom’s ordinary shares and ADSs, our judgments of courts outside of South review
power or otherwise imposes operating revenue, operating expenses, Africa or bring actions based on
unfavourable terms and conditions on net profit, capital expenditures and on securities laws of jurisdictions other than
us, our business operations could be the comparability of our results between South Africa against Telkom or against Financial
statements
disrupted and our net profit could financial periods. members of its Board.
decline.
• The levels of unemployment, poverty • Your ability to sell a substantial number
Company
• If we are unable to recover the and crime in South Africa may cause the of ordinary shares and ADSs may be Financial
Information
substantial capital and operational costs size of the South African communications restricted by the limited liquidity of
associated with the implementation of market and our growth rates, operating ordinary shares.
carrier pre-selection and number revenue and net profit, as well as the
Black economic empowerment
We constantly strive to maintain our
momentum in terms of implementing our

BBBEE transformation pillars
In the year under review, we continued to • In management control, we were recognised procurement spend from all
make a significant contribution towards the ranked the second most empowered suppliers was R8.8 billion, equivalent to
achievement of the objectives of our company on the JSE Securities 70.4% of total measured procurement
government’s Broad-Based Black Economic Exchange by the Financial Mail Top spend. Again, this figure significantly
Empowerment (BBBEE) policies and the Companies Survey. This ranking exceeds the 50% target in the BEE
transformation of the Information and reflected the total transformation of our Codes. BEE recognised procurement
Communications Technology (ICT) sector. Board and top management structures spend from Qualifying Small Enterprises
to significantly exceed government’s (QSEs) and Exempted Micro-Enterprises
One of our strategic goals is to become
targets for this element of BBBEE. (EMEs) declined slightly as many of our
one of South Africa’s leading empowered
small suppliers graduated to become
companies. Our BBBEE Strategy and • In preferential procurement, we were
large enterprises measured under the
Implementation Roadmap, which are the again ranked one of the best performers
Generic Scorecard of the BEE Codes of
enablers to achieve the objectives of our on the JSE Securities Exchange by the
Good Practice.
2010 Strategic Plan, have both been Financial Mail Top Empowerment
approved by the Board. Companies Survey. Our Preferential In this regard, we have a dual BEE
Procurement is recognised as a champion evaluation policy that considers both the
Our BBBEE self-assessment has revealed a
in driving economic transformation DTI scorecard (broad-based BEE
number of highlights.
among JSE Listed companies, state- evaluation criteria) and levels of black
• In ownership, a series of landmark owned enterprises and within the ICT ownership (narrow-based BEE criteria)
transactions – the sale of 15% of our sector. During the past financial year, when making procurement decisions.
shares in Vodacom, the declaration of a we procured goods and services This policy is in line with best practices in
special dividend and the listing and worth R4.1 billion from black-owned the South African economy. Our
unbundling of Vodacom shares – companies, equivalent to 33.2% of total preferential procurement policy also
unlocked value for our shareholders, the measured procurement spend. This seeks to move beyond BBBEE
majority of whom are public entities and figure exceeds the 15% target in the compliance and achieve other qualitative
black shareholders. BEE Codes by a significant margin. BEE and industrial policy objectives such as
reducing our dependence on
international resources, the development
of domestic technology production
capabilities and the creation of
sustainable black-owned ICT companies.
2007/ 2008/
BBBEE element Target 08 09 Although our preferential procurement
policy is perceived to be stringent, the
BBBEE procurement spend from all suppliers 50% 55% 70.4%
majority of our large suppliers, many of
BBBEE procurement spend from qualifying small
them multi-national companies, have set
enterprises or exempted micro-enterprises 10% 6.7% 5.1%
up local operations, sold equity to black
BBBEE procurement from black-owned suppliers 9% 23.4% 33.2%
shareholders and developed BBBEE
BBBEE procurement from black women-owned Commitment Plans that are in line with
suppliers 6% 6.3% 4.8%
our policy.
There was a major
improvement in our BBBEE suppliers spend
Over the past decade, we have made a

major contribution towards the economic
transformation of our sector by awarding
large contracts worth tens of billions of
rands that facilitated the creation of
sustainable black-owned ICT companies.
Through Procurement’s intervention, we

have managed to persuade multi-nationals
to partner with local BEE companies. These
partnerships will provide black-owned
companies with the opportunity to upgrade
their skills and other capabilities. During the
next phase, they will be in a position to
develop their own independent brands,
products and services that can be marketed
in South Africa and the rest of the world.
Thank you Telkom for having faith in

me, says Maletsati
Tracking the health of its employees is Group
overview
critical for Telkom as, not only is it a legal
requirement but it’s the right thing to do in a
company whose employees are subjected Management
review
to various levels of stress in their daily lives.
In line with our commitment to sourcing

We have various programmes in place
BBBEE suppliers, we regularly put out to attract and retain black employees,
Sustainability
review
tenders for the outsourcing of various particularly women. A total of 87% of
activities and, in 2002, a tender for new appointments in 2009 were black,
bringing overall representation in the
occupational health testing was awarded Performance
workforce to 62%.
review
to a small company, Maletsati
Occupational Health.
Initially the company, owned and run by Financial

statements
Maletsati Mosweu, worked in the Gauteng
region, providing an in-house clinic service
from the Telkom Centre For Learning in Company
Financial
Johannesburg. We were so impressed with Information
the service and attention to detail that in

2004 we offered Maletsati a national
Black economic empowerment continued
We have developed
progressive employment equity targets
How BBBEE works

On February 9, 2007, the Department of Trade and Industry (DTI) released its Broad Based Black Economic Empowerment
(BBBEE) Codes of Good Practice (the Codes), a framework to guide government departments in the implementation of BBBEE.
The Codes have a generic scorecard (the Scorecard) with seven elements:
• Ownership (20 points) • Preferential procurement (20 points)

• Management control (10 points) • Enterprise development (15 points)
• Employment equity (15 points) • Socio-economic development (5 points).
• Skills development (15 points)
The elements in turn have indicators, each of which has its own weightings, measurement principles and compliance targets.
Based on its scorecard performance, a business/enterprise is awarded a BEE Status and Recognition Level. The highest BEE
Status is Level 1. This is awarded to an enterprise which scores more than 100 points and gives it a BEE recognition level of
135%. Effectively an enterprise purchasing goods and services from a Level 1 supplier can recognise 135% of the procurement
on its own scorecard.
The lowest BEE Status is Level 8, which is awarded to an enterprise with a score of between 30 and 40 points. This equates
to a BEE recognition level of 10%.
An enterprise that scores less than 30 is a non-compliant BEE contributor with a BEE recognition level of 0%.
contract for our five regions, creating through school. Telkom has taught me that to attract and retain black employees,
additional jobs in the process as she had supporting the smaller people pays especially black women. A total of 87%
to set up satellite offices. dividends all round,” says Maletsati. of new appointments in 2009 were
black, bringing overall black repre-
Maletsati, who says she is eternally grateful • We have developed aggressive
sentation in the workforce to 62%. The
to Telkom for the faith shown in her and her employment equity targets to address
proportion of disabled employees has
colleagues, tests up to 2,000 employees a the challenges we face in terms of
risen from 0.93% in 2007 to 1.13% in
increasing the diversity of our
year, screening them for ailments such as 2009. We continue to drive various
workforce, especially the representation
diabetes, blood pressure, impaired vision initiatives across the organisation to
of black women and black disabled
and hearing. ensure that our policies and guidelines
people in the middle and senior
attract and support the recruitment of
“Telkom has been my springboard. It has management levels of the organisation.
people with disabilities and to
allowed me to pace myself to the point We have put a Human Capital and
encourage the disclosure of current
where I am now ready to take on other Diversity Strategy in place to ensure that
employees with disabilities.
jobs and, at the same time, intensify my our workforce reflects South African
commitment to the community through the demographics in terms of race, gender • As part of our commitment towards
company’s support for, amongst others, the and disability. We also have various Enterprise Development, more than
Society For the Blind, mentoring newly programmes in place, including a 100 black-owned companies are now
qualified nurses and helping some children dedicated talent management division, beneficiaries of a new short-term
payment policy that facilitates the

settlement of invoices in less than Guma – smart by name and nature
15 days. Other initiatives include Success stories include Guma Smart Card. This black-owned company has grown
training provided by senior staff from small beginnings to become a world-class manufacturer of smart cards that has
members within procurement to enable replaced imports with local production and employment and developed lucrative
suppliers to comply with quality export markets. Guma recently produced its 100 millionth smart card.
standards and the training provided to
“Today Guma is a role model black company with ownership of Gijima AST, Tourvest,
suppliers at the Telkom Centre for
etc. employing over 10,000 value-adding employees including those in our overseas
Learning. Khayelihle Projects, which
offices like Australia, Canada, America, etc. Thanks to Telkom for having put faith in
was assisted to develop and implement
us as a small company with big dreams. This year we achieved 100 million Telkom
PCR, an abridged ISO 9000 of 2000
quality system, is one of many phonecards manufactured locally and delivered by Guma Smart Card. Through
beneficiaries of Telkom’s Enterprise Telkom’s vigorous support and commitment to quality, Guma Smart Card attained
Development. Management has been ISO 9001 certification over six years ago. Without Telkom’s commitment to BEE, the
working hard at identifying various success we have achieved thus far would not have been possible. Thanks to Telkom
sustainable initiatives in this area to management for staying true to the spirit of empowerment,” says Robert Matana
improve on current enterprise Gumede, Chairman: Guma Group and Gijima AST.
development contributions. Many of the
identified initiatives have been
approved by the Company’s top
management and are in the process of
being implemented.
• We recognise that we have a critical

role to play in transforming communities
and in ensuring that they are
sustainable.
Our Telkom Foundation is a key driver in

this regard and its activities are detailed on
pages 78 to 80.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Human capital management
The past year’s performance has given us a

platform to critically identify and
prioritise interventions
Introduction
The labour dynamics in the global and local
integrated communications technology (ICT)
industry have been impacted by the rapid
pace of change in the industry, and by the
changes in the sector-specific and broader
economies. These events have led to a
marked change in the labour supply and
skills retention patterns in recent years.
This complex and evolving environment has

tested our ability to provide a continuous
supply of skills to ensure we achieve our
strategy of growing our business and
delivering shareholder value.
The year under review’s performance has

given us a platform to critically identify and
prioritise interventions and test our progress
in this regard.
Our workforce
We currently have 23,520 full-time
employees, 5.5% less than the previous year,
with the majority (68%) in operational and
support roles; a further 21% in supervisory
roles and 11% in managerial positions.
The proportional distribution of our people

largely corresponds with our existing and
potential customer base.
Staffing and staff exits

In line with the changing labour dynamics of
the industry, our natural attrition (employees
We have developed progressive who resigned and were not replaced) rate
employment equity targets to address rose to 9% (7% in the previous year) and
the challenges we face in terms of the resignations rose to 8% (6% in 2007/08).
diversity of our work force.
This , however, is still in line with the South
African industry norm.
Headcount movement In the top management scheme, the

financial driver accounts for 45% of the
2006 2007 2008 2009(**)
total award, and this is measured by the
Opening balance 28,972 25,575 25,864 24,879 basic earning per share, return on assets
(ROA) and the defend and grow revenues
Employee gains 706 1,512 918 1,047
strategy. Performance drivers (customer
Appointments 686 1,486 891 1,034 satisfaction and organisational renewal
Re-instatement 20 26 27 13 components) account for 35% and 20% is
allocated for individual performance.
Employee losses 4,103 1,223 1,903 2,406
• Long-term incentive plan
Employee retrenchments 2,990 20 4 10
All employees receive conditional shares,
Voluntary early retirement 674 7 2 5 subject to their individual performance for
each year preceding the allocation. The
Voluntary severance 2,295 13 2 5
allocation is based on the average share
Involuntary reductions 21 0 0 0 price 10 days before the award date of
June 1 each year, using a percentage of
Natural attrition 1,113 1,203 1,899 2,396
the employees’ total package. Our
Closing balance 25,575 25,864 24,879 23,520 employees have no right or title to the
Other employees* 4,227 5,807 3,801 4,307 shares and cannot receive dividends until
the shares have vested. The shares will only
* Other employees refer to contract and temporary employees but exclude Board members,
learnerships and bursary students. vest if we meet our annual financial targets
** Employee retrenchments for 2009 were employee initiated. which are set out in the relevant team
award plan, and employees must remain in
Compensation and benefits continuous employment. The Company will
• Remuneration introduce a new share scheme subject to
While the fixed, or guaranteed, remune- each year as part of our overall shareholders’ approval.
ration packages are reviewed each year, remuneration review process and they are
• The Telkom Pension Fund and
in certain critical skills areas, depending on assessed against individual performance.
Retirement Fund
the supply and demand of those skills in the
The difference between the upper quartile The old Pension Fund, only had 123
market, there are ad hoc reviews to ensure
and the market median for guaranteed members and the Telkom Retirement Fund
Group
we remain competitive. overview
packages is used when calculating had 23,389 members at March 31, 2009
• Non-executive directors incentives for top management. and both are financially sound.
The directors, on recommendation of the
• Other employees Performance management Management
human resources review and remuneration review
Salary increases for all employees – The performance management system has
committee, determine the fees of non-
management and bargaining unit – are been enhanced to ensure that our
executive directors who do not participate
approved by the Board. Non-management leadership is measured on the right criteria
Sustainability
in the incentive scheme for top
employees are paid in terms of the to drive behaviours that will ensure we review
management. These fees are set out on
negotiated agreements with the relevant continuously improve on the value we
Page • and in Note • in the consolidated
unions. obtain from our employees. A five point
annual financial statements. Performance
assessment scale has been introduced that review
• Short-term incentive plan
• Executive remuneration ranges from ‘consistently exceeds job
There is an incentive scheme for our
Fixed remuneration is currently set at requirements’ to ‘consistently does not meet
management based on a balanced set of
the market median and independent job requirements’ to distinguish those who Financial
measures determined by the Board. The statements
remuneration consultants advise the Board’s do from those who do not.
measures consist of financial and key
remuneration committee on executive
performance driven targets, based on the
Company
management packages.
approved business plan. All other Financial
Information
Guaranteed packages are influenced by the employees participate in an incentive
scope of each individual’s role, knowledge, scheme with different measures applied at
skills and experience. These are reviewed the lower levels.
Human capital management (continued)
In the past year we focused on building the

necessary current and future
competencies
Reward and recognition Training and development (CFL) with the balance conducted via the
Our ‘Name In Lights’ programme that In the past year we focused on building the virtual (PC-based) campus interactive
recognises outstanding achievement by necessary current and future competencies satellite-based facility, Skytrain.
employees or teams who go the extra mile through training programmes in:
Telkom invested R300 million in employee
is one of the yardsticks that distinguishes
• Customer Service Academy (marketing, training and development in the year under
our business from others.
sales, call/contact centre and customer review (2008: R283 million). At CFL,
Our Gold Award team award for service competencies). 12,271 employees (7,796 black
2007/2008 went to Daniel Fourie, Alan candidates and 3,641 women) were
• Leadership and management develop-
Gould, Kevin Burns, Deon Minnie and trained.
ment (enterprise leadership, general
Willie Engelbrecht, for developing a
management, frontline leadership and The CFL, which conducts most of its training
software application that created a service
business development competencies), in-house, spent R35.0 million with external
view for the DSLAM. This application has
and vendors in the key areas of technical and
enabled us to determine within minutes
whether a DSLAM has been affected by a • Technical training (product knowledge, IT, management, marketing and Safety,
major failure. It also provides us with technical service, ICT infrastructure, IT Health and Environment (SHE).
valuable information for special investigation solutions and technology and
sections as it identifies problematic networks innovation management competencies).
for future investigations.
The bulk of the training (64%) was through
Daniel also won the CEO Award. the classroom-based Centre For Learning
EE training 2008–2009 AA and EE as a % of total trained EE/AA 2008–2009
African female AA African female Male African

Coloured female EE Female coloured Male coloured
Foreign female White male Foreign female Male Indian
Indian female Female Indian Male white

White female Female white Male foreigner
• Accelerated development of women, blacks and young

talent Tyron – a fine example of our development programme
In the year under review, 257 employees (50% female and 70%
black) were trained in value management and technology
management.
Some 18 graduates from the ICT GMP obtained their MSc

degrees in technology and innovation management. Of these,
seven were women and 11 were black.
• Technical training
Approximately 2,883 field technicians were trained in IP
telephony and the installation and maintenance of ADSL and, to
date, more than 3,300 students have been trained on IP-related
offerings, including LAN technologies, router installation and
maintenance programmes. Tyron Truter, manager of the Cape Town Electronic Business
• Network and IT training Support Centre (ESBC), is a 20 year Telkom veteran who has
Some 350 ICT diploma and degree graduates and 400 diploma worked his way up from being an ‘appie’ in the Mitchell’s
students were exposed to the industry via theoretical and field Plan branch of the old Posts and Telecommunications
training. This resulted in the creation of various talent pools department in 1989, to where he is today.
including specific functional skills needed by line management; IP He has worked all over the Western Cape, run call centres
skills and field operations. on the West Rand of Gauteng and Pretoria and returned to
• Other training Cape Town in January 2009 to take over the ESBC.
The CFL trained 200 candidates in 22 events relating to IO driven “This job is what you make of it and I’m having a lot of fun.
Telkom OSS/BSS projects and an additional 240 people were I’m not a military style manager, I like to get down and dirty
trained in infrastructure and product/service training on emerging with my team to ensure we deliver on our key performance
technologies. Some 111 employees received IT certification with indicators (KPIs). Our customers make us responsible for
1,823 attending IT short courses and 154 attending IBM Tivoli everything so we have to keep them happy. South Africans,
Netcool training.
in the main, are not techno savvy so it’s up to us to help them
Jobs Initiative on Priority Skills Acquisition (JIPSA) set up their systems. Also, a lot of people don’t realise that we
support all users from MNet to ourselves and we provide a Group
This is a government initiative aimed at addressing the skills overview
shortage in certain areas in South Africa and, to date, 1,138 value-added service to them all.”
unemployed ICT graduates have participated in internship
programmes. Of these, we appointed 644 (75% of total industry Management
review
appointments). In addition, 40 unemployed female ICT graduates
were trained and completed advanced Internet Protocol
Networking/Solutions development and we offered 22 (55%) of Sustainability
them full-time employment. review
Leadership and management development programmes

During the year under review: Performance
review
• 22 employees completed the Implementing Strategy and
Managing Performance programme.
Financial
• 33 employees from the top leadership team enrolled for the statements
Telkom Global Leadership Development programme.
Company
Financial
Information
We remain committed to continuous
engagement with the unions
• 40 employees were nominated for the • There has been a marked improvement albeit one that is within our control if we
NGN Professional programme. in our relationship with the unions, and are prepared to change the way we relate
to these employees.
• 100 employees have graduated to • There is the emerging phenomenon of
date from the Advanced Operations managerial employees joining trade Two factors are involved here – a feeling of
Management Development programme unions. abandonment of junior and middle
(AOMDP). management by top management, and the
The former is, we believe, because of our
annual general salary increase approach
• 81 employees attended the Gordon deliberate action in 2007 to invest in which tends to treat management
Institute of Business Science (GIBS) rebuilding the relationship between employees as immune to the economic
programme in managing the customer ourselves and the unions following 2006’s hardships that we are all facing. As a result
relationship (PMCR), and
industrial action. While the suspicions are of the increases gained by union members,
• 453 employees have been trained in still there, the propensity to engage in the unions are seen as viable vehicles for
the Next Generation Network (NGN) confrontational conduct has diminished. channelling frustrations with some of our
Essentials programme. There is also some semblance of shared practices.
vision and a willingness to co-operate.
Employee engagement Industrial action
Two developments stand out in the year Although the latter increase is not material Following an impasse in wage
under review: it is, nevertheless, a worrying development, negotiations in 2008, some 2,500 out of
Union memberships – bargaining unit
Non-
recognised Non- Grand
Union name CWU SACU Solidarity unions Total unionised total
Number of members 8,205 4,682 2,836 52 15,775 5,259 21,034
% membership: 2008/09 39.0 22.3 13.5 0.2 75.0 25.0 100
% membership: 2007/08 37.6 23.8 13.2 0.2 74.8 25.2 100
Union memberships – managerial staff
Non-
recognised Non- Grand
Union name CWU SACU Solidarity unions Total unionised total
Number of members 149 319 125 225 818 1,668 2,486
% membership: 2008/09 6.0 12.8 5.0 9.1 32.9 67.1 100
% membership: 2007/08 5.7 12.0 4.3 8.7 30.7 69.3 100

14,500 union members participated in a short-lived strike

in August 2008 and 1,680 bargaining unit employees
participated in industrial action in August 2009. Telkom
continues to engage with unions in order to find equitable
solutions. Hartebeeshoek keeps track of South Africa
The multi-billion rand Hartebeeshoek satellite station lies deep
• Heartbeat
in a valley between Krugersdorp and Hartbeespoort Dam.
The company measures the level of employee
Since its opening in 1975 it has relayed literally billions of
engagement, through the annual Heartbeat Survey.
signals from two satellites deep in space to South Africa’s data,
In the year under review our employees were more television and voice units, 24 hours a day, seven days a week.
committed to Telkom and indicated that their intention was Donovan Horn is one of the 28 people that man the station.
to stay with the Company and take up the challenges that
As a technical specialist, Donovan heads a team of eight
come their way. For the first time in a long period
technicians who ensure that the station runs smoothly and
employees are proud to say that they are part of the Telkom
efficiently. “We have to be fully operational at all times and our
family. They are willing to continue to focus on the positive
equipment is in what we call full redundancy mode so that if
in spite of negative economic conditions; internal
anything goes down it kicks in automatically,” he says.
performance pressures; and changing market forces.
For some people, working at the station could be a lonely
The great news is that even in the light of the above
experience, but not for Donovan. “We are surrounded by
challenges the Company’s engagement increased by a
prime bushveld with its myriad species of flora and fauna, so
pleasing 10%. Some 62% of the Company’s employees
there’s always something to see, whether it’s a Piet-my-Vrou
were engaged compared to 52% in 2008. It is expected
whose call echoes from the satellite dishes, or our lone
that this will be reflected in increased individual, team and
Blesbok. The only thing I do miss about ‘civilisation’ is that
Company performance, as well as in the retention of the Group
there is no canteen on site so, if you forget your lunch, the overview
right people in the Company.
nearest hamburger is 23km away!”
Engaged employees focus on what’s good for the customer
and what’s good for shareholders. There is positive growth Management
review
in customer satisfaction in most of the customer segments,
which is indirectly the result of the positive engagement of
our employees.
Sustainability
review
Telkom intends to continue its effort to improve employee
engagement through a particular focus on improving the
accessibility and availability of top management and Performance
review
improving Telkom’s ability to attract and retain a quality
workforce.
Talent management Financial

statements
Managing our talent pool is a critical aspect of our
business, from retaining key skills to unearthing the leaders
of tomorrow. We have a number of initiatives in place to Company
Financial
ensure we are well placed to face current and future Information
challenges.
Our Graduate Development Schemes division is
dedicated to growing and developing young talent
• Succession planning
During the year under review our talent
pool bench strength rose to 1,474.
Effectively this means that there is at least
one candidate in the talent pool for each
group executive and executive position
who can replace the current incumbent.
• Retention programme
The four focus areas of our retention
strategy are:
• Create knowledge (attract and seek

talent)
• Store and protect knowledge (retain

talent)
• Share and distribute knowledge

(develop potential talent); and
• Use knowledge (deploy talent).
The success rate of our retention

programme to date is 95%, with 253
employees on retention.
• Global talent
To ensure we have a sustainable talent
pool to staff our international businesses we
established a Global Talent Pool and,
currently, 48 employees are on short- or
long-term assignments with Multi-Links/
Africa Online.
• Managed career development for

high potential employees
In the year under review our employees The six employees who obtained their
were more committed to Telkom and Masters degrees in engineering and
indicated their intention to stay. computer science at Cornell University in
New York in 2007/08, rejoined us in
September 2008 with two being
promoted. An additional three employees
were admitted to the university in May

2009.
The voices of Telkom
Six employees, identified by the CEO Telkom has 34 call centres in South Africa, each geared to providing technical
Rising Stars programme, are attending the support and service to business and domestic customers. For the men and women
IMD’s Building On Talent programme in who staff the centres, life can, at times, be challenging and stressful for these
Switzerland. people are the ‘voice’ of Telkom, the ones who take the brunt of customer
complaints.
51 female employees attended a Chat
and Learn programme which focused on Hilary Peacock, an agent in the Cape Town Service Activation Unit, says a key
Women Leaders Under Construction – attribute to surviving in the job is the ability to not take any of the abuse received
Blazing Your Own Path. In addition, as personal. The other key attributes are learning what tone of voice to adopt
10 female employees attended a two day when handling calls, good or bad, and having a passion for customers
workshop on Women In Management and
“I try to put myself in the customer’s place and take the good with the bad when
Leadership.
handling calls. Overall, the good definitely outweighs the bad and I would go as
Graduate and skills pipelines (future far as to say that about 90% of the calls I receive are good,” she says.
talent)
Colleague Marlon Ernstzen agrees, particularly when it comes to adopting the
Our Graduate Development Schemes
right tone of voice.
Division is dedicated to growing and
developing young talent, not only for “There’s nothing better than talking to an irate customer who’s upset because
ourselves, but for South Africa as a whole. something he was promised didn’t happen, and then, at the end of the call,
hearing him, or her, calm down and apologising and then saying thank you for
Some R29.7 million was invested in
the help. That experience energises you for the next day.”
student bursaries in the fields of information
technology, electrical engineering and Blanche Machelm is an agent in the Electronic Business Support Centre (EBSC) in
marketing management during the year Cape Town, a unit which handles between 6,000 and 8,000 calls a day, mainly
and an additional R3.7 million was spent in the areas of ADSL support (90% of the calls) and fault and connectivity issues –
on our Centres Of Excellence programme. e-mail, for example.
We also funded 833 full-time bursaries; Blanche, who estimates that she handles approximately 50 calls a day, says all
667 part-time bursaries and 1,121 study EBSC agents have to have an IT background as they have to have an intimate
loans for employees or their dependants in technical knowledge in areas such as routing, configurations, outages, modems
the 2008 academic year. and cable passwords. Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Overall, the year under review was our As part of Telkom’s contribution to the The various CoEs have been encouraged
most successful to date in terms of bursar upliftment of advanced research skills in to build relationships with African
placements (80%) and a pass rate of more South Africa, several of the previously universities to expand the ICT blueprint in
than 95%. under-resourced universities were partnered Africa as a catalyst for job creation and
with historically white universities. After a economic development.
Africa Online and Multi-Links
number of years these previously
Africa Online is our internet service Major progress has already been made in
disadvantaged institutions have established
provider (ISP) in Nairobi, Kenya and Multi- this regard and formal agreements exist,
Links is Nigeria’s first private telecommuni- themselves as research centres that can
inter alia, with institutions in Egypt,
cations operator. Two of our top operate independently. Examples of these
Ethiopia, Uganda, Namibia, Kenya, Libya
management employees are on three year joint research centres are Rhodes University
and Tunisia.
contracts in Nairobi and 39 are based in and the University of Fort Hare as well as
the University of KwaZulu-Natal together The CoE programme enables the various
Lagos.
with the University of Zululand. Currently, institutions to establish research facilities
Telkom Centres of Excellence that would not otherwise have been
there are 16 CoEs across the country, each
Telkom's Centres of Excellence (CoE) is a possible without the necessary Telkom,
with a unique research focus.
collaboration programme between Telkom, industry and government sponsorship.
the telecommunications industry and The CoEs are jointly funded by Telkom, ICT
government to promote research in industry players and the Department of Skills retention in South Africa is a major
communication technology and allied Trade and Industry - through its Technology challenge as many talented post-graduate
sciences and to provide facilities to and Human Resource for Industry students are attracted to opportunities
encourage young scientists and engineers Programme (THRIP). overseas. An important feature of the CoE
to pursue their research interests in South programme is that the extensive research
Sound governance ensures that allocated
Africa opportunities offered to students effectively
funds are well managed. Various levels of
contribute to minimising the “brain drain”,
The CoE programme was launched in governance have been formally
thus keeping our talent here to provide a
February 1997 when the then Minister of established.
valuable human resource to the industry.
Communications, Mr Jay Naidoo
• Formal CoE Agreement between all
participated in the signing ceremony of the Approximately 250 students are currently
stakeholders.
first research agreement between Telkom, pursuing post graduate degrees through
Siemens and the University of Cape Town. • Each CoE is managed by a Steering the programme and since its inception,
During 1997 a total of seven CoEs were Committee represented by the research more than 1,800 post graduate degrees
launched and subsequently, during the staff, Telkom, the respective industry have been awarded.
following year another five were sponsor and a representative from the
established, including several at The profile of the current CoE students is:
THRIP management team.
technikons. From the launch of the • 84 Doctoral students
• Research project selection mechanisms
programme, the current Chief Executive
are aligned with; industry partner/s and • 166 Masters students
Officer of Telkom, Mr Reuben September,
THRIP funding criteria.
became the patron of the programme and • 20 women
has guided and supported the initiative. At • High level governance of the CoE
• 150 BEE candidates
each of the launches during 1997/98, programme is provided by an Executive
top ranking government officials, including Management Council with representivity • 38% non-South African students
Mr Andile Ngcaba, Mr Tokyo Sexwale from Telkom, industry, academia and
Currently 27 industry partners are involved
and Minister Sibusiso Bhengu participated THRIP.
in the CoE programme. Industry
in the signing ceremonies of the
stakeholders are more than financiers of the
collaborative research agreements.
CoE programme as they also play a vital
role in exposing students to the real world Industry Partner: Telkom and Dimension University of KwaZulu-Natal
of communication. Data Radio access involving CDMA receivers;
traffic modelling; adaptive antenna arrays
Telkom’s CoE programme has been Optical Fibre Measurements
and resource management.
recognised as a catalyst for ICT research in
Industry Partners: Telkom, Hezeki and MCT
Africa. Rural telecommunications with a variety of
Communications
projects in the wireless networking arena.
Intuitions, research areas and industry
Solar Energy Research
partners Industry Partners: Telkom and Alcatel-Lucent
Tshwane University of Technology Industry Partners: Telkom and TFMC
University of Zululand
Radio planning: projects involve Rhodes University Mobile e-Services
comparing the calculated or predicted Distributed Multimedia: projects deal with
value of radio signals with the measured Industry Partners: Telkom and Huawei
virtual reality; Internet Protocol telephony,
signals. protocols and intelligent agents Universities of Cape Town and
Industry Partners: Telkom, Alcatel-Lucent Stellenbosch

Industry Partners: Telkom, Comverse,
and Molapo Technology ATM/Broadband Networks and their
Tellabs and StorTech
applications with research on MPLS and IP
North West University (Potchefstroom University of Fort Hare networks; congestion control and network
Campus) Electronic Commerce performance.
Telecommunications Application Modelling
Industry Partners: Telkom, Saab Grintek Industry Partners: Telkom, Nokia Siemens
includes projects on the Super Parallel
and Tellabs Networks and Telesciences
Computing facility; data mining; decision
support systems and mathematical University of Stellenbosch University of Western Cape
programming applications. Satellite communication, speech and Internet Protocol Networks and their
image processing applications
Industry Partners: Telkom and Saab Grintek
Industry Partners: Telkom, Motorola and Industry Partners: Telkom and Cisco
University of Johannesburg
Spescom
Modelling Optical communication: involving University of the Free State
Dense Wave Division Multiplexing (DWDM) University of Witwatersrand The identification of usability and human
projects; optical filters and transport Telecommunications Access and Services factors that will ensure higher accessibility
networks based on the TINA Architecture to Information Technology
Industry Partners: Telkom, CBi Electric and Industry Partners: Telkom, Vodacom and Industry Partner: Telkom Group
overview
Ericsson Nokia Siemens Networks
Vaal University of Technology
Operational Support Systems (OSS) University of Limpopo Power (fuel cells etc) and optic fibre
Automatic Speech technology Management
research review
Industry Partners: Telkom and SAP
Industry Partners: Telkom and Maredi Industry partners: Telkom, M-Tec and
Nelson Mandela Metropolitan University
University of Pretoria TFMC
Multimedia software: includes usability Sustainability
review
laboratory projects, virtual classroom; Next Generation Networks
programming tools and 3D system design
Industry Partners: Telkom, Unisys, Alvarion,
EMC and Tellumat Performance
review
Financial
statements
Company
Financial
Information
Safety, health and environment
We successfully
stress
piloted a
resilience and emotional

intelligence workshop
Safety, health and environment
Our entrenched and integrated Employee
Wellness and Safety, Health and
Environment (SHE) portfolio continues to be
one of the most admired in South African
industry, as evidenced by the following
achievements in the year under review.
• We received the coveted international

Global Business Coalition (GBC)
Award for Excellence as the best
HIV/AIDS workplace programme for
our integrated Voluntary Counselling,
Testing and Treatment programme for
2008. The award was made by the
United Nations Secretary General in
New York.
• Our annual national HIV/AIDS

celebrations campaign, ‘Don’t hesitate,
donate’, was successfully launched
on World AIDS Day 2008 with our
employees donating thousands of
kilograms of food, clothes and toys
to 26 adopted HIV/AIDS havens,
orphanages and hospices.
• Our Direct Retail shops initiated the

Thuso Bus concept (Thuso is our
employee wellness programme). Outlets
in the Eastern Cape, including the
former Transkei, were given a working
day off to attend Thuso programmes.
• We successfully piloted a stress

An industrial theatre show was a key driver in the roll-out of our Thuso Wellness days
resilience and emotional intelligence
which highlighted a step-by-step approach to improve employee wellbeing through
lifestyle changes. (EQ) workshop in areas with high
degrees of trauma as a result of
hijackings, robberies and other criminal
activities. This will be rolled out
nationally in the new financial year.
Sick leave indices
Sick leave measure 2006/2007 2007/2008 2008/2009 % variance
SAR (%) 2.24 2.51 2.52 (0.4)

Defined as a total number of sick days as % of total
available man-days
ASR (days) 2.45 2.48 2.53 2.0

Defined as the average number of days used per sick leave
incident
AFT (incidents) 3.38 3.59 3.30 (8.1)

The average number of sick leave incidents per sick leave user
SUR (%) Monthly average 15.7 17.3 17.3 0

Number of sick leave users per month as % of total number of
employee population
SUR (%) Year-to-date 67.2 70.1 71.7 2.3

Number of sick leave users progressively utilising sick leave as
% of total number of employee population (all sick leave users
are only calculated once)
Total number of man-days/shifts lost due to sick leave 176,795 194,364 183,679 (5.5)
implying the progressive and accumulative total of sick leave
days over 12-month period
• We saved R2 million on our Operational Absenteeism through illness out of our Thuso Wellness days which
Hygiene surveys thanks to the application There were no significant variations in the highlighted a step-by-step approach to
of specific criteria in key areas. absenteeism through illness and year-to- improve employee wellbeing through
date sick leave use figures, although there lifestyle changes. Our challenge remains to
• Our ISO 14001:2007 and OHSAS
was a 5.5% improvement in overall sick reconstruct the “Terrible Triangle” of high
18001:2007 Safety, Occupational
leave days used. stress levels, poor chronic disease profile Group
Health and Environmental Management overview
and bad lifestyle habits.
systems were recertified by Dekra We remain concerned about the high level
Norisko Industrial South Africa. of sick leave taken (71.7% compared to • Eye screening
70.1% in the previous year) and we will be 2,113 employees were screened for vision Management
• The Compensation Commissioner review
making planned changes in sick leave impairment and 194 were identified for
granted us a dedicated resource to deal
policy stipulations and management further treatment intervention.
specifically with Telkom-related cases.
effectiveness to decrease this business risk • Individual health risk assessments Sustainability
This resulted in a ‘quicker return to work’ review
and impact. In terms of productivity and (chronic profile)
by employees who were injured on duty.
direct/indirect cost factors, the data 2,903 employees at selected sites in the
• As a result of effective risk management indicates that 791 employees are off sick Free State, KwaZulu-Natal, Western Cape Performance
controls, there were significant each working day. While this is an and Gauteng were screened for review
reductions in three reportable incident improvement of 2.6% on the previous year, hypertension, cholesterol, diabetes and
categories – working in elevated it is still unacceptable and a significant body mass.
Financial
positions (17%); lifting and pushing improvement is necessary. Our new target statements
# Hypertension profile: While there was a
(30%); and vehicle accidents (16%). is to reduce the sick leave per day to
decrease in the normal range from 63% to
600 employees in 2010/2011.
• We established the Telkom Green 46%, this remains a major risk area as Company
Financial
Initiative (TGI) project team to enable us Physical wellness more than 50% of those tested had some Information
to better manage our environmental An industrial theatre show, ‘How Do I Eat abnormality in their blood pressure. The
impact. This Elephant’ was a key driver in the roll- high systolic range (heart subtraction)
Safety, health and environment (continued)
Of particular
c o n c e rn
is the 17.6% increase in stress-related cases
due to work related relations, poor performance,
incapacity and job security.
The following table shows the diagnostic causal factors for the EAP referrals
Diagnosis 2006/2007 2007/2008 2008/2009 % variance
Crisis and trauma 41.7% 41.3% 40.5% (1.9%)
Family relationships and divorce 15.4% 17.6% 16.1% (8.5%)
Stress related 7.6% 6.8% 8.0% 17.6%
percentage was similar to the previous Psychological wellness • The stress category (which includes
year but the diastolic (heart pumping) rate In the year under review we transformed work-related poor performance,
increased from 15% to 25% as a result this section of the Wellness programme into incapacity, job security etc) constitutes
of increased cardio-vascular illnesses; a more proactive, competency-based almost 14% of all diagnoses and the
increased stress levels and poor lifestyles. approach, highlighted by the following: 293 cases recorded during the year is
an increase of 17.6% on the previous
# Cholesterol profile: There was a 7% • Some 1,216 employees and their
year. This is a major challenge for us in
increase in the at-risk category, again due dependants were referred to our
the next financial year, particularly
to lifestyle factors such as lack of exercise psychological counselling interventions,
in view of the roll-out of Project
and incorrect eating habits. This profile will a 10% decrease on the previous year.
Renaissance and the resultant
be a priority going forward in our wellness This decrease is, we believe, largely
uncertainty of job security and fears of
campaigns. due to the fact that employees did, from
job losses.
time to time, use their own private
# Diabetes profile: There was an 11%
psychologists. From the referrals, Preventative interventions
improvement in the diabetes chronic
4,132 sessions were conducted at an Five key workshops were held during the
profile, thanks to regular testing and the
average of 3.4 sessions per referred year:
fact that diabetes remains a high focus
area. However, we are concerned that low patient at a cost to us of R1.8 million. • Stress and resilience;
blood sugar levels rose from 28% to 37% • Of particular concern is the 3.8% • Team and value development;
and this will be another key focus area in increase in cases in the ‘other
our awareness campaigns. psychological illnesses’, such as • Trauma and resilience;
# Obesity profile: This is a high risk area psycho-sexual, personality disorders • Bereavement therapy; and
for us as 65% of the employees tested were and related psychosis. This could be the
• Conflict management.
overweight or obese. As a result, the tip of the iceberg as some of
importance of lifestyle modification is a the problems experienced by our
priority for us in the new financial year. employees are of such a sensitive nature
that they are discussed with their own
# Opportunistic diseases: We are
psychologists.
pleased to note that only six cases of TB
were reported in the year under review
and all cases were successfully treated.
These will be augmented by another six workshops in the next

financial year: Our carbon footprint
It now takes the earth 16 months to regenerate the resources it
• Psychological and emotional resilience; uses in a year and so businesses that look ahead and actively
manage their ecological risks and opportunities can not only
• Financial wellness;
make a major contribution to saving the world’s resources but,
• Prevention of emotional burnout; at the same time, gain a strong competitive advantage over
those that don’t.
• Emotional intelligence;
At Telkom, via our Green Initiative, we are consolidating all our
• Dealing with challenging circumstances; and
environmental initiatives to ensure we meet our, and legislation’s,
• The psychology of customer care. targets and, additionally, educate our people and encourage
them to lead a greener lifestyle.
Socio-economic wellness
We provided guidance in the areas of lifestyle, finance and debt We have 10 key focus management areas – energy, water,
waste, greenhouse gas emissions, green procurement,
counselling during the year, three key areas that impact on the
biodiversity, renewable energy, company initiatives, our
wellbeing of our employees with the specific focus to reduce stress
corporate image and our people. Some of our key objectives in
and poor lifestyle habits.
these areas are to offset emissions, participate in carbon
# Lifestyle: We contracted a lifestyle service provider to run our trading, provide the greater ICT sector and stakeholders with
Telkom Touch Lifestyle Programme which connects employees to a products and services that will help them to reduce their
range of lifestyle services such as recreational, vocational, footprints and provide our shareholders with ‘green’ returns.
household, educational and general lifestyle value offerings at Some of the areas where we can improve are:
great prices.
• Employee business travel (currently 26.7 million km a year).
# Financial resilience: There was an increase in counselling Our aim is to reduce this by 5.3 million km.
referrals (three to four a month) for employees with financial
• Our 2008/09 electricity consumption was 537,300MWh.
problems, which was underscored by the increase in garnishee Our aim is a reduction of 107,460MWh.
orders against employees. As a result, a bid for the outsourcing of
• EPS generators use 2.3 million litres of diesel. Our aim is to
a financial resilience intervention and a financial advice service
reduce this by 456,000 litres.
has been approved and is in process,
• Employee business air travel sits at 31.8 million km. Our aim
# Debt counselling: We have set up a debt counselling service
is to reduce this by 6.4 million km.
which registers employees who have huge debt under the
National Credit Act of 2005. This protects them against parties Overall, we believe we can reduce our carbon emissions by Group
overview
between 15% and 30% over the next three to five years.
demanding payment. A debt counselling company will act for such
employees, negotiating new payback terms for bonds, vehicle
leases and other creditors and preventing repossession of these Management
review
assets.
Safety management
Sustainability
The Occupational Health and Safety (OHS) of Telkom’s employees review
is a fundamental right and therefore Telkom acknowledges that a

healthy and safe working environment enhances performance in
Performance
the workplace and also contributes to employee wellbeing. review
Financial
statements
Company
Financial
Information
Safety, health and environment (continued)
To ensure Telkom complies with the In analysing this data, 32% of HIV positive educators. It is gratifying to note that the
minimum safety requirements as per employees are either in the process of involvement of peer educators has
national legislation and to support Telkom’s being registered or are unaccounted for. extended beyond the boundaries of the
OHS policy, a: This remains a challenge for the Company into the communities they serve
programme to improve on this conversion via the adoption of various havens,
• Well structured SHE Governance policy
rate to get identified HIV positive orphanages, hospices and presentations to
is developed and revised annually.
employees on to the programme. In the community youth groups. As a result, a
• Incident on Duty (IOD) system is 2008/2009 performance cycle, there Champions Programme will be launched
developed to provide intelligent were 74 new registrations on the later in 2009 to formalise community
information to assist management in programme (40 via onsite VCT; 32 self- involvement.
identifying trends and to implement identified and two prophylaxis patients).
• Thuso Toll-free Call Centre
corrective actions to mitigate future
The gender distribution on the chronic Some 4,234 calls were routed via the
incidents.
programme is 203 (52%) male and 186 Thuso Call Centre for the year under
• Contractor management audit pro- (48%) female. The median age is 36 years review. Outbound calls comprised 65.5%
gramme is implemented to ensure with ranges between four and 56 years. of these, mainly providing clinical support
contractors are audited monthly to meet to patients. Inbound personal advice calls
We have adopted a conservative
the requirements of the Construction made up 29.7% of all calls.
approach in providing anti-retrovirals for
Regulations; and
employees registered on the programme • KABP Study
• Telkom Subsidiary audit initiative is with a CD4 count of 350 versus a The regular KABP (Knowledge, Attitude,
implemented to provide support to the governmental and NGO norm of 200. Behaviour and Perception) studies which
subsidiaries to meet minimum statutory Using this as measurement category, only test the general level of information,
SHE requirements. 14 (4.9%) of the 284 employees on anti- understanding and influencing behaviour
retrovirals are categorised in the AIDS or of employees about education and

HIV/AIDS workplace programme
awareness interventions have been
In addition to our international award, our fully blown AIDS category.
extended to the HIV positive employees to
Thuso programme is recognised for its best • Preventative strategy test their understanding and also determine
practices by researchers and academics Since 1996, we have dispensed free the level of stigmatisation experienced by
who visit us for benchmarking purposes. condoms at all sites. In the year under them in the workplace.
review more than 703,000 condoms
Since the inception of our voluntary Environmental management
were dispensed and more than 120,000
counselling and testing programme (VCT) in While our environmental impact is not big,
expired condoms of previous governmental
2004, 23,391 employees have been our contribution is not totally insignificant
issues were withdrawn.
tested. In the year under review, and, as a result, during the year under review
2,353 employees, from a target population • Peer education we launched our Telkom Green Initiative, a
of 3,178 at 52 sites, were tested. Currently 594 employees have been concerted effort to place green issues firmly
trained and registered as fully fledged peer in the mainstream of our operations.
We have 280 employees receiving anti-
retroviral therapy of which the majority • Treatment protocols
have a normal sick absence profile, being In terms of treatment protocols, the following table reflects the current treatment status:
healthy and productive at work. Treatment aspect Number of employees
HIV positive employees 708
HIV positive status via VCT 512 (72%)
HIV positive status via self-identification 196 (28%)
HIV employees registered on the Chronic Disease

Programme 389 (55%)
HIV employees registered on Medical Aid, NGO or

Government Programmes 92 (13%)
HIV positive employees on treatment (Expert Treatment

Programme (ETP)) 284 (40%)
Some of the key deliverables are: • Participation in national and • Improved functional efficiency of
international climate change awareness underfloor cooling requirements in
• Measuring our carbon footprint through
programmes. equipment rooms.
the monitoring of electricity and fuel use;
minimising travel and reducing waste • Employee behavioural change aware- • The implementation of the Green
and carbon emissions (there is no ness programmes. building concept in partnership with our
carbon trading legislation in South facility management company; and
• Computerised destination control
Africa as yet). Reducing our electricity
elevator system in our high rise • Installation of motion sensor light
bill through the installation of meters at
buildings. switches and upgrade of existing
key sites, a possible return to using more
lighting technology with more efficient
solar power and the installation of wind
technology.
chargers.
Bats
We are currently managing a bat encroachment concern in a
remote exchange building in Mpumalanga. A colony of free tailed
bats is roosting and raising its young in the ceiling, which creates
an unhealthy environment for our technicians performing routine
maintenance work. We are allowing the young to mature and will
then install a one-way excluder exit. This will allow the mature
adults and young to leave but not return. The final phase of the
project will be the erection of a bat house on the site to provide
an artificial roosting site for the colony.
Blue cranes
We are delighted to announce that since the installation of
‘flappers’ on our lines in the central region, no blue crane
mortalities have been recorded.
Raptors
As part of our commitment to active environmental stakeholder
Group
engagement with both governmental and non-governmental overview
organisations we attended various meetings around the country.

One of these is the annual meeting of the Northern Cape Raptor
Management
Forum (NCRF). At the last meeting issues relating to the nesting review
habits of sociable weavers on our towers were raised, specifically
the environmental impact the removal of these nests would have on
the survival of the Pygmy Falcons which prey on the weavers. Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Corporate social investment
The Foundation was voted the
Top Empowerment Company in CSI
All our corporate social investment (CSI)

programmes are run and managed by the
Telkom Foundation which we established
10 years ago.
As a result of the Foundation’s work, we are

recognised as one of the largest CSI
investors in South Africa and in the year
under review we invested more than
R47 million, mainly in the areas of education
and the roll-out of information and
technology in disadvantaged communities.
As a result of this commitment, the Foundation

was voted the Top Empowerment Company
in CSI at the 2009 Oliver Empowerment
Awards, hosted by Topco.
The Foundation’s focus on education and

technology is governed by our belief that
these areas are key contributors to an equal
opportunity society in South Africa. One of
the most powerful learning resources is the
internet and by bringing this medium into
classrooms around the country, educational
standards will be enhanced.
It is our hope that our continued investment

in these fields will help redress skills
shortages, particularly in the engineering,
science and IT fields.
We focused on four main projects in the

year under review:
• 2,010 for 2010 Schools Connectivity

Initiative
This is the Foundation’s biggest and most
ambitious project ever. Our goal is to
provide 2,010 schools across the country
with internet access by 2010.
Group
overview
Management
review
Fittingly, the initiative was launched in Sustainability

review
February 2009 by our CEO, Reuben We have been a proud supporter of the
South African Paralympic team since
September, at his former school, Grassy
1992. Our team achieved 6th place in
Park High School in Cape Town. the overall medal table in the 2008 Performance
review
Beijing Olympics.
Each participating school will receive an
internet connection; discounted broadband
subscription rates and interactive electronic Financial
statements
whiteboards and laptops.
Grassy Park also received an Internet Café

Company
for use by not only the learners, but the Financial
Information
community. If this pilot programme is
successful, it will be rolled out to the other
schools as part of the overall initiative.
Corporate social investment (continued)
• Beacon of Hope
This programme, which was launched in
2006, is designed to develop promising
young learners into future leaders by
placing top students from under-resourced
schools in some of the country’s leading
high schools.
The Foundation pays for the tuition and

boarding fees; uniforms; books and
stationery for the 186 learners enrolled in
the programme.
• Giving from the Heart

Initiated by our Human Resources
department to encourage employees to
give something back to the community, the
project was taken over by the Foundation
in 2006.
Employees can either donate a portion of

their salary to Giving from the Heart projects;
donate their time and skills to projects, or
identify their own charities to which they
contribute either money or time. The Telkom
Foundation matches every rand an employee
donates with the same amount.
In the year under review, the Foundation

launched an Employee Volunteer Week
which resulted in our people working and
assisting at the Tumelo Hospice in
Mabopane; the Centre of Hope in
Mahwelereng; the Nokuthula School for
the Intellectually Disabled in Marlboro; the
Uthando Orphanage House in Hazyview;
St Patrick’s College in Kokstad and the
Hospice Association of Transkei in
Southernworld.
• Sponsorships
In the year under review various grants
were made to organisations ranging from
Childline to Nurturing Orphans of AIDS
for Humanity (Noah) in line with our
commitment to improving the lot of
previously disadvantaged communities.
Going forward
In the next financial year, the Telkom Our Telkom Business golf sponsorships enable us to position our brand in the business
Foundation will launch the Telkom Teacher environment. They also help us to introduce new products and reinforce our relationship
of the Year awards to honour South Africa’s marketing programme.
top maths, science and technology
educators at the Further Education and
Training and the General Education and
Training level. The awards will be made in
August 2009.
Sponsorships ICT capabilities. In June 2009, the The programme is sub-divided into the
Sponsorships continue to be an important Confederations Cup was utilised as a dress ‘Pool Splash’ project which focuses on safe
part of our brand building and reputation rehearsal for the World Cup finals in swimming in pools; the ‘Ocean Splash’
management strategies. In the year under 2010. Telkom exceeded all FIFA’s project which concentrates on sea
review we focused on soccer, swimming requirements in ensuring that broadcasting swimming and the ‘Rural Splash’ project
and golf. and media requirements were met. Telkom which concentrates on swimming in rivers
has approximately 128,000 cable and dams.
Soccer
kilometres of optical fibre in the ground –
For the third consecutive year we Golf
enough to circle the world three times. This
sponsored the Telkom Knockout, a Premier Our Telkom Business golf sponsorships –
is more than enough fibre to support the
Soccer League (‘PSL’) event played by all the Telkom PGA Championships, the
massive amounts of bandwidth that FIFA
16 PSL teams between October and Telkom PGA Pro-Am on the Sunshine Tour
will need in 2010.
December. It is a knockout event that plays and two Telkom Business Pro-Ams – enable
a major role in honing South Africa’s soccer Swimming us to position our brand in the business
skills. Since 2000, we have sponsored environment. They also enable us to
Swimming South Africa, a public benefit introduce new products and reinforce our
For the ninth consecutive year we also
organisation which promotes all aquatic relationship marketing programme.
sponsored the Telkom Charity Cup, a one
sports in the country. In addition to many
day PSL event where the fans choose the We also have a presence on Sunshine Tour
South African swimming stars such as
four competing teams. The teams who tournaments such as the SA Open and the
Ryk Neethling, Natalie du Toit and
receive the most telephone and SMS votes Nedbank Golf Challenge. In addition we
Roland Schoeman, Swimming South Africa
play in a round robin series of games. are a broadcast sponsor of international
has played a key role in boosting public
A significant portion of the money awareness of swimming as a life and events like the European Tour and World
generated by ticket sales and telephone survival skill. Swimming contributes towards Gold championships.
voting is given to charities working with the Company’s objectives of being a Paralympics
children, the elderly and people with caring organisation, as the sport offers Telkom has been a proud supporter of the
disabilities. Some 695,000 fans voted in opportunities for both able and disabled South African Paralympics team since
the 2008 event and R4.6 million was people. 1992. Our team achieved 6th place on
raised for the charitable organisations.
Drowning remains a major cause of death the overall medal table in the 2008 Beijing
2010 FIFA Soccer World Cup among children under the age of 14 and, Olympics. The Paralympics are not only
Telkom is a tier three National Supporter as a result of our support for Swimming about sport; they are about hope, pride,
within the fixed-line environment. The South Africa’s ‘Learn to Swim’ programme, inspiration and courage. Telkom is Group
overview
biggest sporting event in the world is the many children and adults in the country honoured to align our brand with this
perfect platform for Telkom to showcase its have the opportunity to learn to swim. message of upliftment.
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Global reporting initiative (GRI) content index
Telkom has opted for an incremental adoption of the guidelines to the GRI index, the full adoption will include a quality assurance and
compliance audit report. In many cases, Telkom’s internal reporting frameworks pre-date external frameworks, hence this is presented as
a navigation aid as opposed to a “tick-box” compliance exercise.
Item Comment and reference
Vision and strategy

1.1 Statement of the organisation’s vision and strategy regarding its See Telkom’s website: www.telkom.co.za/ir
contribution to sustainable development.
1.2 Statement from CEO (or equivalent senior manager) describing Chief Executive Officer’s review
key elements of the report.
Profile
Organisational profile
2.1 Name of reporting organisation. Telkom SA Limited
2.2 Major products and/or services including brands if appropriate. Operational review
Further details of products and service can be accessed
on the website www.telkom.co.za
2.3 Operational structure of the organisation. Group structure
2.4 Description of major divisions, operating Group structure

companies, subsidiaries.
2.5 Countries in which the organisation’s operations are located. Enterprise risk management
2.6 Nature of ownership; legal form. Telkom Group structure
2.7 Nature of markets served. The telecommunications industry
Report scope
2.10 Contact person(s) for the report, including e-mail and Administration page and www.telkom.co.za/ir
web addresses.
2.11 Reporting period for information provided. Year ended March 31, 2009
2.12 Date of most recent previous report. Year ended March 31, 2008
Report profile
2.17 Decisions not to apply GRI principles or protocols. Sustainability review
2.18 Criteria/definitions used in any accounting for Notes to the consolidated annual financial statements
economic environment.
2.19 Significant changes from previous years in the Notes to the consolidated annual financial statements
measurement methods.
2.22 Means by which report users can obtain additional information See Telkom’s website: www.telkom.co.za/ir
and reports about economic, environmental and social aspects of
the organisation’s activities, including facility-specific information.
Governance structure and management systems

Structure and governance
3.1 Governance structure, including major Board committees. Corporate governance report
3.2 Percentage of the Board of directors that are independent, Corporate governance report
non-executive directors.
3.3 Board-level processes for overseeing economic, environmental Corporate governance report
and social risks and opportunities.
3.4 Linkage between executive compensation and achievement Human capital management report
of goals.
3.5 Organisational structure and key responsibilities. Chief officers and management team
3.6 Mission and values statements and codes of conduct. See Telkom’s website: www.telkom.co.za/ir
3.7 Mechanisms for shareholders to provide recommendations to the Company Secretary (see contact details on ibc;) IR road-
Board of directors. shows; AGM and the IR website www.telkom.co.za/ir
Stakeholder engagement
3.8 Major stakeholders. Sustainability review
3.9 Approaches to stakeholder consultation. Sustainability review
3.10 Type of information generated by stakeholder consultations. Sustainability review
3.11 Use of information resulting from stakeholder engagements. Sustainability review
Economic performance indicators

EC1 Net sales. Consolidated income statement
EC2 Geographic breakdown of markets. Notes to the consolidated annual financial statements
EC3 Cost of all goods, material and services purchased. Consolidated income statement
EC5 Total payroll benefits. Consolidated income statement

Group
overview
EC6 Distributions to providers of capital. Consolidated statement of changes in equity
EC7 Increase/decrease in retained earnings at end of period. Consolidated statement of changes in equity
Management
EC8 Total sum of taxes of all types paid broken down by country. Notes to the consolidated annual financial statements review
EC10 Donations to community, civil society and other groups. Corporate social investment report
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Global reporting initiative (GRI) content index (continued)
Environmental performance indicators

Materials
EN1 Total material use other than water, by type (report in tonnes, Safety, health and environment report
kilograms or volume). Provide definitions used for types
of materials.
EN2 Percentage of materials used that are waste (processed Safety, health and environment report
or unprocessed) from sources external to the reporting
organisation.
EN5 Total water use. Safety, health and environment report
EN6 Land owned, leased, or managed in biodiversity-rich habitats. Safety, health and environment report
EN7 Description of major impacts on biodiversity, associated with Safety, health and environment report
the organisation’s activities and/or products and services in
terrestrial, freshwater and marine environments.
Social performance indicators

Labour practices and decent work
LA1 Breakdown of workforce. Human capital management report
LA2 Percentage of employees represented by independent Human capital management report

trade unions.
LA3 Occupational accidents and diseases. Safety, health and environment report
LA4 Standard injury, lost day and absentee rates and number of Safety, health and environment report
work-related fatalities.
LA5 Description of policies or programmes on HIV/AIDS. Safety, health and environment report
LA6 Average hours of training per year per employee by category Human capital management report
of employee.
LA7 Equal opportunity policies or programmes. Human capital management report
LA8 Composition of senior management and corporate Chief officers and management team
governance bodies. Corporate governance report
respond
to competitive
challenges
Performance review
Five year operational review 86
Operational review 87
Three year financial review 104
Financial review 105
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Five year operational review
for the years ended March 31

2005 2006 2007 2008 2009 CAGR (%)
Fixed-line operational data

ADSL subscribers1 58,278 143,509 255,633 412,190 548,015 75.1
Calling plan subscribers – 62,803 272,071 464,038 590,590 111.1
Closer subscribers – 62,803 266,300 451,122 575,812 109.3
Supreme call subscribers – – 5,771 12,916 14,778 60.0
W-CDMA subscribers – – – – 5,253 n/a
Fixed access lines (’000)1 4,726 4,708 4,642 4,533 4,451 (1.5)
Post-paid – PSTN 3,006 2,996 2,971 2,893 2,769 (2.0)
Post-paid – ISDN channels 664 693 718 754 781 4.1
Prepaid 887 854 795 743 766 (3.6)
Payphones 169 165 158 143 135 (5.5)
Fixed-line penetration rate (%) 10.1 10.0 9.8 9.5 9.1 (2.6)
Revenue per fixed access line (ZAR) 5,250 5,304 5,275 5,250 5,349 0.5
Total fixed-line traffic (millions of minutes) 31,706 31,015 29,323 26,926 24,869 (5.9)
Local 19,314 18,253 14,764 11,317 8,822 (17.8)
Long distance 4,453 4,446 4,224 3,870 3,631 (5.0)
Fixed-to-mobile 3,911 4,064 4,103 4,169 4,126 1.3
International outgoing 415 515 558 635 622 10.6
International VoIP 89 83 38 43 34 (21.4)
Subscription based calling plans – – 1,896 2,997 3,546 36.8
Interconnection 3,524 3,654 3,740 3,895 4,088 3.8
Domestic mobile interconnection 2,206 2,299 2,419 2,502 2,484 3.0
Domestic fixed interconnection – – – 113 415 n/a
International interconnection 1,318 1,355 1,321 1,280 1,189 (2.5)
Managed data network sites 11,961 16,887 21,879 25,112 29,979 25.8
Internet all access subscribers2 225,280 282,927 302,593 358,066 423,196 17.1
Fixed-line employees 28,972 25,575 25,864 24,879 23,520 (5.1)
Fixed access lines per fixed-line employee3 163 184 180 182 189 3.8
(1)
Excludes Telkom internal lines.
(2)
Includes Telkom Internet ADSL, ISDN, WiMAX and dial-up subscribers.
(3)
Based on number of fixed-line employees, excluding subsidiaries.
Mobile operational data4

Total mobile customers (’000) 15,483 23,520 30,150 33,994 39,614 26.5
South Africa
Mobile customers (’000) 12,838 19,162 23,004 24,821 27,625 21.1
Contract 1,872 2,362 3,013 3,541 3,946 20.5
Prepaid 10,941 16,770 19,896 21,177 23,561 21.1
Community services telephones 25 30 95 103 118 47.4
Mobile churn (%) 27.1 17.7 33.8 42.3 40.1 10.3
Contract 9.1 10.0 9.7 8.3 9.9 2.1
Prepaid 30.3 18.8 37.5 47.9 45.4 10.6
Estimated mobile market share (%)5 56 58 58 55 53 (1.4)
Mobile penetration (%) 49.5 70.6 84.2 94.3 108.0 21.5
Total mobile traffic (millions of minutes) 14,218 17,066 20,383 22,769 24,383 14.4
Mobile ARPU (ZAR)6 163 139 128 128 133 (5.0)
Contract 624 572 517 486 474 (6.6)
Prepaid 78 69 63 62 68 (3.4)
Community services 2,321 1,796 902 689 534 (30.7)
Mobile employees7 3,919 4,305 4,727 4,849 5,451 8.6
Mobile customers per mobile employee7 3,276 4,451 4,867 5,119 5,068 11.5
Other African countries
Mobile customers (’000) 2,645 4,358 7,146 9,173 11,989 45.9
Mobile employees8 1,074 1,154 1,522 1,992 2,336 21.4
Mobile customers per mobile employee8 2,463 3,776 4,695 4,605 5,132 20.1
Gateway employees – – – – 389 n/a
(4)
100% of Vodacom data.
(5)
Based on Vodacom estimates.
(6)
With effect from April 1, 2008, ARPU calculations include revenues from national roamers and international visitors roaming on Vodacom’s network.
Historical ARPU numbers have been restated in line with this new methodology.
(7)
Includes Holding company and Mauritian employees and temporary employees.
(8)
Includes temporary employees.
Multi-Links
Subscribers – – 185,619 813,392 2,516,109 268.2
Employees – – – 782 1,124 n/a
Permanent – – – 680 775 n/a
Expatriate – – – 71 95 n/a
Temporary – – – 31 254 n/a
Africa Online
Subscribers9,10 – – n/a 17,252 18,441 n/a
Employees – – 317 379 313 (0.6)
(9)
From April 1, 2008, Africa Online changed the method of counting subscribers to include all the individual corporate sites as individual customers. The comparative information for 2008 has
been restated.
(10)
Excluding UUNet joint venture partner’s subscribers in Kenya. UU-Net had 300 and 320 subscribers as at March 31, 2008 and 2009, respectively.
Operational review
History and development of the Sale and unbundling of Vodacom ineligible foreign shareholders in
Company shareholding proportion to their entitlement to Vodacom
Telkom was incorporated on September Effective as of April 20, 2009, Telkom shares. JP Morgan Securities Limited acted
30, 1991 as a public limited liability concluded the sale and unbundling of its as the Sole Bookrunner for the placement.
company registered under the South interest in Vodacom, pursuant to which the For further information on this transaction
African Companies Act No. 61 of 1973, following inter-conditional transactions please refer to the detailed announcements
as amended. occurred: posted on the Investor Relations website at
www.telkom.co.za.
Registration number: 1991/005476/06 • Telkom sold a 15% stake in Vodacom
for R22.5 billion of cash less the Delisting on the New York Stock
The Company’s principal executive offices
attributable net debt of Vodacom as at Exchange
are located at:
September 30, 2008 and 15% of any Given the current global economic climate
Telkom Towers North dividends, and any secondary taxation and the business imperative for Telkom to
152 Proes Street on companies (STC) levied thereon, reduce its cost base, the Board has
Pretoria which amounted to R20,583 million. decided to delist from the New York Stock
0002 Exchange. Maintaining a listing in the
• Telkom distributed to its shareholders a
Gauteng Province United States is expensive and takes
sum equal to 50% of the after-tax
South Africa considerable management time. The
proceeds from the sale to Vodacom, net
methodology employed and discipline
Telephone number: +27 (0)12 311 3566 of any STC levied thereon (R19 per
gained from compliance with the
Website address: http://www.telkom.co.za share) by way of a special dividend.
Sarbanes-Oxley reporting requirements
Historical background • Vodacom converted to a public will be retained, where appropriate, to
Prior to 1991, the former Department of company and was listed on the main ensure strict corporate governance
Posts and Telecommunications of South board of the JSE Limited on May 18, compliance and transparent financial
Africa exclusively provided telecommuni- 2009; and reporting.
cations and postal services in South Africa.
• Telkom distributed its remaining 35% Telkom is comfortable that the JSE provides
In 1991, the government of South Africa
stake in Vodacom to eligible Telkom sufficient access to capital from both South
transferred the entire telecommunications
shareholders in proportion to their African and global investors. Telkom
enterprise of the Department of Posts and
shareholdings in Telkom, by way of an intends to maintain a level 1 American
Telecommunications of South Africa to a
unbundling in terms of Section 90 of the Depositary Receipt programme to facilitate
new entity, Telkom, as part of a
Companies Act 61 of 1973, as over-the-counter trading in the United States
commercialisation process intended to Group
amended, and Section 46 of the of America. overview
liberalise certain sectors of South Africa’s
Income Tax Act 58 of 1962, as
economy. Telkom remained a wholly state- Senior management
amended.
owned enterprise until May 14, 1997, On November 14, 2008, the Board Management
when the government of South Africa sold On June 2, 2009, Telkom completed a announced that our business would be split review
a 30% equity interest in Telkom to Thintana placement of 28,993,233 shares of into three operational units – Telkom SA,
Communications LLC, a strategic equity Vodacom, on behalf of ineligible foreign Telkom International and Telkom Data
Sustainability
investor beneficially owned by SBC shareholders, with institutional investors Centre Operations, effective from April 1, review
Communications Inc. and Telekom Malaysia through an accelerated bookbuild offering, 2009. On April 15, 2009 Thami
S.D.N. Berhard. On March 7, 2003, we pursuant to Regulation S under the US Msimango was appointed Managing
Performance
completed our initial public offering and Securities Act of 1933. The Vodacom Director of the Telkom International business review
listing on the JSE and NYSE, pursuant to shares were placed at a price of R53.00 unit. On May 1, 2009 Nombulelo Moholi
which the government of South Africa sold per share, raising gross proceeds of was appointed Managing Director of
a total of 154,199,467 ordinary shares, R1.54 billion for such ineligible foreign Telkom SA and on July 30, 2009 Financial
statements
including 14,941,513 ordinary shares shareholders. The proceeds from the Pierre Marais was appointed as acting
through the exercise of an over-allotment offering, net of applicable fees, expenses, Managing Director of Telkom Data Centre
option. taxes and charges, were distributed to the Operations. Company
Financial
Information
Operational review (continued)
Peter Nelson was appointed Chief Business summary • Interconnection services, including
Financial Officer on December 8, 2008. We are one of the largest companies terminating and transiting traffic from
registered in South Africa and one of the South African mobile operators and
On July 7, 2009 Telkom announced the
largest communications service providers in international operators, as well as
appointment of Jeffrey Hedberg as Chief
Africa based on operating revenue and transiting traffic from mobile to
Executive Officer of Multi-Links.
assets. As of March 31, 2009, we had international destinations, and
Segmental reporting and discontinued total assets of R85.8 billion; operating
• Data and internet services, including
operations revenue from continuing operations of
domestic and international data
At the beginning of 2009, Multi-Links was R35.9 billion; approximately 4.5 million
telephone access lines with 99.9% of these transmission services, such as point-to-
added as a separate financial reporting
connected to digital exchanges. point leased lines, ADSL services,
segment. Our four reporting segments are
W-CDMA packet based services,
now fixed-line, Multi-Links, mobile and We offer our customers fixed-line voice managed data networking services, as
other. The other segment includes Trudon, services, fixed-line and wireless data well as internet access and related
formerly TDS Directory Operations; Africa services and mobile communications information technology services.
Online; Swiftnet and Telkom Media. services. Other services include the Trudon
Discontinued operations include Vodacom, Group, our directory services, Multi-Links Products and services
Swiftnet and Telkom Media. and MWEB Africa subsidiaries. Subscriptions and connections
Telkom provides post-paid, prepaid and
Acquisitions and investments Overview
private payphone customers with digital
During the year under review we purchased Our fixed-line segment is our largest
and analogue fixed-line access services
an additional 25% of Multi-Links in Nigeria, business segment and includes our fixed-
including PSTN lines, ISDN lines, and
giving us 100% control of the company. In line voice, data and internet businesses.
wireless access between a customer’s
addition, after year end we acquired Telkom’s fixed-line services comprise:
premises and our fixed-line network. Each
MWEB Africa and 75% of MWEB • Fixed-line subscription and connection analogue PSTN line includes one access
Namibia from Naspers and we sold our services to postpaid, prepaid and channel, each basic rate ISDN line
75% shareholding in Telkom Media to private payphone customers using PSTN includes two access channels and each
Shenzhen Media South Africa. lines including ISDN lines, and the sale primary rate ISDN line includes 30 access
of subscription based value-added voice channels. Each ISDN line transmits signals
Strategic agreement with AT&T
services and customer premises at speeds of 64 Kbps per channel.
On April 16, 2009 we entered into a
equipment (CPE) rental and sales. Subscriptions to ADSL are included in our
strategic memorandum of understanding
data services revenue.
with global communications leader AT&T to • Fixed-line traffic services to postpaid,
enable the Company to extend its reach prepaid and payphone customers We were the first fixed-line operator
into sub-Saharan Africa to service corporate including local, long distance, fixed-to- globally to provide a prepaid service on a
customers and boost our strategy to grow a mobile, international outgoing and fixed-line network. Our prepaid service
strong local footprint in Africa. international Voice over Internet Protocol offers customers an alternative to the
(VoIP) traffic services. conventional post-paid fixed-line telephone
Year ended March 31,

2008/2007 2009/2008
(in thousands, except percentages) 2007 2008 2009 % change % change
Post-paid PSTN(1) 2,971 2,893 2,769 (2.6) (4.3)

Business 1,426 1,429 1,396 0.2 (2.3)
Residential 1,545 1,464 1,373 (5.2) (6.2)
Prepaid PSTN 795 743 766 (6.5) 3.1
ISDN channels 718 754 781 5.0 3.6
Payphones(2) 158 142 135 (10.1) (4.9)
Total fixed access lines(3) 4,642 4,532 4,451 (2.4) (1.8)
(1)
Excluding ISDN channels. PSTN lines are provided using copper cable, DECT and fibre.
(2)
Includes public and private payphones.
(3)
Total fixed access lines are comprised of PSTN lines, including ISDN channels, prepaid lines, ADSL lines and public and private payphones, but excluding
internal lines in service. Each analogue PSTN line includes one access channel, each basic rate ISDN line includes two access channels and each primary
rate ISDN line includes 30 access channels.

2008/2007 2009/2008
(in thousands, except percentages) 2007 2008 2009 % change % change
Opening balance 4,708 4,642 4,532 (1.4) (2.4)

Net line growth (66) (110) (81) (66.7) (26.4)
Connections 572 497 482 (13.1) (3.0)
Disconnections (638) (607) (563) (4.9) (7.2)
Closing balance 4,642 4,532 4,451 (2.4) (1.8)
Chum (%) 13.6 13.3 12.5 (2.2) (6.0)
service. All costs including installation, and combination payphones, and the time up to one hour, a discounted per
telephone equipment, line rental and call remainder card-operated payphones. record rate for local and long distance
charges are paid in advance, eliminating calls subject to a minimum charge, as well
The table opposite presents information
the need for monthly telephone bills. We as 30 free local minutes during standard
regarding our post-paid and prepaid lines
target our prepaid service mainly at first- time introduced since August 2007. In
as well as payphones as at the dates
time residential customers who do not have addition, with effect from August 2008,
indicated, excluding our internal lines.
sufficient credit history, and are located in this package includes 60 free local internet
areas where we can provide access to our The table above shows information related minutes during off-peak time.
network without significant additional to the number of our fixed access lines in
Telkom Closer 2
investment. Customers who have previously service, net line growth and churn for the
Includes line rental, CallAnswer, unlimited
had their telephone service disconnected periods. Churn is calculated by dividing
free calls during off-peak time up to one
the number of disconnections by the
due to non-payment are also encouraged hour, a discounted per record rate for local
average number of fixed access lines in
to migrate to our prepaid service option in and long distance calls subject to a
service during the year.
order to reduce future non-payments while minimum charge, as well as 30 free local
satisfying demand for our services. Connections include new line orders resulting minutes during standard time introduced in
primarily from changes in service and, to a August 2007. In addition, with effect from
We also offer a broad range of value-
lesser extent, new line roll-out. Disconnections August 2008, this package includes
added voice services on a subscription or
include both customer-initiated disconnections 60 free local internet minutes during off-
usage basis including call forwarding, call
and Telkom-initiated disconnections. Included peak time.
waiting, conference calling, voicemail, toll-
in disconnections and churn are those
free calling, ShareCall which permits Telkom Closer 3
customers who have terminated their service Group
callers and recipients to share call costs, overview
with Telkom and subsequently subscribed to a Includes line rental, CallAnswer, 1,300
speed dialling, enhanced fax services and inclusive free peak-time minutes, unlimited
new service with Telkom as a result of
calling card services for payphones. These free calls during off-peak time up to one
relocation or change of subscription to a Management
services complement our basic voice hour, a discounted per second rate for review
different type of service.
services and provide us with additional local and long distance calls subject to a
revenue while satisfying customer demand, Value-enhancing bundles minimum charge, as well as reduced rates
enhancing our brand and increasing During the year under review, Telkom Sustainability
to selected international destinations and review
customer loyalty. Value-added voice continued to focus on customer retention
pure per second billing for fixed-to-mobile
services such as our CallAnswer voicemail and offering value for money by
calls since August 2007.
service are also bundled with value-added continuously enhancing packages such as Performance
PC bundles and Telkom Closer, including Telkom Closer 4 review
calling plans such as Telkom Closer, to
the following: All the benefits of Telkom Closer 3 bundled
further enhance the value of these services
with Fast DSL up to 384 Kbps.
to our customers. From August 1, 2009, Closer customers Financial
will have the option to choose between Telkom Closer 5 statements
We provide payphone services throughout
CallAnswer and Identicall. Currently the All the benefits of Telkom Closer 3 bundled
South Africa. As at March 31, 2009,
package includes only CallAnswer. with Fastest DSL up to 4096 Kbps.
Telkom operated approximately 132,208 Company
Financial
public payphones and approximately Telkom Closer 1 Telkom Closer plans 1 to 3 have an option Information
3,146 private payphones, of which Includes line rental, CallAnswer, a minimum to purchase 150 or 75 local internet hours
approximately 39% were coin-operated flat-rate charge for calls during off-peak during call more time.
The Telkom Closer packages have international norms and improve our effects of theft, as well as grow market
performed well, increasing by 27.6% to competitive position; and share in anticipation of Telkom moving into
575,812 plans. Supreme call packages, the mobile market. Connections to our
• Reduce and rebalance national and
targeted at the business segment, have wireless W-CDMA service are included in
international data prices to improve our
increased by 14.4% to 14,778 packages our numbers of subscribers, but not lines.
competitive position.
and PC bundles have increased 48.3% to
We also offer telecommunications equip-
11,336. Telkom continues to be successful The decrease in the number of subscriber
ment rentals and sales such as telephones
in tying in large corporate customers to lines was largely in the residential post-
and private branch exchange (PABX)
term and volume discount plans. Annuity paid PSTN line and, to a lesser extent,
systems, as well as related post-sales
revenue streams, which exclude line business post-paid PSTN lines, partially
maintenance and service for residential
installations, reconnection fees and offset by an increase in ISDN channels.
and business customers in South Africa.
CPE sales, have increased by 6.8% to The decrease in the number of residential
The market in South Africa for such
R7.4 billion. Telkom will seek to continue post-paid PSTN lines was mainly due to the
equipment and systems, commonly known
converting revenue streams to annuity introduction of competition in the fixed-line
as customer premises equipment (CPE), is
revenues. This will be done largely through arena from Neotel, including due to
characterised by high competition and low
bundling call minutes and ADSL services customers relocating and changing
profit margins. We believe, however, that
with access line rental in attractive providers, customer migration to mobile
the supply and servicing of CPE is an
subscription based value propositions. This and higher bandwidth products and, to a
essential part of providing a full service
is an important strategy for delivering lesser extent, cable theft incidents. The
to our customers and in the process
greater value to our customers. Our current increase in prepaid services in the 2009
stimulating usage on our network.
line penetration of bundled products is financial year was due primarily to our
41.7% and we are targeting a penetration lower priced “Waya-Waya” offering, Traffic minutes
of 56% by 2013/14. which accounted for approximately 60.2% We offer local, long distance, fixed-to-
of prepaid services as of March 31, mobile, international outgoing and
Pricing is a key element of the value
2009. The increase in ISDN channels and international voice over internet protocol
proposition and our pricing strategy is
ADSL services was mainly driven by services to business, residential and
aimed at improving our competitiveness in
increased demand for higher bandwidth payphone customers throughout South
areas where competition is expected to
and functionality. This is evident in the 6% Africa at tariffs that vary depending on the
intensify and where arbitrage opportunities
growth in ISDN Primary rates and the 33% destination, length, day and time of call.
exist. Telkom’s strategy to counter pricing
growth in ADSL services. The upgrading of
pressures is as follows: The following table presents information
DSL 1024 to DSL 4096 increased the
regarding our fixed-line traffic minutes,
• Actively offer value based calling plans attractiveness of this DSL band, with
excluding interconnection traffic, for the
and bundles to extend value and customers migrating from DSL 512 to the
periods indicated. We calculate fixed-line
savings to our customers. high speed offering despite the added
traffic by dividing fixed-line traffic revenues
cost. Telkom’s aggressive marketing
• Reduce international and long distance for the particular category by the weighted
campaigns for Do Broadband products,
rates to reduce arbitrage opportunities; average tariff for that category during the
also contributed to the ADSL growth. In the
relevant period.
• Rebalance standard/off-peak local 2009 fiscal year, Telkom introduced a
rates, to better align these with wireless W-CDMA service to combat the

2008/2007 2009/2008
(in millions of minutes, except percentages) 2007 2008 2009 % change % change
Local(1) 14,764 11,317 8,822 (23.3) (22.0)

Long distance(1) 4,224 3,870 3,631 (8.4) (6.2)
Fixed-to-mobile 4,103 4,169 4,126 1.6 (1.0)
International outgoing 558 635 622 13.8 (2.0)
International voice over internet protocol 38 43 34 13.2 (20.9)
Subscription based calling plans 1,896 2,997 3,546 58.1 18.3
Total 25,583 23,031 20,781 (10.0) (9.8)

(1)
Local and long distance traffic includes dial-up Internet traffic.

2008/2007 2009/2008
(in millions of minutes, except percentages) 2007 2008 2009 % change % change
Domestic mobile interconnection traffic 2,419 2,502 2,484 3.4 (0.7)

Domestic fixed interconnection traffic – 113 415 n/a 267.3
International interconnection traffic 1,321 1,280 1,189 (3.1) (7.1)
Total 3,740 3,895 4,088 4.1 5.0
Traffic was adversely affected in both the network. lines up to and including lines of 2 Mbps
2009 and 2008 financial years by the of capacity and the rental and installation
Domestic fixed interconnection traffic
increasing substitution of calls placed using of business exchange lines. Approximately
includes traffic from Neotel, USALs and
mobile services rather than our fixed-line 57% of our operating revenue for the year
VANS. The increase in domestic fixed
service and dial-up internet traffic being ended March 31,2008 was included in
interconnection traffic in the year under
substituted by our ADSL service, as well as this basket, compared to approximately
review was mainly due to increased
the decrease in the number of residential 54% in the year ended March 31, 2009.
competition.
post-paid PSTN lines and increased Our tariffs for these services are filed with
competition in our payphone business. In International interconnection traffic ICASA for approval. The price cap
addition, the 2009 financial year traffic decreased in the 2009 and 2008 operates by restricting the annual
was adversely affected by customer financial years due to a decrease in percentage increase in revenues from all
migration to broadband services offered volumes as a result of loss of volumes to services included in the basket that are
by mobile operators. Neotel, Sentech, the USALs and illegal attributable solely to changes in annual
operators terminating traffic in the country. inflation, measured by changes in the
The table above sets forth information The decrease was partially offset by consumer price index, less a specified
regarding interconnection traffic terminating increased international hubbing traffic in percentage.
on or transiting through our network for the year under review.
the periods indicated. We calculate Historically, the annual permitted
Tariff rebalancing percentage increase in revenues from both
interconnection traffic, other than
We made significant progress in the whole basket and the residential sub-
international outgoing mobile traffic and
rebalancing our fixed-line tariffs. Our tariff basket was 1.5% below inflation. Effective
international interconnection traffic, by
rebalancing programme was historically from August 1, 2005 through July 31,
dividing interconnection revenue for the
aimed at better aligning our fixed-line traffic 2008, the annual permitted increase in Group
particular category by the weighted
overview
charges with underlying costs and revenues from both the whole basket and
average tariff for such category during the
international norms. We expect that our the residential sub-basket was lowered to
relevant period. Fixed-line international
tariff rebalancing in future will focus more 3.5% below inflation, and ADSL products
outgoing mobile traffic and international Management
on the relationship between the actual and services have been added to the review
interconnection traffic are based on the
costs and tariffs of subscriptions, basket. In addition, the price of no
traffic registered through the respective
connections and traffic in order to more individual service within the residential sub-
exchanges and reflected in international Sustainability
accurately reflect underlying costs, and in basket can be increased by more than 5% review
interconnection invoices.
response to increased competition. above inflation except where specific
The increase in domestic mobile approval has been received from ICASA,
Regulations under the Telecommunications
interconnection traffic in the years ended and pursuant to the Electronic Communi- Performance
Act, which remain in effect, impose a price review
March 31, 2009 and 2008 was primarily cations Act, revenue generated from
cap on a basket of Telkom’s specified
due to an overall increase in mobile calls services where we have significant market
services including installations, prepaid
as a result of growth in the mobile market, power may not be used to subsidise Financial
and post-paid line rental, local, long statements
partially offset by increased mobile-to- competitive services. Early in 2008,
distance and international calls, fixed-to-
mobile calls bypassing our network. The ICASA commissioned a review of the
mobile calls, public payphone calls, ISDN
decrease in domestic mobile inter- existing price control regulations Company
services, our Diginet product and our Financial
connection traffic in the 2009 financial applicable to Telkom; however, ICASA has Information
Megaline product. A similar cap applies to
year was primarily due to increased not initiated the statutory public process of
a sub-basket of those services provided to
mobile-to-mobile calls bypassing our reviewing the existing regulations. Telkom is
residential customers, including leased
awaiting communications from ICASA in links at speeds of 45 Mbps, 155 Mbps Managed data networking services
respect of proposed timelines for the and 622 Mbps, and anticipate that we Our managed data networking services
review. will soon be providing links at speeds of combine our data transmission services
2.5 Gbps. Formalised service level discussed above with active network
ICASA approved a 2.1% reduction in the
agreements as well as term and volume management provided through our state-of-
overall tariffs for services in the basket
based discount structures, as a counter to the-art national network operations centre.
effective August 1, 2006, a 1.2%
the competitive challenges that are We offer a wide range of integrated and
reduction in the overall tariffs for services in
occurring in this area of the business, have customised networking management
the basket effective August 1, 2007 and a
been implemented. services, including design, planning,
2.4% increase on its regulated basket of
products and services effective August 1, Recognising the increasing threat of installation, management and maintenance
2008. On June 22, 2009, Telkom filed competition in the provision of leased lines of corporate-wide data, voice and video
with ICASA proposed average price to the mobile operators, Telkom introduced communications networks, as well as other
increases on its regulated basket of further discounting structures in the 2007 value-added services such as capacity,
products and services of 1.7% as a result and 2008 financial years to enhance the configuration and software version
of inflation increases, effective August 1, attractiveness of Telkom’s product offerings management on customers’ networks. To
2009. The price control formula would to this rapidly growing market. Fixed-link support our service commitment, we offer
have permitted Telkom to apply for a leasing agreements were also entered into guaranteed service level agreements on a
19.7% price increase due to the high with some of the smaller operators, wide range of our products, which include
consumer price index in South Africa and including VANS and USALs, as well as with
guaranteed availability, or uptime, of the
Neotel. Vodacom and MTN have both
excess carryover of lower price increases network through the use of our national
indicated that they intend to self-provide
for prior periods. Our tariffs are subject to network operations centre.
some of the leased lines, which they require
approval by the regulatory authorities. All
for the build-out of their networks, as an Our managed data networking services
tariffs include value-added tax (VAT) at a
alternative to leasing from Telkom. We are include our customer network care service
rate of 14%.
currently negotiating improved leased line which facilitates the network management
Data prices with the mobile operators in order to of all our data transmission services using
Leased lines retain revenue from leased lines. the leased lines or packet based services
A large number of leased lines are discussed above, and our Spacestream
The table below indicates the bandwidth
provided to the mobile operators at and IVSat products, which are satellite
capacity of our Diginet, Diginet Plus, ATM
negotiated wholesale rates for the build-out based products. Spacestream is a high
Express and broadcasting data
of their networks. With the growth in traffic quality, flexible satellite networking service
transmission services:
carried on the mobile networks, a need that supports data, voice, fax, video and
was identified for the deployment within Leased line Bandwidth
multimedia applications, both domestically
these networks of transmission links with Diginet 64 Kbps
and in the rest of Africa.
Diginet Plus 128 Kbps to 2 Mbps
speeds higher than the 2 Mbps provided
ATM Express 2 Mbps to 155 Mbps Managed data networking services are
by existing agreements. We have
broadband fixed-link leasing agreements Broadcasting billed on a monthly basis and vary by
with Vodacom, MTN and Cell C. These Analogue audio 7.5 or 15 KHz customer depending on the particular
agreements have been enhanced over Analogue video 70 MHz services provided and the number of
time, and we currently provide broadband Digital 2 Mbps to 155 Mbps network sites under management.
As of March 31,
2008/2007 2009/2008
2007 2008 2009 % change % change
Terrestrial based 12,905 17,237 19,042 33.6 10.5

Satellite based 8,974 7,875(1) 10,937(2) (12.2) 38.9
Total managed network sites 21,879 25,112 29,979 14.8 19.4

(1)
Satellite based managed network sites declined during the 2008 financial year as a result of Uthingo, the South African lottery operator, losing its licence
to operate.
(2)
The increase in the 2009 financial year was mainly due to new global and corporate customers and expansion of the networks of existing customers.
Telkom’s focus on bringing new innovative The following table indicates our product offerings as at March 31, 2009:
products to the market that cater for
increased data usage and converged DSL DSL DSL
services has resulted in our new VPN 384 512 4096
products gaining increased traction in the
market. We have increased VPN sites by Downstream speed Up to 384 Kbps 512 Kbps 4096 Kbps
20.7% to 14,659. Our VPN Lite products, Upstream speed Up to 128 Kbps 256 Kbps 512 Kbps
which are delivered over the ADSL
Internet access services and other related internet service targeted at African operators
network, include advanced self-help and
information technology services and ISPs to enhance additional growth of
online charging solutions. This product was
Telkom is one of the leading internet access internet access services north of the equator.
launched during November 2007. Telkom
providers in South Africa in the retail and Currently, the customers in this region buy
is in the process of building on a culture of
wholesale internet access provision markets. their internet services from Europe. By
research and innovation and fast time-to-
We also package our TelkomInternet establishing a central SAIX hub in London
market, in order to cater for customers who
product with personal computers, ADSL and we believe we can capture this market and
are increasingly looking for innovative,
ISDN services, as well as our satellite access increase our revenue.
easy to use products.
products, SpaceStream Express and
The table below presents information
Broadband and converged services continue SpaceStream Office.
regarding our wholesale and retail internet
to perform well with ADSL subscribers up
Our South African Internet exchange (SAIX) services and customers as at the dates
33% to 548,015. Do Broadband
is South Africa’s largest internet access indicated.
subscribers increased 58.1% to 188,540.
provider, offering dedicated and dial-up,
Internet all access subscribers increased Voice over Internet Protocol network
aDSL and satellite internet connectivity to
18.2% to 423,196. Our current broadband internet service providers and value-added Softswitch capability has been deployed
line penetration rate is 15% and our targeted network providers. SAIX has offered fixed- as an overlay network to enable the
penetration rate is 25 by 2013/14. line network internet access through dial-up communication of VoIP services. Our
service since 1995. SAIX derives revenue current VoIP network terminates calls for
We have increased DSLAMs throughout
for its access services primarily from numerous international voice carriers into
the country by 50.4% to 4,000 sites. We
subscription fees paid by internet service our fixed-line network as well as local
have installed 91% of ADSL lines within
providers and value-added network VANS providers. Call centres from around
21 working days where no network build
providers for access services. In order to the world that have relocated to South
is required, compared to 79% in the year
grow the portfolio, an opportunity has been Africa due to favourable economic
ended March 31, 2008 and 74% within
identified to develop a service targeted conditions and lower resource costs are
21 working days where network build is
mainly at night-time users of the SAIX ADSL also hosted on our VoIP network. Telkom
required compared to 66% in the year Group
service. These customers can be regarded has points of presence for connectivity to overview
ended March 31, 2008. The ADSL Self
as heavy users as they use the service mainly the VoIP network in Amsterdam, London,
Install option is expected to continue to
for games, music and movie downloading. New York, Ashburn (Washington DC),
improve the installation times. As of March The SAIX customer base has expanded Hong Kong, Zambia, Zanzibar, Tanzania, Management
31, 2009, 57% of all ADSL installations beyond service providers and value-added review
Senegal and Madagascar. The network
were being done through the Self Install network providers, and now includes has 69 media gateways and can terminate
option. Vodacom and other operators in Africa. some 32,700 voice circuits. The media
These include incumbents in Mozambique, Sustainability
ADSL allows provisioning of high speed gateways compress the traditional voice review
Namibia, Angola, Zimbabwe and Lesotho.
connections over existing copper wires channels of 64 Kbps to 8 Kbps channels,
using digital compression. We have Broadband and converged services thus enabling us to reduce the cost of
different ADSL services available, aimed at We have identified an opportunity to international calls, while maintaining the Performance
review
the distinct needs of our customers. develop a SAIX northern hemisphere perceived voice quality of a 64 Kbps call.
2008/2007 2009/2008 Financial
statements
2007 2008 2009 % change % change
Wholesale
Company
Internet leased lines-equivalent 64 kbps 19,247 22,541 24,204 17.1 7.4 Financial
Information
Dial-up ports 11,462 7,010 4,541 (38.8) (35.2)
Retail
Internet all access subscribers 302,593 358,066 423,196 18.3 18.2
WiFi its head office in Kenya and operating in Trudon’s primary competitors for print
In February 2005 Telkom launched a hot eight other African countries. materials include Caxton, Easy Info and
spot service that provides wireless data Brabys. Trudon’s primary internet
The Telkom Group added Multi-Links as a
access through 802.11b/g WiFi competitors include Yahoo, Google,
new segment to its financial reporting for the
technology. Any user with a wireless-enabled Ananzi, as well as vertical search
2009 financial year. As a result, the Telkom
notebook computer or personal digital capabilities such as Auto Trader and
Group’s four reporting segments for the
assistant can connect to the service while in Supersport. Trudon’s estimated market
2009 financial year are fixed-line, Multi-
the coverage area. WiFi is mainly targeted share as of March 31, 2009 was
Links, mobile and other. The other segment
at restaurants, hotel groups, major shopping approximately 11% in respect of print
includes Telkom’s Trudon, formerly known as
malls and some sites on national routes. At media and approximately 22% in respect
TDS Directory Operations, and Africa
March 31, 2009 Telkom had 335 hotspots, of internet directory services.
Online subsidiaries. The information in this
up from 237 at March 31, 2008.
annual report has been updated to reflect Trudon had 531 employees as of March
WiMAX the above changes to Telkom’s reporting 31, 2009.
Telkom has launched services based on fixed segments. Multi-Links
(IEEE 802. 16-2004) WiMAX technology. With effect from May 1, 2007, Telkom
Trudon
This technology is a standards based acquired 75% of Multi-Links Telecom-
Telkom owns 64.9% of Trudon, formerly
broadband wireless access technology that munications Limited, or Multi-Links, through
known as TDS Directory Operations, the
provides throughput connectivity in a point-to- Telkom International, a wholly owned South
largest directory publisher in South Africa
multipoint configuration. The technology is African subsidiary, in Nigeria, for
providing white and yellow pages
designed to enable Telkom to complement its US$280 million, or R1,985 million. The
directory services and electronic white
ADSL service offering and voice services to remaining 25% of Multi-Links was owned
pages. In the year ended March 31,
customers in areas affected by fixed-line by Kenston Investment Limited, an
2009, Trudon published approximately
copper cable problems. Currently there are investment company based in the Isle of
5.437 million white, 1.995 million yellow
57 WiMAX base stations across all major Man in the United Kingdom. With effect
and 7.433 million combined directories.
cities and towns with 2,615 customers, from January 21, 2009, Telkom acquired
Trudon also provides electronic yellow
including voice and internet customers as of the remaining 25% interest in Multi-Links for
March 31, 2009. pages and value-added content through full
US$130 million, thereby increasing its
colour advertisements. Trudon has
W-CDMA ownership of Multi-Links to 100%. The
improved the accessibility and distribution
We have started rolling out a W-CDMA purchase price was subject to a contractual
of directories through door-to-door delivery
Wireless Local Loop (WLL) network in the put option in favour of the minority
and electronic media. Trudon also provides
2100MHz band. Initially planned to deliver shareholder.
national telephone inquiries and directory
service in areas plagued by theft, breakages services. The remaining 35.1% of Trudon is Multi-Links is a private telecommunications
and incidents, the network is now expected owned by Truvo Services South Africa (Pty) operator with a Unified Access Licence
to evolve into a full mobile network to Ltd, formerly known as Maister Directories. allowing fixed, mobile, data, long distance
compete with other mobile operators. As of On January 23, 2007, Trudon acquired a and international telecommunications
March 31, 2009, we had 141 base 100% shareholding in a shell company services to corporate clients, wholesale
station sites in major metropolitan areas. and subsequently renamed it TDS Directory and mass markets in Nigeria.
Geographic expansion and other Operations (Namibia) (Pty) Ltd, which Multi-Links’ Unified Access Licence was
operations provides directory services in Namibia. granted on November 1, 2006 and has a
Telkom aims to establish itself as a regional On October 31, 2008, Trudon sold a term of 10 years, with seven years
voice and data player through providing a 25% interest in TDS Directory Operations remaining. There are currently
range of hosting services, managed (Namibia) (Pty) Ltd to Ripanga Investment 13 operators licensed with Unified Access
solutions, mobile voice and wireless Holdings (Pty) Ltd, a black economic Services Licences in Nigeria, making the
broadband services. We are also entering empowerment partner in Namibia, for two Nigerian telecommunications market
the field of management consulting to million Namibian dollars. extremely competitive as operators may use
operators. In addition, we are positioning any technology to deliver voice, data and
Trudon’s capital expenditure was
Telkom as a wholesale facilities and video services to their customers.
R12 million in the 2009 financial year as
infrastructure enabler for regional incumbents.
the company sought to continue to expand We were disappointed with the
Our expansion to date has been through access and distribution into new markets. performance of Multi-Links. The poor
Multi-Links, a private telecommunications Trudon has invested in a new online performance is solely attributable to our
operator operating in Nigeria and Africa platform in order to combat declining under-estimation of the competitiveness of
Online, an internet services provider with revenue from printed products. the Nigerian market and the aggressive
response of the CDMA operators to our internet protocol/next generation network • Extended coverage to 22 states and
subsidisation of handsets. We also failed services to the government, corporate and Abuja.
to adequately manage our distribution SMME customers whilst extending its metro-
Turning around Multi-Links’s performance is
channels and opened ourselves up to ethernet services. The reach of its fibre
vital to Telkom given the extent of the
exploitation by the dealers. We have learnt network also allows Multi-Links to concentrate
Group’s investment and the enormous
our lessons the hard way. Turning around on carrier class corporate and wholesale
opportunity the Nigerian market provides.
Multi-Links is our number one priority. product and services offerings.
US$100 million has been budgeted for the
Multi-Links reported a 124.9% increase in Multi-Links has contracted the service of
revenue to R1.9 billion with subscribers 2009/10 financial year for the completion
Blue Label Telecoms Limited to assist with
growing 209.3% to 2,516,109 in the the development and management of of an additional 1,645 km build and
year ended March 31, 2009. Voice and our distribution channels, dealerships, 584 km swop of optic fibre cable for the
data revenue contributed 75.0% to total promotional campaigns and inventory DWDM/SDH network. It is anticipated that
revenue, handset sales 11.9%, inter- management. the network will connect 80 DWDM/SDH
connect revenue 12.6% and SMS 0.5%. sites, covering all major cities in Nigeria,
Operating expenses have been driven by
Multi-Links’s slow start in developing an providing us with additional bandwidth
network growth, rehabilitation of
efficient and well controlled distribution connectivity for voice and data customers.
distribution channels, marketing costs and
channel, together with a departure from its In addition, 227 cell towers are to be
customer acquisition and maintenance.
initial strategy of focusing on high ARPU erected and another 300 commissioned on
Multi-Links is focusing on containing costs
subscribers, the delayed launch of EVDO third party leased tower infrastructure during
through reducing handset subsidies
and destructive competition in the CDMA the year. Seven new customer service
drastically, continuing to migrate to an all IP
market caused ARPU to decline from centres are planned to facilitate and support
network in order to reap the benefits of its
US$32 at March 31, 2008 to US$9 at
cost effective network management the network growth.
March 31, 2009. Telkom is currently
capabilities and securing cost effective
addressing these challenges as indicated We expect Multi-links to be EBITDA
international connectivity through the SAT-3
below. positive in 2010/11 and to be cash flow
and other submarine cables.
positive by 2011/12.
Operating expenses increased 157.1% to
Capital expenditure increased 112.7% to
R2.4 billion primarily as a result of upfront Africa Online
R2.8 billion in the year ended March 31,
handset subsidies. The average cost per unit On February 23, 2007, Telkom acquired
2009. In the 2009 financial year, Multi-
equalled approximately R400 and subsidies 100% of the issued share capital of Africa
Links’s build and expansion programme
totalled R281 million. Payment to other Online from African Lakes Corporation for
operators contributed 26.9%, selling general achieved the following:
a total cost of R150 million. Africa Online
and administrative expenses 46.0%, • Deployed additional packet based is an internet service provider active in
Group
employee expenses 5.2%, operating leases mobile switching centres increasing the Cote d’Ivoire, Ghana, Kenya, Namibia, overview
8.0%, service fees 1.6% and depreciation available capacity from 1,000,000 to Swaziland, Tanzania, Uganda, Zambia
12.3%. 2,800,000 subscribers. and Zimbabwe. Africa Online’s strategy
focuses on brand development, creation Management
Multi-Links reported a negative EBITDA • Extended home location register review
margin of 11.9%, an EBITDA loss of and development of customer channels,
capacities from 800,000 to
R226 million for the year ended March 31, improvement of network systems, human
5,100,000 subscribers.
2009 and a net loss of R1.76 billion after resources development and an expansion
Sustainability
accounting for an impairment of the • Rolled out additional base transmission drive targeting other African countries. review
deferred tax asset of R301 million. Bad stations increasing its total capacity from Africa Online offers wireless and fixed
debts increased 208.2% to R7.9 million. 800,000 to 1,800,000 subscribers. technologies, hosting and domain
registration to both consumer and Performance
Multi-Links has begun focusing its attention on • Successfully launched its broadband review
corporate customers.
the SMME, corporate and wholesale service offering by rolling out an EVDO
markets and mainly on high ARPU users. Its 3G network to a capacity of 100,000 In the 2009 financial year, Africa Online
revenue retention and growth strategy will subscribers. had R194 million of revenue and Financial
statements
concentrate on increasing revenue of fixed R216 million of total assets. The major
• Added 1,300 kms of optic fibre resulting
wireless and mobile customers through brand contributors to revenue were corporate and
in a total to 3,711 kms.
awareness and promotion; expanding consumer wireless and broadband VSAT Company
• Increased international capacity by the services. Consumer wireless revenue Financial
broadband internet to offer high value Information
bundles and services. Through its extensive addition of 2 x 155Mb services on the growth was predominantly in East Africa,
fibre network it will provide high quality SAT-3 submarine cable system; and while corporate revenue growth was

Restated(1) 2008/2007 2009/2008
2007 2008 2009 % change % change
Dial-up ports n/a 12,051 11,437 3.9 (5.1)

Consumer wireless n/a 4,075 5,754 110.2 41.2
Unbundled local loop n/a 99 99 (1.0) –
ADSL n/a 325 308 8.3 (5.2)
VSAT n/a 96 210 269.2 118.8
Dedicated corporate n/a 606 633 4.8 4.5
Total(1) n/a 17,252 18,441 18.6 6.9
UUNet subscribers(2) n/a 300 320 – 6.7

(1) In the 2009 financial year, Africa Online changed the method of counting subscribers to include all the individual corporate sites as individual customers.
The comparative information for the 2008 financial year has been restated.
(2) Includes 100% of UUNet’s subscribers. UUNet is Africa Online’s joint venture partner that provides internet services in Kenya. We own a 40% interest
in UUNet and MTN owns the remaining 60% of UUNet.
mainly in Ghana and Uganda. The growth to increase customers on its own wireless
in Pan African business, Ghana and network infrastructure as opposed to dial-
Tanzania accounted for the increase in up and ADSL networks.
Broadband VSAT. In the 2008 financial
Africa Online’s distribution is conducted
year, Africa Online had R110 million of
through various channels, including direct
revenue, and R122 million of total assets.
sales and different types of resellers
In the 2008 financial year, dedicated
depending on the customer segment.
corporate links and consumer wireless
Customers are serviced through customer
were the highest revenue streams followed
closely by dial-up business. Dial-up relationship managers and a 24 hour call
packages are the most popular and centre. Africa Online’s primary competitors
accounted for approximately 62% of Africa include former telecommunication
Online’s total customers as of March 31, companies that have entered the internet
2009. Wireless customers are expected to service provider market, mobile providers
continue to grow with Africa Online’s and other private data companies.
continued investment in infrastructure.
Africa Online’s network had 29 points of
The reason for the decrease in the number presence, 46 mobile broadband transceiver
of dial-up and ADSL customers is that Africa stations, 31 fixed broadband wireless
Online has shifted its marketing approach access transceiver stations, eight network Shiletsi Makhofane was appointed as
operation and 17 support centres and eight acting chief executive officer in October
data centres across nine countries as of 2008.
March 31, 2009. Africa Online’s capital Africa Online’s footprint covers East Africa,
expenditure was US$7 million in the 2009 southern Africa and West Africa. The
financial year, US$5.7 million in the 2008 regulatory environments are fairly different
financial year and US$0.8 million in the in each of Africa Online’s different regions.
2007 financial year. The increase in Africa East Africa is liberalised and Africa Online
Online’s capital expenditure was primarily for provides services across the information,
the improvement of service quality and to communications and technology spectrum,
increase the range of information, including voice over internet protocol
communications and technology services services, in East Africa. Markets in southern
offered in the market. Africa are still regulated, limiting the
services Africa Online is able to provide to
Africa Online had 313 employees as of its customers. West Africa is a fairly
March 31, 2009. UUNet, Africa Online’s liberalised market and Africa Online is
40% joint venture partner had presently seeking to take advantage of this
70 employees as of March 31, 2009. opportunity.
MWEB Africa efficiencies and the opportunity to standards necessitate the provision of
On April 21, 2009, we acquired a 100% consolidate traffic onto Telkom’s network. services and particularly bandwidth that is
interest in MWEB Africa Limited, which only possible utilising the intelligence of an
Currently mobile customers are
owns approximately 88% of ASFAT NGN system.
experiencing the effects of highly
Communications Limited, and a 75%
congested networks. Telkom intends to use Our NGN build-out achievements are as
interest in MWEB Namibia (Pty) Ltd, for
the strengths of its fixed-line network to follows:
R498 million. MWEB Africa is a group of
differentiate its mobile service on quality
companies offering internet services and its • In the national layer of the transport
with a fully converged array of products
own VSAT access services in sub-Saharan network, bandwidth capability has
and services. Our Next Generation
Africa (excluding South Africa). MWEB increased by more than 500% in
Network and access to the latest
Africa is obliged to acquire the additional bandwidth and automatic self-healing
technologies will provide further value to
12% of AFSAT Communications Limited re-routing of bandwidth has been
our customers.
and we are currently in negotiations to introduced based on customer service
purchase such shares. Telkom has rolled out 141 W-CDMA sites levels.
in major metropolitan areas throughout
MWEB Africa’s VSAT service is mostly • Optical fibre deployment has been
South Africa. Our initial focus has been on
focused on the corporate and enterprise accelerated and Telkom now has
theft, breakages and incident-prone areas,
markets and is branded iWay. Its VSAT around 128,000 cable kilometres of
customers waiting for service and
services are using satellite teleport facilities optical fibre in the ground, enough to
greenfield areas where Telkom has no
in SA, the USA and Europe. The company circle the world three times.
copper infrastructure. In essence, the
had almost 20,175 customers at
W-CDMA technology allows Telkom to • Dense Wave Division Multiplexing
March 31, 2009.
deploy fixed-line lookalike services with (DWDM) systems have been introduced
The group is headquartered in Mauritius regional fixed numbering plans instead of between major metropolitan centres
with operations in Nigeria, Kenya, deploying copper, especially in high such as Gauteng and Durban. These
Tanzania, Uganda, Namibia and copper theft areas or areas where copper systems can carry 40 10GB signals
Zimbabwe and an agency arrangement in deployment is not feasible or too slow to over a single fibre pair.
Botswana. There are distributors in 26 sub- roll out. This roll-out will be extended to
• Metro Ethernet has been deployed in
Saharan African countries. rural areas and to replace expensive to
the major metros, including Cape Town,
maintain legacy equipment.
Other developments Durban, Johannesburg, Pretoria and
Mobile strategy Our move into offering a fully fledged Port Elizabeth.
Mobile Strategy – South Africa mobile service is dependent on the
• Integrated Multi-Service Access
The recent liberalisation in the licensing finalisation of market research and the
Multiplexer (IMAX) has been deployed
regime, advancements in convergence outcome of pilot and customer trials
to carry narrowband and broadband Group
technology and termination of the planned for the end of 2009. overview
services for Wireline legacy and
Vodafone shareholders’ agreement provide
We are however aware of the power of converged systems.
Telkom with the opportunity to enter the
the entrenched mobile companies. With
mobile market. We believe that an • A Network Interactive Voice Response Management
this in mind, Telkom will not commit to review
integrated fixed-mobile operator is well system has been introduced, giving
further capital expenditure other than that
positioned to react to, and take advantage Telkom and its corporate customers the
focused on reducing costs before the
of the future requirements of our customers. ability to use advanced speech services
Company has completed its market Sustainability
By developing an integrated fixed-mobile such as automated speech recognition review
research. Future build will be based on
offering Telkom will seek to leverage its and text-to-speech applications.
maximising our current infrastructure and
customer base, marketing, logistics and
subscriber numbers in order to reduce • The SAT-3/WASC/SAFE undersea
distribution channels to increase its share of Performance
operational and build costs and improve cable system, which connects South review
voice revenue. In addition, internet access
value add as far as possible. Africa to Europe and the Far East, has
demands are increasingly requiring
been upgraded to treble the amount of
mobility. An integrated bundled offering Key Next Generation Network, capacity
international bandwidth available. Financial
would offer superior speeds and quality and product developments statements
through the fixed-line, including the Telkom is in the fourth year of its Next
advantages of mobility when required by Generation Network (NGN) build out
Company
the customer. Mobility provides cost programme. Customer demand and global Financial
Information
Next Generation Network (NGN) in the longer term, in view of the longer term customer services will migrate
Telkom has strategic objectives that are expectation that bandwidth will grow to an NGN infrastructure where only a few
followed as part of network planning to exponentially. Softswitch nodes with multiple Softswitches
ensure that we drive the implementation of are required to fulfil the functionalities of the
The NGN network elements
the NGN. Telkom’s NGN is based on an Class 4 core and Class 5 edge Time
The Metro Ethernet Network
evolutionary approach where the NGN is Division Multiplex switches.
An extensive Metro Ethernet Network is
deployed in parallel with the legacy
being deployed for the provisioning of IP Network
network and migration to the NGN is
high-speed broadband services for Telkom’s IP Network is an extensive
phased in over time.
corporate customers and to serve as an network, providing points of presence
Key to Telkom’s NGN deployment are access network backhaul to provide cost country wide. 34 Edge nodes, each with
Softswitches that function in association effective transport of high bandwidth multiple routers, have been deployed. At
with Application Servers, next generation services, typically as a backhaul for access these nodes, edge routers act as
transport networks, and IP and Metro nodes. Metro Ethernet also serves as an distribution and aggregation points to
Ethernet networks. In order to leverage on access network to services provisioned on IPNet via the Network Access Servers (dial-
Telkom’s ubiquitous network deployment, the IP Network. up customers), Access Routers (leased
the transport network will be transformed to line Internet customers), customer edges
The Transport Network
support the expected exponential growth in (Customer Edges for VPN termination) and
To achieve the growth and manageability
bandwidth. The IP Network has been also terminate ADSL sessions – 145 Edge
in the transport network, Telkom is
positioned to differentiate Telkom from routers are deployed at the 34 edge
deploying Next Generation Synchronous
its competitors and to leverage on nodes.
Digital Hierarchy (NG-SDH) and Dense
the bandwidth capacity increase of the The IPNet routing platforms support
Wavelength Division Multiplexing
transport network. business customer requirements (VPN) as
(DWDM). In order to provide automated
To achieve success with the NGN, two provisioning, routing and restoration well as providing Internet capacity for
objectives are actively pursued; the capability, Automatic Switching Transport leased line and broadband internet
consolidation of service offerings and the Network (ASTN) technology is being services.
development and marketing of new and deployed on Telkom’s long haul network. Separate and dedicated edge routers for
innovative services which are enabled by The ASTN network will also improve business traffic and internet traffic provide
the NGN technology. resilience, reliability and reduce cost of the physical separation of corporate customer
transport network. Virtual Private Network (VPN) traffic from
NGN is cheaper to maintain and
operate Softswitches and application servers that of Internet traffic to ensure secure
NGN will provide network convergence Softswitches have been deployed to implementation of services to the business
and simplification over the longer term as control media gateways, access gateways segment. Separate routing platforms,
and provide basic voice services while it dedicated for ADSL termination, are also
separate networks for voice and data
deployed at the IPNet edge nodes.
converge to one IP based network with functions in association with application
associated intelligent devices such as servers to provide advanced next An extensive access network that could
softswitches and application servers. NGN generation voice services. Telkom’s IP potentially provide connectivity to almost
requires less diverse technology elements network provides the transport capability any customer provides access to IP
to maintain that will increase network between the network elements while media services. These access networks include
reliability and manageability and result in gateways mediate between the circuit legacy networks such as Constant Bit Rate
operational savings. switched network and the Voice Over (CBR), and new point to cloud infrastructure
Internet Protocol (VoIP) network. The need e.g. Synchronous High-bit rate Digital
NGN is a revenue generator
for such media gateways will diminish as Subscriber Line and Metro Ethernet.
There is a critical mass of NGN equipment
more traffic moves to VoIP.
that is required before proper converged To further improve the secure provisioning
services with a viable footprint are The NGN network will continue to be of services and create new business
possible. Some NGN services are already developed towards an IP Multimedia opportunities, IPNet is evolving to a
functioning, but in small numbers. Pre- Subsystem (IMS) controlled network where Carrier-supporting-Carrier (CsC) Multi-
provisioning in the core of the network is call control will be combined into a single Protocol Label Switching (MPLS)
currently taking place that will be beneficial control layer with IMS architecture. In the architecture. In short, CsC is a hierarchical
VPN model that allows other service the edge other than physical protection Data networks
providers or corporate customers to at the SDH layer where end-to-end path At the core layer and between the core
interconnect their own IP/MPLS networks protection, utilising 1+1 protection and the edge nodes, full resilience exists.
over Telkom’s MPLS backbone. This architecture, i.e. a working path and a hot Edge devices are connected to two core
eliminates the need for customer carriers standby protection path, has been devices, located in physically diverse
and service carriers to build and maintain deployed. buildings. The connectivity between the
their own MPLS backbone. In the edge and each core router as well as the
The traffic leaving or entering edges to or
backbone, the CsC concept provides core infrastructure is dimensioned to carry
from the network is protected in the core.
complete separation of the different service the full traffic load in the event of a link
Core redundancy provides protection in
carriers’ traffic. failure or core node failure. Edge to core,
edge to edge and edge to international
inter-core and edge to International
A Service Carrier is a collection of destination set-ups. The degree of
destinations are therefore fully redundant.
Service (or customer-specific) Provider redundancy varies across the different
Edge routers (S-PEs), essentially forming a technologies and networks. Connectivity to international destinations is
layer around the Backbone Carrier provided from two physically diverse
Voice network
network. Service Carriers also include their nodes, through different cable landing
Dual connectivity exists between edge to
respective Customer Edge (CE) routers. stations and different submarine cable
core nodes and core to international
S-PE and CE routers can only belong to a networks to multiple international nodes on
gateway nodes. The transmission links
single Service Carrier at any one time. different continents that are all
between the edge and the core pair nodes
interconnected using protected or
In essence, IPNet will consist of a are geographically separated. These links
restorable transmission systems. In the event
Backbone Carrier, supporting various are protected to eliminate any single point
of the loss of one of the local nodes,
Service or Customer Carriers each of failure in the transport network. All links
potentially 38% of the IP throughput traffic
retaining a level of autonomy (e.g. security, are designed to cater for the busy hour
could be lost. Mechanisms will schedule
management, Quality of Service loads and have been implemented in a
traffic and prioritisation of traffic will
implementation) from the core. At a basic 50:50 load sharing fashion with each
take place.
technical level, it means that any number of route limited to 80% utilisation.
customer VPNs are embedded and treated Service level agreements are offered to
In the event of a failure of an international
as a single VPN within the backbone clients to provide improved resilience from
gateway during the peak hour, about 38%
carrier infrastructure by means of multiple the customer site to the edge.
of the international traffic will be lost. In the
stacked MPLS labels, while preserving the event of a failure of a core switch during Power
customer’s unique parameters, such as Group
the peak hour, about 38% of national and Only 12V and 48V direct current (DC) overview
Quality of Service models. international traffic will be lost from the equipment is utilised. Some alternating
secondary layer of a particular region. current (AC) equipment is used, mainly in
Network resilience
Activation of disaster recovery procedures the server environments, eg data centres Management
Telkom’s networks are generally viewed as review
and plans to re-route traffic will further limit and at sites where DC is not available, eg
three layers, ie access, edge and core.
the loss of traffic. The Intelligent Network at customer service branches.
The different network elements are
platforms, providing advance services, Sustainability
interconnected utilising Synchronous Digital Operations centres, Core nodes, Edge review
cater for protection of traffic under failure
Hierarchy (SDH), with the primary physical nodes, International gateway nodes and
conditions.
interconnecting medium being fibre. any station carrying core or edge traffic
Signalling have been defined as critical sites where a Performance
The transport network equipment is review
No risk exists from a national perspective disruption of service cannot be tolerated.
connected in a mesh or ring topology,
as full redundancy has been implemented. Power availability is ensured, using a
providing for redundancy. To further
Due to the fact that the international combination of battery back up and AC Financial
improve resilience, intelligent ASTN statements
Signalling Transit Points are not connected standby plants.
switches are deployed in the long haul
as a mated pair to all international
network to provide automatic provisioning,
destinations, failure of an international Company
routing, and restoration capability. Financial
gateway Signalling Transit Point may Information
Generally, at the access, no resilience is result in the loss of some international
present in the network architecture towards connections.
Cost, efficiency and productivity Network in order to reduce maintenance customer needs more rapidly, and to
management spend. We continue with the renegotiation provide appropriate solutions and services.
Faced with competition eroding our of all supplier contracts and constructive In order to take advantage of economies of
revenue base, cost management continues engagement with labour unions. We are scale, we have consolidated our six voice
to be a key element in creating shareholder reviewing our IT investment strategy in installation and fault management centres
value. Combined with the inflationary order to ensure optimum levels of spend in into two centres to address faults,
environment affecting our operating line with our strategy and network installation and service appointment sites,
expenses, a number of once-off items investment. Inventories and capital work-in- and have consolidated our six data
impacted fixed-line expenditure including: progress are receiving considerable installation and fault management centres
• R177 million expenses relating to the attention as we seek to lower just-in-time into two centres.
Vodacom transaction; levels of investment and to monetise any

Faults reported on residential, business and
excessive levels of assets.
• R85 million impairment of Africa ADSL business services increased in the
Online; Telkom is targeting an operating cost 2009 financial year mainly due to the 33%
reduction of 10% over the following three increase in the ADSL installed base during
• R254 million impairment of Telkom
financial years. the 2009 financial year resulting in an
Media; and
increase in the number of reported faults,
The Telkom Board is focusing on improving
• R1.8 billion impairment of Multi-Links. adverse weather conditions causing many
the cost efficiency and free cash flow
areas to be flooded, mainly in the coastal
Fixed-line operating expenses increased profile of the company. It has reduced the
areas of KwaZulu-Natal, Western Cape
19.6% to R29.8 billion. Employee initial five year capital expenditure budget
and Eastern Cape, and third party
expenses increased by 8.1% to by 40% to R34 billion and intends to
damage to Telkom cable infrastructure, roll-
R8.0 billion, payments to other operators reduce it further where possible.
out of other providers’ services, road
increased 9.2% to R7.5 billion, selling
Maintaining the quality of services to our extensions and other 2010 Soccer World
general and administrative expenses
customers Cup projects. In addition, many customers
increased by 68.8% to R6.6 billion,
Improved customer service is vital to the were affected by access equipment that
service fees increased by 14.4% to
success of Telkom into the future. failed following prolonged power outages.
R2.8 billion and operating leases
Sustainable and profitable growth in the Data and ADSL Business services fulfilment
decreased by 1.0% to R613 million.
customer base requires creating and performances improved following the
Depreciation, amortisation, impairment
strengthening capabilities focused on introduction of more efficient workflow
and write-offs increased by 16.8% to
managing customer relationships and processes.
R4.4 billion resulting in an EBITDA margin
learning from acquired customer
of 25.8%. Excluding the Multi-Links, Telkom Faults cleared in 24 hours declined in the
information. This will allow Telkom to better
Media and Africa Online impairment the 2009 financial year due to the increased
manage the customer experience and
fixed-line adjusted EBITDA margin was number of ADSL services. The ADSL
anticipate customer needs.
32.3%. installed base grew by 61% during the
Customer segmentation based on value is 2008 financial year. This growth resulted
The Telkom reorganisation programme –
enabling Telkom to understand customers in an increase in the number of reported
Telkom Renaissance – improves profit and
better in order to give additional value and faults and impacted on the time taken to
loss accountability throughout the
services to customers. Surveys with our key clear faults. This growth also impacted on
organisation and will allow us to focus on
customer segments have shown that service data subrate services as they share ADSL
efficient resource management and cost
quality perception has improved in the resources. Network failures consist of cable
containment. In addition, the roll-out of our
small business, medium and large business breaks, cable theft and failures on other
mobile network is expected to enable us to
and corporate and government sectors. core network elements. We implemented a
provide connectivity in a more cost
The residential market perception survey self install option for ADSL, which had a
effective manner in rural and high cable
indicates a stable rating. positive impact on ADSL installation.
theft areas. Next Generation Network and
mobile technology also allows us to Network service quality We expect to continue to change the
replace expensive to maintain legacy We have made significant investments in method in which we measure performance
equipment. We intend to expedite the our national network operations centre and to align with changes in the information
retirement of costly legacy systems as a our data centre, designed to increase our communication technology industry that
result of our growing Next Generation ability to identify and anticipate future focus more on broadband and data
The following table presents information regarding Telkom’s service delivery measurements during the periods indicated.
2007 2008 2009
Residential voice
% cleared in 24 hours 50 38 32
Faults per 1,000 lines 485 476 650
% installed within 28 working days initial timeframe – No build 84 91 91
% installed within 80 working days initial timeframe – Build 73 82 80
Business voice
Data subrate
ADSL business
services and also to support Telkom’s We intend to introduce new products and our fixed-line service. ICASA has initiated a
customer centricity drive. services as well as tariff structures with the review process of mobile termination rates
aim of maintaining and gaining revenue. aimed at reducing high mobile
Competition
interconnect charges which, once
Competition in the South African fixed-line Mobile competition
completed, is also likely to impact Telkom’s
communications market is intense and is Telkom competes for voice customers with
own termination rates and interconnection
increasing as a result of the Electronic the three existing mobile operators, Group
revenues. overview
Communications Act and determinations Vodacom, MTN and Cell C. Vodacom,
issued by the Minister of Communications. our previously 50% owned joint venture, Data competition
was listed on the JSE on May 18, 2009. Neotel, the former VANS providers such as Management
The new licensing framework included in the review
The sale and unbundling of our stake in Internet Solutions and the three existing
Electronic Communications Act is resulting in
Vodacom will further increase competition. mobile operators are our main competitors
the market becoming more horizontally
MTN is a public company listed on the JSE in the data market. Each of Vodacom,
layered, with a large number of separate Sustainability
Limited, and Cell C entered into a joint MTN and Cell C currently offer 3G, HSPA review
licences being issued for electronic
venture with Virgin Mobile which has and EDGE mobile broadband data
communications network services, electronic
further increased competition. Telkom also services that directly compete with our
communications services, broadcasting Performance
competes with service providers who use services. Neotel is entering the market review
services and the radio frequency spectrum.
least cost routing technology that enables through competitive pricing and niche
This will substantially increase competition in
fixed-to-mobile calls from corporate private products such as fibre connections and
our fixed-line business.
branch exchanges to bypass our fixed-line rings. The mobile operators have also Financial
statements
We compete primarily on the basis network by being transferred directly to stated their intention to start competing in
of customer service, quality, reliability mobile networks. In recent periods, our the fixed-line market through building their
and price in those areas where we fixed-line business has experienced own infrastructure. The former VANS Company
Financial
currently face competition and where we significant customer migration to mobile provide competitive internet protocol virtual Information
expect to compete for public-switched services, as well as substitution of calls private networks and internet service
telecommunications services in the future. placed using mobile services rather than provider services to the business segment.
Consumer orientated internet service alliances between the VANS and fixed and and Pretoria. Government has created an
providers such as MWEB are our main mobile operators. Technological advances infrastructure company, Broadband Infraco,
competitors in the consumer internet will also enable more and more which stated that it will provide inter-city
market. convergence and integration which in turn bandwidth at cost based prices to Neotel,
will enable more effective competition and and later to the rest of the industry. This will
In addition, our data services have faced
usage of bandwidth. further compete with our existing
increased competition from iBurst, a
communications network. As an alternative
wireless competitor that offers competing As competition increases in the South
provider of communications infrastructure,
broadband services and, to a lesser extent, African market, South African tele-
Broadband Infraco will also be involved in
Sentech, which owns and operates satellite communication service providers, including
some of the undersea cable projects.
transmission systems, a packaged, always- Telkom, are expected to increasingly look
Broadband Infraco was established by an
on bidirectional broadband service via to other developing markets for new
Act of Parliament: the Broadband Infraco
satellite and a wireless high-speed internet revenue streams, particularly in sub-
Act, No 33 of 2007. The Electronic
service offering. The mobile data providers Saharan Africa. Internationally, Telkom’s
Communications Act, No 36 of 2005, has
have reduced prices significantly, leading to new Africa Online business already
been amended by the Electronic
price competition in our data markets. We competes with Internet Solutions and MTN
Communications Amendment Act, No 37
believe the former VANS operators and Network Solutions. In addition, Verizon is
of 2007, to permit electronic
internet service providers will increasingly already present in a number of other
communications licences to be issued to
move into the corporate and voice services African markets.
Broadband Infraco.
market, while telecommunications service
Fixed-line voice competition
providers aim to expand into the managed A process to issue additional licences to
In September 2004, the Minister of
data network and international traffic small business operators to provide
Communications granted an additional
markets. We anticipate that alliances will telecommunications services in
licence to provide public-switched
be forged between the former VANS underserviced areas with a teledensity of
telecommunications services to Neotel.
operators, telecommunications service less than 5% commenced in 2005 and is
Neotel was 30% owned by Transtel and
providers and content providers to continuing. The Minister of Communi-
Esitel, which are beneficially owned by the
concentrate on the delivery of converged cations has identified 27 of these
South African government and other
services within the next few years. underserviced areas. ICASA has issued
strategic equity investors including 26%
licences to successful bidders in seven of
Domestically, expansion into new markets beneficially owned by TATA Africa
these areas and the Minister has issued
by the former VANS and mobile Holdings (Pty) Ltd, a member of the large
invitations to apply for licences in
companies will occur, while the Indian conglomerate with information and
14 additional areas. In August 2006
development of new products and services communications operations. On March
ICASA recommended to the Minister that
will intensify competition. We expect 19, 2008 Neotel announced that the
licences be granted to successful
competition to further increase as a result of Competition Tribunal of South Africa had
applicants in 13 of these areas. While it
consolidation in the market, with approved its acquisition of Transtel without
was expected that further licences would
competitors growing through mergers, any conditions. TATA Africa Holdings (Pty)
be issued in the 2007 calendar year, none
acquisitions and alliance-forming activity. Ltd has subsequently acquired the 30%
were issued. The Minister of
The entry of multi-national corporations into equity stake beneficially owned by the
Communications has issued a policy
South Africa is expected to be a further South African government, increasing its
directive to ICASA directing it to, where
incentive for global communications shareholding in Neotel to 56%. Neotel
there is more than one licence in a
operators, which already service these was licensed on December 9, 2005 and
province, merge the licences and issue one
corporations abroad, to establish or commercially launched on August 31,
Provincial Under-Serviced Area Network
enhance their presence in South Africa. 2006. Neotel commenced providing
Operator (PUSANO) licence. None of
services to large corporations and other
Competition in the data market is expected these consolidated licences have yet been
licensees at the beginning of the 2007
to increase as a result of the VANS issued by ICASA. In his budget speech of
calendar year.
providers’ ability to deliver complex June 26, 2009, the Minister of
managed data solutions and integrated On April 25, 2008, Neotel announced Communications indicated the intention to
information communications technology that the first of its consumer products were review the policy in relation to USALs.
solutions, as well as expected future available in limited parts of Johannesburg
Telkom’s fixed-line voice business is

expected to be further impacted by
continuing developments of Voice over
Internet Protocol (VoIP) and by the roll-out of
limited mobility services. Wireless operator
iBurst has started to offer portable voice
services over its wireless network.
Additionally, VoIP and other operators with
international gateway licences are
expected to create increased competition
for Telkom’s fixed-line voice business in
carrying international traffic in and out of
South Africa.
We expect that the introduction of number

portability and carrier pre-selection could
further enhance competition in our fixed-line
voice business and increase our churn
rates. As competition intensifies, the main
challenges our fixed-line voice business
faces are continuing to improve customer
loyalty through improved services and
products, and maintaining our leadership
in the South African communications
market. As a result of increasing
competition, we anticipate pressure on our
overall average tariffs and a reduction in
our market share.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Three year financial review
for the years ended March 31

Amounts in accordance with IFRS
(in ZAR millions, except percentages) 2007 2008 2009 CAGR (%)
Fixed-line segment financial data
Revenue 32,345 32,572 33,659 2.0
Operating profit 8,596 8,107 4,334 (29.0)
Operating profit margin (%) 26.6 24.9 12.9 (30.4)
EBITDA 12,178 11,839 8,692 (15.5)
EBITDA margin (%) 37.7 36.3 25.8 (17.3)
Capital expenditure to revenue (%) 20.4 20.9 19.9 (1.2)
Multi-Links segment financial data
Revenue – 845 1,900 124.9
Operating profit – (97) (522) 438.1
Operating profit margin (%) – (11.5) (27.5) 139.3
EBITDA – (11) (226) 1,954.5
EBITDA margin (%) – (1.3) (11.9) 813.7
Capital expenditure to revenue (%) – 155.3 146.9 (5.4)
Other segment financial data
Revenue 873 1,040 1,214 17.9
Operating profit 411 453 477 7.7
EBITDA 430 486 527 10.7
EBITDA margin (%) 49.3 46.7 43.4 (6.1)
Capital expenditure to revenue (%) 5.0 32.1 13.8 66.1
Financial review (Group)
Income statement data
Operating revenue 32,441 33,611 35,940 5.3
Operating expenses (including depreciation) 23,028 25,014 29,895 13.9
EBITDA 13,352 13,203 11,668 (6.5)
Operating profit 9,751 9,069 6,388 (19.1)
Profit before tax 9,093 7,681 3,726 (36.0)
Profit from continuing operations 6,290 5,034 2,066 (42.7)
Basic earnings per share (cents) 1,204.7 963.7 407.4 (41.8)
Headline earnings per share (cents) 1,235.5 1,028.9 557.0 (32.9)
Dividend per share (cents) 900.0 1,100.0 660.0 (14.4)
Total operations
Basic earnings per share (cents) 1,681.0 1,565.0 832.8 (29.6)
Headline earnings per share (cents) 1,710.7 1,634.8 994.6 (23.8)
Balance sheet data
Total assets 59,146 70,372 85,779 20.4
Current assets 10,376 12,609 11,287 4.3
Non-current assets 48,770 57,763 51,009 2.3
Assets of disposal groups held for sale n/a n/a 23,482
Total liabilities 27,138 37,035 48,673 33.9
Current liabilities 18,584 21,931 17,452 (3.1)
Non-current liabilities 8,554 15,104 15,348 33.9
Liabilities of disposal groups held for sale n/a n/a 15,873
Shareholders’ equity 32,008 33,337 37,106 7.7
Capital expenditure 6,623 8,428 9,631 20.6
Total debt 11,034 18,365 18,630 29.9
Net debt 10,026 16,617 15,497 24.3
Total operations
Capital expenditure 10,246 11,900 13,234 13.6
Net debt 10,026 16,617 23,047 51.6
Cash flow data
Cash flow from operating activities 9,356 10,603 11,432 10.5
Cash flow from investing activities (10,412) (14,106) (17,005) 27.8
Cash flow from financing activities (2,920) 2,943 7,093 –
Capital expenditure excluding intangibles 8,648 10,108 8,725 0.4
Operating free cash flow 3,728 2,229 (2,237) –
Financial ratios
EBITDA margin (%) 41.2 39.3 32.5 (11.2)
Net profit margin (%) 19.4 15.0 5.7 (45.5)
Net debt to EBITDA n/a n/a 1.3 –
After tax operating return on assets (%) n/a n/a 5.0 –
Capital expenditure to revenue (%) 20.4 25.1 26.8 14.6
Total operations
Net debt to EBITDA 0.5 0.8 1.2 54.9
After tax operating return on assets (%) 22.7 18.3 9.7 (34.6)
Financial review
Results of operations
The Telkom Group added Multi-Links as a new segment to its
financial reporting for the 2009 financial year. As a result, the
Telkom Group’s four reporting segments for the 2009 financial
year are fixed-line, Multi-Links, mobile and other. The other
segment includes Telkom’s Trudon, formerly known as TDS
Directory Operations, and Africa Online subsidiaries. The
information in this annual report has been updated to reflect the
above changes to Telkom’s reporting segments.
Telkom concluded the disposal and sale of Vodacom, its mobile

segment that provided mobile services through its 50% joint
venture interest in Vodacom, effective as of April 20, 2009. In
addition, Telkom’s Board of directors determined to dispose of
Swiftnet, a wholly owned subsidiary that provides wireless data
services, and determined to wind up its Telkom Media subsidiary.
The Telkom Group’s consolidated financial statements and
information included herein reflects the restatement to Telkom’s
consolidated financial statements in prior years as a result of these
events to disclose the effect of discontinued operations and the
disposal of the subsidiaries held for sale as follows:
• Income statement data for all the periods have been restated to
reflect our 50% share of Vodacom’s results, our 100% share of
Swiftnet’s results and our 75% share of Telkom Media’s results
as discontinued operations in accordance with IFRS5; and
• Balance sheet data for only the year ended March 31, 2009
reflect our 50% share of Vodacom’s results and our 100% share
of Swiftnet’s results as discontinued operations in accordance
with IFRS5.
The discussion of the business below has been revised from The Board has decided to delist from the New York Stock
Group
previous years to reflect the changes to Telkom’s segments and its Exchange. Maintaining a listing in the United States is overview
discontinued operations. expensive and takes considerable management time. The

methodology employed and discipline gained from
Year ended March 31, 2009 compared to year ended March Management
compliance with the Sarbanes-Oxley reporting review
31, 2008 and year ended March 31, 2007
requirements will be retained, where appropriate, to
Consolidated results ensure strict corporate governance compliance and
The following table shows information related to our operating transparent financial reporting. Sustainability
review
revenue, other income, operating expenses, operating profit,
Telkom is comfortable that the JSE provides sufficient access
operating profit margin, profit for the year, profit margin, EBITDA
to capital from both South African and global investors.
and EBITDA margin for the periods indicated.
Performance
review
Financial
statements
Company
Financial
Information
Financial review (continued)
Telkom Group’s segmental results

2008/ 2009/
2007 2008 2009 2007 2008
(in millions, except percentages) ZAR % ZAR % ZAR % % change % change
Operating revenue 32,441 100.0 33,611 100.0 35,940 100.0 3.6 6.9
Fixed-line 32,345 99.7 32,572 96.9 33,659 93.7 0.7 3.3
Multi-Links – – 845 2.5 1,900 5.3 – 124.9
Other 873 2.7 1,040 3.1 1,214 3.4 19.1 16.7
Intercompany eliminations (777) (2.4) (846) (2.5) (833) (2.4) 8.9 (1.5)
Other income(1) 338 100.0 472 100.0 343 100.0 39.6 (27.3)
Fixed-line 334 98.8 497 105.3 524 152.8 48.8 5.4
Multi-Links – – – – – – – –
Other 50 14.8 61 12.9 64 18.6 22.0 4.9
Intercompany eliminations (46) (13.6) (86) (18.2) (245) (71.4) 87.0 184.9
Operating expenses 23,028 100.0 25,014 100.0 29,895 100.0 8.6 19.5
Fixed-line 24,083 104.6 24,962 99.7 29,849 99.8 3.6 19.6
Multi-Links – – 942 3.8 2,422 8.1 – 157.1
Other 512 2.2 648 2.6 801 2.7 26.6 23.6
Intercompany eliminations (1,567) (6.8) (1,538) (6.1) (3,177) (10.6) (1.9) 106.6
Operating profit 9,751 100.0 9,069 100.0 6,388 100.0 (7.0) (29.6)
Fixed-line 8,596 88.2 8,107 89.4 4,334 67.8 (5.7) (46.5)
Multi-Links – – (97) (1.1) (522) (8.2) – (438.1)
Other 411 4.2 453 5.0 477 7.5 10.2 5.3
Intercompany eliminations 744 7.6 606 6.7 2,099 32.9 (18.5) 246.4
Operating profit margin (%) 30.1 27.0 17.8 (10.3) (34.1)
Fixed-line 26.6 24.9 12.9 (6.4) (48.2)
Multi-Links – (11.5) (27.5) – 139.1
Other 47.1 43.6 39.3 (7.4) (9.9)
Profit for the year attributable
to equity holders of Telkom
Profit margin (%)
EBITDA(2) 13,352 100.0 13,203 100.0 11,668 100.0 (1.1) (11.6)
Fixed-line 12,178 91.2 11,839 89.7 8,692 74.5 (2.8) (26.6)
Multi-Links – – (11) (0.1) (226) (1.9) – (1,954.5)
Other 430 3.2 486 3.7 527 4.5 13.0 8.4
Intercompany eliminations 744 5.6 889 6.7 2,675 22.9 19.5 200.9
EBITDA margin (%) 41.2 39.3 32.5
Notes:
(1) Other income includes profit and losses on disposal of investments, property, plant and equipment and intangible assets.
(2) EBITDA represents profit for the year, which includes profit on sale of investments, before taxation, finance charges, investment income and depreciation,
amortisation, impairments and write-offs. We believe that EBITDA provides meaningful additional information to investors since it is widely accepted by
analysts and investors as a basis for comparing a company’s underlying operating profitability with that of other companies as it is not influenced by past
capital expenditures or business acquisitions, a company’s capital structure or the relevant taxation regime. This is particularly the case in a capital intensive
industry such as communications. It is also a widely accepted indicator of a company’s ability to service its long-term debt and other fixed obligations
and to fund its continued growth. You should not construe EBITDA as an alternative to operating profit or cash flows from operating activities determined
in accordance with IFRS or as a measure of liquidity. EBITDA is not defined in the same manner by all companies and may not be comparable to other
similarly titled measures of other companies unless the definition is the same. In addition, the calculation of EBITDA for the maintenance of our covenants
contained in our TL20 bond is based on accounting policies in use, consistently applied, at the time the indebtedness was incurred. As a result, EBITDA
for purposes of those covenants is not calculated in the same manner as it is calculated in the above table.
EBITDA can be reconciled to operating profit as follows:

2007 2008 2009
(in millions) ZAR ZAR ZAR
Fixed-line
EBITDA 12,178 11,839 8,692
Depreciation, amortisation, impairments and write-offs (3,582) (3,732) (4,358)
Operating profit 8,596 8,107 4,334
Multi-Links
EBITDA – (11) (226)
Depreciation, amortisation, impairments and write-offs – (86) (296)
Operating profit – (97) (522)
Other
EBITDA 430 486 527
Depreciation, amortisation, impairments and write-offs (19) (33) (50)
Operating profit 411 453 477
Operating revenue more properties at a higher value during expenses, depreciation, amortisation
Operating revenue increased in the years the 2008 fiscal year. impairments and write-offs, operating
ended March 31, 2009 and 2008 due to leases and service fees.
Operating expenses
increased operating revenue in our fixed-
Operating expenses increased in the years The increase in fixed-line operating
line, Multi-Links and other segment. The
ended March 31, 2009 and 2008 as a expenses in the 2009 financial year was
increase in fixed-line operating revenue of
result of increased operating expenses in primarily due to increased selling, general
3.3% and 0.7% in the 2009 and 2008
Multi-Links and fixed-line segments. and administrative expenses, payment to
financial years, respectively, was primarily
other network operators, depreciation,
due to continued growth in data services, The increase in the Multi-Links segment’s
amortisation impairments and write-offs,
higher revenue from interconnection and operating expenses in the 2009 financial
employee expenses and service fees.
subscription based calling plans, partially year was primarily due to increased cost of
Selling, general and administrative
offset by lower traffic revenue. The increase sales and associated subsidies as a result
expenses increased primarily due to the
in revenue in our Multi-Links segment in the of increased sales volumes, increased
impairment of the Multi-Links investment in Group
2009 financial year was primarily due to advertising and promotional expenditure overview
the 2009 financial year, increased
subscriber growth, an increase in and an increase in expatriate fees as a
materials and maintenance expenses and
domestic traffic volumes as well as result of an increase in staff seconded from
higher bad debts. Depreciation,
increased data revenue. The increase in Telkom during the year. The increase in the Management
amortisation, impairments and write-offs review
revenue in our Multi-Links and other Multi-Links segment’s operating expenses in
increased in the year ended March 31,
segment in the 2008 financial year was the 2008 financial year was primarily due
2009 primarily as a result of higher
primarily due to the inclusion in the 2008 to the inclusion of operating expenses Sustainability
amortisation of intangible assets and review
fiscal year of revenue generated by our relating to our newly acquired subsidiary,
increased depreciation due to the on-going
newly acquired subsidiaries, Multi-Links Multi-Links, which impacted all expense
investment in telecommunications network
and Africa Online. categories.
equipment and data processing Performance
review
Other income The increase in the other segment’s equipment. Payments to other operators
Other income includes profit on the operating expenses in the 2009 financial increased primarily due to increased
disposal of investments, property, plant and year was mainly contributed by the payments to international operators due to Financial
statements
equipment and intangible assets. The operating expenditure of UUNET, Africa increased switch hubbing volumes and
decrease in fixed-line other income in the Online’s 40% joint venture. Increases in the higher exchange rates and settlement rates.
2009 financial year was primarily due to other segment’s operating expenses in the Employee expenses increased in the year Company
Financial
the gain on disposal of properties in the 2008 financial year were primarily driven ended March 31, 2009 primarily due to a Information
2008 financial year. The increase in fixed- by significant increases in payments to higher provision for medical aid for
line other income in the 2008 financial other operators, employee expenses, pensioners as a result of increased interest
year was primarily due to the disposal of selling, general and administrative costs, higher salaries and wages as a result
of average annual salary increases of due to a discount received on the extension year to a negative operating margin of
10.86% as well as higher leave benefits. of our vehicle lease and a reduction in the 25.7% in the 2009 financial year. The
Service fees increased in the year ended number of vehicles from 9,694 at operating profit margin for our other
March 31, 2009 primarily due to March 31, 2007 to 8,792 at March 31, segment decreased from 47.1% in the
consultancy fees relating to the Vodacom 2008. Selling, general and administrative 2007 financial year to 43.6% in the 2008
sale and unbundling transaction and higher expenses decreased primarily due to the financial year and decreased to 39.3% in
security costs to secure the copper network. provision for probable liabilities in the the 2009 financial year.
Telcordia dispute in the 2007 financial
The increase in fixed-line operating Investment income
year, which were not increased significantly
expenses in the 2008 financial year was Investment income consists of interest
in the 2008 financial year, and lower
primarily due to increased payments to received on short-term investments and
marketing expense, partially offset by the
other operators, higher employee expenses bank accounts and income received from
R217 million impairment of the Telkom
and service fees, partially offset by lower our investments. Group investment income
Media loan in the 2008 financial year –
leases and selling, general and increased 7.7% to R181 million in the
increased materials and maintenance
administrative expenses. Payments to other 2009 financial year and decreased
expenses and higher bad debts.
operators increased primarily due to 15.6% to R168 million in the 2008
Depreciation, amortisation, impairments
increased calls from our fixed-line network financial year from R199 million in the
and write-offs increased in the year ended
to mobile and international operators as 2007 financial year. The increase in the
March 31, 2008 primarily as a result of
result of higher call volumes from our fixed- 2009 financial year was primarily due to
higher amortisation of intangible assets and
line network to the mobile and international increased short-term investments and
increased depreciation due to the on-going
networks. Employee expenses increased interest rates. The decrease in the 2008
investment in telecommunications network
due to higher salaries and wages as a financial year was primarily due to lower
equipment and data processing equipment,
result of average annual salary increases interest received from fixed deposits and
partially offset by lower asset write-offs.
and higher share compensation expenses, repurchase agreements mainly due to
partially offset by a reduced provision for Operating profit lower cash balances.
team award and a reduction in the number Operating profit decreased in the 2009
Finance charges and fair value
of employees. Service fees increased and 2008 financial years due to
movements
primarily due to increased property decreased operating profit in the fixed-line
Finance charges and fair value movements
management costs mainly related to and Multi-Links segments as a result of
include interest paid on local and foreign
increased electricity usage, electricity rates increased operating expenditure. As a
borrowings, amortised discounts on bonds
and taxes, payments to consultants to result, the fixed-line operating profit margin
and commercial paper bills, fair value
explore local and international investment decreased from 26.6% in the 2007
gains and losses on financial instruments
opportunities, higher security costs due to financial year to 24.9% in the 2008
and foreign exchange gains and losses.
increases in contract prices and financial year and decreased to 12.9% in
maintenance and monitoring of the cable the 2009 financial year. The operating The following table sets forth information
alarm system and legal fees related to margin for our Multi-Links segment related to our finance charges and fair
Telcordia. Operating leases decreased in decreased significantly from a negative value movements for the periods indicated.
the year ended March 31, 2008 primarily margin of 11.5% in the 2008 financial
Finance charges and fair value movements

2007 2008 2009 2008/2007 2009/2008
(in millions, except percentages) ZAR ZAR ZAR % change % change
Interest expense 1,142 1,543 1,732 35.1 12.2
Local loans 1,303 1,700 1,895 30.5 11.5

Foreign loans – 18 – – –
Finance charges capitalised (161) (175) (163) 8.7 (6.9)
Foreign exchange losses and fair value movements (285) 13 1,111 (104.6) –
Fair value (adjustments) on derivative instruments (344) (80) 268 (76.7) (435.0)
Foreign exchange losses 59 93 843 57.6 806.5
Total finance charges 857 1,556 2,843 81.6 82.7
During the year ended March 31, 2009, option we have in place relating to Multi- was raised on the capital gains tax base
finance charges increased primarily due to Links. This was partially offset by fair value cost of the 15% investment in Vodacom,
higher foreign exchange losses and fair adjustments as a result of the significant that are held for sale and will be utilised for
value movements incurred by Multi-Links on weakness of the rand against international the future capital gains tax liability of the
foreign denominated loans and creditor’s currencies. sale transaction. This was partially offset by
balances as a result of the devaluation of higher non-deductible expenditure relating
Taxation
the naira and the mark to market valuation to the impairment of Multi-Links and Africa
Our consolidated taxation expense from
of the Multi-Links put option as well as Online. The decrease in the 2008
continuing operations decreased 37.3% to
increased interest paid as a result of higher financial year was primarily due to higher
R1,660 million in the year ended March
debt levels and interest rates. During the non-deductible expenses relating mostly to
31, 2009 and decreased 5.6% to
the impairment of Telkom Media and Africa
year ended March 31, 2008, finance R2,647 million in the year ended March
Online assets, the increase in STC taxation
charges increased primarily due to a 31, 2008 from R2,803 million in the year
credits utilised in respect of the repurchase
higher interest expense resulting from ended March 31, 2007. The decrease in
of Telkom shares, the utilisation of the Multi-
higher debt levels in the fixed-line, Multi- the 2009 financial year was primarily due
Links assessed losses and the impact of the
Links and other segments, and foreign to the decrease in the STC charge as a
taxation rate change on deferred taxation Group
exchange losses and fair value movements result of lower dividends declared as overview
from 29% to 28% with effect from April 1,
decreased primarily due to currency compared to the previous year and the
2008.
movements and fair value losses on the put R454 million deferred taxation asset that
Management
review
The following table sets forth information related to our effective taxation rate for the Telkom Group, Telkom Company and Vodacom for
the periods indicated:
Year ended March 31, Sustainability

review
2007 2008 2009 2008/2007 2009/2008
(in percentages) % % % % change % change
Effective tax rate Performance

review
Telkom Group – continuing operations 30.8 34.5 44.5 12.0 29.3
Telkom Company 24.2 24.6 8.9 1.7 (63.8)
Vodacom 36.9 34.1 39.5 (7.6) 15.8 Financial
statements
Company
Financial
Information
The increase in the Telkom Group effective in the rate of secondary taxation on Fixed-line operating revenue
taxation rate in the 2009 financial year companies from 12.5% to 10%. Our fixed-line operating revenue is derived
was mainly due to higher non-deductible principally from fixed-line subscriptions and
Minority interests
expenditure relating to the impairment of connections; traffic, which comprises local
Minority interests in the income of subsidiaries
Multi-Links and Africa Online and Vodacom and long distance traffic, fixed-to-mobile
decreased significantly to R77 million in the
transaction costs. The increase in the traffic, international outgoing traffic and
year ended March 31, 2009 primarily due
Telkom Group effective taxation rate in the international voice over internet protocol
to an increase in the Multi-Links minorities’
2008 financial year was mainly due to services; and interconnection, which
share in net losses. Minority interests in the
higher non-deductible expenses relating comprise terminating and hubbing traffic.
income of subsidiaries decreased 3.0% to
mostly to the impairment of Telkom Media We also derive fixed-line operating
R197 million in the year ended March 31,
and Africa Online assets, the increase in revenue from our data business, which
2008 primarily due to the purchase of the
STC taxation credits utilised in respect of includes data transmission services,
remaining equity interest of 30% in
the repurchases of Telkom shares and the managed data networking services and
Smartphone on August 31, 2007, partially
impact of the taxation rate change on internet access and related information
offset by an increase in profits generated by
deferred taxation from 29% to 28% with technology services.
our Telkom Directory Services subsidiary and
effect from April 1, 2008.
Vodacom Tanzania. Telkom has in recent years introduced
The decrease in the Telkom Company calling plans as a customer retention
Profit for the year attributable to equity
effective taxation rate in the 2009 financial strategy in order to defend revenues. These
holders of Telkom
year was mainly due to the R1,280 million calling plan arrangements comprise
Profit for the year attributable to equity
deferred taxation asset that was raised on monthly subscriptions for access line rental,
holders of Telkom decreased to
the capital gains tax base cost of the 15% value-added services and free or
R4,170 million in the 2009 financial year
investment in Vodacom, that are held for discounted rates on calls. The access line
primarily due to decreased operating profit
sale and will be utilised for the future rentals and value-added services revenue
in our Multi-Links, fixed-line and mobile
capital gains tax liability of the sale components of calling plan arrangements
segments, partially offset by increased
transaction, partially offset by the are included in subscriptions and
operating profit in our other segment.
R1,843 million impairment of the Multi- connections revenue. In response to the
Higher finance charges were partially
Links investment, R254 million impairment significant growth in calling plan
offset by lower taxation and higher
of the Telkom Media loan and R85 million arrangements, the need arose to separate
investment income. Profit for the year
impairment of the Africa Online investment traffic revenue resulting from subscription
attributable to equity holders of Telkom
as well as Vodacom transaction costs. The based calling plans into annuity revenue
decreased to R7,975 million in the 2008
higher effective taxation rate for Telkom and the respective traffic revenue streams.
financial year primarily due to decreased
Company in the year ended March 31, Subscription based on calling plans
operating profit in our fixed-line and other
2008 was primarily due to higher non- revenue includes traffic annuity revenue
segments, partially offset by increased
deductible expenses relating to the related to calling plans. Discounted and
operating profit in our mobile segment.
R217 million impairment of the Telkom out of plan traffic relating to these calling
Higher finance charges and lower
Media loan and an increase of plans is disclosed under the applicable
investment income were partially offset by
R198 million in secondary taxation on traffic revenue streams.
lower taxation.
companies, partially offset by higher
The following table shows operating
exempt income resulting from dividends Fixed-line segment
revenue for our fixed-line segment broken
received from Vodacom and other The following is a discussion of the results
down by major revenue streams and as a
subsidiaries. Vodacom’s effective taxation of operations from our fixed-line segment
percentage of total revenue for our fixed-
rate increased in the 2008 financial year before eliminations of intercompany
line segment and the percentage change
primarily due to the disallowable expenses transactions with the mobile and other
by major revenue stream for the periods
relating to the BEE deal and non-deductible segments. Our fixed-line segment is our
indicated.
interest expenses. Vodacom’s effective largest segment based on revenue and
taxation rate decreased in the 2008 profit contribution.
financial year primarily due to the decrease
Fixed-line operating revenue

2008/ 2009/
2007 2008 2009 2007 2008
Subscriptions and connections 6,286 19.4 6,330 19.4 6,614 19.7 0.7 4.5
Traffic 16,740 51.8 15,950 49.0 15,323 45.5 (4.7) (3.9)
Local 4,832 14.9 4,076 12.6 3,634 10.8 (15.6) (10.8)

Long distance 2,731 8.5 2,252 6.9 2,036 6.0 (17.5) (9.6)
Fixed-to-mobile 7,646 23.6 7,557 23.2 7,420 22.0 (1.2) (1.8)
International outgoing 988 3.1 986 3.0 933 2.8 (0.2) (5.4)
Subscription based calling plans 543 1.7 1,079 3.3 1,300 3.9 98.7 20.5
Interconnection 1,639 5.1 1,757 5.4 2,084 6.2 7.2 18.6

Data 7,489 23.1 8,308 25.5 9,310 27.6 10.9 12.1
Sundry revenue 191 0.6 227 0.7 328 1.0 18.8 44.5
Fixed-line operating revenue 32,345 100.0 32,572 100.0 33,659 100.0 0.7 3.3
Fixed-line operating revenue increased in lines as a result of customer migration to 0.5% to R5,250 in the 2008 financial
the 2009 financial year primarily due to mobile services and our residential post- year from R5,275 in the 2007 financial
continued growth in data services, higher paid PSTN services to enable access to year primarily due to the decline in traffic
revenue from interconnection services and subscription based calling plans and was tariffs and local traffic volumes, partially
subscriptions and connections partially positively impacted by our increase in offset by increased subscription based
offset by a decrease in traffic revenue, ISDN channels, ADSL services and, to a calling plans, interconnection and
particularly local and long distance traffic lesser extent, business post-paid PSTN subscriptions and connections tariffs.
revenue partially offset by an increase in lines. In addition, traffic was adversely
Subscriptions and connections. Revenue
traffic revenue from subscription based affected in both years by the increasing
from subscriptions and connections consists
calling plans. Fixed-line operating revenue substitution of calls placed using mobile
of revenue from connection fees, monthly
services rather than our fixed-line service
increased in the 2008 financial year rental charges, value-added voice services
and dial-up traffic being substituted by our
primarily due to continued growth in data and the sale and rental of customer
ADSL service, as well as the decrease in Group
services and higher revenue from premises equipment for post-paid and overview
the number of prepaid and residential post-
subscription based calling plans, prepaid PSTN lines, including ISDN
paid PSTN lines and increased competition
interconnection and subscriptions and channels and private payphones.
in our payphones business. As a result, Management
connections, partially offset by a decrease Subscriptions and connections revenue is review
traffic declined 7.6% in the 2009 financial
in traffic revenue, particularly local and principally a function of the number and
year and 8.2% in the 2008 financial year.
long distance traffic revenue. mix of residential and business lines in
Revenue per fixed access line increased
service, the number of private payphones Sustainability
Fixed-line operating revenue was adversely 2.1% to R5,349 in the 2009 financial review
in service and the corresponding charges.
impacted in both the 2009 and 2008 year from R5,250 in the 2008 financial
The following table sets forth information
financial years due to a decrease in the year primarily due to a 1.4% decrease in
related to our fixed-line subscription and Performance
number of residential post-paid PSTN lines the average number of access lines review
connection revenue during the periods
primarily as a result of customer migration and increased interconnection and
indicated.
to mobile and higher bandwidth products subscriptions and connection revenue
such as ADSL and lower connections, and partially offset by lower traffic revenue. Financial
statements
a decrease in the number of prepaid PSTN Revenue per fixed access line decreased
Company
Financial
Information
Fixed-line subscription and connection revenue

2007 2008 2009 2008/2007 2009/2008
% change % change
Total subscriptions and connections revenue

(ZAR millions, except percentages) 6,286 6,330 6,614 0.7 4.5
Total subscription access lines (thousands,
except percentages)(1) 4,490 4,395 4,319 (2.1) (1.7)
Postpaid
PSTN(2) 2,971 2,893 2,769 (2.6) (4.3)
ISDN channels 718 754 781 5.0 3.6
Prepaid PSTN 795 743 766 (6.5) 3.1
Private payphones 6 5 3 (16.7) (40.0)
Notes:
(1) Total subscription access lines comprise PSTN lines, including ISDN lines and private payphones, but excluding internal lines in service and public
payphones. Each analogue PSTN line includes one access channel, each basic rate ISDN line includes two access channels and each primary rate
ISDN line includes 30 access channels.
(2) Excluding ISDN channels. PSTN lines are provided using copper cable, DECT and fibre.
Revenue from subscriptions and increase in the number of post-paid ISDN Telkom has in recent years introduced
connections increased in the year ended channels was driven by increased demand calling plans as a customer retention
March 31, 2009 mainly due to increased for higher bandwidth and functionality. The strategy in order to defend revenues. These
tariffs as well as an increase in the number increase in prepaid PSTN lines in the calling plan arrangements comprise
of ISDN lines and, to a lesser extent, 2009 financial year was primarily due to monthly subscriptions for access line rental,
residential prepaid PSTN lines, partially our affordable Waya Waya offering. The value-added services and free or
offset by lower business and residential decrease in prepaid PSTN lines in the discounted rates on calls. The access line
post-paid PSTN lines. The average monthly 2008 financial year was primarily due to rentals and value-added services revenue
prices for subscriptions increased by continued migration to mobile services and components of calling plan arrangements
11.0% on August 1, 2008. Revenue from our residential post-paid PSTN services to are included in subscriptions and
subscriptions and connections increased in enable access to subscription based connections revenue. In response to the
the year ended March 31, 2008 mainly calling plans. In addition, we relaxed our significant growth in calling plan
due to increased tariffs as well as an credit policies which led to fewer arrangements, the need arose to separate
increase in the number of ISDN lines and, migrations of our postpaid customers to traffic revenue resulting from subscription
to a lesser extent, business post-paid PSTN prepaid service in the 2008 financial year. based calling plans into annuity revenue
lines, partially offset by lower residential and the respective traffic revenue streams.
Traffic. Traffic revenue consists of revenue
post-paid PSTN lines and prepaid PSTN Subscription based on calling plans
from local, long distance, fixed-to-mobile
lines. The average monthly prices for revenue includes traffic annuity revenue
and international outgoing calls,
subscriptions increased by 8.3% on August related to calling plans. Discounted and
international voice over internet protocol
1, 2006 and 12.0% on August 1, 2007. out of plan traffic relating to these calling
services and subscription based calling
plans is disclosed under the applicable
The decrease in the number of residential plans. Traffic revenue is principally a
traffic revenue streams.
post-paid PSTN lines in service in both the function of tariffs and the volume, duration
2009 and 2008 financial years was and mix between relatively more expensive Traffic includes dial-up internet traffic.
primarily as a result of customer migration domestic long distance, international and
to mobile and higher bandwidth products fixed-to-mobile calls and relatively less
such as ADSL and lower connections. The expensive local calls.
The following table sets forth information related to our fixed-line traffic revenue for the periods indicated.
Fixed-line traffic revenue

2007 2008 2009 2008/2007 2009/2008
% change % change
Local traffic revenue (ZAR millions, except percentages) 4,832 4,076 3,634 (15.6) (10.8)
Local traffic (millions of minutes, except percentages)(1) 14,764 11,317 8,822 (23.3) (22.0)
Long distance traffic revenue (ZAR millions,
except percentages) 2,731 2,252 2,036 (17.5) (9.6)
Long distance traffic (millions of minutes, except
percentages)(1) 4,224 3,870 3,631 (8.4) (6.2)
Fixed-to-mobile traffic revenue (ZAR millions,
except percentages) 7,646 7,557 7,420 (1.2) (1.8)
Fixed-to-mobile traffic (millions of minutes, except
percentages)(1) 4,103 4,169 4,126 1.6 (1.0)
International outgoing traffic revenue
(ZAR millions, except percentages) 988 986 933 (0.2) (5.4)
International outgoing traffic (millions of minutes,
except percentages)(1) 558 635 622 13.8 (2.0)
International voice over internet protocol (millions
of minutes, except percentages)(2) 38 43 34 13.2 (20.9)
Subscription based calling plans revenue
(ZAR millions, except percentages) 543 1,079 1,300 98.7 20.5
Subscription based calling plans (millions of
minutes, except percentages) 1,896 2,997 3,546 58.1 18.3
Total traffic revenue (ZAR millions, except
percentages) 16,740 15,950 15,323 (4.7) (3.9)
Total traffic (millions of minutes, except percentages)(1) 29,323 26,926 24,869 (8.2) (7.6)
Average total monthly traffic minutes per average
monthly access line (minutes)(3) 456 417 385 (8.6) (7.7)
Group
overview
Notes:
(1) Traffic, other than international voice over internet protocol traffic, is calculated by dividing total traffic revenue by the weighted average tariff during the
relevant period. Traffic includes dial-up internet traffic.
Management
(2) International voice over internet protocol traffic is based on the traffic reflected in invoices. review
(3) Average monthly traffic minutes per average monthly access line are calculated by dividing the total traffic by the cumulative number of monthly access
lines in the period.
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Traffic revenue declined in the 2009 on August 1, 2006 and August 1, 2007. and mix of calls to destinations outside
financial year primarily due to lower traffic On August 1, 2008, we increased the South Africa. In the 2009 financial year,
volumes partially offset by increased price of local peak calls after the first unit international outgoing traffic revenue
subscription based calling plans and by 3.2% to 39.2 SA cents per minute (VAT declined primarily as a result of a decrease
revenue and higher average traffic tariffs. inclusive). On August 1, 2007, the price of in volumes mainly as a result of the
Traffic revenue declined in the 2008 local off-peak calls increased 4.1% on increase in the number of Telkom Closer
financial year primarily due to lower average. On August 1, 2008, the price of subscribers, thereby decreasing the out of
average traffic tariffs and lower local traffic local off-peak calls increased 9.2% on bundle volumes. In the 2008 financial
volumes partially offset by increased average. year, international outgoing traffic revenue
subscription based calling plans and declined primarily as a result of a decrease
Long distance traffic revenue decreased in
revenue, international outgoing and fixed- in the average international outgoing
the 2009 and 2008 financial years mainly
to-mobile traffic. tariffs, partially offset by an increase in
due to a decrease in average long
international outgoing traffic primarily as a
ICASA approved a 2.1% reduction in the distance tariffs and, to a lesser extent,
result of the reduced tariffs. The average
overall tariffs for services in the basket decreased long distance traffic, partially
tariffs to all international destinations
effective August 1, 2006, 1.2% reduction offset by increased traffic related to Telkom
decreased by 11.1% on August 1, 2006
in the overall tariffs for services in the Closer packages and Worldcall. We
and by 9.0% on August 1, 2007. On
basket effective August 1, 2007 and a decreased our fixed-line long distance
traffic tariffs by 10% on September 1, August 1, 2008 the overall international
2.4% increase in the overall tariffs for
2005, a further 10% on August 1, 2006 tariffs remained unchanged, but tariffs to
services in the basket effective August 1,
and a further 10% on August 1, 2007. The certain destinations were increased whilst
2008. Traffic was adversely affected in
tariff remained unchanged on August 1, others were decreased.
both the 2009 and 2008 financial years
by the increasing substitution of calls 2008. Revenue from subscription based calling
placed using mobile services rather than Revenue from fixed-to-mobile traffic consists plans includes revenue from Telkom’s
our fixed-line service and dial-up traffic of revenue from calls made by our fixed-line subscription based plans, Telkom Closer
being substituted by our ADSL service, as customers to the three mobile networks in and Supreme Call, which are bundled
well as the decrease in the number of South Africa and is primarily a function of products on post-paid PSTN lines that
prepaid and residential post-paid PSTN fixed-to-mobile tariffs and the number, the include discounted rates and free minutes
lines and increased competition in our duration and the time of calls. Fixed-to- for a fixed monthly subscription fee. In the
payphone business. mobile traffic revenue decreased in the 2009 financial year, revenue from
2009 and 2008 financial years due to subscription based calling plans increased
Local traffic revenue decreased in the
higher discount offered to customers in by 20.5% primarily due to a 27.6%
2009 and 2008 financial years primarily
order to retain traffic, partially offset by increase in customers subscribing to these
due to significantly lower traffic resulting
higher traffic related to the Telkom Closer packages. In the 2008 financial year,
primarily from internet call usage being
packages. The decrease in fixed-to-mobile revenue from subscription based calling
substituted by our ADSL service, the
traffic in the 2009 financial year was plans increased by 98.7% primarily due to
substitution of calls placed using mobile
primarily due to an increase in the number a 69.4% increase in customers subscribing
services and discounts to business
of Telkom Closer customers, thereby to these packages.
customers, partially offset by increased
decreasing the out of bundle volumes. The
local off-peak tariffs and traffic volumes Interconnection. We generate revenue from
increase in fixed-to-mobile traffic in the
related to Telkom Closer packages. We interconnection services for traffic from calls
2008 financial year was primarily due to
increased penetration of subscription made by other operators’ customers that
discounts offered to larger customers on
based calling plans to stimulate usage in terminate on or transit through our network.
fixed-to-mobile calls.
the 2009 and 2008 financial years and to Revenue from interconnection services
counteract mobile substitution, which Revenue from international outgoing traffic includes payments from domestic mobile,
effectively lowers the cost to the customer. consists of revenue from calls made by our domestic fixed and international operators
On September 1, 2005, we decreased fixed-line customers to international regardless of where the traffic originates or
the price of local peak calls after the first destinations and from international voice terminates. The following table sets forth
unit by 5.0% to 38 SA cents per minute over internet protocol services and is a information related to interconnection
(VAT inclusive). This price was unchanged function of tariffs and the number, duration revenue for the years indicated.
Interconnection revenue
2007 2008 2009 2008/2007 2009/2008
% change % change
Interconnection revenue (ZAR millions, except

percentages) 1,639 1,757 2,084 7.2 18.6
Interconnection revenue from domestic mobile
operators (ZAR millions, except percentages) 816 838 916 2.7 9.3
Domestic mobile interconnection traffic
(millions of minutes, except percentages)(1) 2,419 2,502 2,484 3.4 (0.7)
Interconnection revenue from domestic fixed-line
operators (ZAR millions, except percentages) – 28 111 – 296.4
Domestic fixed-line interconnection traffic
(millions of minutes, except percentages)(2) – 113 415 – 267.3
Interconnection revenue from international
operators (ZAR millions, except percentages) 823 891 1,057 8.3 18.6
International interconnection traffic
(millions of minutes, except percentages)(2) 1,321 1,280 1,189 (3.1) (7.1)
Notes:
(1) Domestic mobile interconnection traffic, other than international outgoing mobile traffic, is calculated by dividing total domestic mobile and domestic fixed-
line interconnection traffic revenue, respectively, by the weighted average domestic mobile and domestic fixed-line interconnection traffic tariffs during the
relevant period. International outgoing mobile traffic is based on the traffic registered through the respective exchanges and reflected in interconnection
invoices.
(2) International interconnection and domestic fixed-line interconnection traffic is based on the traffic registered through the respective exchanges and reflected
on interconnection invoices.
Interconnection revenue from domestic interconnection traffic increased in the year services, such as emergency services and
mobile operators includes revenue for call ended March 31, 2008 primarily due to directory inquiry services. With effect from
termination and international outgoing calls an overall increase in mobile calls as a May 23, 2007, ICASA approved
from domestic mobile networks, as well as result of a growing mobile market, partially interconnection rates with Neotel,
Group
underserviced area licence holders and
access to other services, such as offset by increased mobile-to-mobile calls overview
value-added network service providers for
emergency services and directory enquiry bypassing our network. Interconnection
interconnection on our fixed-line network. In
services. Interconnection revenue from revenue from domestic mobile operators
October 2007, Neotel commenced Management
domestic mobile operators increased in the includes fees paid to our fixed-line business review
interconnection with Telkom. In July 2007,
2009 and financial year mainly due to by Vodacom of R462 million in the year Telkom began interconnection with the
higher average tariffs, partially offset by ended March 31, 2009, R468 million in underserviced area licence holders and in
lower volumes. Interconnection revenue the year ended March 31, 2008 and November 2007, value added network Sustainability
review
from domestic mobile operators increased R468 million in the year ended March 31, service providers. We expect inter-
in the 2008 financial year mainly due to 2007. Fifty percent of these amounts were connection revenue to increase as a result
increased traffic from domestic mobile attributable to our interest in Vodacom and of the entrance of Neotel and the further Performance
liberalisation of the South African review
operators, partially offset by lower average were eliminated from the Telkom Group’s
tariffs on mobile international outgoing revenue on consolidation. telecommunications industry, which may
partially mitigate declines in revenue in
calls. Domestic mobile interconnection
Interconnection revenue from domestic other areas. Financial
traffic decreased in the year ended March fixed-line operators includes fees paid by
statements
31, 2009 primarily due to increased Neotel, underserviced area licence holders Interconnection revenue from international
mobile-to-mobile calls bypassing our and value-added network service providers operators includes amounts paid by foreign
Company
network and volumes lost to other for call termination and international operators for the use of our network to Financial
Information
international carriers. Domestic mobile outgoing calls, as well as access to other terminate calls made by customers of such
Data services revenue

2007 2008 2009 2008/2007 2009/2008
% change % change
Data services revenue (ZAR millions, except

percentages) 7,489 8,308 9,310 10.9 12.1
Leased lines and other data revenue(1) 5,828 6,460 7,452 10.8 15.4
Leased line facilities revenues from mobile
operators 1,661 1,848 1,858 11.3 0.5
Number of managed network sites (at period end) 21,879 25,112 29,979 14.8 19.4
Internet all access subscribers (at period end) 302,593 358,066 423,196 18.3 18.2
Total ADSL subscribers (at period end)(2) 255,633 412,190 548,015 61.2 33.0
Notes:
(1) Leased lines and other data revenue includes all data services revenue other than leased line facilities revenue from mobile operators.
(2) Excludes Telkom internal ADSL services of 1,029, 751 and 523 as of March 31, 2009, 2008 and 2007, respectively.
operators and payments from foreign distance. The table above sets forth amounts were attributable to our interest in
operators for interconnection hubbing information related to revenue from data Vodacom and were eliminated from the
traffic through our network to other foreign services for the periods indicated. Telkom Group’s revenue on consolidation.
networks. Interconnection revenue from
Our data services revenue increased in Sundry revenue. Sundry revenue includes
international operators increased in the
both the 2009 and 2008 financial years revenue relating to collocation of other
year ended March 31, 2009 primarily
primarily due to increased revenue from licensed operators on Telkom owned
due to the weakening of the Rand against
data connectivity service, including ADSL properties, the sale of materials and
the SDR, the notional currency in which
connectivity and SAIX, internet access, and revenue related to the recovery of costs for
international rates are determined, and
managed data networks, including VPN work performed on behalf of other licensed
increased switched hubbing traffic volumes
Supreme and increased revenue from operators. Sundry revenue increased by
due to a reduction in tariffs to stimulate
leased line facilities from mobile operators. 44.5% to R328 million in the 2009
competitiveness. Interconnection revenue
These increases were partially offset by financial year and 18.8% to R227 million
from international operators increased in
decreased tariffs for leased line facilities to in the 2008 financial year from
the year ended March 31, 2008 primarily
mobile operators and data connectivity R191 million in the 2007 financial year.
due to the weakening of the rand against
services. Revenue from leased line facilities The increase in the 2009 financial year
the SDR, the notional currency in which
from mobile operators was relatively flat in was primarily due to revenue from the FIFA
international rates are determined, and
the year ended March 31, 2009. Revenue World Cup project. The increase in the
increased switched hubbing traffic volumes
from leased line facilities from mobile 2008 financial year was primarily due to
due to a reduction in tariffs to stimulate
operators increased in the year ended an increase in prices for collocation and
competitiveness, partially offset by lower
March 31, 2008 primarily due to the roll- recoveries.
volumes and settlement rates.
out of third generation and universal mobile
Fixed-line operating expenses
Data. Data services comprise data telecommunications system products by the
The following table shows the operating
transmission services, including leased mobile operators.
expenses of our fixed-line segment broken
lines and packet based services, managed
Operating revenue from our data services down by expense category as a
data networking services and internet
included R1,059 million, R1,028 million percentage of total revenue and the
access and related information technology
and R907 million in revenue received by percentage change by operating expense
services. In addition, data services include
our fixed-line business from Vodacom in the category for the years indicated.
revenue from ADSL. Revenue from data
years ended March 31, 2009, 2008 and
services is mainly a function of the number
2007, respectively. Fifty percent of these
of subscriptions, tariffs, bandwidth and
Fixed-line operating expenses

2007 2008 2009 2008/ 2009/
% of % of % of 2007 2008
(in millions, except percentages) ZAR revenue ZAR revenue ZAR revenue % change % change
Employee expenses(1) 7,096 21.9 7,397 22.7 7,999 23.8 4.2 8.1
Payments to other
network operators 6,461 20.0 6,902 21.2 7,536 22.3 6.8 9.2
expenses(2)(3) 3,976 12.3 3,899 11.9 6,582 19.5 (1.9) 68.8
Service fees 2,206 6.8 2,413 7.4 2,761 8.2 9.4 14.4
Operating leases 762 2.4 619 1.9 613 1.8 (18.8) (1.0)
Depreciation, amortisation,
impairments and write-offs 3,582 11.1 3,732 11.5 4,358 13.0 4.2 16.8
Fixed-line operating expenses 24,083 74.5 24,962 76.6 29,849 88.7 3.6 19.6
Notes:
(1) Employee expenses include workforce reduction expenses of R8 million, R3 million and R24 million in the years ended March 31, 2009, 2008 and
2007, respectively.
(2) In the year ended March 31, 2007 we recorded a provision of R527 million for probable liabilities related to Telkom’s arbitration with Telcordia,
excluding legal fees, of which R510 million is included in selling, general and administrative expenses and R11 million for interest and R6 million for
foreign exchange rate effect is included in finance charges. In the year ended March 31, 2008 we recorded a provision of R569 million for probable
liabilities related to Telkom’s arbitration with Telcordia, including legal fees. The movement in the provision is due to increased interest of R53 million and
foreign exchange rate effect of R52 million, which are included in finance charges, partially offset by a provisional payment made in respect of specific
sub-claims within the Telcordia claim. In the year ended March 31, 2009 we recorded a provision of R664 million for probable liabilities related to
Telkom’s arbitration with Telcordia, including legal fees. The movement in the provision is due to increased interest of R11 million and foreign exchange
rate effect of R94 million, which are included in finance charges, partially offset by a R10 million reversal of the provision which is included in selling,
general and administrative expenses.
(3) Includes a R254 million and R217 million impairment relating to Telkom Media in the 2009 and 2008 financial years, respectively and R1,843 million
relating to the impairment of Multi-Links, R85 million impairment relating to Africa Online in the 2009 financial year.
Fixed-line operating expenses increased in operating expenses increased in the 2008 Employee expenses. Employee expenses
the 2009 financial year primarily due to financial year primarily due to increased consist mainly of salaries and wages for
Group
increased selling, general and administrative payments to other network operators, employees, including bonuses and other overview
expenses, payments to other network employee expenses, service fees and incentives, benefits and workforce
operators, depreciation, amortisation, depreciation, amortisation, impairment and reduction expenses.
impairment and write-offs, employee write-offs, partially offset by lower leases and Management
The following table sets forth information review
expenses and service fees. Fixed-line selling, general and administrative expenses.
related to our employee expenses for the
years indicated.
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information
Fixed-line employee expenses

(in millions, except percentages and 2007 2008 2009 2008/2007 2009/2008
number of employees) ZAR ZAR ZAR % change % change
Salaries and wages 5,095 5,509 5,746 8.1 4.3

Benefits 2,673 2,671 2,981 (0.1) 11.6
Workforce reduction expenses 24 3 8 (87.5) 166.7
Employee related expenses capitalised (696) (786) (736) 12.9 (6.4)
Employee expenses 7,096 7,397 7,999 4.2 8.1
Number of full-time, fixed-line employees

(at period end) 25,864 24,879 23,520 (3.8) (5.5)
Employee expenses increased in the year provisions, workmen’s compensation and employees in the 2008 financial year and
ended March 31, 2009 primarily due to a levies payable for skills development. 13 employees in the 2007 financial year
higher provision for medical aid for Benefits increased in the 2009 financial left Telkom as part of the conclusion of
pensioners as a result of increased interest year primarily due to a higher provision for Telkom’s workforce reduction initiatives for
costs, higher salaries and wages as a result medical aid for pensioners as a result of the 2005 financial year.
of average annual salary increases of increased interest costs and a higher
Employee related expenses capitalised
10.85% as well as a higher leave provision for leave as a result of annual
include employee related expenses
provision, partially offset by a lower salary increases and a decrease in leave
associated with construction and
number of employees. Employee expenses days taken. Benefits decreased in the
infrastructure development projects.
increased in the year ended March 31, 2008 financial year primarily due to lower
Employee related expenses capitalised
2008 primarily due to higher salaries and team awards, a lower provision for
decreased in the year ended March 31,
wages as a result of average annual salary medical aid for pensioners as a result of the
2009 primarily due to an increase in the
increases of 7.0%, and increased share annuity policy qualifying as a plan asset in
use of subcontractors. Employee related
option grant expenses as a result of the June 2006, a lower provision for leave as
expenses capitalised increased in the year
higher number of shares granted in the a result of the decrease in the number of
ended March 31, 2008 primarily due to
year, partially offset by lower team employees and lower training expenses, annual salary increases and increased
awards. partially offset by increased share option capital expenditures on projects during the
grant expenses as a result of the higher year.
Salaries and wages increased in the year
number of shares allocated during the year.
ended March 31, 2009 primarily due to Payments to other network operators.
average annual salary increases of Workforce reduction expenses include the Payments to other network operators
10.85%, partially offset by lower cost of voluntary early retirement, include settlement payments paid to the
headcount. Salaries and wages increased termination severance packages offered to three South African mobile communications
in the year ended March 31, 2008 employees and the cost of social plan network operators and commencing in the
primarily due to average annual salary expense to prepare affected employees for 2008 financial year, Neotel, for
increases of 7.0% and were further new careers outside Telkom. Workforce terminating calls on their networks and to
impacted by increased payments to reduction expenses decreased substantially international network operators for
contractors from original equipment in the years ended March 31, 2009 and terminating outgoing international calls and
manufacturers. 2008 due to the moratorium on voluntary traffic transiting through their networks.
Benefits include allowances, such as severance packages taken in the 2007 The following table sets forth information
bonuses, company contributions to medical financial year. An additional seven related to our payments to other network
aid, pension and retirement funds, leave employees in the 2009 financial year, four operators for the periods indicated.
Fixed-line payments to other network operators

2007 2008 2009 2008/2007 2009/2008
Payments to mobile communications network operators 5,425 5,460 5,432 0.6 (0.5)
Payments to international and other network operators 1,036 1,208 1,853 16.6 53.4
Payments to fixed-line operators – 234 251 n/a 7.3
Payments to other network operators 6,461 6,902 7,536 6.8 9.2
Payments to fixed-line operators increased in the 2009 financial year due to higher call volumes from interconnection with Neotel and
VANS. Payments to fixed-line operators in the 2008 financial year were derived from interconnection commencing with Neotel, USALS
and VANS during the 2008 financial year. Payments to mobile network operators decreased in the 2009 financial year primarily due to
lower call volumes from our fixed-line network to the mobile networks due to an increase in mobile-to-mobile calls. Payments to international
operators increased during the 2009 financial year due to increased switch hubbing volumes and higher exchange rates. Payments to
mobile and international network operators increased in the 2008 financial year primarily due to higher call volumes from our fixed-line
network to the mobile networks, resulting from discounts offered on our CellSaver and Telkom Closer products, increased fixed-to-mobile
calls by business customers due to growth in the mobile market, increased international outgoing traffic arising from our reduced average
international tariffs, a weaker exchange rate in the 2008 financial year and payments to fixed-line operators commencing in the 2008
financial year. Payments to other network operators include payments made by our fixed-line business to Vodacom, which were
R3,020 million, R3,017 million and R2,954 million in the years ended March 31, 2009, 2008 and 2007, respectively. Fifty percent
of these amounts were attributable to our interest in Vodacom and were eliminated from the Telkom Group’s expenses on consolidation.
Selling, general and administrative expenses. Selling, general and administrative expenses include materials and maintenance costs,
marketing expenditures, bad debts, theft, losses and other expenses, including obsolete stock and cost of sales.
The following table sets forth information related to our fixed-line selling, general and administrative expenses for the periods indicated.
Fixed-line selling, general and administrative expenses

2007 2008 2009 2008/2007 2009/2008
Group
overview
Materials and maintenance 1,900 1,996 2,295 5.1 15.0
Marketing 604 583 574 (3.5) (1.5)
Bad debts 137 217 285 58.4 31.3
Management
Other(1)(2) 1,335 1,103 3,428 (17.4) 210.8 review
Selling, general and administrative expenses(1)(2) 3,976 3,899 6,582 (1.9) 68.8
Notes: Sustainability
review
(1) In the year ended March 31, 2007 we recorded a provision of R527 million for probable liabilities related to Telkom’s arbitration with Telcordia,
excluding legal fees, of which R510 million is included in selling, general and administrative expenses and R11 million for interest and R6 million for
foreign exchange rate effect is included in finance charges. In the year ended March 31, 2008 we increased the provision to R569 million for probable
Performance
liabilities related to Telkom’s arbitration with Telcordia, including legal fees. The movement in the provision is due to increased interest of R53 million and review
foreign exchange rate effect of R52 million, which are included in finance charges, partially offset by a provisional payment made in respect of specific
sub-claims within the Telcordia claim. In the year ended March 31, 2009 we increased the provision to R664 million for probable liabilities related to
Telkom’s arbitration with Telcordia, including legal fees. The movement in the provision is due to increased interest of R11 million and foreign exchange
Financial
rate effect of R94 million, which are included in finance charges, partially offset by a R10 million reversal of the provision which is included in selling, statements
general and administrative expenses.
(2) Includes a R254 million and R217 million impairment relating to Telkom Media in the 2009 and 2008 financial years, respectively and a R1,843 million
impairment of the Multi-Links investment and an R85 million impairment of the Africa Online investment in the 2009 financial year. Company
Financial
Information
Selling, general and administrative fuel. In the 2009 financial year increased R1,843 million impairment of the Multi-
expenses increased primarily due to the maintenance on the submarine cables as a Links investment, R254 million impairment
impairment of the Multi-Links investment in result of higher exchange rates also of the Telkom Media loan and R85 million
the 2009 financial year, increased contributed. impairment of the Africa Online investment
materials and maintenance expenses and in the 2009 financial year. Other expenses
Marketing expenses were relatively flat in
higher bad debts. Selling, general and decreased in the year ended March 31,
the 2009 financial year. Marketing
administrative expenses decreased 2008 primarily due to the provision for
expenses decreased in the year ended
primarily due to the provision for probable probable liabilities in the Telcordia dispute
March 31, 2008 primarily due to lower
liabilities in the Telcordia dispute in the in the 2007 financial year, which were not
sponsorships and decreased calling plan
2007 financial year, which were not increased significantly in the 2008 financial
advertising during the year.
increased significantly in the 2008 year, partially offset by the R217 million
financial year, and lower marketing Bad debt increased in the year ended impairment of the Telkom Media loan in the
expense, partially offset by the R217 million March 31, 2009 as more debtors 2008 financial year.
impairment of the Telkom Media loan in the defaulted on payments as a result of poor
Service fees. Service fees include payments
2008 financial year – increased materials economic conditions in South Africa driven
in respect of the management of our
and maintenance expenses and higher by higher inflation. Bad debt increased in
properties, to TFMC, a facilities and
bad debts. the year ended March 31, 2008 due to
property management company, consultants
provisions for higher international bad
Materials and maintenance expenses and security. Consultants comprise fees
debts in certain countries, including
include stock write-offs, subcontractor paid to collection agents and to providers
Nigeria, Gabon and the United Kingdom.
payments and consumables required to of other professional services and external
Bad debt as a percentage of revenue was
maintain our network. Materials and auditors. Security refers to services to
1.0%, 0.7% and 0.4% in the 2009, 2008
maintenance expenses increased in the
and 2007 financial years, respectively. safeguard the network and contracts to
years ended March 31, 2009 and 2008
ensure a safe work environment, such as
primarily due to increased operating Other expenses include obsolete stock,
guard services.
maintenance projects as result of an cost of sales, subsistence and travel and an
increase in the number of technologies offset for bad debts recovered. Other The following table sets forth information
employed in the network and higher fuel expenses increased in the year ended relating to service fee expenses for the
costs as a result of the increased price of March 31, 2009 primarily due to the periods indicated.
Fixed-line service fees

2007 2008 2009 2008/2007 2009/2008
Property management 1,141 1,222 1,262 7.1 3.2

Consultants, security and other 1,065 1,191 1,499 11.8 25.9
Service fees 2,206 2,413 2,761 9.4 14.4

The following table sets forth information relating to depreciation, amortisation, impairments and write-offs for the periods indicate.
Fixed-line depreciation, amortisation, impairments and write-offs

2007 2008 2009 2008/2007 2009/2008
Depreciation of property, plant and equipment 2,993 3,061 3,399 2.3 11.0
Amortisation of intangibles 305 409 638 34.1 56.0
Write-offs of property, plant and equipment and
intangible assets 284 262 321 (7.7) 22.5
Depreciation, amortisation, impairments and

write-offs 3,582 3,732 4,358 4.2 16.8
Service fees increased in the year ended of vehicles from 9,694 at March 31, 2007 customers in South Africa. In addition to its
March 31, 2009 primarily due to to 8,792 at March 31, 2008. South African operations, Vodacom has
consultancy fees relating to the Vodacom investments in mobile communications
sale and unbundling transaction and higher network operators in Lesotho, Tanzania, the
and write-offs. Depreciation, amortisation,
security costs to secure the copper network. Democratic Republic of the Congo and
impairments and write-offs increased in the
Service fees increased in the year ended Mozambique. On December 30, 2008
year ended March 31, 2009 primarily as
March 31, 2008 primarily as a result of Vodacom acquired 100% shareholding in
a result of higher amortisation of intangible
increased property payment costs, mainly Gateway Telecommunications Plc,
assets and increased depreciation due to
related to increased electricity usage, Gateway Communications (Proprietary)
the ongoing investment in
electricity rates and taxes, payments to Limited, Gateway Communications
telecommunications network equipment
consultants to explore local and Mozambique LDA, Gateway
and data processing equipment.
international investment opportunities, Communications (Tanzania) Limited, GS
Telecom (Proprietary) Limited and their
higher security costs due to increases in and write-offs increased in the year ended
respective subsidiaries, or Gateway which
contract prices and maintenance and March 31, 2008 primarily as a result of
has customers in 40 countries in Africa.
monitoring of the cable alarm system and higher amortisation of intangible assets
legal fees related to Telcordia. and increased depreciation due to the The following table shows information
ongoing investment in telecommunications Group
related to our 50% share of Vodacom’s
Operating leases. Operating leases overview
network equipment and data processing operating revenue and operating profit
include payments in respect of equipment,
equipment, partially offset by lower asset broken down by Vodacom’s South African
buildings and vehicles. Operating leases
write-offs. operations and operations in other African Management
decreased by 1.0% primarily due to a review
Mobile segment countries and Gateway for the periods
6.0% reduction in the vehicle fleet from
Mobile encompasses all the operating indicated. All amounts in this table and the
8,792 vehicles at March 31, 2008 to
activities of our 50% joint venture discussion of our mobile segment that
8,266 vehicles at March 31, 2009. Sustainability
investment in Vodacom, the largest mobile review
Operating leases decreased in the year follows represent 50% of Vodacom’s results
operator in South Africa with an of operations unless otherwise stated and
ended March 31, 2008 primarily due to a
approximate 53% market share as of
discount received on the extension of our are before the elimination of intercompany Performance
March 31, 2009 based on total estimated review
vehicle lease and a reduction in the number transactions with us.
Financial
statements
Company
Financial
Information
Mobile operating revenue and profits

2008/ 2009/
2007 2008 2009 2007 2008
Operating revenue 20,573 100.0 24,089 100.0 27,594 100.0 17.1 14.6
South Africa 18,504 89.9 21,392 88.8 23,688 85.8 15.6 10.7
Other African countries 2,069 10.1 2,697 11.2 3,502 12.7 30.4 29.8
Gateway – – – – 404 1.5 – n/a
Operating profit(1) 5,430 100.0 6,247 100.0 6,009 100.0 15.0 (3.8)
South Africa 5,170 95.2 5,852 93.7 5,690 94.7 13.2 (2.8)
Other African countries 260 4.8 395 6.3 303 5.0 51.9 (23.3)
Gateway – – – – 16 0.3 n/a
EBITDA(1)(2) 7,123 100.0 8,217 100.0 8,407 100.0 15.4 2.3
Notes:
(1) Mobile operating profit and mobile EBITDA include our 50% share of an impairment loss of R23 million, R30 million and R112 million, in the 2007,
2008 and 2009 financial years, respectively, in respect of the assets in Mozambique due to a decrease in the fair value of the assets. R5.8 million of
the impairment loss related to available-for-sale investments.
(2) Mobile EBITDA comprises our 50% share of Vodacom’s EBITDA, which represents mobile net profit, before taxation, finance charges, investment income
and depreciation, amortisation and impairments, but includes the profit on sale of investments and broad-based black economic empowerment expenses.
We believe that EBITDA provides meaningful additional information to investors since it is widely accepted by analysts and investors as a basis for
comparing a company’s underlying operating profitability with that of other companies as it is not influenced by past capital expenditures or business
acquisitions, a company’s capital structure or the relevant taxation regime. This is particularly the case in a capital intensive industry such as
communications. It is also a widely accepted indicator of a company’s ability to service its long-term debt and other fixed obligations and to fund its
continued growth. EBITDA is not an IFRS measure. You should not construe EBITDA as an alternative to operating profit or cash flows from operating
activities determined in accordance with IFRS or as a measure of liquidity. EBITDA is not defined in the same manner by all companies and may not be
comparable to other similarly titled measures of other companies unless the definition is the same.
Mobile operating revenue interconnection revenue from other customers from other international networks
Vodacom derives revenue from mobile operators for the termination of calls on and Vodacom customers who roam abroad.
services as well as other related or value- Vodacom’s network and national roaming
The following table shows our 50% share
added goods and services. Vodacom’s revenue, revenue from equipment sales, of Vodacom’s revenue broken down by
revenue is mainly in the form of airtime including sales of handsets and accessories; major revenue type and as a percentage of
charges, primarily airtime payments from and revenue from international services, total operating revenue for our mobile
customers registered on Vodacom’s including airtime charges for the use of segment and the percentage change by
network; data products and services; Vodacom’s network through roaming of revenue type for the periods indicated.
Mobile operating revenue

2008/ 2009/
2007 2008 2009 2007 2008
Airtime and access 11,854 57.6 13,548 56.3 15,166 55.0 14.3 11.9
Data 1,671 8.1 2,501 10.4 3,221 11.7 49.7 28.8
Interconnection 3,918 19.0 4,443 18.4 4,899 17.7 13.4 10.3
Equipment sales 2,350 11.4 2,526 10.5 2,650 9.6 7.5 4.9
International airtime 653 3.2 918 3.8 1,043 3.8 40.6 13.6
Other sales and services 127 0.7 153 0.6 615 2.2 20.5 302.0
Mobile operating revenue 20,573 100.0 24,089 100.0 27,594 100.0 17.1 14.6
Vodacom’s operating revenue from South year and R517 per month in the 2007 94.4% of all gross connections were
African operations increased in the 2009 financial year. South African prepaid ARPU prepaid customers in the 2009 financial
financial year mainly due to an increase in increased to R68 per month in the 2009 year. Vodacom expects the number of
customers driven by retention campaigns financial year from R62 per month in the prepaid mobile users to continue to grow
and loyalty programmes, the introduction 2008 financial year, a decrease from to a greater extent than contract mobile
of more affordable products and lower R63 per month in the 2007 financial year. users. The increasing number of prepaid
denomination vouchers. Revenue growth in In the 2008 and 2007 financial years, users, who tend to have lower average
the other African operations was mainly contract and prepaid customer ARPU were usage, and the lower overall usage as the
due to strong customer growth driven by also negatively impacted by the high lower end of the market is penetrated have
the launch of new products and services, growth in Vodacom’s hybrid contract historically resulted in decreasing overall
aggressive sales and marketing campaigns product, Family Top Up, which contributed average revenue per customer. Total South
as well as enhanced network coverage. to the migration of higher spending African ARPU increased to R133 per month
Vodacom’s operating revenue increased in prepaid customers, who tend to spend less in the 2009 financial year and remained
the 2008 financial year primarily due to than existing contract customers, to stable at R128 per month in the 2008 and
increased airtime, data, interconnection contracts. In the 2007 financial year, 2007 financial years. Total South African
and equipment sales revenue as a result of Vodacom changed its definition of active ARPU remained stable in the 2008
continued customer growth. Vodacom’s customers to exclude calls forwarded to financial year, despite declining South
equipment sales further increased in the voicemail from the definition of revenue African contract and prepaid ARPU, due to
2008 financial year due to the added generating activity for a six-month period, a shift in the customer mix to higher
functionality of new phones based on new resulting in the deletion of approximately spending contract customers, which
technologies. three million customers. Prepaid ARPU was represented 14.3% of total South African
positively impacted by this temporary rule customers as of March 31, 2009 and
Our 50% share of Vodacom’s revenue from
change in the 2007 financial year. 2008, respectively.
operations outside of South Africa increased
Vodacom subsequently changed its
to R3,502 million for the year ended Service providers in South Africa generally
definition of revenue generating activity
March 31, 2009 from R2,697 million subsidise handsets when a contract
back to include calls forwarded to
for the year ended March 31, 2008 and customer enters into a new contract or
voicemail effective September 1, 2006.
R2,069 million in the year ended renews an existing contract depending on
Such SIM cards were disconnected from
March 31, 2007. The increase in the airtime and tariff plan and type of
the network after being inactive for a
Vodacom’s operating revenue from other handset purchased. Subsidised handset
215 consecutive day period. Since
African countries in the 2009 and 2008 sales give customers an incentive to switch
implementing this change, prepaid SIM Group
financial years was primarily due to operators to obtain new handsets and
cards remaining in an active state on the overview
substantial increases in the number of have contributed to churn. Handsets for
network, with only call forwarding to
customers in Vodacom’s operations, prepaid customers are not subsidised by
voicemail and no other revenue generating
particularly in Tanzania, the Democratic Vodacom as these users have the freedom Management
activities, increased significantly. Vodacom review
Republic of the Congo and Mozambique, of switching operators and contribute to
therefore implemented a supplementary
and the weakening of the rand in the 2009 churn. Vodacom is more vulnerable to
disconnection rule in September 2007 to
and 2008 financial years, which resulted in churn than other mobile communications Sustainability
disconnect inactive prepaid SIM cards
higher rand converted revenue, partially providers in South Africa since it has the review
after 13 months of being kept in an active
offset by lower ARPU resulting from the largest number of customers in South
state, by call forwarding to voicemail only,
higher volume of lower spending prepaid Africa. To date, mobile number portability
and not having had any other revenue Performance
customers. Revenue from Vodacom’s other has had no significant impact on churn. review
generating activity on Vodacom’s network.
African countries as a percentage of
The implementation of the supplementary The cost to acquire contract customers in a
Vodacom’s total mobile operating revenue
disconnection rule led to the disconnection highly developed market is high. Vodacom
increased to 12.7% in the year ended Financial
of an additional 2.9 million prepaid SIM has therefore implemented upgrade and statements
March 31, 2009 from 11.2% in the year
cards in September 2007, which resulted retention policies over the last few years
ended March 31, 2008 and 10.1% in the
in higher prepaid ARPU than would have and has striven to maintain a high level of
Company
year ended March 31, 2007. Financial
otherwise occurred. Approximately 85.3% incentives to service providers in order to
Information
South African contract ARPU decreased to of Vodacom’s South African mobile reduce churn. Vodacom’s churn rate for
R474 per month in the 2009 financial year customers were prepaid customers at contract customers in South Africa
from R486 per month in the 2008 financial March 31, 2009 and approximately increased to 9.9% in the 2009 financial
year from 8.3% in the 2008 financial year Vodacom’s primary market in South Africa GPRS, 3G and HSDPA, the volume of data
mainly due to an increase in involuntary continues to mature and Vodacom transferred increased to 3,175 Terabytes,
churn driven by the economic conditions. continues to connect more marginal a 97.8% increase from the 2008 financial
Vodacom’s churn rate for contract customers in its South African operations, year.
customers decreased in the 2008 financial Vodacom expects that growth in airtime in
Interconnection. Vodacom generates
year to 8.3% from 9.7% in the 2007 South Africa will continue to slow. Total
interconnection revenue when a call
financial year mainly due to an customers increased 16.5% and 12.7% in
originating from our fixed-line network and
improvement in service and products to the years ended March 31, 2009 and
more recently, Neotel, or one of the other
customers and the continued high level of 2008, respectively, primarily due to strong
mobile operators’ networks terminates on
handset support to retain customers. prepaid customer growth in South Africa
Vodacom’s network. Interconnection
Prepaid churn is adversely impeded by an and significant customer growth in
revenue also includes revenue from Cell C
increasingly competitive market, lower Vodacom’s operations outside of South
for national roaming services. Vodacom
barriers to entry for prepaid customers in Africa, particularly in Tanzania, the
does not have a roaming agreement with
South Africa and the volatile nature of the Democratic Republic of Congo and
MTN. Vodacom generates national
prepaid customer base. Vodacom’s churn Mozambique in the 2009 and 2008
roaming revenue when its mobile network
rate for prepaid customers in South Africa financial years.
carries a call made from a Cell C customer.
decreased to 45.4% in the 2009 financial
Data revenue. Vodacom derives data Interconnection revenue depends on the
year from 47.9% in the 2008 financial
revenue from mobile data, including short volume of traffic terminating on Vodacom’s
year mainly due to focused campaigns to
messaging services, or SMSs, and network, the interconnection termination
offer greater value to customers to reduce
multimedia messaging services, or MMSs, rates payable by ourselves and the other
churn coupled with the marketing of SIM
general packet radio services, or GPRS, mobile operators to Vodacom and national
swaps and various loyalty programmes.
and third generation services, or 3G. Data roaming rates.
Vodacom’s churn rate for prepaid
revenue contributed 11.7% of Vodacom’s
customers in South Africa increased to Vodacom’s interconnection revenue
total revenue in the year ended March 31,
47.9% in the 2008 financial year from increased in the years ended March 31,
2009, up from 10.4% in the year ended
37.5% in the 2007 financial year. The 2009 and March 31, 2008 primarily due
March 31, 2008 and 8.1% in the year
increase in prepaid churn in the 2008 to an increase in the number of calls
ended March 31, 2007. Vodacom’s
financial year was mainly due to the terminating on Vodacom’s network as a
mobile data revenue increased in the year
supplementary disconnection rule result of the increased number of
ended March 31, 2009 primarily due to
implemented, which led to the Vodacom’s customers and South African
growth in the number of messages sent as
disconnection of an additional 2.9 million mobile users generally. The increase in the
well as an increase in the number of
prepaid SIM cards in September 2007. 2009 financial year was mainly driven by
broadband customers. Vodacom’s mobile
an increase in incoming traffic as well as
Airtime. Vodacom derives airtime revenue data revenue increased in the year ended
an increase in national roaming revenue
from connection and monthly rental fees March 31, 2008 primarily due to higher
from Cell C as a result of their increased
and airtime usage fees paid by Vodacom’s penetration levels influenced by more
market share and increased calls
contract customers for use of its mobile affordable product offerings.
terminating on Vodacom’s network. The
networks. Airtime revenue also includes
In South Africa, Vodacom transmitted growth in the 2008 financial year was
fees paid by Vodacom’s prepaid phone
5.4 billion SMSs and MMSs over its also attributable to the growth in the
customers for prepaid starter phone
network in the 2009 financial year, substitution of fixed-line calls by mobile
packages and airtime recharge vouchers
compared to 5.0 billion in the 2008 calls and incoming traffic resulting from an
utilised, which entitle customers to receive
financial year. The number of broadband overall increase in the customer base of
unlimited incoming calls up to 365 days.
connectivity customers increased by 79.8% other mobile operators. The increases were
Airtime revenue depends on the total
to approximately 720,000 customers from partially offset by a reduced number of
number of customers, traffic volume, mix of
approximately 400,000 customers as of fixed-line calls from Telkom’s network
prepaid and contract customers and tariffs.
March 31, 2008. The number of terminating on Vodacom’s network.
Vodacom’s airtime revenue increased in the 3G/HSDPA handsets on the network as of Interconnection revenue in our mobile
years ended March 31, 2009 and March March 31, 2009 was 2.8 million, as segment included R1,483 million,
31, 2008 primarily due to continued compared to 1.3 million as of March 31, R1,482 million and R1,454 million in the
customer growth and an increase in 2008. During the 2009 financial year years ended March 31, 2009, 2008 and
outgoing voice traffic minutes. As there was an increase in the usage of 2007, respectively, for calls received from
our fixed-line business, which were enabled phones, camera phones and the acquisition of Gateway. Vodacom’s
eliminated from the Telkom Group’s colour screens. other sales and services revenue increased
revenue on consolidation. 20.5% to R153 million in the 2008
International airtime. International airtime
financial year primarily due to an increase
Equipment sales. Vodacom generates revenues are predominantly from
in inactivated starter packs which do not
revenue from equipment sales primarily international calls by Vodacom customers,
contain an expiration date, but which are
from the sale of mobile phones and roaming revenue from Vodacom’s
recognised as income after a period of
accessories. Vodacom purchases handsets customers making and receiving calls while
36 months.
for itself and for external service providers abroad and revenue from international
in bulk at purchase discounts in order to customers roaming on Vodacom’s Mobile operating expenses
lower the cost of handset subsidisation for networks. International airtime increased The following is a discussion of our mobile
contract customers. Equipment sales 13.6% to R1,043 million in the year ended segment’s operating expenses which
revenue fluctuates based on whether March 31, 2009 and 40.6% to comprise our 50% share in Vodacom’s
external providers and Vodacom’s other R918 million in the year ended March 31, operating expenses. Vodacom’s operating
African operators source equipment from 2008 primarily as a result of growth in the expense line items are presented in
Vodacom in South Africa or purchase customer base. accordance with the line items reflected in
equipment from third party suppliers. the Telkom Group’s consolidated operating
Other. Revenue from other sales and
expenses which are different from the
Vodacom’s equipment sales increased in services includes revenue from Vodacom’s
operating expense line items contained in
the 2009 and 2008 financial years cell captive insurance vehicle, wireless
Vodacom’s consolidated financial statements.
primarily due to the growth of Vodacom’s application services provider, or WASP,
customer base and the continued uptake of revenue, site sharing rental income as well The following table shows our 50% share
new handsets in South Africa as a result of as other revenue from non-core operations. of Vodacom’s operating expenses and the
cheaper rand prices of new handsets and Vodacom’s other sales and services percentage change for the periods
the added functionality of new phones revenue increased 302.0% to R615 million indicated.
based on new technologies such as 3G in the 2009 financial year primarily due to
Mobile operating expenses

2007 2008 2009 2008/2007 2009/2008
Employee expenses 1,186 1,488 1,804 25.5 21.2 Group

overview
Payments to other network operators 2,818 3,279 3,822 16.4 16.6
Selling, general and administrative expenses 8,777 10,271 12,553 17.0 22.2
Service fees 82 115 169 40.2 47.0 Management
review
Operating leases 629 775 958 23.2 23.6
Depreciation, amortisation and impairments 1,693 1,970 2,398 16.4 21.7
Mobile operating expenses 15,185 17,898 21,704 17.9 21.3 Sustainability

review
Performance
review
Financial
statements
Company
Financial
Information
The increase in mobile operating expenses Vodacom’s employee expenses increased payments to other network operators
in the 2009 financial year was mainly due in the year ended March 31, 2008 increased significantly in the years ended
to the increased cost of connecting prepaid primarily as a result of a 9.5% increase in March 31, 2009 and 2008 as a result of
customers and retaining contract customers, headcount to support the expansion of increased outgoing traffic in line with
as well as increased network operational customer care operations, the strengthening increased customer growth and the
expenditure due to the roll-out of additional of senior management structures to support increasing percentage of outgoing traffic
sites, coupled with increased inter- the growth in ongoing operations and the terminating on the other mobile networks
connection rates in the DRC. The increase in launch of Vodacom Business. Annual salary rather than Telkom’s fixed-line network as
mobile operating expenses in the 2008 increases and increased provisions for the cost of terminating calls on other mobile
financial year was primarily due to other employee incentive schemes also networks is higher than calls terminating on
inflationary factors and growth in the contributed to the increase in staff Telkom’s fixed-line network. As the mobile
business, which led to increased selling, expenses. communications market continues to grow
general and administrative expenses to in South Africa, Vodacom expects that
Total headcount in Vodacom’s South
support the expansion of 3G, growth in interconnection charges will continue to
African operations increased 12.4% to
Vodacom’s South African and African increase and adversely impact Vodacom’s
5,451 employees as of March 31, 2009
operations and increased competition, profit margins.
and 2.6% to 4,849 employees as of
increased payments to other network
March 31, 2008 from 4,727 employees Payments to other network operators in our
operators due to higher outgoing traffic and
as of March 31, 2007. Total headcount in mobile segment included R231 million,
the increased percentage of outgoing traffic
Vodacom’s other African countries R234 million and R234 million in the years
terminating on other mobile networks,
increased 17.3% to 2,336 employees as ended March 31, 2009, 2008 and
higher employee costs as a result of
of March 31, 2009 and 30.9% to 1,992 2007, respectively, for interconnection fees
increased headcount as well as increased
employees as of March 31, 2008 from paid to our fixed-line segment, which were
depreciation, amortisation and impairment.
1,522 employees as of March 31, 2007. eliminated from the Telkom Group’s
Employee expenses. Employee expenses Total headcount includes temporary operating expenses on consolidation.
consist mainly of salaries and wages of agency employees. Employees seconded
employees as well as contributions to to other African countries are included in
expenses. Selling, general and
employee pension, medical aid funds and the number of employees of other African
administrative expenses include customer
benefits and the deferred bonus incentive countries and excluded from Vodacom
acquisition and retention costs, packaging,
scheme. South Africa’s number of employees.
distribution, marketing, regulatory licence
Vodacom’s employee expenses increased Payments to other network operators. fees, bad debts and various other general
in the year ended March 31, 2009 Payments to other network operators consist administrative expenses, including
primarily as a result of the increase in the mainly of interconnection payments made accommodation, information technology
average number of employees and annual by Vodacom’s South African and other costs, office administration, consultant
salary increases, partially offset by lower African operations for terminating calls on expenses, social economic investment and
performance based remuneration. other operators’ networks. Vodacom’s insurance.
The following table sets forth information related to our 50% share of Vodacom’s selling, general and administrative expenses for the
periods indicated.
Mobile selling, general and administrative expenses

2007 2008 2009 2008/2007 2009/2008
Selling, distribution and other 7,703 9,063 11,105 17.7 22.5

Marketing 573 632 762 10.3 20.6
Regulatory and licence fees 490 527 607 7.6 15.2
Bad debts 11 49 79 345.5 61.2
Selling, general and administrative expenses 8,777 10,271 12,553 17.0 22.2
Vodacom’s selling, general and increased customer connections, accommodation, office equipment and
administrative expenses increased in the competition, revenue, cost of equipment as motor vehicles. Operating leases in our
year ended March 31, 2009 primarily a result of increased handset sales and mobile segment included R529 million,
due to an increase in selling, distribution maintenance of the GSM infrastructure and R514 million and R453 million in the years
and other expenses and marketing billing systems as well as due to the ended March 31, 2009, 2008 and
expenses to support the launch and Vodafone global alliance fee. 2007, respectively, for operating lease
expansion of 3G, growth in Vodacom’s payments to our fixed-line segment, which
The increase in marketing expenses in the
South African and African operations and were eliminated from the Telkom Group’s
2009 financial year was mainly as a result
competition. Vodacom’s selling, general operating expenses on consolidation.
of promotion campaigns to counter
and administrative expenses increased in competition. The increase in marketing Depreciation, amortisation and
the year ended March 31, 2008 primarily expenses in the 2008 financial year was impairments. Depreciation, amortisation
due to an increase in selling, distribution mainly due to promoting new technologies, and impairments increased in the years
and other expenses, incentive costs, including 3G and Vodafone live! and ended March 31, 2009 and 2008
regulatory and licence fees and marketing further promoting the Vodacom brand in all primarily due to higher capital expenditure
expenses to support the launch and operations. The increases in regulatory and as a result of the implementation and
expansion of 3G, growth in Vodacom’s licence fees during the reporting periods expansion of 3G/HSDPA networks, the
South African and African operations and were directly related to the increase in weakening of the rand against the other
increased competition. operating revenues and corresponding
functional currencies of Vodacom and the
payments under Vodacom’s existing
Selling, distribution and other expenses impairment of assets in Vodacom
licences. The increase in bad debts in the
include cost of goods sold, commissions, Mozambique.
2008 financial year resulted from a clean-
customer acquisition and retention
up of Smartphone debtors following the Multi-Links segment
expenses, distribution expenses and
increase in shareholding to 100%. Multi-Links operating revenue
insurance. The increase in selling,
Multi-Links operating revenue is derived
distribution and other expenses in the Service fees. Service fees include
principally from fixed, mobile, data, long
2009 financial year was primarily due to consultancy services for technical,
administrative and managerial services, distance and international communications
increased fuel and electricity costs,
audit fees, legal fees and communication services throughout Nigeria, through our
competition and network operational
and information technology costs. wholly owned subsidiary, Multi-Links.
expenditure as a result of the roll-out of
additional sites. The increase in selling, Operating leases. Operating leases The following table shows the operating
distribution and other expenses in the include payments in respect of rentals of revenue for our Multi-Links segment for the Group
overview
2008 financial year was primarily due to GSM transmission lines as well as office periods indicated.
Multi-Links operating revenue Management

review
2007 2008 2009 2008/2007 2009/2008
Sustainability
review
Multi-Links operating revenue – 845 1,900 – 124.9
Performance
Multi-Links operating expenses review
The increase in Multi-Links revenue is which was acquired with effect from May The following table shows operating
mainly as a result of subscriber growth and 1, 2007, contributed R845 million in the expenses for our Multi-Links segment broken
an increase in domestic traffic volumes as 2008 financial year from its customers in down by major expense categories and the Financial
statements
well as increased data revenue. Multi-Links, the Nigerian market since its acquisition. percentage change for the periods indicated.
Company
Financial
Information
Multi-Links operating expenses

2007 2008 2009 2008/2007 2009/2008
Employee expenses – 39 126 – 223.1

Payments to other operators – 624 652 – 4.5
Selling, general and administrative expenses – 142 1,117 – 686.6
Service fees – 14 38 – 171.4
Operating leases – 37 193 – 421.6
Depreciation, amortisation and impairments – 86 296 – 244.2
Other operating expenses – 942 2,422 – 157.1
Employee expenses increased by 223.1% in The increases in service fees were mainly Other segment
the 2009 financial year primarily due to an as a result of increased security cost and Other operating revenue
increase in the number of employees as well payments to consultants as a result of an Our other operating revenue is derived
as salary increases and bonus payments. increase in operations during the year. principally from directory services, through
our Trudon Group, internet services outside
The 686.6% increase in selling, general Operating leases increased 421.6% as a
South Africa, through our Africa Online
and administrative expenditure in the result of an increase in the number of
subsidiary.
2009 financial year primarily related to leased base stations, warehouses and
increased cost of sales and associated The following table shows the operating
office buildings as a result of the
handset subsidies of R281 million as a revenue for our other segment broken
expanding operations.
result of increased sales volumes, down by major revenue streams and the
increased advertising and promotional Depreciation, amortisation and impairments percentage change by major revenue
expenditure and an increase in expatriates increased 244.2% as a result of higher stream for the periods indicated.
fees as a result of an increase in staff capital expenditure incurred during the
seconded from Telkom during the year. year.
Other operating revenue

2007 2008 2009 2008/2007 2009/2008
Trudon 865 930 1,020 7.5 9.7

Africa Online 8 110 194 n/a 76.4
Other operating revenue 873 1,040 1,214 19.1 16.7

The increase in other operating revenue These additional revenue streams were Other operating expenses
was mainly attributable to UUNET, Africa further supported by the continued growth The following table shows operating
Online’s 40% joint venture. Our other in advertising revenue from our subsidiary, expenses for our other segment broken
operating revenue increased in the 2008 Trudon. Revenue from directory services down by major expense categories and
financial year primarily due the inclusion in increased in the years ended March 31, the percentage change for the periods
the current year of revenue generated by 2009 and 2008 primarily due to annual indicated.
our newly acquired subsidiary, Africa tariff increases and increased marketing
Online. Africa Online, which was acquired and online efforts, resulting in increased
with effect from February 23, 2007, spending on advertising by existing
increased the revenue contribution to the customers and additional advertising
group from R8 million during the 2007 revenue from new customers.
financial year to R110 million during the
2008 financial year.
Other operating expenses

2007 2008 2009 2008/2007 2009/2008
Employee expense 158 193 220 22.2 14.0

Payments to other operators – 53 89 – 67.9
Selling, general and administrative expenses 310 335 404 8.1 20.6
Service fees 5 12 12 140.0 –
Operating leases 20 23 26 15.0 13.0
Depreciation, amortisation and impairments 19 32 50 68.4 56.3
Other operating expenses 512 648 801 26.6 23.6
Increases in other operating expenses in driven by increases in payments to other Online, which impacted all expense
the 2009 financial year were primarily operators, employee expenses, depre- categories.
driven by increases in selling, general and ciation, amortisation and impairments,
The following table shows the contributions
administrative expenses, payments to other operating leases and service fees. The Group
to other operating expenses by each of the overview
operators, employee expenses and increase in these operating expenses in the
two subsidiaries contained in our other
depreciation, amortisation and impairments. 2008 financial year was primarily due to
segment and the percentage change for
Increases in other operating expenses in the inclusion of operating expenses relating
the periods indicated. Management
the 2008 financial year were primarily to our newly acquired subsidiary, Africa review
Other operating expenses Sustainability

review
2007 2008 2009 2008/2007 2009/2008
(in millions, except percentages) ZAR ZAR ZAR % change % change Performance
review
Trudon 504 530 593 5.2 11.9
Africa Online 8 118 208 1,375.0 76.3
Financial
Other operating expenses 512 648 801 210.7 23.6 statements
Company
Financial
Information
Liquidity and capital resources

Group liquidity and capital resources
Cash flows
The following table shows information regarding our consolidated cash flows for the periods indicated.

2007 2008 2009 2008/2007 2009/2008
Cash flows from operating activities 9,356 10,603 11,432 13.3 7.8
Cash flows from investing activities (10,412) (14,106) (17,005) 35.5 20.6
Cash flows from financing activities (2,920) 2,943 7,093 200.8 141.0
Net (decrease)/increase in cash and cash

equivalents (3,976) (560) 1,520 85.9 371.4
Effect of foreign exchange rate differences 29 44 (30) 51.7 (168.2)
Net cash and cash equivalents at the beginning
of the year 4,255 308 (208) (92.8) (167.5)
Net cash and cash equivalents at the end of

the year 308 (208) 1,282 (167.5) 716.3
Cash flows from operating activities our 50% share of Vodacom’s investments in In the 2009 financial year, loans raised
Our primary sources of liquidity are cash its mobile networks in South Africa and exceeded loans repaid and the increase in
flows from operating activities and other African countries. The increase in net financial assets. In the 2009 financial
borrowings. We intend to fund our cash flows used in investing activities in the year, cash flows from financing activities
expenses, indebtedness and working 2009 financial year was as a result of the were primarily due to the issuance of
R11,025 million nominal value of
capital requirements from cash generated increased capital expenditure of Multi-Links
commercial paper bills, the issue of the
from our operations and from capital raised as well as the acquisition of Gateway by
new local bonds, the TL12 and TL15 with
in the markets. The increase in cash flows Vodacom and the acquisition of the
a nominal value of R1,060 million and
from operating activities in the 2009 remaining 25% share in Multi-Links. The
R1,160 million, respectively, as well as
financial year is mainly due to a lower increase in cash flows used in investing
entering into a syndicated loan agreement
dividend payment in respect of the 2008 activities in the 2008 financial year was
with a nominal value of R4,100 million.
financial year and lower taxation paid, mainly the result of R1,985 million cash This was partially offset by the repayment of
partially offset by higher finance charges utilised for the purchase of Multi-Links and a term loan of R1,000 million, a bank
and a decrease in cash generated from increased equity investments in Smartphone, facility of R1,000 million, bridging finance
operations. The increase in cash flows from increased capital expenditures in our fixed- of R1,600 million and maturing commercial
operating activities in the 2008 financial line, mobile and other segments and lower paper bills of R9,849 million nominal value.
year is mainly due to lower taxation proceeds on the disposal of investments,
In the 2008 financial year, loans raised
payments as well as an increase in cash partially offset by higher proceeds on the
and the decrease in net financial assets
generated from operations, partially offset disposal of property, plant and equipment
exceeded loans repaid, shares bought
by higher dividends paid. and intangibles.
back and cancelled and finance lease
Cash flows from investing activities Cash flows from financing activities obligation repaid. In the 2008 financial
Cash flows from investing activities relate Cash flows from financing activities are year, cash flows from financing activities
primarily to investments in our fixed-line primarily a function of borrowing and share were primarily due to the issuance of
network, our other segment’s networks and buy-back activities. R18,806 million nominal value of
commercial paper bills, as well as entering R3,731 million in nominal value of by the TL12 and TL15 bonds after the year
into call and term loans of R5,600 million commercial paper bill debt. Commercial end, a reduction in cash available due to
to fund the redemption of the TK01 bond paper bills having a nominal value of acquisition activities, increased capital
and other cash flows from investing R4,651 million were issued in the 2007 expenditure, increased dividends paid,
activities, including R1.6 billion of financial year. shares repurchased and an increase in trade
additional bank borrowings and interest and other payables. Telkom is of the opinion
Working capital
bearing debt by Vodacom. This was that the Telkom Group’s cash flows from
We had negative consolidated working
partially offset by the maturing commercial operations, together with proceeds from the
capital from continuing operations of
paper debt of R15,773 million nominal Vodacom transaction and the proceeds from
approximately R6.2 billion as of March 31,
value, the repayment of the TK01 bond liquidity available under credit facilities and
2009, we had negative consolidated
with a nominal value of R4,680 million in the capital markets, will be sufficient to
working capital from total operations of
and R1,647 million paid for the meet the Telkom Group’s present working
approximately R9.3 billion as of March 31,
repurchase of shares during the year. capital requirements for the 12 months
2008 and approximately R8.2 billion as of
following the date of this annual report. We
In the 2007 financial year, loans and finance March 31, 2007. Negative working
intend to fund current liabilities through a
leases repaid and shares repurchased and capital arises when current liabilities are
combination of operating cash flows and
cancelled exceeded loans raised and the greater than current assets. The increase in
with new borrowings and borrowings
decrease in net financial assets, by the Company’s negative working capital in
available under existing credit facilities. We
R2,920 million. In the 2007 financial year the 2009 financial year was mainly as a
had R6.2 billion available under existing
cash flows used in financing activities result of an increase in interest bearing debt
credit facilities as of March 31, 2009.
increased primarily due to the lower sale of payable, partially offset by higher financial
repurchase agreements and derivative assets in the form of repurchase agreements. Capital expenditures and investments
instruments that were sold in the 2006 The increase in negative working capital in The following table shows the Telkom
financial year to fund dividends and tax the 2008 financial year was primarily due Group’s investments in property, plant and
payments. On October 31, 2006, we to an increase in the current portion of equipment including intangible assets,
repaid the TL06 local bond having a nominal interest bearing debt due to the repayment including our 50% share of Vodacom’s
value of R2,100 million and during the of the TK01 local bond with short-term debt investments, for the periods indicated.
2007 financial year, we repaid that was subsequently partially refinanced

2007 2008 2009 2008/2007 2009/2008
(in millions, except percentages) ZAR ZAR ZAR % change % change Group
overview
Group capital expenditure

Fixed-line 6,594 6,794 6,690 3.0 (1.5)
Management
Baseline 3,409 4,039 3,343 18.5 (17.2) review
Revenue generating 159 57 30 (64.2) (47.4)

Network evolution 784 1,092 1,373 39.3 25.7
Sustainment 416 277 115 (33.4) (58.5) Sustainability
review
Effectiveness and efficiencies 1,141 841 603 (26.3) (28.3)
Company support 497 451 790 (9.3) 75.2
Regulatory 188 37 436 (80.3) 1,078.4 Performance
review
Mobile 3,608 3,460 3,569 (4.1) 3.2
Multi-Links – 1,312 2,791 – 112.7

Financial
Other 44 334 184 659.1 (44.9) statements
Total investment in property, plant and

equipment and intangible assets 10,246 11,900 13,234 16.1 11.2 Company
Financial
Information
Fixed-line capital expenditure, which in the 2007 financial year and represented geographic coverage and increase
includes spending on intangible assets, 20.9% of fixed-line revenue compared to capacity for both the voice and data
decreased by 1.5% to R6,690 million and 20.4% in the 2007 financial year. The networks. Mobile capital expenditure (50%
represents 19.9% of fixed-line revenue. increase in baseline and revenue of Vodacom’s capital expenditure)
Baseline capital expenditure of generating capital expenditure to decreased by 4.1% to R3,460 million
R3,343 million in the 2009 financial year R4,095 million in the 2008 financial year in the 2008 financial year from
was largely for the deployment of from R3,568 million in the 2007 financial R3,608 million in the 2007 financial year
technologies to support the growing data year was largely for the deployment of and represents 14.4% of mobile revenue
services business (including ADSL footprint), technologies to support the growing data compared to 17.5% in the 2007 financial
links to the mobile cellular operators and services business (including ADSL footprint), year which was mainly spent on the
expenditure for access line deployment in links to the mobile cellular operators and cellular network infrastructure consisting of
selected high growth commercial and expenditure for access line deployment in radio, switching and transmission network
residential areas. The continued focus on selected high growth residential areas. infrastructure and computer software. The
rehabilitating the access network and decrease in capital expenditure in other
During the year ended March 31, 2008,
increasing the efficiencies and African countries was largely as a result of
R841 million was spent on the
redundancies in the transport network as decreased investment in Tanzania,
implementation of systems compared to
well as the initiation of the fixed-wireless Democratic Republic of the Congo and
R1,141 million in the 2007 financial year.
roll-out contributed to the network evolution Mozambique offset by an increase in
Mobile capital expenditure (50% of
and sustainment capital expenditure of investment in Lesotho.
Vodacom’s capital expenditure) increased
R1,488 million.
by 3.2% to R3,569 million in the 2009 Our consolidated capital expenditure in
Telkom continues to focus on its operations financial year from R3,460 million in the property, plant and equipment for the
support system investment with current 2008 financial year and represents 12.9% 2010 financial year budgeted to be
emphasis on workforce management, of mobile revenue compared to 14.4% in approximately R7.9 billion, of which
provisioning and fulfilment, assurance and the 2008 financial year which was mainly approximately R7.0 billion is budgeted to
customer care, hardware technology spent on the continued investment to be spent in our fixed-line segment,
upgrades on the billing platform and improve geographic coverage and approximately R847 million is budgeted to
performance and service management and increase capacity for both the voice and be spent in our Multi-Links segment, and
property optimisation. During the year data networks in South Africa and to approximately R90 million is budgeted to
ended March 31, 2009, R603 million expand coverage in Tanzania and be spent in our other segment. Our capital
was spent on the implementation of several Mozambique. expenditures are continuously examined
systems. and evaluated against the perceived
Mobile capital expenditure, which includes
economic benefit and may be revised in
Fixed-line capital expenditure, which spending on intangible assets, increased
light of changing business conditions,
includes spending on intangible assets, by 3.2% to R3,569 million and represents
regulatory requirements, investment
increased 3.0% to R6,794 million in the 12.9% of mobile revenue and was due to
opportunities and other business factors.
2008 financial year from R6,594 million the continued investment to improve
The following table sets forth our consolidated indebtedness including finance leases as of March 31, 2009
Nominal
amount
Out- out
standing standing Maturing
Interest Interest as of as of Year ended March 31,
payment rate/ March 31, March 31, After
dates coupon 2009 2009 2010 2011 2012 2013 2014 2014
(in millions) (%) ZAR ZAR ZAR ZAR ZAR ZAR ZAR ZAR
Telkom
Bonds
12.45% unsecured local bond due 29 Apr &
April 29, 2012 (TL12)(1, 2) 29 Oct 12.45 1,059 1,060 – – – 1,060 – –
11.90% unsecured local bond due 29 Apr &
April 29, 2015 (TL15)(1, 3) 29 Oct 11.9 1,159 1,160 – – – – – 1,160
6% unsecured local bond due
February 24, 2020 (TL20)(1, 4) 22 Feb 6 1,325 2,500 – – – – – 2,500
Zero coupon unsecured loan stock
due September 30, 2010 (PP02)(5) – – 349 430 – 430 – – – –
Zero coupon unsecured loan stock
due June 15, 2010 (PP03)(6) – – 1,131 1,350 – 1,350 - – – –
Commercial paper – 11.44 5,476 5,559 5,559 – – – – –
Syndicated loans due December 17,
2011 and 2013(7) 11.46 4,083 4,100 – – 820 – 3,280 –
Term loans Various 9.67 2,000 2,000 2,000 – – – – –
Bank facilities
R394 million uncommitted overdraft
facility with ABSA Bank Limited,
repayable on demand, and a
R1 billion unsecured committed
facility, repayable on 364 days Mutually Not Not
notice – agreed utilised utilised – – – – – –
R1 billion unsecured committed facility
with The Standard Bank of South Africa
Limited, repayable within 365 days of Mutually Not Not
Group
drawdown – agreed utilised utilised – – – – – – overview
R1 billion unsecured committed facility
with FirstRand Bank Limited, repayable Mutually Not Not
on 364 days notice – agreed utilised utilised – – – – – –
Management
$35 million unsecured short-term loan review
facility with Calyon Corporate and Mutually Not Not
Investment Bank, repayable on demand – agreed utilised utilised – – – – – –
R1 billion uncommitted short term facility with Sustainability
Sumitomo Mitsui Banking Corporation, Mutually Not Not review
repayable on demand – agreed utilised utilised – – – – – –
R500 million call loan facility with
iNkotha Investments Limited, repayable Mutually Not Not Performance
on demand – agreed utilised utilised – – – – – – review
R1 billion loan agreement with

Old Mutual Specialised Finance Mutually Not Not
(Proprietary) Limited, repayable on demand agreed utilised utilised – – – – – – Financial
statements
Various bank loans8 – Various 138 138 – 20 13 9 0 96
Bank overdraft and other short-term debt – 106 106 106 – – – –
13.43% –
Company
Finance leases(9) n/a 37.78% 984 984 35 231 – – – 718 Financial
Information
Total Telkom 17,810 19,387 7,700 2,031 833 1,069 3,280 4,474
Nominal
amount
Out- out
standing standing Maturing
Interest Interest as of as of Year ended March 31,
payment rate/ March 31, March 31, After
dates coupon 2009 2009 2010 2011 2012 2013 2014 2014
(in millions) (%) ZAR ZAR ZAR ZAR ZAR ZAR ZAR ZAR
Other
Trudon (Pty) Ltd
Various finance leases – Various 2 2 1 1 – – – –
Telkom Media (Pty) Ltd

Various loans – 13% 9 9 – 5 2 2 – –
Multi-Links Telecommunications Limited

Naira 1,100 million Commercial paper – 18.5% 70 70 70 – – –
$18 million Export Development Bank LIBOR
of Canada funding – + 1.25% 157 157 35 – – 122 – –
$41.6 million Huawei Vendor Financing LIBOR
Facility funding – + 2% 323 323 – – 323 – – –
Africa Online Limited

Various loans – Various 11 11 4 7 – – – –
Bank overdrafts and other short-term debt – 20 20 20 – – – – –
Total other 592 592 130 13 325 124 – –
Grand total 18,402 19,979 7,830 2,044 1,158 1,193 3,280 4,474
1. Listed on the Bond Exchange of South Africa.

2. The TL12 was issued on April 29, 2009 at a yield to maturity of 12.47% and listed on the Bond Exchange of South Africa.
3. The TL15 was issued on April 29, 2009 at a yield to maturity of 11.91% and listed on the Bond Exchange of South Africa.
4. 2,500 of these bonds were issued on February 22, 2000 at a yield to maturity of 15.00%. The TL20 bond was listed on the Bond Exchange of South Africa with effect of April 1,
2005.
5. Issued on February 25, 2000. Original amount issued was R430 million. The yield to maturity of this instrument issued by Telkom is 14.37%.
6. Issued on June 15, 2000. Original amount issued was R1,350 million. The yield to maturity of this instrument is 15.175%.
7. Agreement effective from December 17, 2008 for three and five years.
8. R138 million of Telkom's indebtedness outstanding as of March 31, 2009 was guaranteed by the government of South Africa. Euro loans converted at the spot rate.
9. Secured by land and buildings.
Telkom fins (group) NEW 8/12/09 6:28 PM Page 135
challeng
Consolidated financial statements

Directors’ responsibility statement 137
Certificate from Group Company Secretary 137
Report of independent auditors 138
Directors’ report 140
Consolidated income statement 142
Consolidated balance sheet 143
Consolidated statement of changes in equity 144
Consolidated cash flow statement 145
Notes to the consolidated annual financial statements 146
economic conditions
contributed to a
d i f ficult year Group
overview 1
Management
review
2
Sustainability
review
3
Performance
review
4
Financial
statements 5
Company
Financial
Information
6
Directors’ responsibility statement
The directors are responsible for the preparation of the annual financial accountability for assets and liabilities. The directors are satisfied that
statements of the Company and the Group. The directors are also the Company and the Group have adequate resources to continue in
responsible for maintaining a sound system of internal controls to operational existence for the foreseeable future. Accordingly, Telkom
safeguard shareholders’ investments and the Group’s assets. SA Limited continues to adopt the going concern basis in preparing the
annual financial statements.
In presenting the accompanying financial statements, International
Financial Reporting Standards as issued by the International Against this background, the directors of the Company accept
Accounting Standards Board have been followed and applicable responsibility for the annual financial statements, which were approved
accounting policies have been used incorporating prudent judgements by the Board of directors on 10 July 2009 and are signed on their
and estimates. behalf by:
The external auditors are responsible for independently auditing and

reporting on the annual financial statements.
In order for the directors to discharge their responsibilities,

management continues to develop and maintain a system of internal
Shirley Lue Arnold
controls aimed at reducing the risk of error or loss in a cost-effective
Chairman
manner. The internal controls include a risk-based system of internal
auditing and administrative controls designed to provide reasonable
but not absolute assurance that assets are safeguarded and that
transactions are executed and recorded in accordance with generally
accepted business practices and the Group’s policies and procedures.
Reuben September
The directors, primarily through the audit and risk committee, which
consists of non-executive directors, meet periodically with the external
and internal auditors, as well as executive management to evaluate
matters concerning accounting policies, internal controls, auditing and
financial reporting.
The directors are of the opinion, based on the information and

Peter Nelson
explanations given by management and internal audit, that the internal
accounting controls are adequate, so that the financial records may be
relied on for preparing the financial statements and maintaining Pretoria
Certificate from Group Company Secretary
I hereby certify that in accordance with section 268G(d) of the Companies Act, 1973, as amended, the Company has lodged with the Registrar
of Companies all such returns as are required of a public company in terms of this Act and that all such returns are, to the best of my knowledge
and belief, true, correct and up to date.
Mmathoto Lephadi
Group Company Secretary
Pretoria
10 July 2009


Directors’ report
To the members of Telkom SA Limited SHARE REPURCHASE

The directors have pleasure in submitting the annual financial Shareholders approved a special resolution granting a general
statements of the Company and the Group for the year ended authority for the repurchase of shares by the Company at its annual
March 31, 2009. general meeting of September 15, 2008. The Company repurchased
286 ordinary shares at a value of R30,425 (including costs) during the
NATURE OF BUSINESS
year under review. These shares have been cancelled as issued share
Telkom is a leading integrated communications service provider in
capital and restored as authorised but unissued share capital.
South Africa and on the African continent.
BORROWING POWERS
FINANCIAL RESULTS
In terms of the Company’s articles of association, Telkom has unlimited
Earnings attributable to equity holders of Telkom for the year ended
borrowing powers subject to the restrictive financial covenants of the
March 31, 2009 were R4,170 million (2008: R7,975 million)
TL20 bond and Syndicated loans.
representing basic earnings per share from continuing operations of
407.4 cents (2008: 963.7 cents). Full details of the financial position CAPITAL EXPENDITURE AND COMMITMENTS
and results of the Group are set out in the accompanying Company Details of the Company’s capital expenditure on property, plant and
and Group financial statements. equipment as well as intangibles are set out in notes 9 and 10 of the
accompanying financial statements, while details of the Company’s
DIVIDENDS
capital commitments are set out in note 34.
The following dividend was declared in respect of the year ended
March 31, 2009: Details of the Group’s capital expenditure on property, plant and
equipment as well as intangibles are set out in notes 11 and 12 of the
• Ordinary dividend number 14 of 115 cents per share (2008:
accompanying financial statements, while details of the Group’s
660 cents);
capital commitments are set out in note 38.
• Special dividend of 260 cents per share (2008: nil cents).
EVENTS SUBSEQUENT TO BALANCE SHEET DATE
The level of dividend payments will be based upon a number of Events subsequent to the balance sheet date are set out in note 45 of
factors, including the consideration of financial results, capital and the accompanying Group financial statements and note 39 of the
operating expenditure requirements, the Group’s debt level, interest Company financial statements.
coverage, internal cash flows, prospects and available growth
DIRECTORATE
opportunities.
The following changes occurred in the composition of the Board from
SUBSIDIARIES April 1, 2008 to date of this report.
Particulars of the significant subsidiaries of the Group are set out in
Appointments
notes 42 and 43 of the accompanying Group financial statements.
B Molefe July 3, 2008
The attributable interest of the Group in the after taxation earnings from PG Joubert August 12, 2008
continuing operations of its subsidiaries for the year ended March 31, DD Barber September 1, 2008
2009 were: PG Nelson December 8, 2008
2008 2009 Resignations

Rm Rm MJ Lamberti June 3, 2008
Aggregate amount of loss after taxation (102) (2,142) AG Rhoda July 3, 2008
SHARE CAPITAL
Details of the authorised, issued and unissued share capital of the
Company as at March 31, 2009 are contained in note 22 and
note 20 of the accompanying Group and Company financial
statements respectively.
Directors’ report (continued)
The Board of Directors at date of this report are as follows:
ST Arnold (Chairman)
RJ September (Chief Executive Officer)
PG Nelson (Chief Financial Officer)
DD Barber
B du Plessis
RJ Huntley
PG Joubert
VB Lawrence
PCS Luthuli
KST Matthews
B Molefe
E Spio-Garbrah
Details of each director may be found on pages 28 and 29 in the

Management review section.
DIRECTORS’ INTERESTS
At the date of this report, none of Telkom’s directors other than
Mr RJ September, Mr PG Nelson, Mr PG Joubert and Mr DD Barber,
held any direct and indirect, beneficial and non-beneficial interests in
the share capital of the Company. Mr RJ September directly held
90,815 and indirectly held 1,820 ordinary shares, Mr. PG Nelson
directly held 19,182 ordinary shares, Mr PG Joubert indirectly held
15,000 ordinary shares and Mr DD Barber indirectly held
1,200 ordinary shares in the capital of Telkom.
Details of the Company Secretary’s business address and the

Company’s registered office are set out on the inside back cover.
Consolidated income statement

for the three years ended March 31, 2009
Restated* Restated* Audited

2007 2008 2009
Notes Rm Rm Rm
Total revenue 3.1 32,919 34,084 36,433
Operating revenue 3.2 32,441 33,611 35,940

Other income 4 338 472 343
Operating expenses 23,028 25,014 29,895
Employee expenses 5.1 7,254 7,629 8,345

Payments to other operators 5.2 5,005 6,098 6,919
Selling, general and administrative expenses 5.3 4,184 4,045 5,772
Service fees 5.4 2,209 2,437 2,756
Operating leases 5.5 775 671 823
Depreciation, amortisation, impairment and write-offs 5.6 3,601 4,134 5,280

Investment income 6 199 168 181
Finance charges and fair value movements 7 857 1,556 2,843
Interest 1,142 1,543 1,732

Foreign exchange and fair value movement (gain)/loss (285) 13 1,111
Profit before taxation 9,093 7,681 3,726

Taxation 8 2,803 2,647 1,660
Profit from continuing operations 6,290 5,034 2,066

Profit for the year from discontinued operations 9 2,559 3,138 2,181
Profit for the year 8,849 8,172 4,247
Attributable to:
Equity holders of Telkom 8,646 7,975 4,170
Minority interest 203 197 77
8,849 8,172 4,247
Total operations
Basic earnings per share (cents) 10 1,681.0 1,565.0 832.8
Diluted earnings per share (cents) 10 1,676.3 1,546.9 819.6
Dividend per share (cents) 10 900.0 1,100.0 660.0
Basic earnings per share (cents) 10 1,204.7 963.7 407.4
Diluted earnings per share (cents) 10 1,201.3 952.6 401.0
* The amounts have been restated for the effect of the discontinued operation and disposal groups held for sale as disclosed in note 9.
Consolidated balance sheet

at March 31, 2009
2007 2008 2009

Notes Rm Rm Rm
ASSETS
Non-current assets 48,770 57,763 51,010
Property, plant and equipment 11 41,254 46,815 41,418

Intangible assets 12 5,111 8,468 7,232
Investments 14 1,384 1,448 1,383
Deferred expenses 15 270 221 55
Finance lease receivables 16 158 206 166
Deferred taxation 17 593 605 756
Current assets 10,376 12,609 11,287
Short-term investments 14 77 51 –
Inventories 18 1,093 1,287 1,974
Income taxation receivable 34 520 9 91
Current portion of deferred expenses 15 287 362 –
Current portion of finance lease receivables 16 88 166 109
Trade and other receivables 19 7,303 8,986 5,980
Other financial assets 20 259 614 1,202
Cash and cash equivalents 21 749 1,134 1,931
Assets of disposal groups classified as held for sale 9 – – 23,482
Total assets 59,146 70,372 85,779
EQUITY AND LIABILITIES

Equity attributable to equity holders of Telkom 31,724 32,815 36,253
Share capital 22 5,329 5,208 5,208

Treasury share reserve 23 (1,774) (1,638) (1,517)
Share-based compensation reserve 24 257 643 1,076
Non-distributable reserves 25 1,413 1,292 1,758
Retained earnings 26 26,499 27,310 28,852
Reserves of disposal groups classified as held for sale 9 – – 876
Minority interest 27 284 522 853
Total equity 32,008 33,337 37,106
Non-current liabilities 8,554 15,104 15,348
Interest-bearing debt 28 4,338 9,403 10,653

Other financial liabilities 20 36 919 –
Provisions 29 1,443 1,675 1,875
Deferred revenue 15 1,021 1,128 997
Deferred taxation 17 1,716 1,979 1,823
Current liabilities 18,584 21,931 17,452
Trade and other payables 31 7,237 8,771 5,538

Shareholders for dividend 35 15 20 23
Current portion of interest-bearing debt 28 6,026 6,330 7,622
Current portion of provisions 29 2,095 2,181 2,150
Current portion of deferred revenue 15 1,983 2,593 1,714
Income taxation payable 34 594 323 50
Other financial liabilities 20 193 371 228
Credit facilities utilised 21 441 1,342 127
Liabilities of disposal groups classified as held for sale 9 – – 15,873
Total liabilities 27,138 37,035 48,673
Total equity and liabilities 59,146 70,372 85,779

Consolidated statement of changes in equity

Attributable to equity holders of Telkom

Share-
based Discon-
Treasury compen- Non-distri- tinued
Share Share share sation butable Retained opera- Minority Total
capital premium reserve reserve reserves earnings tions Total interest equity
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at April 1, 2006 5,449 1,342 (1,809) 151 1,128 22,904 – 29,165 301 29,466
Total income and expense for the year 46 8,646 – 8,692 217 8,909
Profit for the year – 8,646 – 8,646 203 8,849
Foreign currency translation reserve
(net of taxation of R4 million) (refer to note 25) 46 – – 46 14 60
Dividend declared (refer to note 35) – (4,678) – (4,678) (166) (4,844)
Transfer to non-distributable reserves
(refer to note 25) 239 (239) – – – –
Shares vested and re-issued
(refer to note 24) 35 (35) – – – – – –
Increase in share-based compensation
reserve (refer to note 24) – 141 – – – 141 – 141
Acquisition of subsidiaries and minorities
(refer to note 36) – – – – – – (68) (68)
Shares bought back and cancelled
(refer to note 22) (120) (1,342) – – – (134) – (1,596) (1,596)
Balance at March 31, 2007 5,329 – (1,774) 257 1,413 26,499 – 31,724 284 32,008
Total income and expense for the year 529 7,975 – 8,504 226 8,730
Revaluation of available-for-sale
investment (net of taxation of R1 million) 8 – – 8 – 8
(net of taxation of R6 million) (refer to note 25) 521 – – 521 29 550
(refer to note 25) 11 (11) – – – –
reserve (refer to note 24) 522 – – – 522 – 522
Shares vested and re-issued
(refer to note 24) 136 (136) – – – – – –
Acquisition of subsidiaries and
minorities (refer to note 36) – – – – – – 77 77
(refer to note 22) (121) – – – (1,526) – (1,647) – (1,647)
Minority put option – – – – (661) – – (661) – (661)
Balance at March 31, 2008 5,208 – (1,638) 643 1,292 27,310 – 32,815 522 33,337
Discontinued operations (4) – 4 – – –
Total income and expense for the year (181) 4,171 181 4,171 93 4,264
Revaluation of available-for-sale
investment (net of taxation of R1 million) – – (8) (8) – (8)
(net of taxation of R6 million) (refer to note 25) (181) – 189 8 16 24
(refer to note 25) (10) 10 – – – –
reserve (refer to note 24) 554 – – – 554 – 554
Shares vested and re-issued (refer to note 24) 121 (121) – – – – – –
Acquisition of subsidiaries and minorities – – – 667 – 667 – 667
(refer to note 22) – – – – – – – –
Minority put option – – 661 – – 661 – 661
Broad-based black economic
empowerment transaction in Vodacom – – – – 691 691 271 962
Balance at March 31, 2009 5,208 – (1,517) 1,076 1,758 28,852 876 36,253 853 37,106
Consolidated cash flow statement

2007 2008 2009

Notes Rm Rm Rm
Cash flows from operating activities 9,356 10,603 11,432
Cash receipts from customers 50,979 55,627 61,302

Cash paid to suppliers and employees (30,459) (34,371) (40,908)
Cash generated from operations 32 20,520 21,256 20,394

Interest received 422 433 485
Dividends received 6 3 – –
Finance charges paid 33 (1,115) (1,077) (2,164)
Taxation paid 34 (5,690) (4,277) (3,947)
Cash generated from operations before dividend paid 14,140 16,335 14,768
Dividend paid 35 (4,784) (5,732) (3,336)
Cash flows from investing activities (10,412) (14,106) (17,005)
Proceeds on disposal of property, plant and equipment and

intangible assets 54 169 43
Proceeds on disposal of investments 77 8 –
Additions to property, plant and equipment and intangible assets (10,037) (11,657) (13,191)
Acquisition of subsidiaries and minority interest (445) (2,462) (3,778)
Additions to other investments (61) (164) (79)
Cash flows from financing activities (2,920) 2,943 7,093
Loans raised 5,624 23,877 18,168

Loans repaid (6,922) (19,315) (10,212)
Shares bought back and cancelled (1,596) (1,647) –
Finance lease obligation repaid (37) (61) (136)
Decrease/(increase) in net financial assets 11 89 (727)
Net (decrease)/increase in cash and cash equivalents (3,976) (560) 1,520

Net cash and cash equivalents at beginning of the year 4,255 308 (208)
Effect of foreign exchange rate differences 29 44 (30)
Net cash and cash equivalents at end of the year 21 308 (208) 1,282
Notes to the consolidated annual financial statements

1. CORPORATE INFORMATION Mobile communications services, wireless data services and

Telkom SA Limited (Telkom) is a company incorporated and television media services through Vodacom, Swiftnet and Telkom
domiciled in the Republic of South Africa (South Africa) Media Group respectively have been classified as disposal
whose shares are publicly traded. The main objective of Telkom, groups held for sale and discontinued operations.
its subsidiaries and joint ventures (the Group) is to supply
2. SIGNIFICANT ACCOUNTING POLICIES
telecommunication, broadcasting, multimedia, technology,
Basis of preparation
information and other related information technology services to
The consolidated annual financial statements comply with
the general public, as well as mobile communication services
the International Financial Reporting Standards (IFRS) of the
through the Vodacom Group (Proprietary) Limited (Vodacom) in
International Accounting Standards Board (IASB) and the
South Africa and certain other African countries. The principal
Companies Act of South Africa, 1973.
activities of the Group include:
The financial statements are prepared on the historical cost
• fixed-line subscription and connection services to post-paid,
basis, with the exception of certain financial instruments which
prepaid and private payphone customers using PSTN
are measured at fair value and share-based payments which are
(‘Public Switched Telephone Network’) lines, including ISDN
measured at grant date fair value.
(‘Integrated Services Digital Network’) lines, and the sale of
subscription based value-added voice services and customer Details of the Group’s significant accounting policies are set out
premises equipment rental and sales; below, and are consistent with those applied in the previous
financial year except for the following:
• fixed-line traffic services to post-paid, prepaid and payphone
customers, including local, long distance, fixed-to-mobile, The Group has adopted certain amendments to IAS39 and
international outgoing and international voice-over-internet IFRS7, and adopted IFRIC12 and IFRIC14 which are
protocol traffic services; applicable for annual periods on or after January 1, 2008.
• interconnection services, including terminating and transiting The principal effects of these changes are discussed below.
traffic from South African mobile operators, as well as from Adoption of amendments to standards and new
international operators and transiting traffic from mobile to interpretation
international destinations; IAS39 Financial Instruments: Recognition and Measurement
• fixed-line data and internet services, including domestic and and IFRS7 Financial Instruments: Disclosures –
international data transmission services, such as point-to-point Reclassification of Financial Assets (amended)
leased lines, ADSL (Asymmetrical Digital Subscriber Line) The amendments, which are effective on or after July 1, 2008,
services, packet-based services, managed data networking permit an entity to reclassify non-derivative financial assets (other
services and internet access and related information than those designated at fair value through profit or loss by the
technology services; entity upon initial recognition) out of the fair value through profit
or loss category in particular circumstances. The amendments
• e-commerce, including internet access service provider,
also permit an entity to transfer from the available-for-sale
application provider, hosting, data storage, e-mail and
category to the loans and receivables category a financial asset
security services;
that would have met the definition of loans and receivables
• W-CDMA (Wideband Code Division Multiple Access), a (if the financial asset had not been designated as available-for-
3G next generation network, including fixed voice services, sale), if the entity has the intention and ability to hold that
data services and nomadic voice services; and financial asset for the foreseeable future. The amendments do
not have an impact on the consolidated annual financial
• other services including directory services, through Trudon
statements.
(Proprietary) Limited (formerly trading as TDS Directory
Operations (Proprietary) Limited), wireless data services, IFRIC12 Service Concession Arrangements
through Swiftnet (Proprietary) Limited, television media The interpretation, which is effective for annual periods
services, through Telkom Media Group, internet services beginning on or after January 1, 2008, sets out general
outside South Africa, through Africa Online Limited and principles on recognising and measuring the obligations and
information, communication and telecommunication related rights in service concession arrangements from an
operating services in Nigeria, through Multi-Links operator’s perspective. The interpretation does not have an
Telecommunications Limited. impact on the consolidated annual financial statements.
Notes to the consolidated annual financial statements (continued)

2. SIGNIFICANT ACCOUNTING POLICIES (continued) the relative fair values could affect the allocation of arrangement
Adoption of amendments to standards and new consideration between the various revenue streams.
interpretation (continued)
Judgement is also required to determine the expected customer
IFRIC14 The Limit on a Defined Benefit Asset, Minimum
relationship period. Any changes in these assessments may
Funding Requirements and their Interaction
have a significant impact on revenue and deferred revenue.
The interpretation, which is effective for annual periods
beginning on or after January 1, 2008, provides guidance on Property, plant and equipment and intangible assets
assessing the limit in IAS19 on the amount of the surplus that can The useful lives of assets are based on management’s
be recognised as an asset. It also explains how the pension estimation. Management considers the impact of changes in
asset or liability may be affected by a statutory or contractual technology, customer service requirements, availability of
minimum funding requirement. The interpretation does not have capital funding and required return on assets and equity to
any impact on the consolidated annual financial statements, as determine the optimum useful life expectation for each of the
the Group is not subject to minimum funding requirements. individual categories of property, plant and equipment and
intangible assets. Due to the rapid technological advancement
Significant accounting judgements, estimates and
in the telecommunications industry as well as Telkom’s plan to
assumptions
migrate to a next generation network over the next few years,
The preparation of financial statements requires the use of
the estimation of useful lives could differ significantly on an
estimates and assumptions that affect the reported amounts
annual basis due to unexpected changes in the roll-out strategy.
of assets and liabilities and disclosure of contingent assets and
The impact of the change in the expected useful life of property,
liabilities at the date of the financial statements and the reported
plant and equipment is described more fully in note 5.6.
amounts of revenue and expenses during the reporting periods.
The estimation of residual values of assets is also based on
Although these estimates and assumptions are based on
management’s judgement whether the assets will be sold
management’s best knowledge of current events and actions that
or used to the end of their useful lives and what their condition
the Group may undertake in the future, actual results may
ultimately differ from those estimates and assumptions. will be like at that time.
The presentation of the results of operations, financial position For intangible assets that incorporate both a tangible and an
and cash flows in the financial statements of the Group is intangible portion, management uses judgement to assess which
dependent upon and sensitive to the accounting policies, element is more significant to determine whether it should be
assumptions and estimates that are used as a basis for the treated as property, plant and equipment or intangible assets.
preparation of these financial statements. Management has Asset retirement obligations
made certain judgements in the process of applying the Group’s Management judgement is exercised when determining whether
accounting policies. These, together with the key estimates and an asset retirement obligation exists, and in determining the
assumptions concerning the future, and other key sources of
present value of expected future cash flows and discount rate
estimation uncertainty at the balance sheet date, are as follows:
when the obligation to dismantle or restore the site arises, as
Revenue recognition well as the estimated useful life of the related asset.
To reflect the substance of each transaction, revenue recognition
Impairments of property, plant and equipment and
criteria are applied to each separately identifiable component
intangible assets
of a transaction as disclosed in note 3. In order to account for
Management is required to make judgements concerning
multiple-element revenue arrangements in developing its
the cause, timing and amount of impairment as indicated on
accounting policies, the Group considered the guidance
notes 11 and 12. In the identification of impairment indicators,
contained in the United States Financial Accounting Standards
management considers the impact of changes in current
Board (’FASB’) Emerging Issues Task Force No 00-21 Revenue
competitive conditions, cost of capital, availability of funding,
Arrangements with Multiple Deliverables. Judgement is required
to separate those revenue arrangements that contain the delivery technological obsolescence, discontinuance of services and
of bundled products or services into individual units of other circumstances that could indicate that an impairment
accounting, each with its own earnings process, when the exists. The Group applies the impairment assessment to its
delivered item has stand-alone value and the undelivered item separate cash-generating units. This requires management to
has fair value. Further judgement is required to determine the make significant judgements concerning the existence of
relative fair values of each separate unit of accounting to be impairment indicators, identification of separate cash-generating
allocated to the total arrangement consideration. Changes in units, remaining useful lives of assets and estimates of projected

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Leases in which a significant portion of the risks and rewards of
Significant accounting judgements, estimates and ownership are retained by the lessor are classified as operating
assumptions (continued) leases. Payments made under operating leases (net of any
Impairments of property, plant and equipment and incentives received from the lessor) are charged to the income
intangible assets (continued) statement on a straight-line basis over the period of the lease.
cash flows and fair value less costs to sell. Management A lease is classified as a finance lease if it transfers substantially
judgement is also required when assessing whether a previously all the risks and rewards incidental to ownership.
recognised impairment loss should be reversed.
Deferred taxation asset
Where impairment indicators exist, the determination of Management judgement is exercised when determining the
the recoverable amount of a cash-generating unit requires probability of future taxable profits which will determine whether
management to make assumptions to determine the fair value deferred taxation assets should be recognised or derecognised.
less costs to sell and value in use. Key assumptions on which The realisation of deferred taxation assets will depend on
management has based its determination of fair value less costs whether it is possible to generate sufficient taxable income,
to sell include the existence of binding sale agreements, and for taking into account any legal restrictions on the length and
the determination of value in use include the weighted average nature of the taxation asset. When deciding whether to
cost of capital, projected revenues, gross margins, average recognise unutilised taxation credits, management needs to
revenue per customer, capital expenditure, expected customer determine the extent that the future obligation is likely to be
bases and market share. The judgements, assumptions and available for set-off. In the event that the assessment of the future
methodologies used can have a material impact on the fair obligation and future utilisation changes, the change in the
value and ultimately the amount of any impairment. recognised deferred taxation asset must be recognised in profit
Impairment of other financial assets or loss.
At each balance sheet date management assesses whether Taxation
there are indicators of impairment of financial assets, including The taxation rules and regulations in South Africa as well as the
equity investments. If such evidence exists, the estimated present other African countries within which the Group operates are
value of the future cash flows of that asset is determined. highly complex and subject to interpretation. Additionally, for
Management judgement is required when determining the
the foreseeable future, management expects South African
expected future cash flows. To determine whether any decline in
taxation laws to further develop through changes in South
fair value in available-for-sale investments is significant or
Africa’s existing taxation structure as well as clarification of the
prolonged, reliance is placed on an assessment by
existing taxation laws through published interpretations and the
management. In measuring impairments, quoted market prices
resolution of actual taxation cases. Refer to notes 8 and 17.
are used, if available, or projected business plan information
from the investee is used for those financial assets not carried at Management has made a judgement that all outstanding
fair value. taxation credits relating to secondary taxation on companies
(STC) will be available for utilisation before the taxation regime
Impairment of receivables
from STC to withholding taxation change is effective.
An impairment is recognised on trade receivables that are
assessed to be impaired (refer to notes 13 and 19). The The growth of the Group, following its geographical expansion
impairment is based on an assessment of the extent to which into other African countries over the past few years, has made
customers have defaulted on payments already due and an the estimation and judgement required in recognising and
assessment on their ability to make payments based on their measuring deferred taxation balances more challenging. The
credit worthiness and historical write-offs experience. Should the resolution of taxation issues is not always within the control of
assumptions regarding the financial condition of the customer the Group and it is often dependent on the efficiency of the
change, actual write-offs could differ significantly from the legal processes in the relevant taxation jurisdictions in which
impaired amount. the Group operates. Issues can, and often do, take many years
to resolve. Payments in respect of taxation liabilities for an
Leases
accounting period result from payments on account and on the
The determination of whether an arrangement is, or contains a
final resolution of open items. As a result there can be substantial
lease is based on whether, at the date of inception, the fulfilment
differences between the taxation charge in the consolidated
of the arrangement is dependent on the use of a specific asset
income statement and the current taxation payments.
or assets or the arrangement conveys a right to use the asset as
set out in notes 16 and 38.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Telkom provides equity compensation in the form of the Telkom
Significant accounting judgements, estimates and Conditional Share Plan to its employees. The related expense
assumptions (continued) and reserve are determined through an actuarial valuation
Taxation (continued) which relies heavily on assumptions. The assumptions include
Group entities are regularly subject to evaluation, by the relevant employee turnover percentages and whether specified
taxation authorities, of their historical taxation filings and in performance criteria will be met. Changes to these assumptions
connection with such reviews, disputes can arise with the taxation could affect the amount of expense ultimately recognised in the
authorities over the interpretation or application of certain taxation financial statements. An actuarial valuation relies heavily on the
rules to the business of the relevant Group entities. These disputes actual plan experience assumptions as disclosed in note 30.
may not necessarily be resolved in a manner that is favourable for Provisions and contingent liabilities
the Group. Additionally the resolution of the disputes could result in Management judgement is required when recognising and
an obligation for the Group that exceeds management’s estimate. measuring provisions and when measuring contingent liabilities as
The Group has historically filed, and continues to file, all required set out in notes 29 and 39 respectively. The probability that an
income taxation returns. Management believes that the principles outflow of economic resources will be required to settle the
applied in determining the Group’s taxation obligations are obligation must be assessed and a reliable estimate must be made
consistent with the principles and interpretations of the relevant of the amount of the obligation. Provisions are discounted where
countries’ taxation laws. the effect of discounting is material based on management’s
judgement. The discount rate used is the rate that reflects current
Deferred taxation rate
market assessments of the time value of money and, where
Management makes judgements on the taxation rate applicable
appropriate, the risks specific to the liability, all of which requires
based on the Group’s expectations at balance sheet date on
management judgement. The Group is required to recognise
how the asset is expected to be recovered or the liability is
provisions for claims arising from litigation when the occurrence of
expected to be settled.
the claim is probable and the amount of the loss can be reasonably
Employee benefits estimated. Liabilities provided for legal matters require judgements
The Group provides defined benefit plans for certain post- regarding projected outcomes and ranges of losses based on
employment benefits. The Group’s net obligation in respect of historical experience and recommendations of legal counsel.
defined benefits is calculated separately for each plan by Litigation is however unpredictable and actual costs incurred could
estimating the amount of future benefits earned in return for differ materially from those estimated at the balance sheet date.
services rendered. The obligation and assets related to each of
Held-to-maturity financial assets
the post-retirement benefits are determined through an actuarial
Management has reviewed the Group’s held-to-maturity
valuation. The actuarial valuation relies heavily on assumptions
financial assets in the light of its capital management and
as disclosed in note 30. The assumptions determined by
liquidity requirements and has confirmed the Group’s positive
management make use of information obtained from the
intention and ability to hold those assets to maturity.
Group’s employment agreements with staff and pensioners,
market related returns on similar investments, market related Summary of significant accounting policies
discount rates and other available information. The assumptions Basis of consolidation
concerning the expected return on assets and expected change The consolidated financial statements incorporate the financial
in liabilities are determined on a uniform basis, considering statements of Telkom and entities (including special purpose
long-term historical returns and future estimates of returns and entities) controlled by Telkom, its subsidiaries, as well as its joint
medical inflation expectations. In the event that further changes ventures and associates. Control is achieved where Telkom has
in assumptions are required, the future amounts of post- the power to govern the financial and operating policies of an
employment benefits may be affected materially. investee entity so as to obtain benefits from its activities. Joint
ventures are those enterprises over which the Group exercises
The discount rate reflects the average timing of the estimated
joint control in terms of a contractual agreement. Joint ventures
defined benefit payments. The discount rate is based on long-
are proportionately consolidated. Associates are those entities
term South African government bonds with the longest maturity
over which the Group has significant influence and that are
period as reported by the Bond Exchange of South Africa.
neither subsidiaries nor joint ventures. Associates are equity
The discount rate is expected to follow the trend of inflation.
accounted. Significant influence exists when the Group has the
The overall expected rate of return on assets is determined power to participate in the financial and operating policy
based on the market prices prevailing at that date, applicable decisions of these entities, but does not have control or joint
to the period over which the obligation is to be settled. control over those policies.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue is recognised when there is evidence of an

Summary of significant accounting policies (continued) arrangement, collectability is reasonably assured, and the
Basis of consolidation (continued) delivery of the product or service has occurred. In certain
The results of subsidiaries acquired or disposed of during the circumstances revenue is split into separately identifiable
year are included in the income statement from the effective date components and recognised when the related components are
of acquisition and up to the effective date of disposal, as delivered in order to reflect the substance of the transaction.
appropriate. The value of components is determined using verifiable
Where necessary, adjustments are made to the financial objective evidence. The Group does not provide customers with
statements of subsidiaries, joint ventures and associates to bring the right to a refund.
the accounting policies used in line with those used by the Fixed-line and other
Group. Subscriptions, connections and other usage
Inter-company transactions, balances and unrealised gains on The Group provides telephone and data communication
transactions between Group companies are eliminated. services under post-paid and prepaid payment arrangements.
Unrealised profit or losses are also eliminated. Revenue includes fees for installation and activation, which are
deferred over the expected customer relationship period. Costs
The Group applies a policy of treating transactions with minority
incurred on first time installations that form an integral part of
interests as transactions with parties external to the Group.
the network are capitalised and depreciated over the expected
Disposals to minority interests result in gains and losses for the
average customer relationship period. All other installation and
Group and are recorded in the income statement. Acquisition of
activation costs are expensed as incurred.
minority interests results in goodwill, being the difference
between any consideration paid and the relevant share Post-paid and prepaid service arrangements include
acquired of the carrying value of net assets of the subsidiary. subscription fees, typically monthly fees, which are recognised
over the subscription period.
Business combinations
Revenue related to sale of communication equipment, products
The purchase method of accounting is used to account for the
and value-added services is recognised upon delivery and
acquisition of subsidiaries by the Group. The cost of an
acceptance of the product or service by the customer.
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at Traffic (domestic, fixed-to-mobile and international)
the date of exchange, plus costs directly attributable to the Prepaid
acquisition. Identifiable assets acquired and liabilities and Prepaid traffic service revenue collected in advance is deferred
contingent liabilities assumed in a business combination are and recognised based on actual usage or upon expiration of
measured initially at their fair values at the acquisition date, the usage period, whichever comes first. The terms and
irrespective of the extent of any minority interest. The excess conditions of certain prepaid products allow the carry over of
of the cost of acquisition over the fair value of the Group’s share unused minutes. Revenue related to the carry over of unused
of the identifiable net assets acquired is recorded as goodwill. minutes is deferred until usage or expiration.
If the cost of acquisition is less than the fair value of the net Payphones
assets of the subsidiary acquired, the difference is recognised Payphone service coin revenue is recognised when the service
directly in the income statement. is provided.
Operating revenue Payphone service card revenue collected in advance is deferred

The Group provides fixed-line communication services, mobile and recognised based on actual usage or upon expiration of
communication services and other services. Other includes the usage period, whichever comes first.
data services, directory services and communication related Post-paid
products. The Group provides such services to business, Revenue related to local, long distance, network-to-network,
residential, payphone and mobile customers. Revenue roaming and international call connection services is recognised
represents the fair value of fixed or determinable consideration when the call is placed or the connection provided.
that has been received or is receivable.
Interconnection
Revenue for services is measured at amounts invoiced to Interconnection revenue for call termination, call transit, and
customers and excludes Value Added Taxation. network usage is recognised as the traffic flow occurs.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Vodacom revenue from the handset is recognised when the
Summary of significant accounting policies (continued) product is delivered limited to the amount of cash received.
Fixed-line and other (continued) Monthly service revenue received from the customer is recognised
Data in the period in which the service is delivered. Airtime revenue is
The Group provides data communication services under post- recognised on the usage basis. The terms and conditions of the
paid and prepaid payment arrangements. Revenue includes fees bundled airtime products, where applicable, allow the carry over
for installation and activation, which are deferred over the of unused airtime. The unused airtime is deferred in full. Deferred
expected average customer relationship period. Costs incurred revenue related to unused airtime is recognised when utilised by
on first time installations that form an integral part of the network the customer. Upon termination of the customer contract, all
are capitalised and depreciated over the life of the expected deferred revenue for unused airtime is recognised in revenue.
average customer relationship period. All other installation and
Prepaid products
activation costs are expensed as incurred. Post-paid and prepaid
Prepaid products that may include deliverables such as a SIM-
service arrangements include subscription fees, typically monthly
card and airtime are defined as arrangements with multiple
fees, which are recognised over the subscription period.
deliverables. The arrangement consideration is allocated to
Directory services each deliverable, based on the fair value of each deliverable
Included in other are directory services. Revenue is recognised on a stand-alone basis as a percentage of the aggregated fair
when printed directories are released for distribution, as the value of the individual deliverables. Revenue allocated to the
significant risks and rewards of ownership have been transferred identified deliverables in each revenue arrangement and the
to the buyer. Electronic directories’ revenue is recognised on a cost applicable to these identified deliverables are recognised
monthly basis, as earned. based on the same recognition criteria of the individual
deliverable at the time the product or service is delivered.
Sundry revenue
Sundry revenue is recognised when the economic benefit flows • Revenue from the SIM-card representing activation fees is
to the Group and the earnings process is complete. recognised over the average useful life of a prepaid customer.
Dealer incentives • Airtime revenue is recognised on the usage basis. Unused

Telkom provides incentives to its retail payphone card distributors airtime is deferred in full.
as trade discounts. Incentives are based on sales volume and
• Deferred revenue related to unused airtime is recognised
value. Revenue for retail payphone cards is recorded as traffic
when utilised by the customer. Upon termination of the
revenue, net of these discounts as the cards are used.
customer relationship, all deferred revenue for unused airtime
Mobile is recognised in revenue.
The Vodacom Group invoices its independent service providers
Upon purchase of an airtime voucher the customer receives the
for the revenue billed by them on behalf of the Group. The
right to make outgoing voice and data calls to the value of the
Group, within its contractual arrangements with its agents, pays
airtime voucher. Revenue is recognised as the customer utilises
them administrative fees. The Group receives in cash, the net
the voucher.
amount equal to the gross revenue earned less the administrative
fees payable to the agents. Deferred revenue and costs related to unactivated starter packs
which do not contain any expiry date, are recognised in the
Contract products
period when the probability of these starter packs being
Contract products that may include deliverables such as a
activated by a customer becomes remote. In this regard the
handset and 24-month service are defined as arrangements
Group applies a period of 36 months before these revenue and
with multiple deliverables. The arrangement consideration is
costs are released to the consolidated income statement.
allocated to each deliverable, based on the fair value of each
deliverable on a stand-alone basis as a percentage of the Data
aggregated fair value of the individual deliverables. Revenue Revenue, net of discounts, from data services is recognised
allocated to the identified deliverables in each revenue when the Group has performed the related service and
arrangement and the cost applicable to these identified depending on the nature of the service, is recognised either at
deliverables are recognised based on the same recognition the gross amounts billed to the customer or the amount
criteria of the individual deliverable at the time the product or receivable by the Group as commission for facilitating the
service is delivered. service.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) A deferred taxation asset is recognised to the extent that it is
Summary of significant accounting policies (continued) probable that future taxable profits will be available against
Mobile (continued) which the associated unused taxation losses, unused taxation
Equipment sales credits and deductible temporary differences can be utilised.
All equipment sales are recognised only when delivery and The carrying amount of deferred taxation assets is reviewed at
acceptance has taken place. Equipment sales to third party each balance sheet date and is reduced to the extent that it is
service providers are recognised when delivery is accepted. no longer probable that the related taxation benefit will be
No rights of return exist on sales to third party service providers. realised. In respect of deductible temporary differences
Mobile number portability associated with investments in subsidiaries, associates and
Revenue transactions from mobile number portability are interest in joint ventures, deferred income taxation assets are
accounted for in terms of current business rules and revenue recognised only to the extent that it is probable that temporary
recognition policies above. differences will reverse in the foreseeable future and taxable
profit will be available against which temporary differences can
Interest on debtors’ accounts
be utilised.
Interest is raised on overdue accounts on an effective interest
rate method and recognised in the income statement. Deferred taxation relating to items recognised directly in equity
Marketing is recognised in equity and not in the income statement.

Marketing costs are recognised as an expense when incurred. Deferred taxation assets and liabilities are measured at the
Incentives taxation rates that are expected to apply to the period when the
Incentives paid to service providers and dealers for products asset is realised or the liability is settled, based on taxation rates
delivered to the customer are expensed as incurred. Incentives (and taxation laws) that have been enacted or substantively
paid to service providers and dealers for services delivered are enacted by the balance sheet date. Deferred taxation assets and
expensed in the period that the related revenue is recognised. liabilities are not discounted.
Distribution incentives paid to service providers and dealers for Deferred taxation assets and deferred taxation liabilities are
exclusivity are deferred and expensed over the contractual offset, if a legally enforceable right exists to set off current
relationship period. taxation assets against current taxation liabilities and the
Investment income deferred taxes relate to the same taxable entity and the same
Dividends from investments are recognised on the date that the taxation authority.
Group is entitled to the dividend. Interest is recognised on a time Exchange differences arising from the translation of foreign
proportionate basis taking into account the principal amount
deferred taxation assets and liabilities of foreign entities where
outstanding and the effective interest rate.
the functional currency is different to the local currency, are
Taxation classified as a deferred taxation expense or income.
Current taxation
Secondary taxation on companies
The charge for current taxation is based on the results for the year
Secondary taxation on companies (STC) is provided for at a
and is adjusted for non-taxable income and non-deductible
rate of 10% (12.5% before October 1, 2007) on the amount
expenditure. Current taxation is measured at the amount expected
by which dividends declared by the Group exceeds dividends
to be paid to the taxation authorities, using taxation rates and
laws that have been enacted or substantively enacted by the received. Deferred taxation on unutilised STC credits is
balance sheet date. recognised to the extent that STC payable on future dividend
payments is likely to be available for set-off.
Deferred taxation
Deferred taxation is accounted for using the balance sheet
liability method on all temporary differences at the balance
sheet date between the taxation bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred taxation is not provided on the initial recognition of

assets or liabilities which is not a business combination and at the
time of the transaction affects neither accounting nor taxable profit
or loss.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) The estimated useful lives assigned to groups of property, plant
Summary of significant accounting policies (continued) and equipment are:
Property, plant and equipment
Years
At initial recognition acquired property, plant and equipment
are recognised at their purchase price, including import duties Freehold buildings 15 to 50
and non-refundable purchase taxes, after deducting trade Leasehold buildings 7 to 50
discounts and rebates. The recognised cost includes any directly Network equipment
attributable costs for preparing the asset for its intended use. Cables 20 to 40
Switching equipment 2 to 25
The cost of an item of property, plant and equipment is
Transmission equipment 3 to 18
recognised as an asset if it is probable that the future economic
Other 1 to 20
benefits associated with the item will flow to the Group and the
Support equipment 3 to 13
cost of the item can be measured reliably.
Furniture and office equipment 2 to 25
Property, plant and equipment is stated at historical cost less Data processing equipment and software 3 to 10
accumulated depreciation and any accumulated impairment Other 2 to 20
losses. Each component of an item of property, plant and
An item of property, plant and equipment is derecognised upon
equipment with a cost that is significant in relation to the total
disposal or when no future economic benefits are expected from
cost of the item is depreciated separately. Depreciation is
its use or disposal. Any gain or loss arising on derecognition of
charged from the date the asset is available for use on a
the asset (calculated as the difference between the net disposal
straight-line basis over the estimated useful life and ceases at the
proceeds and the carrying amount of the asset) is included in
earlier of the date that the asset is classified as held for sale and
the income statement in the year the asset is derecognised.
the date the asset is derecognised. Idle assets continue to attract
depreciation. Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or,
The estimated useful life of individual assets and the
where shorter, the term of the relevant lease if there is no
depreciation method thereof are reviewed on an annual basis
reasonable certainty that the Group will obtain ownership by the
at balance sheet date. The depreciable amount is determined
end of the lease term.
after taking into account the residual value of the asset. The
residual value is the estimated amount that the Group would Intangible assets
currently obtain from the disposal of the asset, after deducting Goodwill
the estimated cost of disposal, if the asset were already of the Goodwill arising on the acquisition of a subsidiary is
age and in the condition expected at the end of its useful life. recognised as an asset at the date that control is acquired (the
The residual values of assets are reviewed on an annual basis acquisition date). Goodwill is measured as the excess of the
at balance sheet date. sum of the consideration transferred, the amount of any minority
interest in the acquiree and the fair value of the acquirer’s
Assets under construction represents freehold buildings, integral previously-held equity interest (if any) in the entity over the net fair
operating software, network and support equipment and value of the identifiable net assets recognised.
includes all direct expenditure as well as related borrowing
If, after reassessment, the Group’s interest in the net fair value of
costs capitalised, but excludes the costs of abnormal amounts of
the acquiree’s identifiable net assets exceeds the sum of the
waste material, labour or other resources incurred in the
consideration transferred, the amount of any minority interest in
production of self-constructed assets.
the acquiree and the fair value of the acquirer’s previously-held
Freehold land is stated at cost and is not depreciated. Amounts equity interest (if any), the excess is recognised immediately in
paid by the Group on improvements to assets which are held in profit or loss as a bargain purchase gain.
terms of operating lease agreements are depreciated on a
Goodwill is not amortised, but is reviewed for impairment at
straight-line basis over the shorter of the remaining useful life of
least annually. Any impairment loss is recognised immediately in
the applicable asset or the remainder of the lease period.
profit or loss and is not subsequently reversed.
Where it is reasonably certain that the lease agreement will be
renewed, the lease period equals the period of the initial On disposal of a subsidiary, the attributable amount of goodwill
agreement plus the renewal periods. is included in the determination of the profit or loss on disposal.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) use and no future economic benefit is expected from its
Intangible assets (continued) disposal. Any gains or losses on the retirement or disposal of
Licences, software, trademarks, copyrights and other assets are recognised in the income statement in the year in
At initial recognition acquired intangible assets are recognised which they arise.
at their purchase price, including import duties and non-
The expected useful lives assigned to intangible assets are:
refundable purchase taxes, after deducting trade discounts and
rebates. The recognised cost includes any directly attributable Years
costs for preparing the asset for its intended use. Internally Licences 5 to 30
generated intangible assets are recognised at cost comprising Software 2 to 10
all directly attributable costs necessary to create and prepare Trademarks, copyrights and other 1 to 15
the asset to be capable of operating in the manner intended by
Asset retirement obligations
management. Licences, software, trademarks, copyrights and
Asset retirement obligations related to property, plant and
other intangible assets are carried at cost less accumulated
equipment and intangible assets are recognised at the present
amortisation and any accumulated impairment losses.
value of expected future cash flows when the obligation to
Amortisation commences when the intangible assets are dismantle or restore the site arises. The increase in the related
available for their intended use and is recognised on a straight- asset’s carrying value is depreciated over its estimated useful
line basis over the assets’ expected useful lives. Amortisation life. The unwinding of the discount is included in finance
ceases at the earlier of the date that the asset is classified as charges and fair value movements. Changes in the
held for sale and the date that the asset is derecognised. measurement of an existing liability that result from changes in
the estimated timing or amount of the outflow of resources
The residual value of intangible assets is the estimated amount that
required to settle the liability, or a change in the discount rate
the Group would currently obtain from the disposal of the asset,
are accounted for as increases or decreases to the original cost
after deducting the estimated cost of disposal, if the asset were
of the recognised assets. If the amount deducted exceeds the
already of the age and in the condition expected at the end of its
carrying amount of the asset, the excess is recognised
useful life. Due to the nature of the asset the residual value is
immediately in profit or loss.
assumed to be zero unless there is a commitment by a third party
to purchase the asset at the end of its useful life or when there is an Non-current assets held for sale
active market that is likely to exist at the end of the asset’s useful life, Non-current assets and disposal groups are classified as held
which can be used to estimate the residual values. The residual for sale if their carrying amount will be recovered through a sale
values of intangible assets, amortisation methods and their useful transaction rather than through continuing use. This condition is
lives are reviewed on an annual basis at balance sheet date. regarded as met only when the sale is highly probable and the
asset (or disposal group) is available for immediate sale in its
Intangible assets with indefinite useful lives and intangible assets present condition. Management must be committed to the sale,
not yet available for use are tested for impairment annually which should be expected to qualify for recognition as a
either individually or at the cash-generating unit level. Such complete sale within one year from the date of classification and
intangible assets are not amortised. The useful life of an marketed at a reasonable value. Assets are no longer
intangible asset with an indefinite life is reviewed annually to depreciated when they are classified into the category.
determine whether indefinite life assessment continues to be
If a non-current asset or disposal group is classified as held for
supportable. If not, the change in the useful life assessment from
sale, but the criteria for classification as held for sale are no
indefinite to finite is made on a prospective basis.
longer met, the disclosure of such non-current asset or disposal
Assets under construction represents application and other non- group as held for sale is ceased. Where the disposal group
integral software and includes all direct expenditure as well as was also classified as a discontinued operation, the subsequent
related borrowing costs capitalised, but excludes the costs of classification as held for use also requires that the discontinued
abnormal amounts of waste material, labour or other resources operation be included in continuing operations.
incurred in the production of self-constructed assets.
Non-current assets (and disposal groups) classified as held for
Intangible assets are derecognised when they have been sale are measured at the lower of the assets’ previous carrying
disposed of or when the asset is permanently withdrawn from amount and fair value less cost to sell.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) being deferred and recognised systematically over the expected
Summary of significant accounting policies (continued) duration of the customer relationship because it is considered to
Impairment of property, plant and equipment and be part of the customers’ ongoing rights to telecommunication
intangible assets services and the operator’s continuing involvement. Any excess
The Group regularly reviews its non-financial assets and cash- of the costs over revenues is expensed immediately.
generating units for any indication of impairment. When
Inventories
indicators, including changes in technology, market, economic,
Installation material, maintenance and network equipment
legal and operating environments occur and could result in
inventories are stated at the lower of cost, determined on a
changes of the asset’s or cash-generating unit’s estimated
weighted average basis, or estimated net realisable value.
recoverable amount, an impairment test is performed.
Merchandise inventories are stated at the lower of cost,
The recoverable amount of assets or cash-generating units is determined on a first-in first-out (FIFO) basis, or estimated net
measured using the higher of the fair value less costs to sell and realisable value. Write-down of inventories arises when, for
its value in use, which is the present value of projected cash example, goods are damaged or when net realisable value is
flows covering the remaining useful lives of the assets. lower than carrying value.
Impairment losses are recognised when the asset’s carrying
Financial instruments
value exceeds its estimated recoverable amount. Where
Recognition and initial measurement
applicable, the recoverable amount is determined for the cash-
All financial instruments are initially recognised at fair value, plus,
generating unit to which the asset belongs.
in the case of financial assets and liabilities not at fair value through
Previously recognised impairment losses, other than goodwill, are profit or loss, transaction costs that are directly attributable to the
reviewed annually for any indication that it may no longer exist or acquisition or issue. Financial instruments are recognised when the
may have decreased. If any such indication exists, the recoverable Group becomes a party to their contractual arrangements. All
amount of the asset is estimated. Such impairment losses are regular way transactions are accounted for on settlement date.
reversed through the income statement if the recoverable amount Regular way purchases or sales are purchases or sales of financial
has increased as a result of a change in the estimates used to assets that require delivery of assets within the period generally
determine the recoverable amount, but not to an amount higher established by regulation or convention in the marketplace.
than the carrying amount that would have been determined (net of
Subsequent measurement
depreciation or amortisation) had no impairment loss been
Subsequent to initial recognition, the Group classifies financial
recognised in prior years. Impairment on goodwill is not reversed.
assets as ’at fair value through profit or loss’, ’held-to-maturity
Repairs and maintenance investments’, ’loans and receivables’, or ’available-for-sale’.
The Group expenses all costs associated with repairs and Financial liabilities are classified ’at fair value through profit or
maintenance, unless it is probable that such costs would result in loss’ or ’other financial liabilities’. The measurement of each is
increased future economic benefits flowing to the Group, and set out below and presented in a table in note 13.
the costs can be reliably measured.
The fair value of financial assets and liabilities that are actively
Borrowing costs traded in financial markets is determined by reference to quoted
Financing costs directly associated with the acquisition or market prices at the close of business on the balance sheet date.
construction of assets that require more than three months to Where there is no active market, fair value is determined using
complete and place in service are capitalised at interest rates valuation techniques such as discounted cash flow analysis.
relating to loans specifically raised for that purpose, or at the
Financial assets at fair value through profit or loss
weighted average borrowing rate where the general pool of
The Group classifies financial assets that are held for trading in the
Group borrowings was utilised. Other borrowing costs are
category ’financial assets at fair value through profit or loss’.
expensed as incurred.
Financial assets are classified as held for trading if they are
Deferred revenue and expenses acquired for the purpose of selling in the future. Derivatives not
Activation revenue and costs are recognised in accordance with designated as hedges are also classified as held for trading. On
the principles contained in Emerging Issues Task Force Issue remeasurement to fair value the gains or losses on held for trading
No 00-21, Revenue Arrangements with Multiple Deliverables financial assets are recognised in net finance charges and fair
(EITF 00-21), issued in the United States. This results in activation value movements for the year.
revenue and costs up to the amount of the deferred revenue

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial liabilities at fair value through profit or loss
Financial instruments (continued) Financial liabilities are classified as ‘at fair value through profit
Financial assets at fair value through profit or loss or loss’ (FVTPL) where the financial liability is held for trading.
(continued)
A financial liability is classified as held for trading:
Gains and losses arising from changes in the fair value of the
’financial assets at fair value through profit or loss’ category are • if it is acquired for the purpose of settling in the near term; or
presented in the income statement within ’finance charges and
• if it is a derivative that is not designated and effective as a
fair value movements’ in the period which they arise.
hedging instrument.
The Group classifies non-derivative financial assets with fixed or Financial liabilities at a FVTPL are stated at fair value, with any
determinable payments and fixed maturity dates as held-to- resultant gains or losses recognised in profit or loss. The net
maturity when the Group has the positive intention and ability to gain or loss recognised in profit or loss incorporates any interest
hold to maturity. These assets are subsequently measured at paid on the financial liability.
amortised cost. Amortised cost is computed as the amount
Other financial liabilities
initially recognised minus principal repayments, plus or minus
Other financial liabilities are subsequently measured at
the cumulative amortisation using the effective interest rate
amortised cost using the effective interest rate method, with
method. This calculation includes all fees paid or received
interest expense recognised in finance charges and fair value
between parties to the contract. For investments carried at
movements, on an effective interest rate basis.
amortised cost, gains and losses are recognised in net profit or
loss when the investments are sold or impaired. The effective interest rate is the rate that accurately discounts
Loans and receivables estimated future cash payments through the expected life of the
Loans and receivables are non-derivative financial assets with financial liability or, where appropriate, a shorter period.
fixed or determinable payments that are not quoted in an active Financial guarantee contracts
market. Such assets are carried at amortised cost using the
Financial guarantee contracts are subsequently measured at the
effective interest rate method. Trade receivables are
higher of the amount determined in accordance with IAS37
subsequently measured at the original invoice amount where the
Provisions, Contingent Liabilities and Contingent Assets or the
effect of discounting is not material.
amount initially recognised less, when appropriate, cumulative
Available-for-sale financial assets amortisation, recognised in accordance with IAS18 Revenue.
Available-for-sale financial assets are those non-derivative assets
Cash and cash equivalents
that are designated as available-for-sale, or are not classified in
any of the three preceding categories. Equity instruments are all Cash and cash equivalents are measured at amortised cost. This
treated as available-for-sale financial instruments. After initial comprises cash on hand, deposits held on call and term
recognition, available-for-sale financial assets are measured at deposits with an initial maturity of less than three months when
fair value, with gains and losses being recognised as a entered into.
separate component of equity, net of taxation. Dividend income
For the purpose of the cash flow statement, cash and cash
is recognised in the income statement as part of other income
equivalents consist of cash and cash equivalents defined above,
when the Group’s right to receive payment is established.
net of credit facilities utilised.
Changes in the fair value of monetary items denominated in a
Capital and money market transactions
foreign currency and classified as available-for-sale are
New bonds and commercial paper bills issued are subsequently
analysed between translation differences resulting from changes
in amortised cost of the security and other changes in carrying measured at amortised cost using the effective interest rate
amount of the item. The translation differences on monetary method.

items are recognised in profit or loss, while translation Bonds issued where Telkom is a buyer and seller of last resort
differences on non-monetary securities are recognised in equity. are carried at fair value. The Group does not actively trade in
Changes in the fair value of monetary and non-monetary items
bonds.
classified as available-for-sale are recognised directly in equity.
When an investment is derecognised or determined to be
impaired, the cumulative gain or loss previously recorded in
equity is recognised in profit or loss.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) If, in a subsequent period, the amount of the impairment loss for
Financial instruments (continued) financial assets decreases and the decrease can be related
Derecognition objectively to an event occurring after the impairment was
A financial instrument or a portion of a financial instrument will recognised, the previously recognised impairment loss is
be derecognised and a gain or loss recognised when the reversed except for those financial assets classified as available-
Group’s contractual rights expire, financial assets are transferred for-sale and carried at cost that are not reversed. Any
or financial liabilities are extinguished. On derecognition of a subsequent reversal of an impairment loss is recognised in the
financial asset or liability, the difference between the income statement, to the extent that the carrying value of the
consideration and the carrying amount on the settlement date is asset does not exceed its amortised cost at the reversal date.
included in finance charges and fair value movements for the Reversals in respect of equity instruments classified as available-
year. For available-for-sale assets, the fair value adjustment for-sale are not recognised in profit or loss. Reversals of
relating to prior revaluations of assets is transferred from equity impairment losses on debt instruments classified as available-for-
and recognised in finance charges and fair value movements for sale are reversed through the income statement, if the increase
the year. in fair value of the instrument is objectively related to an event
Bonds and commercial paper bills are derecognised when the occurring after the impairment loss was recognised through the
obligation specified in the contract is discharged. The difference income statement.
between the carrying value of the bond and the amount paid to Remeasurement of embedded derivatives
extinguish the obligation is included in finance charges and fair The Group assesses whether an embedded derivative is
value movements for the year. required to be separated from the host contract and accounted
Impairment of financial assets for as a derivative when it first becomes party to the contract.
At each balance sheet date an assessment is made of whether The Group reassesses the contract when there is a change in the
there are any indicators of impairment of a financial asset or terms of the contract which significantly modifies the cash flows
a group of financial assets based on observable data about that would otherwise be required under the contract.
one or more loss events that occurred after the initial recognition Financial instruments: Disclosures
of the asset or the group of assets. For loans and receivables The Group groups its financial instruments into classes of similar
carried at amortised costs, if there is objective evidence that an
instruments and where disclosure is required, it discloses them
impairment loss has been incurred, the amount of the loss is
by class. It also discloses information about the nature and
measured at the difference between the asset’s carrying amount
extent of risks arising from its financial instruments as indicated
and the present value of estimated future cashflows. The
in note 13.
carrying amount of the assets is reduced through the use of an
allowance account and the amount of the loss is recognised in Foreign currencies
the income statement. In the case of equity securities classified Each entity within the Group determines its functional currency.
as available-for-sale, a significant or prolonged decline in the The Group’s presentation currency is the South African rand
fair value of the security below its cost is considered as an (ZAR).
indicator that the securities are impaired.
Transactions denominated in foreign currencies are measured at
If any such evidence exists for available-for-sale assets, the the rate of exchange at transaction date. Monetary items
cumulative loss – measured as the difference between the denominated in foreign currencies are remeasured at the rate of
acquisition cost and the current fair value, less any impairment exchange at settlement date or balance sheet date, whichever
loss on that financial asset previously recognised in profit or loss occurs first. Exchange differences on the settlement or translation
– is removed from equity and recognised in the income of monetary assets and liabilities are included in finance
statement. Impairment losses recognised in the income statement charges and fair value movements in the period in which they
on equity instruments are not reversed through the income arise. Non-monetary items that are measured in terms of
statement. The recoverable amount of financial assets carried at historical cost in a foreign country are translated using the
amortised cost is calculated as the present value of expected exchange rates as at the dates of the initial transactions. Non-
future cash flows discounted at the original effective interest rate monetary items measured at fair value in a foreign currency are
of the asset. translated using the exchange rates at the date when the fair
value is determined.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) The land and buildings elements of a lease of land and
Foreign currencies (continued) buildings are considered separately for the purposes of lease
The annual financial statements of foreign operations are classification unless it is impracticable to do so.
translated into South African rand, the Group’s presentation
Lessee
currency, for incorporation into the consolidated annual
Operating lease payments are recognised in the income
financial statements. Assets and liabilities are translated at the
statement on a straight-line basis over the lease term.
foreign exchange rates ruling at the balance sheet date.
Income, expenditure and cash flow items are measured at the Assets acquired in terms of finance leases are capitalised at the
actual foreign exchange rate or average foreign exchange rates lower of fair value or the present value of the minimum lease
for the period. All resulting unrealised exchange differences are payments at inception of the lease and depreciated over the
classified as equity. On disposal, the cumulative amounts of lesser of the useful life of the asset or the lease term. The capital
unrealised exchange differences that have been deferred are element of future obligations under the leases is included as a
recognised in the consolidated income statement as part of the liability in the balance sheet. Lease finance costs are amortised
gain or loss on disposal. in the income statement over the lease term using the interest rate
implicit in the lease. Where a sale and leaseback transaction
All gains and losses on the translation of equity loans to foreign
operations that are intended to be permanent, whether they are results in a finance lease, any excess of sale proceeds over the
denominated in one of the entities’ functional currencies or in a carrying amount is deferred and recognised in the income
third currency, are recognised in equity. statement over the term of the lease.
Goodwill and intangible assets arising on the acquisition of a Lessor

foreign operation are treated as assets of the foreign operation Operating lease revenue is recognised in the income statement
and translated at the foreign exchange rates ruling at balance on a straight-line basis over the lease term.
sheet date. Assets held under a finance lease are recognised in the balance
Treasury shares sheet and presented as a receivable at an amount equal to the
Where the Group acquires, or in substance acquires, Telkom net investment in the lease. The recognition of finance income is
shares, such shares are measured at cost and disclosed as a based on a pattern reflecting a constant periodic rate of return
reduction of equity. No gain or loss is recognised in profit or loss on the net investment in the finance lease.
on the purchase, sale, issue or cancellation of the Group’s own
Employee benefits
equity instruments. Such shares are not remeasured for changes
Post-employment benefits
in fair value.
The Group provides defined benefit and defined contribution
Where the Group chooses or is required to buy equity instruments plans for the benefit of employees. These plans are funded by
from another party to satisfy its obligations to its employees under the employees and the Group, taking into account
the share-based payment arrangement by delivery of its own recommendations of the independent actuaries. The post-
shares, the transaction is accounted for as equity-settled. This retirement telephone rebate liability is unfunded.
applies regardless of whether the employees’ rights to the equity
Defined contribution plans
instruments were granted by the Group itself or by its shareholders
The Group’s funding of the defined contribution plans is charged
or was settled by the Group itself or its shareholders.
to employee expenses in the same year as the related service is
Leases provided.
A lease is classified as a finance lease if it transfers substantially
Defined benefit plans
all the risks and rewards incidental to ownership. All other
leases are classified as operating leases. The Group provides defined benefit plans for pension,
retirement, post-retirement medical aid benefits and telephone
Where the Group enters into a service agreement as a supplier or rebates to qualifying employees. The Group’s net obligation in
a customer that depends on the use of a specific asset, and conveys respect of defined benefits is calculated separately for each
the right to control the use of the specific asset, the arrangement is
plan by estimating the amount of future benefits earned in return
assessed to determine whether it contains a lease. Once it has been
for services rendered.
concluded that an arrangement contains a lease, it is assessed
against the criteria in IAS17 to determine if the arrangement should
be recognised as a finance lease or operating lease.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred bonus incentives

Employee benefits (continued) Employees of the wholly owned subsidiaries of Vodacom,
Defined benefit plans (continued) including executive directors, are eligible for compensation
The amount recognised in the balance sheet represents the present benefits in the form of a Deferred Bonus Incentive Scheme. The
value of the defined benefit obligations, calculated by using the benefit is recorded at the present value of the expected future
projected unit credit method, as adjusted for unrecognised cash outflows.
actuarial gains and losses, unrecognised past service costs and
Share-based compensation
reduced by the fair value of the related plan assets. The amount
The grants of equity instruments, made to employees in terms of
of any surplus recognised and reflected as deferred expenses is
the Telkom Conditional Share Plan, are classified as equity-
limited to unrecognised actuarial losses and past service costs plus
settled share-based payment transactions. The expense relating
the present value of available refunds and reductions in future
to the services rendered by the employees, and the
contributions to the plan. To the extent that there is uncertainty as
corresponding increase in equity, is measured at the fair value
to the entitlement to the surplus, no asset is recognised. No gain
of the equity instruments at their date of grant based on the
is recognised solely as a result of an actuarial loss or past service
market price at grant date, adjusted for the lack of entitlement to
cost in the current period and no loss is recognised solely as a
dividends during the vesting period. This compensation cost is
result of an actuarial gain or past service cost in the current period.
recognised over the vesting period, based on the best available
Actuarial gains and losses are recognised as employee estimate at each balance sheet date of the number of equity
expenses when the cumulative unrecognised gains and losses instruments that are expected to vest.
for each individual plan exceed 10% of the greater of the
Short-term employee benefits
present value of the Group’s obligation and the fair value of
The cost of all short-term employee benefits is recognised during
plan assets at the beginning of the year. These gains or losses
the year the employees render services, unless the Group uses
are amortised on a straight-line basis over 10 years for all the
the services of employees in the construction of an asset and the
defined benefit plans, except gains or losses related to the
benefits received meet the recognition criteria of an asset, at
pensioners in the Telkom Retirement Fund or unless the standard
which stage it is included as part of the related property, plant
requires faster recognition. For the Telkom Retirement Fund
and equipment or intangible asset item.
pensioners, the cumulative unrecognised actuarial gains and
losses in excess of the 10% corridor at the beginning of the year Long-term incentive provision
are recognised immediately. The Vodacom Group provides long-term incentives to eligible
employees payable on termination or retirement. The Group’s
Past service costs are recognised immediately to the extent that
liability is based on an actuarial valuation. Actuarial gains and
the benefits are vested, otherwise they are recognised on a
losses are recognised as employee expenses.
straight-line basis over the average period the benefits become
vested. Provisions
Provisions are recognised when the Group has a present
Leave benefits
obligation (legal or constructive) as a result of a past event, it is
Annual leave entitlement is provided for over the period that the
probable that an outflow of resources will be required to settle
leave accrues and is subject to a cap of 22 days.
the obligation, and a reliable estimate can be made of the
Workforce reduction amount of the obligation. Provisions are reviewed at each
Workforce reduction expenses are payable when employment balance sheet date and adjusted to reflect the current best
is terminated before the normal retirement age or when an estimate. Where the effect of the time value of money is
employee accepts voluntary redundancy in exchange for material, the amount of the provision is the present value of the
benefits. Workforce reduction benefits are recognised when the expenditures expected to be required to settle the obligation.
entity is demonstrably committed and it is probable that the
expenses will be incurred. In the case of an offer made to
encourage voluntary redundancy, the measurement of
termination benefits is based on the number of employees
expected to accept the offer.

2007 2008 2009

Rm Rm Rm
3. REVENUE
3.1 Total revenue 32,919 34,084 36,433
Operating revenue 32,441 33,611 35,940

Other income (excluding profit on disposal of property, plant and
equipment, intangible assets and investments, refer to note 4) 279 305 312
Investment income (refer to note 6) 199 168 181
3.2 Operating revenue 32,441 33,611 35,940
Fixed-line 32,345 32,572 33,659

Multi-Links – 845 1,900
Other 873 1,040 1,214
Eliminations (777) (846) (833)
Fixed-line 32,345 32,572 33,659
Subscriptions, connections and other usage 6,286 6,330 6,614

Traffic 16,740 15,950 15,323
Domestic (local and long distance) 7,563 6,328 5,670

Fixed-to-mobile 7,646 7,557 7,420
International (outgoing) 988 986 933
Subscription based calling plans 543 1,079 1,300
Interconnection 1,639 1,757 2,084

Data 7,489 8,308 9,310
Sundry revenue 191 227 328
4. OTHER INCOME 338 472 343
Other income (included in Total revenue, refer to note 3) 279 305 312
Interest received from trade receivables 188 254 270

Sundry income 91 51 42
Profit on disposal of property, plant and equipment and intangible assets 16 167 31
Profit on disposal of investment 43 – –

2007 2008 2009

Rm Rm Rm
5. OPERATING EXPENSES
Operating expenses comprise:
5.1 Employee expenses 7,254 7,629 8,345
Salaries and wages 5,215 5,710 6,050

Medical aid contributions 384 415 410
Retirement contributions 446 470 472
Post-retirement pension and retirement fund (refer to note 30) 33 5 29
Current service cost 5 5 4

Interest cost 329 509 633
Expected return on plan assets (508) (713) (825)
Actuarial gain (136) (16) –
Settlement loss/(gain) 21 (2) (3)
Asset limitation 322 222 220
Post-retirement medical aid (refer to notes 29 and 30) 330 278 457

Expected return on plan asset (188) (257) (223)
Actuarial loss 149 129 157
Telephone rebates (refer to notes 29 and 30) 104 27 61

Past service cost 76 2 2
Actuarial loss 5 – 14
Share-based compensation expense (refer to note 24) 141 522 554

Other benefits* 1,297 988 1,048
Employee expenses capitalised (696) (786) (736)
* Other benefits include annual leave, performance incentive,

service bonuses, skills development and workforce reduction expenses.
5.2 Payments to other operators 5,005 6,098 6,919
Payments to other network operators consist of expenses in respect of interconnection with other network operators.

2007 2008 2009

Rm Rm Rm
5. OPERATING EXPENSES (continued)

5.3 Selling, general and administrative expenses 4,184 4,045 5,772
Selling and administrative expenses 1,533 1,220 2,374

Maintenance 1,870 1,966 2,319
Marketing 640 614 711
Bad debts 141 245 368
The increase in the current year’s selling and administrative expenses is

attributable to the focus on expanding the customer base in Nigeria.
5.4 Service fees 2,209 2,437 2,756
Facilities and property management 1,142 1,228 1,275

Consultancy services 192 169 295
Security and other 821 982 1,121
Auditors’ remuneration 54 58 65
Audit services 53 57 58
Company auditors 48 46 47
Current year 47 43 47
Prior year underprovision 1 3 –
Other auditors – current year 5 11 11
Audit related services – 1 –
Other auditors – 1 –
Other services 1 – 7
Included in the current year’s consultancy services is an amount of

R177 million relating to services rendered in respect of the transaction
to dispose of Telkom’s shareholding in Vodacom Group (Proprietary) Limited.
The increase in the current year’s security and other costs is mainly
attributable to the new contract negotiated to secure the copper network
in Telkom’s drive to cut down on cable thefts.
5.5 Operating leases 775 671 823
Land and buildings 135 160 244

Transmission and data lines 8 35 118
Equipment 80 48 72
Vehicles 552 428 389
5.6 Depreciation, amortisation, impairment and write-offs 3,601 4,134 5,280
Depreciation of property, plant and equipment 3,011 3,151 3,733

Amortisation of intangible assets 306 469 724
Impairment of property, plant and equipment and intangible assets – 229 501
Write-offs of property, plant and equipment and intangible assets 284 285 322
Included in the current year’s amortisation of intangible assets is an amount of R134 million relating to the FIFA brand intangible asset.
The impairment charge for the 2009 financial year consists of R462 million and R39 million relating to Multi-Links and Africa Online
respectively.

2007 2008 2009

Rm Rm Rm
6. INVESTMENT INCOME 199 168 181
Interest income 196 168 181

Dividend income from investments 3 – –
Included in investment income is an amount of R160 million (2008:

R142 million; 2007: R196 million) which relates to interest earned from
financial assets not measured at fair value through profit or loss.
7. FINANCE CHARGES AND FAIR VALUE MOVEMENTS 857 1,556 2,843
Finance charges on interest-bearing debt 1,142 1,543 1,732
Local debt 1,303 1,700 1,895

Foreign debt – 18 –
Finance charges capitalised (161) (175) (163)
Foreign exchange gains and losses and fair value movement (285) 13 1,111
Foreign exchange losses 59 93 843

Fair value adjustments on derivative instruments (344) (80) 268
Capitalisation rate 14.77% 12.60% 12.40%
Included in finance charges is an amount of R1,655 million (2008: R1,499 million; 2007: R1,142 million) which relates to interest paid
on financial liabilities not measured at fair value through profit or loss.
Included in foreign exchange losses and fair value adjustments are forex losses of R961 million in respect of the loan that Multi-Links
received from Telkom and R409 million loss in respect of the Multi-Links put option, offset by the R318 million gain in Telkom.

2007 2008 2009

Rm Rm Rm
8. TAXATION 2,803 2,647 1,660
South African normal company taxation 1,989 2,018 1,658
Current taxation 2,023 2,018 1,686

Overprovision for prior year (34) – (28)
Deferred taxation 490 254 (164)
Temporary differences – normal company taxation 534 121 241

Temporary difference – secondary taxation on companies
(STC) taxation credits (raised)/utilised (45) 190 (89)
Change in taxation rate – (54) –
Capital gains taxation (CGT) asset – – (454)
Underprovision/(overprovision) for prior year 1 (3) 138
Secondary taxation on companies 324 381 164

Foreign taxation – (6) 2
Included in the current year’s deferred taxation expense is a credit of

R454 million relating to the deferred taxation on temporary differences
associated with the disposal groups which are classified as held for sale.
The decrease in the deferred taxation expense is mainly due to the

temporary difference associated with the disposal groups which are
classified as held for sale.
The STC expense was provided for at a rate of 10% (12.5% before
October 1, 2007) on the amount by which dividends declared exceeded
dividends received. Deferred taxation expense relating to STC credits is
provided for at a rate of 10% (2008: 10%; 2007: 12.5%).
Reconciliation of taxation rate % % %

Effective rate 30.8 34.5 44.5
South African normal rate of taxation 29.0 29.0 28.0
Adjusted for: 1.8 5.5 16.5
Change in taxation rate – (0.5) –

Exempt income (2.2) (2.5) (26.8)
Disallowable expenditure 0.7 2.9 47.7
Taxation losses not utilised – (0.7) 1.6
STC credits (raised)/utilised (0.3) 1.5 (2.4)
STC charge 3.1 5.3 4.4
CGT asset 1.1 – (11.0)
Net (overprovision)/underprovision for prior year (0.5) (0.5) 3.0
Utilisation of assessed loss (0.1) – –

2007 2008 2009

Rm Rm Rm
9. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE

9.1 Discontinued operations
Telkom Media (Proprietary) Limited
Telkom Media was classified as held for sale in the September 2008 interim
financials. At year end March 31, 2009, the subsidiary did not meet
the held for sale criteria as management were unable to sell the disposal
group for its expected price and therefore decided to abandon it.
The results and cash flows of the subsidiary are disclosed as a
discontinued operation in accordance with IFRS.
Analysis of the results of discontinued operations:

Revenue* 14 26
Expenses* 157 305
Loss before taxation of discontinued operations 143 279

Taxation (1) 2
Loss after taxation of discontinued operations 142 281
The net cash flows attributable to the operating, investing and

financing activities of discontinued operations:
Operating cash flows (95) (140)
Investing cash flows (218) (39)
Financing cash flows 319 149
Total cash inflow/(outflow) 6 (30)
9.2 Disposal groups held for sale

9.2.1 Vodacom Group (Proprietary) Limited
In the current year, the Group announced a decision to dispose of its entire
interest in Vodacom through selling 15% of its shareholding to Vodafone, a
wholly owned subsidiary of Vodafone Group Plc (Vodafones) and unbundling
its remaining 35% shareholding to its shareholders pursuant to a listing of
Vodacom on the main board of the JSE Limited. This decision was taken in
line with the Group’s strategy to unlock shareholder value; consequently, all
assets and liabilities of Vodacom and its subsidiaries were classified as a
discontinued operation.

Revenue* 19,157 22,653 26,215
Expenses* 14,709 17,334 21,749
Profit before taxation of discontinued operations 4,448 5,319 4,466

Taxation 1,918 2,055 2,023
Profit after taxation of discontinued operations 2,530 3,264 2,443
* Revenue comprises operating revenue, other income and investment income. Expenses comprises operating expenses and finance charges.

2007 2008 2009

Rm Rm Rm
9. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD

FOR SALE (continued)
9.2 Disposal groups held for sale (continued)
9.2.1 Vodacom Group (Proprietary) Limited (continued)
The major classes of assets and liabilities of the business classified
as a disposal group:
Assets 23,410
Property, plant and equipment 10,922

Intangible assets 5,897
Trade and other receivables 4,283
Other non-current and current assets 2,308
Liabilities 15,858
Interest-bearing debt 4,170

Trade and other payables 4,679
Current portion of interest-bearing debt 2,882
Current portion of deferred revenue 1,260
Credit facilities utilised 1,102
Other non-current and current liabilities 1,765
Reserve of disposal group held for sale 876
Reconciliation of carrying value transferred to disposal groups at year end: Property,

plant and
equipment
Carrying value at beginning of year 9,585

Additions 2,979
Disposals (28)
Foreign currency translation reserve 340
Business combinations 143
Impairments and write-offs (53)
Depreciation (1,974)
Transfers (33)
Other transfers (37)
Carrying value at end of year 10,922
Intangible
assets
Carrying value at beginning of year 2,111

Additions 590
Foreign currency translation reserve 26
Business combinations 3,503
Amortisation (366)
Transfers (33)
Carrying value at end of year 5,897
The net cash flows attributable to the operating, investing and

financing activities of the disposal group:
Operating cash flows 2,429 2,563 2,092

Investing cash flows (3,292) (3,751) (6,375)
Financing cash flows (100) 1,617 4,436
Total cash (outflow)/inflow (963) 429 153


2007 2008 2009

Rm Rm Rm
9. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD

FOR SALE (continued)
9.2 Disposal groups held for sale (continued)
9.2.2 Swiftnet (Proprietary) Limited
In February 2009, Telkom’s Board of directors took a decision to
dispose of its 100% investment in Swiftnet (Proprietary) Limited.
The investment is classified as held for sale.

Revenue* 103 98 97
Expenses* 64 79 82
Profit before taxation of discontinued operations 39 19 15

Taxation 10 3 (4)
Profit after taxation of discontinued operations 29 16 19
The major classes of assets and liabilities of the business

classified as a disposal group:
Assets 72
Property, plant and equipment and intangible assets 24

Income taxation receivable 2
Trade and other receivables 18
Cash and cash equivalents 28
Liabilities 15
Provisions 1
Trade and other payables 10
Current portion of provisions 4
The net cash flows attributable to the operating, investing and financing
activities of the disposal group:
Operating cash flows 43 22 31

Investing cash flows (15) (11) (33)
Financing cash flows (23) – 10
Total cash inflow 5 11 8
* Revenue comprises operating revenue, other income and investment income. Expenses comprises operating expenses and finance charges.

2007 2008 2009
10. EARNINGS PER SHARE

Total operations
Basic earnings per share (cents) 1,681.0 1,565.0 832.8
The calculation of earnings per share is based on profit attributable to equity
holders of Telkom for the year of R4,170 million (2008: R7,975 million;
2007: R8,646 million) and 500,700,538 (2008: 509,595,092;
2007: 514,341,284) weighted average number of ordinary shares in issue.
Diluted earnings per share (cents) 1,676.3 1,546.9 819.6

The calculation of diluted earnings per share is based on earnings for the
year of R4,170 million (2008: R7,975 million; 2007: R8,646 million) and
508,782,641 (2008: 515,541,968; 2007: 515,763,581) diluted
weighted average number of ordinary shares. The adjustment in the
weighted average number of shares is as a result of the expected future
vesting of shares already allocated to employees under the Telkom
Conditional Share Plan.
Headline earnings per share (cents)* 1,710.7 1,634.8 994.6

The calculation of headline earnings per share is based on headline
earnings of R4,980 million (2008: R8,331 million; 2007:
R8,799 million) and 500,700,538 (2008: 509,595,092;
2007: 514,341,284) weighted average number of ordinary shares in issue.
Diluted headline earnings per share (cents)* 1,706.0 1,616.0 978.8

The calculation of diluted headline earnings per share is based on headline
earnings of R4,980 million (2008: R8,331 million; 2007: R8,799 million)
and 508,782,641 (2008: 515,541,968; 2007: 515,763,581)
diluted weighted average number of ordinary shares in issue. The
adjustment in the weighted average number of shares is as a result
of the expected future vesting of shares already allocated to
employees under the Telkom Conditional Share Plan.
Basic earnings per share (cents) 1,204.7 963.7 407.4
The calculation of earnings per share is based on profit attributable to
equity holders of Telkom for the year of R2,040 million (2008: R4,911 million;
2007: R6,196 million) and 500,700,538 (2008: 509,595,092;
2007: 514,341,284) weighted average number of ordinary shares
in issue.
Diluted earnings per share (cents) 1,201.3 952.6 401.0

The calculation of diluted earnings per share is based on earnings for
the year of R2,040 million (2008: R4,911 million; 2007: R6,196 million)
and 508,782,641 (2008: 515,541,968; 2007: 515,763,581) diluted
weighted average number of ordinary shares. The adjustment in the

2007 2008 2009
10. EARNINGS PER SHARE (continued)

Continuing operations (continued)
Headline earnings per share (cents)* 1,235.5 1,028.9 557.0
and 500,700,538 (2008: 509,595,092; 2007: 514,341,284)
weighted average number of ordinary shares in issue.
Diluted headline earnings per share (cents)* 1,232.2 1,017.0 548.2

The calculation of diluted headline earnings per share is based on headline
and 508,782,641 (2008: 515,541,968; 2007: 515,763,581) diluted
weighted average number of ordinary shares in issue. The adjustment in the
Discontinuing operations
Basic earnings per share (cents) 476.3 601.3 425.4
The calculation of earnings per share is based on profit attributable to
equity holders of Telkom for the year of R2,130 million (2008:
R3,064 million; 2007: R2,450 million) and 500,700,538
(2008: 509,595,092; 2007: 514,341,284) weighted average
number of ordinary shares in issue.
Diluted earnings per share (cents) 475.0 594.3 418.6

The calculation of diluted earnings per share is based on earnings for the
year of R2,130 million (2008: R3,064 million; 2007: R2,450 million)
and 508,782,641 diluted weighted average number of ordinary shares
(2008: 515,541,968; 2007: 515,763,581). The adjustment in the
Headline earnings per share (cents)* 475.2 606.0 437.6

and 500,700,538 (2008: 509,595,092; 2007: 514,341,284)
weighted average number of ordinary shares in issue.
Diluted headline earnings per share (cents)* 473.9 599.0 430.6

The calculation of diluted headline earnings per share is based on
headline earnings of R2,191 million (2008: R3,088 million; 2007:
R2,444 million) and 508,782,641 (2008: 515,541,968;
2007: 515,763,581) diluted weighted average number of ordinary
shares in issue. The adjustment in the weighted average number of
shares is as a result of the expected future vesting of shares already
allocated to employees under the Telkom Conditional Share Plan.

2007 2008 2009

Reconciliation of weighted average number of ordinary shares:
Ordinary shares in issue (refer to note 22) 544,944,901 532,855,530 520,784,186
Weighted average number of shares bought back (7,442,253) (1,594,241) (27)
Weighted average number of treasury shares (23,161,364) (21,666,197) (20,083,621)
Weighted average number of shares outstanding 514,341,284 509,595,092 500,700,538
Reconciliation of diluted weighted average number of ordinary shares

Weighted average number of shares outstanding 514,341,284 509,595,092 500,700,538
Expected future vesting of shares 1,422,297 5,946,876 8,082,103
Diluted weighted average number of shares outstanding 515,763,581 515,541,968 508,782,641
Gross** Net
Total operations Rm Rm
2009
Reconciliation between earnings and headline earnings:
Earnings as reported 4,170
Profit on disposal of property, plant and equipment and intangible assets (25) (21)
Impairment loss on property, plant and equipment and intangible assets 557 557
Write-offs of property, plant and equipment and intangible assets 322 274
Headline earnings 4,980
2008
Profit on disposal of investments (available-for-sale) (4) (3)
2007
Reversal of impairment loss on property, plant and equipment and intangible assets 12 9
* The disclosure of headline earnings is a requirement of the JSE Limited and is not a recognised measure under IFRS. It has been calculated in accordance
with the South African Institute of Chartered Accountants’ circular issued in this regard.
** These are the gross amounts, before deducting taxation and minority interests.


Gross* Net
Continuing operations Rm Rm
2009
Profit from continuing operations 2,066
Minority interest 26
Earnings from continuing operations attributable to equity holders of Telkom 2,040

2008

2007

* These are the gross amounts, before deducting taxation and minority interests.


Gross* Net
Discontinuing operations Rm Rm
2009
Profit from discontinued operations 2,181
Earnings from discontinued operations attributable to equity holders of Telkom 2,130

Profit on disposal of property, plant and equipment and intangible assets 7 5
2008

Profit on disposal of property, plant and equipment and intangible assets 19 13
2007

Reversal of impairment loss on property, plant and equipment and intangible assets 12 9
2007 2008 2009
Dividend per share (cents) 900.0 1,100.0 660.0
The calculation of dividend per share is based on dividends of R3,306 million (2008: R5,627 million; 2007: R4,678 million) declared
on June 6, 2008 and 500,941,027 (2008: 511,513,237; 2007: 519,711,236) number of ordinary shares outstanding on the date
of dividend declaration. The reduction in the number of shares represents the number of treasury shares held on date of payment.
* These are the gross amounts, before deducting taxation and minority interests.

2007 2008 2009*

Accumu- Accumu- Accumu-
lated lated lated
depre- depre- depre-
ciation and ciation and ciation and
impair- Carrying impair- Carrying impair- Carrying
Cost ment value Cost ment value Cost ment value
Rm Rm Rm Rm Rm Rm Rm Rm Rm
11. PROPERTY, PLANT

AND EQUIPMENT
Freehold land and
buildings 4,594 (1,837) 2,757 4,931 (2,010) 2,921 4,950 (2,136) 2,814
Leasehold buildings 926 (362) 564 1,052 (418) 634 805 (477) 328
Network equipment 63,003 (31,820) 31,183 69,572 (35,214) 34,358 59,765 (29,982) 29,783
Support equipment 4,045 (2,436) 1,609 4,355 (2,635) 1,720 3,921 (2,482) 1,439
Furniture and office
equipment 536 (366) 170 568 (377) 191 453 (328) 125
Data processing
equipment and
software 5,836 (3,707) 2,129 6,279 (3,904) 2,375 5,543 (3,518) 2,025
Under
construction 2,536 – 2,536 4,200 – 4,200 4,612 – 4,612
Other 860 (554) 306 1,046 (630) 416 721 (429) 292
82,336 (41,082) 41,254 92,003 (45,188) 46,815 80,770 (39,352) 41,418
Fully depreciated assets with a cost of R155 million (2008: R498 million; 2007: R1,225 million) were derecognised in the 2009 financial
year. This has reduced both the cost price and accumulated depreciation of property, plant and equipment.
Property, plant and equipment with a carrying value of R158 million (2008: R681 million; 2007: R574 million) are pledged as security.
Details of the loans are disclosed in note 28.
* Net of assets of disposal groups classified as held for sale.


11. PROPERTY, PLANT AND EQUIPMENT (continued)

The carrying amounts of property, plant and equipment can be reconciled as follows:**
Carrying Transfers Impairment, Carrying
value at to Business Foreign write-offs value at
beginning disposal combi- currency and Depre- end of
of year groups Additions nations Transfers* translation reversals Disposals ciation year
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
2009
Freehold land and buildings 2,921 (293) 283 – 82 (4) (5) (2) (168) 2,814
Leasehold buildings 634 (360) 119 – 24 (64) – – (25) 328
Network equipment 34,358 (7,951) 2,913 – 3,378 30 (141) (71) (2,733) 29,783
Support equipment 1,720 (235) 137 – 112 1 (12) – (284) 1,439
Furniture and office equipment 191 (72) 19 – 13 1 – – (27) 125
Data processing equipment
and software 2,375 (370) 154 – 310 (1) (5) (1) (437) 2,025
Under construction 4,200 – 4,872 – (4,120) (238) (102) – – 4,612
Other 416 (304) 228 – 13 (1) (1) – (59) 292
46,815 (9,585) 8,725 – (188) (276) (266) (74) (3,733) 41,418
2008
Freehold land and buildings 2,757 – 300 22 27 2 (3) (8) (176) 2,921
Leasehold buildings 564 – 136 26 32 1 (67) (1) (57) 634
Network equipment 31,183 – 5,167 404 1,301 272 (136) (107) (3,726) 34,358
Support equipment 1,609 – 316 1 116 3 (8) – (317) 1,720
Furniture and office equipment 170 – 78 3 1 1 (8) (1) (53) 191
and software 2,129 – 525 31 150 6 (19) (2) (445) 2,375
Under construction 2,536 – 3,416 135 (1,737) 2 (152) – – 4,200
Other 306 – 170 8 11 7 (2) (3) (81) 416
41,254 – 10,108 630 (99) 294 (395) (122) (4,855) 46,815
2007
Freehold land and buildings 2,699 – 209 – – 2 17 (1) (169) 2,757
Leasehold buildings 618 – – – 1 – – (14) (41) 564
Network equipment 28,941 – 5,154 1 849 240 (199) (270) (3,533) 31,183
Support equipment 1,321 – 442 – 109 2 (15) – (250) 1,609
Furniture and office equipment 134 – 51 3 8 1 – – (27) 170
and software 2,082 – 466 12 (36) 8 (10) (2) (391) 2,129
Under construction 1,320 – 2,165 – (912) – (37) – – 2,536
Other 159 – 161 – 58 4 (1) (3) (72) 306
37,274 – 8,648 16 77 257 (245) (290) (4,483) 41,254
Full details of land and buildings are available for inspection at the registered offices of the Group.
The Group does not have temporarily idle property, plant and equipment.
A major portion of this capital expenditure relates to the expansion of existing networks and services. An extensive build programme that provides capacity
for growth in services, with focus on Next Generation Network technologies, roll-out of the W-CDMA network and Multi-Links’s expansion of network
equipment, has resulted in an increase in property, plant and equipment additions.
During the 2008 financial year, the Group recognised an impairment loss relating to Telkom Media assets. The recoverable amount for certain items of
property, plant and equipment was estimated, and an impairment loss of R217 million was recognised in order to reduce the carrying amount of those
assets to their recoverable amount. The impairment has been included in impairment, write-offs and reversals.
Included in the current year’s additions in the other category, is an amount of R179 million (2008: R31 million; 2007: RNil) that relates to finance leases.
An amount of R71 million (2008: R88 million; 2007: R240 million) under property, plant and equipment disposals relates to the reclassification of
Customer Premises Equipment at the start of the lease. These disposals are as a result of the Group entering into a leasing arrangement.
* An amount of R21 million was transferred from network equipment to cash and cash equivalents for Telkom Media.
** The 2009 reconciliation excludes assets held in the disposal groups held for sale, refer to note 9.

2007 2008 2009*

Accumulated Accumulated Accumulated
amortisation amortisation amortisation
and impair- Carrying and impair- Carrying and impair- Carrying
Cost ment value Cost ment value Cost ment value
12. INTANGIBLE ASSETS

Goodwill 673 – 673 3,267 (12) 3,255 3,461 (501) 2,960
Trademarks, copyrights
and other 761 (521) 240 1,127 (633) 494 677 (332) 345
Licences 222 (116) 106 311 (140) 171 228 (35) 193
Software 6,720 (3,737) 2,983 8,106 (4,298) 3,808 7,045 (3,799) 3,246
Under construction 1,109 – 1,109 740 – 740 488 – 488
9,485 (4,374) 5,111 13,551 (5,083) 8,468 11,899 (4,667) 7,232
* Net of assets of disposal groups classified as held for sale.
The carrying amounts of intangible assets can be reconciled as follows:**

Carrying Transfers Impair- Carrying
value at to Business Foreign ment value at
beginning disposal combi- currency and Amor- end of
of year groups Additions nations Transfers translation write-offs tisation year
2009
Goodwill 3,255 (947) – 1,309 – (156) (501) – 2,960
and other 494 (178) 300 – (28) (22) – (221) 345
Licences 171 (104) 41 – 137 (42) – (10) 193
Software 3,808 (882) 209 – 613 (8) (1) (493) 3,246
Under construction 740 – 356 – (555) 2 (55) – 488
8,468 (2,111) 906 1,309 167 (226) (557) (724) 7,232
2008
Goodwill 673 – 492 1,727 – 375 (12) – 3,255
and other 240 – 174 165 – 20 – (105) 494
Licences 106 – 32 36 – 15 (3) (15) 171
Software 2,983 – 739 – 713 9 (10) (626) 3,808
Under construction 1,109 – 354 – (614) – (109) – 740
5,111 – 1,791 1,928 99 419 (134) (746) 8,468
2007
Goodwill 305 – 186 173 – 9 – – 673
and other 213 – 8 69 – – – (50) 240
Licences 60 – 47 1 – 8 – (10) 106
Software 2,269 – 628 – 559 7 (4) (476) 2,983
Under construction 1,063 – 729 – (636) – (47) – 1,109
3,910 – 1,598 243 (77) 24 (51) (536) 5,111
Intangible assets that are material to the Group consist of Software and Goodwill. The average remaining amortisation period for Software
is between 2 and 10 years.
** The 2009 reconciliation excludes assets held in the disposal groups held for sale, refer to note 9.

12. INTANGIBLE ASSETS (continued)

Impairment testing of goodwill
For the purposes of impairment testing, goodwill is allocated to the smallest cash-generating unit. A cash-generating unit is the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets. The Group reviews goodwill for impairment annually by comparing the recoverable amounts of cash-generating units to the carrying
amounts.
Goodwill acquired through business combinations has been allocated to two cash-generating units for impairment testing as follows:
Africa Online Limited (Kenya)

Multi-Links Telecommunications Limited (Nigeria)
Kenya
The carrying amount of goodwill is R144 million.
For the period ending March 31, 2009, Africa Online was treated as one cash-generating unit for impairment testing purposes. This
represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.
Goodwill relating to Africa Online was tested for impairment on March 31, 2009. The recoverable amount of goodwill relating to Africa
Online was determined on the basis of value in use calculations.
Key assumptions used to determine the value in use include the discount rate and cash flows. Cash flows are based on a five year forecast
of future cash flows, extrapolated in perpetuity to reflect the long-term plans for the entity, using a weighted average cost of capital of 15.4%
(2008: 11.59%) and a terminal growth rate of 3%.
An impairment loss of R39 million (2008: R12 million) was recognised.
Nigeria
The carrying amount of goodwill is R2,749 million.
Multi-Links has been identified as a single cash-generating unit within the Group. The recoverable amount of goodwill relating to Multi-Links
was determined using the discounted cash flow method.
The key assumptions in determining cash flows are a five year forecast of future cash flows, extrapolated in perpetuity to reflect the long-
term plans for the entity, using a weighted average cost of capital of 18.8%. The calculated perpetuity value for Multi-Links assumes that
the company will continue to grow at 3% p.a. (nominal).
Key assumptions used in the testing of goodwill for impairment:

Applicable to all cash-generating units
Expected customer base: The basis for determining value(s) assigned to key assumptions is based on the closing customer base in the period
immediately preceding the budget period and increased for expected growth. The value assigned to key assumptions reflects past
experience, and has an element of potential growth. The growth is based on market assumptions.
Gross margin: The basis for determining value(s) assigned to key assumptions is based on the average gross margin achieved in the period
immediately before the budget period and increased for expected efficiences. The value assigned reflects past experience and efficiency
improvements.
Capital expenditure: The basis for determining value(s) assigned to key assumptions is based on the total capital expenditure achieved in
the period immediately before the budget period and adjusted for expected network coverage roll-out. The value assigned is based on
management’s expected network coverage roll-out.
Applicable to all cash-generating units except for the Africa Online cash-generating units
ARPU: The basis for determining value(s) assigned to key assumptions is based on past experience and expected growth which is based
on market forces and external sources of information.
Applicable to all non-South African cash-generating units

Exchange rates: The basis for determining value(s) assigned to key assumptions is based on the average market forward exchange rate
over the budget period in respect of the ZAR/US$. The value assigned to the key assumption is consistent with external sources of
information.

13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Risk management
Exposure to continuously changing market conditions has made management of financial risk critical for the Group. As a result of the
financial instruments held, the Group is exposed to market risk (comprising interest rate risk and currency risk), credit risk and liquidity risk.
Treasury policies, risk limits and control procedures are continuously monitored by the Board of directors through its audit and risk
management committee.
The Group holds or issues financial instruments to finance its operations, for the temporary investment of short-term funds and to manage
currency and interest rate risks. In addition, financial instruments, for example trade receivables and payables, arise directly from the
Group’s operations.
The Group finances its operations primarily by a mixture of issued share capital, retained earnings, long-term and short-term loans. The
Group uses derivative financial instruments to manage its exposure to market risks from changes in interest and foreign exchange rates. The
derivatives used for this purpose are principally interest rate swaps and forward exchange contracts. The Group does not speculate in
derivative instruments.
The table below sets out the Group’s classification of financial assets and liabilities:
At fair
value
through
profit or Financial
loss liabilities at Total
held for amortised Held-to- Available- Loans and carrying
trading cost maturity for-sale receivables value Fair value
Note Rm Rm Rm Rm Rm Rm Rm
2009
Classes of financial
instruments per balance sheet
Assets 1,442 – 1,046 – 7,976 10,464 10,464
Investments 14 1,286 – – – 97 1,383 1,383

Trade and other receivables* 19 – – – – 5,673 5,673 5,673
Other financial assets 20 156 – 1,046 – – 1,202 1,202
Interest rate swaps 4 – – – – 4 4

Forward exchange contracts 152 – – – – 152 152
Repurchase agreements – – 1,046 – – 1,046 1,046
Finance lease receivables 16 – – – – 275 275 275

Cash and cash equivalents 21 – – – – 1,931 1,931 1,931
Liabilities (228) (23,963) – – – (24,191) (25,265)
Interest-bearing debt 28 – (18,275) – – – (18,275) (19,349)

Trade and other payables 31 – (5,538) – – – (5,538) (5,538)
Other financial liabilities 20 (228) – – – – (228) (228)
Interest rate swaps (72) – – – – (72) (72)

Forward exchange contracts (156) – – – – (156) (156)
Credit facilities utilised 21 – (127) – – – (127) (127)

Shareholders for dividends 35 – (23) – – – (23) (23)
* Trade and other receivables are disclosed net of prepayments of R307 million (2008: R404 million; 2007: R256 million).

13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Risk management (continued)
At fair
value
through
profit or Financial
2008
Assets 1,991 – – 55 10,155 12,201 12,201
Investments 14 1,377 – – 55 67 1,499 1,499

Other financial assets 20 614 – – – – 614 614

Forward exchange
contracts 589 – – – – 589 589
Other financial assets 16 – – – – 16 16
Finance lease receivables 16 – – – – 372 372 372

Cash and cash equivalents 21 – – – – 1,134 1,134 1,134
Liabilities (1,290) (25,866) – – – (27,156) (27,692)

Other financial liabilities 20 (1,290) – – – – (1,290) (1,290)
Put option (Multi-Links) (919) – – – – (919) (919)

Put option (Vodacom DRC) (198) – – – – (198) (198)
Credit facilities utilised 21 – (1,342) – – – (1,342) (1,342)

Shareholders for dividend 35 – (20) – – – (20) (20)


Risk management (continued)
At fair
value
through
profit or Financial
2007
Assets 1,608 – 246 47 7,861 9,762 9,762
Investments 14 1,349 – – 47 65 1,461 1,461

Other financial assets 20 259 – – – – 259 259
Bills of exchange 98 – – – – 98 98
Forward exchange contracts 145 – – – – 145 145
Finance lease receivables 16 – – 246 – – 246 246

Cash and cash equivalents 21 – – – – 749 749 749
Liabilities (327) (17,959) – – – (18,286) (19,676)
Interest-bearing debt 28 (98) (10,266) – – – (10,364) (11,754)

Other financial liabilities 20 (229) – – – – (229) (229)
Put option (Vodacom DRC) (125) – – – – (125) (125)

Interest rate swaps (26) – – – – (26) (26)
Other financial liabilities (36) – – – – (36) (36)



13.1 Fair value of financial instruments
Carrying value of all financial instruments noted in the balance sheet approximates fair value except as disclosed below.
The estimated net fair values as at March 31, 2009, have been determined using available market information and appropriate valuation
methodologies as outlined below.
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 balance sheet date.
The fair value of receivables, bank balances, repurchase agreements and other liquid funds, payables and accruals, approximate their fair
amount due to the short-term maturities of these instruments.
The fair values of the borrowings disclosed above 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 values of listed investments are based on quoted market prices.
13.2 Interest rate risk management

Interest rate risk arises from the repricing of the Group’s forward cover and floating rate debt as well as incremental funding or new
borrowings and the refinancing of existing borrowings.
The Group’s policy is to manage interest cost through the utilisation of a mix of fixed and floating rate debt. In order to manage this mix in
a cost efficient manner and to hedge specific exposure in the interest rate repricing profile of the existing borrowings and anticipated peak
additional borrowings, the Group makes use of interest rate derivatives as approved in terms of the Group policy limits. Fixed rate debt
represents approximately 64.86% (2008: 51.88%; 2007: 90.37%) of the total debt, after taking the instruments listed below into
consideration. There were no changes in the policies and processes for managing and measuring the risk from the previous period.
The table below summarises the interest rate swaps outstanding as at March 31:
Notional Weighted
Average amount average
maturity Currency Rm coupon rate
2009
Interest rate swaps outstanding
Pay fixed 2-5 years ZAR 2,000 10.84%
2008
Pay fixed < 1 year ZAR 27 13.62%
Receive fixed 1-5 years ZAR 58 13.30%
2007
Pay fixed < 1 year ZAR 1,000 14.67%
Receive fixed 1-5 years ZAR 38 11.45%
>5 years ZAR 61 11.44%
Pay fixed
The floating rate is based on the three month JIBAR, and is settled quarterly in arrears. The interest rate swaps are used to manage interest
rate risk on debt instruments.


13.3 Credit risk management
Credit risk is the risk due to uncertainty in a counterparty’s ability to meet its obligations as they fall due.
Credit risk arises from derivative contracts entered into with financial institutions with a rating of A1 or better. The Group is not exposed to
significant concentrations of credit risk. Credit limits are set on an individual basis. The maximum exposure to the Group from counterparties
is a net favourable position of R29 million (2008: R438 million; 2007: R144 million). No collateral is required when entering into
derivative contracts. Credit limits are reviewed on an annual basis or when information becomes available in the market. The Group limits
the exposure to any counterparty and exposures are monitored daily. The Group expects that all counterparties will meet their obligations.
With regard to credit risk arising from other financial assets of the Group, which comprises held-to-maturity investments, financial assets held
at fair value through profit or loss, loans and receivables and available-for-sale assets, the Group’s exposure to credit risk arises from a
potential default by a counterparty, with a maximum exposure equal to the carrying amount of these instruments.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each type of customer. Management reduces
the risk of irrecoverable debt by improving credit management through credit checks and limits. To reduce the risk of counterparty failure,
limits are set based on the individual ratings of counterparties by well-known ratings agencies. Trade receivables comprise a large
widespread customer base, covering residential, business, government, wholesale, global and corporate customer profiles.
Credit checks are performed on all customers, other than prepaid customers, on application for new services on an ongoing basis where
appropriate.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.
The collective loss allowance is determined based on historical data of payment statistics for similar financial assets as well as expected
future cash flows. Refer to note 19.
The Group has provided a financial guarantee to Africa Online Limited for bank loans to the value of R26 million as at March 31, 2009
(2008: R23 million; 2007: RNil).
Telkom guarantees a certain portion of employees’ housing loans. The amount guaranteed differs depending on facts such as employment
period and salary rates. When an employee leaves the employment of Telkom, any housing debt guaranteed by Telkom is settled before
any pension payout can be made to the employee. There is no provision outstanding in respect of these contingencies. The maximum
amount of the guarantee in the event of a default is R12 million. The fair value of the guarantee at March 31, 2009 was RNil (2008:
RNil; 2007: RNil).
Given the deterioration of credit markets, stricter objectives, policies and processes were applied for managing and measuring the risk than
in the previous period.


13.3 Credit risk management (continued)
The maximum exposure to credit risk for financial assets at the reporting date by type of customer was:
Carrying amount
2007 2008 2009
Rm Rm Rm
Trade receivables
Fixed-line 3,926 4,401 4,231
Business and residential 1,924 1,824 1,870

Global, corporate and wholesale 1,643 1,875 1,708
Government 318 368 444
Other customers 41 334 209
Mobile 2,299 2,880 –

Multi-Links – 38 72
Other 567 666 720
Impairment of trade receivables (235) (290) (324)
Subtotal for trade receivables 6,557 7,695 4,699

Other receivables* 490 887 974
Other financial assets 259 614 1,202
7,306 9,196 6,875
* Excluding prepayments.
The ageing of trade receivables at the reporting date was:

Not past due/current 5,829 6,840 3,582
Ageing of past due but not impaired

21 to 60 days 331 384 441
61 to 90 days 80 110 135
91 to 120 days 59 71 84
120+ days 258 290 457
6,557 7,695 4,699
The ageing in the allowance for the impairment of trade receivables

at reporting date was:
Fixed-line and other
Current defaulted trade 24 53 70
21 to 60 days 21 25 30
61 to 90 days 19 31 19
91 to 120 days 15 19 74
120+ days 118 121 131
197 249 324

Mobile 38 41 –
235 290 324



The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in note 19.
Included in the allowance for doubtful debts are individually impaired receivables with a balance of R49 million (2008: R32 million; 2007:
R49 million) which have been identified as being unable to service their debt obligation. The impairment recognised represents the
difference between the carrying amount of these trade receivables and the present value of the expected liquidation proceeds. The Group
does not hold any collateral over these balances.
During the 2009 year end the Group renegotiated the terms of trade receivables amounting to R1,9 million from a long outstanding
customer. No impairment losses were recognised.
13.4 Liquidity risk management

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. Liquidity risk is managed by the Group’s various Corporate Finance
divisions in accordance with policies and guidelines formulated by the Group’s executive committees. In terms of its borrowing requirements
the Group ensures that sufficient facilities exist to meet its immediate obligations. In terms of its long-term liquidity risk, the Group maintains
a reasonable balance between the period over which assets generate funds and the period over which the respective assets are funded.
Short-term liquidity gaps may be funded through repurchase agreements and commercial paper bills.
There were no material changes in the exposure to liquidity risk and its objectives, policies and processes for managing and measuring
the risk from the previous period.
The table below summarises the maturity profile of the Group’s financial liabilities based on undiscounted contractual cash flow at the
balance sheet date:
Carrying Contractual 0 – 12 1–2 2–5 >5

amount cash flows months years years years
Note Rm Rm Rm Rm Rm Rm
2009
Non-derivative financial liabilities
Finance lease liabilities 38 986 1,848 165 172 516 995
Interest-bearing debt (excluding
finance leases) 28 17,291 18,866 7,670 1,817 5,621 3,758
Trade and other payables 31 5,538 5,778 5,778 – – –
Credit facilities utilised 21 127 127 127 – – –
Derivative financial liabilities
Other financial liabilities 20 228 228 156 72 – –
Interest rate swaps 72 72 – 72 – –

Forward exchange contracts 156 156 156 – – –
24,170 26,847 13,896 2,061 6,137 4,753



13.4 Liquidity risk management (continued)
Carrying Contractual 0 – 12 1–2 2–5 >5
amount cash flows months years years years
Note Rm Rm Rm Rm Rm Rm
2008
Finance lease liabilities 38 1,167 2,198 257 202 589 1,150
Interest-bearing debt (excluding finance
leases) 28 14,566 16,672 6,350 4,835 2,733 2,754
Credit facilities utilised 21 1,342 1,342 1,342 – – –
Other financial liabilities 20 1,290 1,290 371 919 – –
Put option (Multi-Links) 919 919 – 919 – –

Put option (Vodacom DRC) 198 198 198 – – –
27,136 30,273 17,091 5,956 3,322 3,904
2007
Finance lease liabilities 38 1,220 2,424 231 276 585 1,332
finance leases) 28 9,144 11,329 6,133 1 2,551 2,644
Credit facilities utilised 21 441 441 441 – – –
Other financial liabilities 20 229 229 229 – – –
Put option (Vodacom DRC) 125 125 125 – – –

Interest rate swaps 26 26 26 – – –
Other financial liability 36 36 36 – – –
18,271 21,660 14,271 277 3,136 3,976



13.5 Foreign currency exchange rate risk management
The Group manages its foreign currency exchange rate risk by economically hedging all identifiable exposures via various financial
instruments suitable to the Group’s risk exposure.
Forward exchange contracts have been entered into to reduce the foreign currency exposure on the Group’s operations and liabilities. The
Group also enters into foreign forward exchange contracts to economically hedge interest expense and purchase and sale commitments
denominated in foreign currencies (primarily United States dollars and euros). The purpose of the Group’s foreign currency hedging activities
is to protect the Group from the risk that the eventual net cash flows will be adversely affected by changes in exchange rates.
There were no changes in the exposure to foreign currency exchange rate risk and its objectives, policies and processes for managing and
measuring the risk from the previous period.
The following table details the foreign forward exchange contracts outstanding at year end:
Foreign
contract Forward
amount amount Fair value
To buy m Rm Rm
2009
Currency
US$ 155 1,477 14
Euro 92 1,205 (24)
Other 36 69 (3)
2,751
2008
Currency
US$ 139 1,042 109
Euro 252 2,826 444
Pound Sterling 19 281 30
Other 31 32 6
4,181
2007
Currency
US$ 181 1,329 (1)
Euro 196 1,899 23
Other 66 49 (1)
3,538


13.5 Foreign currency exchange rate risk management (continued)
Foreign
contract Forward
To sell m Rm Rm
2009
Currency
US$ 99 947 (22)
Euro 35 485 28
Other 21 43 4
1,475
2008
Currency
US$ 78 596 (68)
Euro 73 848 (103)
Pound Sterling 5 89 (1)
Other 17 22 (1)
1,555
2007
Currency
US$ 122 994 88
Euro 52 505 (5)
Other 29 17 –
1,567
The Group has various monetary assets and liabilities in currencies other than the Group’s functional currency. The following table represents
the net currency exposure (net carrying amount of foreign denominated monetary assets and liabilities) of the Group according to the
different foreign currencies.
South United
African Pound States
Rand Euro Sterling Dollar Other
Rm Rm Rm Rm Rm
2009
Net foreign currency monetary assets/(liabilities)
Functional currency of company operation
South African rand – 204 – 650 19
Naira – – – (1,611) –
2008
South African Rand – 481 (133) 224 (13)
United States Dollar – 8 – – (17)
Naira – – – (446) –


13.5 Foreign currency exchange rate risk management (continued)
South United
African Pound States
Rand Euro Sterling Dollar Other
Rm Rm Rm Rm Rm
2007
South African rand – 475 (166) 159 32
United States dollar 26 (25) – – (17)
Currency swaps
There were no currency swaps in place at March 31, 2009, 2008 and 2007.
13.6 Sensitivity analysis

Interest rate risk
The following table illustrates the sensitivity to a reasonably possible change in the interest rates, with all other variables held constant:
+1% movement –1% movement

Other Other
movements movements
Profit in equity Profit in equity
Rm Rm Rm Rm
2009
Classes of financial instruments per balance sheet
Assets
Trade and other receivables 5 – (5) –
Other financial assets 28 – (28) –
Interest rate swaps 18 – (18) –

Repurchase agreements 10 – (10) –
Liabilities
Interest-bearing debt (67) – 67 –
Other financial liabilities 15 – (15) –
(19) – 19 –


13.6 Sensitivity analysis (continued)
Interest rate risk (continued)
Other Other
movements movements
Rm Rm Rm Rm
2008
Assets
Liabilities
(57) – 57 –
2007
Assets
Liabilities
Forward exchange contract 2 – (2)
5 – (5) –
Foreign exchange currency risk

The following table illustrates the sensitivity to a reasonably possible change in the exchange rates, with all other variables held constant.

(depreciation) (appreciation)
Other Other
movements movements
Rm Rm Rm Rm
2009
Assets
Trade and other receivables 40 – (40)
Forward exchange contract 1 – (1) –
Liabilities
Trade and other payables (173) – 173 –
(74) – 74 –


Foreign exchange currency sensitivity (continued)
Other Other
movements movements
Rm Rm Rm Rm
2008
Assets
Liabilities
Interest-bearing debt 68 – (68) –
Other financial liabilities (153) – 153 –
Forward exchange contract (153) – 153 –
161 – (161) –
2007
Assets
Liabilities
Interest-bearing debt 10 – (10) –
45 – (45) –


13.7 Exchange rate table (closing rate)
2007 2008 2009
R R R
United States Dollar 7.248 8.132 9.484

Euro 9.649 12.854 12.617
Pound Sterling 14.189 16.166 13.555
Swedish Krona 1.033 1.370 1.153
Japanese Yen 0.061 0.082 0.097
13.8 Capital management

The Group’s policy is to maintain a strong capital base so as to sustain investor, creditor and market confidence and to sustain future
development of the business. Capital comprises equity attributable to equity holders of Telkom. The Group monitors capital using net debt
to EBITDA ratio. Telkom’s policy is to keep the net debt to EBITDA ratio between 1 and 2 times. Included in net debt are interest-bearing
loans and borrowings, credit facilities and other financial liabilities, less cash and cash equivalents and other financial assets.
Telkom plans on continuing its share buy-back strategy based on certain criteria, including market conditions, availability of cash and other
investment opportunities and needs.
All of Telkom’s issued and outstanding ordinary shares, including the class A ordinary share and the class B ordinary share, rank equal for
dividends. No dividend may be declared to a holder of the class A ordinary share or class B ordinary share, unless the same dividend is
declared to holders of all ordinary shares. Telkom’s current dividend policy aims to provide shareholders with a competitive return on their
investment, while assuring sufficient reinvestment of profits to enable the Group to achieve its strategy. Telkom may revise its dividend policy
from time to time. The determination to pay dividends and the amount of the dividends, will depend upon, among other things, the earnings,
financial position, capital requirements, general business conditions, cash flows, net debt levels and share buy-back plans.
The Group has access to financing facilities; the total unused amount is R6,237 million (2008: R7,565 million; 2007: R8,658 million) at
the balance sheet date.
There were no changes in the Group’s approach to capital management during the year.
Neither the Group nor any of its subsidiaries are subject to externally imposed capital requirements.
The net debt to EBITDA ratio is as follows:

2007 2008 2009
Rm Rm Rm
Non-current portion of interest-bearing debt 4,338 9,403 10,653

Current portion of interest -bearing debt 6,026 6,330 7,622
Credit facilities utilised 441 1,342 127
Non-current portion of other financial liabilities 36 919 –
Current portion of other financial liabilities 193 371 228
Less: Cash and cash equivalents (749) (1,134) (1,931)
Less: Other financial assets (259) (614) (1,202)
Net debt 10,026 16,617 15,497
EBITDA 13,352 13,203 11,668
Net debt to EBITDA ratio 0.75 1.26 1.33


2007 2008 2009

Rm Rm Rm
14. INVESTMENTS 1,384 1,444 1,383
Available-for-sale 47 55 –
Unlisted investments
Rascom – – –
WBS Holdings (Proprietary) Limited 40 23 –
2 500 ordinary shares at R0.01 each
Other investments 7 32 –
Loans and receivables 65 63 97
Mirambo Limited – 60 –
Planetel Communications Limited 25 – –
Caspian Limited 29 – –
Number Portability Company (Proprietary) Limited 3 3 –
Sekha-Metsi Investment Consortium Limited 8 – –
Empresa Mocambicana de Telecommunicacoes S.A.R.L. (’Emotel’) – 4 –
Other unlisted investments – – 97
At fair value through profit or loss 1,349 1,377 1,286
Linked insurance policies – Coronation 1,280 1,291 1,286

Other money market investments 69 51 –
Other unlisted investments – 35 –
Less: Short-term investments (77) (51) –
Sekha-Metsi Investment Consortium Limited (8) – –

WBS Holdings (Proprietary) Limited (included in other unlisted investments) – (13) –
Other money market investments (69) (38) –
Included in held-for-trading investments is R1,286 million (2008: R1,290 million, 2007: R1,279 million) that will be used to fund the post-
retirement medical aid liability. These investments are made through a cell captive, in which Telkom holds 100% of the preference shares of the
cell captive, and represent the fair value of the underlying investments of the cell captive. The initial cost of the investment amounts to R535 million
(2008: R535 million; 2007: R535 million). Telkom bears all the risks and rewards of the investment, as the returns/losses on the preference
shares are dependent on the performance of the underlying investments made by the cell captive. On this basis Telkom as the preference
shareholder receives any residual gains or losses made by the cell captive. The ordinary shareholders of the cell captive do not bear any of the
risks and rewards. The cell captive has been consolidated in full.

2007 2008 2009

Rm Rm Rm
15. DEFERRED REVENUE AND DEFERRED EXPENSES

Deferred revenue 3,004 3,721 2,711
Non-current deferred revenue 1,021 1,128 997

Current portion of deferred revenue 1,983 2,593 1,714
Deferred expenses 557 583 55
Non-current deferred expenses 270 221 55

Current portion of deferred expenses 287 362 –
Included in non-current deferred expenses and revenue for the financial

year end March 31, 2008 and 2007 is Vodacom unactivated starter packs.
16. FINANCE LEASE RECEIVABLES

The Group provides voice and non-voice services to its customers, which make use of router and PABX equipment that is dedicated to
specific customers. The disclosed information relates to those arrangements which were assessed to be finance leases in terms of IAS17.
Total < 1 year 1 – 5 years > 5 years

Rm Rm Rm Rm
2009
Minimum lease payments
Lease payments receivable 360 142 219 –
Unearned finance income (85) (33) (53) –
Present value of minimum lease payments 275 109 166 –
Lease receivables 275 109 166 –
2008
2007


2007 2008 2009

Rm Rm Rm
17. DEFERRED TAXATION (1,123) (1,374) (1,068)
Opening balance (587) (1,123) (1,374)

Transferred to disposal group – – 281
Income statement movements (516) (219) 164
Temporary differences (515) (331) (152)

(Underprovision)/overprovision prior year (1) 53 (138)
Capital gains taxation asset – – 454
Change in taxation rate – 59 –
Business combinations (16) (65) (137)

Foreign currency translation reserve and foreign equity revaluation (4) 33 (2)
The balance comprises: (1,123) (1,374) (1,067)
Capital allowances (3,325) (3,841) 3,210)

Provisions and other allowances 1,719 2,008 1,416
Taxation losses 113 276 –
Capital gains taxation asset – – 454
STC taxation credits 370 183 273
Deferred taxation balance is made up as follows: (1,123) (1,374) (1,067)
Deferred taxation assets 593 605 756

Deferred taxation liabilities (1,716) (1,979) (1,823)
Unutilised STC credits 2,958 1,830 2,730
Secondary taxation on companies (STC) is provided for a rate of

10% on the amount by which dividends declared by Telkom
exceeds dividends received. The deferred taxation asset is raised as it is
probable that it will be utilised in future. The asset will be released as a
taxation expense when dividends are declared.
The deferred taxation asset represents STC credits on past dividends

received that are available to be utilised against dividends declared.
The deferred taxation asset also includes deferred taxation on temporary
differences arising on investments that were classified as held for sale in
the period as well as STC credits on past dividends received.
18. INVENTORIES 1,093 1,287 1,974
Gross inventories 1,275 1,535 2,165

Write-down of inventories to net realisable value (182) (248) (191)
Inventories consist of the following categories: 1,093 1,287 1,974
Installation material, maintenance material and network equipment 811 895 1,051
Merchandise 282 392 923
Write-down of inventories to net realisable value 182 248 191
Opening balance 102 182 248

Transferred to disposal group – – (50)
Charged to selling, general and administrative expenses 154 164 167
Inventories written-off (74) (98) (174)
Inventory levels as at March 31, 2009, 2008 and 2007 have increased due to the accelerated roll-out of the Next Generation Network
required to improve customer service, and the acquisition of merchandise for the W-CDMA roll-out.

2007 2008 2009

Rm Rm Rm
19. TRADE AND OTHER RECEIVABLES 7,303 8,986 5,980
Trade receivables 6,557 7,695 4,698
Gross trade receivables 6,792 7,985 5,022

Impairment of receivables (235) (290) (324)
Prepayments and other receivables 746 1,291 1,282
Impairment allowance account for receivables 235 290 324

Receivables written-off (208) (245) (334)
Refer to note 13 for detailed credit risk analysis.
20. OTHER FINANCIAL ASSETS AND LIABILITIES

Other financial assets consist of: 259 614 1,202
Held-to-maturity
Repurchase agreements – – 1,046
At fair value through profit or loss 259 614 156
Bills of exchange 98 – –
Interest rate swaps 16 9 4
Forward exchange contracts 145 589 152
Other financial assets – 16 –
Repurchase agreements
Telkom manages a portfolio of repurchase agreements in the South
African capital and money markets, with a view to generating additional
investment income on the favourable interest rates provided on these
transactions. Interest received from the borrower is based on the current
market related yield. There were no repurchase agreements held at
March 31, 2008 and 2007.
Bills of exchange
The fair value of bills of exchange has been calculated at with reference
to the Bond Exchange of South Africa quoted prices.
Other financial liabilities consist of: (229) (1,290) (228)
Non-current portion of other financial liabilities

Other (36) – –
Put option at fair value through profit or loss – (919) –
Current portion of other financial liabilities
At fair value through profit or loss (193) (371) (228)
Put option at fair value through profit or loss (125) (198) –

Interest rate swaps (26) – (72)
Forward exchange contracts (42) (173) (156)

2007 2008 2009

Rm Rm Rm
21. NET CASH AND CASH EQUIVALENTS 308 (208) 1,282
Net cash and cash equivalents attributable to continuing operations 308 (208) 1,804
Cash shown as current assets 749 1,134 1,931
Cash and bank balances 649 664 1,361

Short-term deposits 100 470 570
Credit facilities utilised (441) (1,342) (127)
Net cash and cash equivalents attributable to disposal groups – – (522)
Cash at banks and short-term deposits attributable to disposal groups – – 580

Credit facilities utilised – – (1,102)
Undrawn borrowing facilities 8,658 7,565 6,237
The undrawn borrowing facilities are unsecured, when drawn bear interest at a rate that will be mutually agreed between the borrower
and lender at the time of drawdown, have no specific maturity date and are subject to annual review. The facilities are in place to ensure
liquidity. At March 31, 2009, R3,000 million of these undrawn facilities were committed by Telkom.
Borrowing powers
To borrow money, Telkom’s directors may mortgage or encumber Telkom’s property or any part thereof and issue debentures, whether
secured or unsecured, whether outright or as security for debt, liability or obligation of Telkom or any third party. For this purpose the
borrowing powers of Telkom are unlimited, but are subject to the restrictive financial covenants of the loan facilities indicated on note 28.

2007 2008 2009

Rm Rm Rm
22. SHARE CAPITAL

Authorised and issued share capital is made up as follows:
Authorised 10,000 10,000 10,000
999,999,998 ordinary shares of R10 each 10,000 10,000 10,000

1 class A ordinary share of R10 – – –
1 class B ordinary share of R10 – – –
Issued and fully paid 5,329 5,208 5,208
520,783,898 (2008: 520,784,184; 2007: 532,855,528)

ordinary shares of R10 each 5,329 5,208 5,208
1 (2008: 1; 2007: 1) class A ordinary share of R10 – – –
1 (2008: 1; 2007: 1) class B ordinary share of R10 – – –
The following table illustrates the movement within the number of shares issued:
Number of Number of Number of
shares shares shares
Shares in issue at beginning of year 544,944,901 532,855,530 520,784,186

Shares bought back and cancelled (12,089,371) (12,071,344) (286)
Shares in issue at end of year 532,855,530 520,784,186 520,783,900
Full details of the voting rights of ordinary, class A and class B shares are documented in the articles of association of Telkom.
Share buy-back
During the financial year Telkom bought back 286 ordinary shares at a total consideration of R30,425. The shares were bought back and
cancelled in order to allow Telkom shareholders to participate in the proposed unbundling of Vodacom Group on a one to one basis. This
reduced share capital by R2,860 and retained earnings by R27,565.
During the financial year ended March 31, 2008, Telkom bought back 12,071,344 ordinary shares at a total consideration of
R1,647 million. This reduced share capital by R121 million and retained earnings by R1,526 million.
During the financial year ended March 31, 2007, Telkom bought back 12,089,371 ordinary shares at a total consideration of
R1,596 million. This reduced share capital by R120 million, share premium by R1,342 million and retained earnings by R134 million.
Capital management
Refer to note 13 for detailed capital management disclosure.

2007 2008 2009

Rm Rm Rm
23. TREASURY SHARE RESERVE (1,774) (1,638) (1,517)
This reserve represents amounts paid by Telkom to Rossal No 65

(Proprietary) Limited and Acajou Investments (Proprietary) Limited,
subsidiaries, for the acquisition of Telkom’s shares to be utilised in terms
of the Telkom Conditional Share Plan (’TCSP’).
At March 31, 2009, 11,646,680 (2008: 10,493,141;

2007: 12,237,016) and 8,143,556 (2008: 10,849,058;
2007: 10,849,058) ordinary shares in Telkom, with a fair value of
R1,229 million (2008: R1,377 million; 2007: R2,031 million) and
R859 million (2008: R1,423 million; 2007: R1,801 million) are held
as treasury shares by its subsidiaries Rossal No 65 (Proprietary) Limited
and Acajou Investments (Proprietary) Limited, respectively.
The shares held by Rossal No 65 (Proprietary) Limited and Acajou

Investments (Proprietary) Limited are reserved for issue in terms of the
Telkom Conditional Share Plan (’TCSP’).
The reduction in the number of treasury shares is due to 1,552,029

(2008: 1,743,785; 2007: 450,505) shares that vested in terms
of the TCSP during the year.
The fair value of these shares at the date of vesting was R228 million
(2008: R301 million; 2007: R63 million).
24. SHARE-BASED COMPENSATION RESERVE

This reserve represents the cumulative grant date fair value of the equity-
settled share-based payment transactions recognised in employee
expenses during the vesting period of the equity instruments granted to
employees in terms of the Telkom Conditional Share Plan (refer to note 30).
No consideration is payable on the shares issued to employees, but

performance criteria will have to be met in order for the granted shares
to vest. The ultimate number of shares that will vest may differ based on
certain individual and Telkom performance conditions being met. The
related compensation expense is recognised over the vesting period of
shares granted, commencing on the grant date.
The following table illustrates the movement within the share-based

compensation reserve:
Balance at beginning of year 151 257 643
Net increase in equity 106 386 433
Employee cost 141 522 554

Vesting and transfer of shares (35) (136) (121)
Balance at end of year 257 643 1,076
At March 31, 2009 the estimated total compensation expense to be recognised over the vesting period was R1,824 million (2008:
R2,151 million; 2007: R580 million), of which R554 million (2008: R522 million; 2007: R141 million) was recognised in employee
expenses for the year.

2007 2008 2009

Rm Rm Rm
25. NON-DISTRIBUTABLE RESERVES 1,413 1,292 1,758
Opening balance 1,128 1,413 1,292

Transferred to disposal groups (4)
Movement during the year 285 (121) 470
Foreign currency translation reserve (net of taxation of R6 million

(2008: R6 million; 2007: R4 million) 46 521 (181)
Minority put option – (661) 661
Revaluation of an available-for-sale investment (net of taxation of R1 million) – 8 –
Available-for-sale financial asset
Life fund reserve (cell captive) 239 11 (10)
The balance comprises: 1,413 1,292 1,758
Foreign currency translation reserve (58) 463 286

Cell captive reserve 1,471 1,482 1,472
Available-for-sale investment – 8 –
Minority put option – (661) –
The Group has a consolidated cell captive, used as an investment to fund

Telkom’s post-retirement medical aid liability.
The earnings from the cell captive are recognised in the income statement
and then transferred to non-distributable reserves.
Gains and losses from changes in the fair value of available-for-sale

investments are recognised directly in equity until the financial asset
is disposed of.
26. RETAINED EARNINGS 26,499 27,310 28,852
Opening balance 22,904 26,499 27,310

Movement during year 3,729 2,337 1,542
Net profit for the year 8,646 7,975 4,171

Transfer to non-distributable reserves (refer to note 25) (239) (11) 10
Premium on acquisition of minority interest in Multi-Links – – 667
Dividend declared (refer to note 35) (4,678) (5,627) (3,306)
Shares bought back (refer to note 22) (134) (1,526) –
The balance comprises: 26,499 27,310 28,852
Company 21,906 22,484 24,323

Joint venture 4,762 5,697 6,132
Subsidiaries 786 428 223
Eliminations (955) (1,299) (1,826)

2007 2008 2009

Rm Rm Rm
27. MINORITY INTEREST 284 522 853

Movement during the year (17) 238 331
Reconciliation: 284 522 853

Share of earnings 203 197 77
Acquisition of subsidiaries and minority interests (68) 77 –
Foreign currency translation reserves 14 29 16
Dividend declared (166) (65) (33)
Broad-based black economic empowerment transaction in Vodacom – – 271
28. INTEREST-BEARING DEBT

Non-current interest-bearing debt 4,338 9,403 10,653
Total interest-bearing debt (refer to note 13) 10,364 15,733 18,275
Gross interest-bearing debt 12,549 17,839 19,851

Discount on debt instruments issued (2,185) (2,106) (1,576)
Less: Current portion of interest-bearing debt (6,026) (6,330) (7,622)
Local debt (5,772) (6,001) (7,546)
Locally registered Telkom debt instruments (4,432) – (2,000)

Commercial paper bills (1,339) (3,401) (5,546)
Short-term interest-free loans (1) – –
Call borrowings – (2,600) –
Foreign debt (193) (202) (40)

Finance leases (61) (124) (36)
Licence obligation – (3) –

2007 2008 2009

Rm Rm Rm
28. INTEREST-BEARING DEBT (continued)

Total interest-bearing debt is made up as follows: 10,364 15,733 18,275
(a) Local debt 8,131 12,923 16,660
Locally registered Telkom debt instruments 6,786 8,164 11,106
Name, maturity, rate p.a., nominal value

TK01, 2009, 10%, RNil (2008: RNil;
2007: R4,680 million) 4,432 – –
TL12, 2012, 12.45%, R1,060 million (2008: RNil;
2007: RNil) – – 1,059
TL15, 2015, 11.9%, R1,160 million (2008: RNil;
2007: RNil) – – 1,159
TL20, 2020, 6%, R2,500 million (2008: R2,500 million;
2007: R2,500 million) 1,246 1,283 1,325
PP02, 2010, 0%, R430 million (2008: R430 million;
2007: R430 million) 264 304 349
PP03, 2010, 0%, R1,350 million (2008: R1,350 million;
2007: R1,350 million) 844 977 1,131
Call borrowings, 2009, 11.58%, RNil (2008: R2,600 million;
2007: RNil) – 2,600 –
Term loans, 2010, 9.67%, R2,000 million (2008: R3,000 million;
2007: RNil) – 3,000 2,000
Syndicated loans, 2014, 11.46%, R4,100 million (2008: RNil;
2007: RNil) – – 4,083
Total interest-bearing debt is made up of R18,275 million debt at

amortised cost (2008: R15,733 million debt at amortised cost;
2007: R10,266 million debt at amortised cost and R98 million debt
at fair value through profit and loss).
Local bonds
The local Telkom bonds are unsecured, but a Side letter to the
Subscription Agreement (as amended) of the TL20 bond contains a
number of restrictive covenants, which, if not met, could result in the
early redemption of the loan. The local bonds limit Telkom’s ability to
create encumbrances on revenue or assets, and secure any indebtedness
without securing the outstanding bonds equally and rateably with such
indebtedness. The Term loan agreements limit Telkom’s ability to encumber,
cede, assign, sell or otherwise dispose of a material portion of its assets
without prior written consent of the Lenders, which will not be
unreasonably withheld. The syndicated loan agreement contains
restrictive covenants as well as restrictions on encumbrances,
disposals, Group guarantees and Group loans.
Commercial paper bills 1,339 4,202 5,546

Rate p.a., nominal value
2009, 11.44% (2008: 11.71%; 2007: 9.04%), R5,559 million
(2008: R4,383 million; 2007: R1,350 million)
Asset Backed Arbitraged Securities (Proprietary) Limited – 500 –

Licence obligation – 47 –
Other debt 6 10 8

2007 2008 2009

Rm Rm Rm

(b) Foreign debt 1,013 1,643 629
Maturity, rate p.a., nominal value 106 141 138

Euro: 2010 – 2025, 0.10% – 0.14% (2008: 0.10% – 0.14%;
2007: 0.10% – 0.14%), e11 million (2008: e11 million;
2007: e11 million)
Interest-bearing debt held in Vodacom disposal group 907 957 –

The local and foreign debt, for both the non-current and current portion,
is disclosed in note 9.2 in the disposal group.
Zenith Bank – 45 –
Multi-Links Telecommunications Limited took out a loan with Zenith Bank.
The original loan amounted to US$14 million against which full repayments
were made in 2009. The loan bore interest at LIBOR plus 3.5%.
FCMB loan – 87 –
Multi-Links Telecommunications Limited took out a FCMB loan.The original
loan amounted to naira 1,500 million against which full repayments were
made in 2009. The loan bore interest at 13%.
Export Development Bank of Canada – 82 157

Multi-Links Telecommunications Limited has a long-term funding facility in
place with Export Development Bank of Canada (EDC), through First Bank
of Nigeria plc. The original funding amounted to US$18 million against
which US$1,6 million repayments were made.The loan bears interest
at LIBOR plus 1.25%, and will be fully repaid during 2013.
Huawei Vendor Financing Facility (‘VFF’) – 319 323

Multi-Links Telecommunications Limited entered into a Bridge Financing
Agreement with Huawei Tech Investment Co. Limited for the supply of
telecommunications equipment and services. The original funding amounted
to US$41.6 million against which repayments of US$5 million have
already been made. The loan bears interest at LIBOR plus 2% and will
be repaid by 2012. The above arrangement is temporary until financing
facilities are obtained from China Development Bank.
PTA Bank and Barclays Bank – 12 11

Africa Online Group has taken out a loan with PTA Bank and Barclays
Bank to the value of US$1.5 million in total. Of this amount US$0.8 million
bears interest at LIBOR plus 6% and the remaining US$0.4 million bears
interest at 11.5%.
(c) Finance leases 1,220 1,167 986

The finance leases are secured by buildings with a carrying value of
R152 million (2008: R174 million; 2007: R197 million) and office
equipment with a book value of R6 million (2008: R14 million;
2007: R6 million) (refer to note 11). These amounts are repayable within
periods ranging from 1 to 12 years. Interest rates vary between 13.43%
and 37.78%.

2007 2008 2009

Rm Rm Rm

Included in non-current and current debt is:
Debt guaranteed by the South African Government 4,537 141 138
Telkom may issue or re-issue locally registered debt instruments in terms of
the Post Office Amendment Act 85 of 1991. The borrowing powers of
Telkom are set out as per note 21.
Repayments/refinancing of current portion of interest-bearing debt

Telkom issued new local bonds, the TL12 and TL15 with a nominal value
of R1,060 million and R1,160 million respectively and entered into
Syndicated loan agreements with a nominal value of R4,100 million
during the current year. Commercial Paper Bills with a nominal value of
R11,025 million were issued and Commercial Paper debt with a nominal
value of R9,849 million was repaid during the current year.
The repayment/refinancing of R7,622 million of the current portion of

interest-bearing debt will depend on the market circumstances at the time
of repayment.
Management believes that sufficient funding facilities will be available

at the date of repayment/refinancing.
29. PROVISIONS 1,443 1,675 1,875
Employee related 3,005 3,186 3,169
Annual leave 413 438 428

Transferred to disposal groups – – (67)
Charged to employee expenses 66 44 72
Leave paid (9) (19) (15)
Post-retirement medical aid (refer to note 30) 1,139 1,356 1,745
Balance at beginning of year 2,607 1,139 1,356

Termination settlement – – (5)
Plan asset – initial recognition (1,720) – –
Contributions paid (78) (61) (63)
Telephone rebates (refer to note 30) 282 287 325

Benefits paid (20) (22) (23)
Bonus 1,090 992 671
Balance at beginning of year 1,071 1,090 992

Payment (946) (895) (501)

2007 2008 2009

Rm Rm Rm
29. PROVISIONS (continued)

Long-term incentive provision 81 113 –

Charged to employee expenses 21 41 –
Payment (1) (9) –
Non-employee related 533 670 856
Supplier dispute (refer to note 39) 527 569 664
Balance at beginning of year – 527 569

Charged to expenses 527 42 95
Warranty provision – – –
Balance at beginning of year 16 – –

Provision utilised (16) – –
Other 6 101 192
Less: Current portion of provisions (2,095) (2,181) (2,150)
Annual leave (402) (417) (425)

Post-retirement medical aid (186) (186) (227)
Telephone rebates (26) (26) (29)
Bonus (911) (921) (654)
Supplier dispute (527) (569) (664)
Other (43) (62) (151)
Annual leave
In terms of Telkom’s policy, employees are entitled to accumulate vested leave benefits not taken within a leave cycle, to a cap of 22 days
which must be taken within an 18 month leave cycle. The leave cycle is reviewed annually and is in accordance with legislation.
Bonus
The Telkom bonus scheme consists of performance bonuses which are dependent on achievement of certain financial and non-financial
targets. The bonus is to all qualifying employees payable bi-annually after Telkom’s results have been made public.
Supplier dispute
Telkom provided R664 million (2008: R569 million; 2007: R527 million) for its estimate of the probable liability as discussed in note 39.
The net movement in the provision of R95 million consists of finance charges and fair value movements.
Other
Included in other provisions is an amount provided for asset retirement obligations and the onerous lease obligation recognised in Telkom
Media.

30. EMPLOYEE BENEFITS

The Group provides benefits for all its permanent employees through the Telkom Pension Fund and the Telkom Retirement Fund. Membership
of one of the funds is compulsory. In addition, certain retired employees receive medical aid benefits and a telephone rebate. The liabilities
for all of the benefits are actuarially determined in accordance with accounting requirements each year. In addition, statutory funding
valuations for the retirement and pension funds are performed at intervals not exceeding three years.
At March 31, 2009, the Group employed 25,445 employees (2008: 33,616; 2007: 33,047).
Actuarial valuations were performed by qualified actuaries to determine the benefit obligation, plan asset and service costs for the pension
and retirement funds for each of the financial periods presented.
The Telkom Pension Fund

The Telkom Pension Fund is a defined benefit fund that was created in terms of the Post Office Amendment Act 85 of 1991.
The latest actuarial valuation performed at March 31, 2009 indicates that the pension fund is in a surplus position of R94 million after
unrecognised losses. The recognition of the surplus is limited due to the application of the asset limitation criteria in IAS19 (revised).
With effect from July 1, 1995, the Telkom Pension Fund was closed to new members. During the year ended March 31, 2007, a settlement
event occurred in the Telkom Pension Fund whereby 106 members were transferred to the Telkom Retirement Fund.
The funded status of the Telkom Pension Fund is disclosed below:
2007 2008 2009

Rm Rm Rm

The net periodic pension costs includes the following components:
Interest and service cost on projected benefit obligations 22 21 21
Recognised actuarial loss/(gain) 9 (16) –
Asset limitation – 29 39
Net periodic pension expense recognised 33 5 29
Pension fund contributions (refer to note 5.1) 8 5 (1)
The status of the pension plan obligation is as follows:

At beginning of year 281 205 204
Interest and service cost 22 21 21
Employee contributions 2 2 2
Settlements (70) (15) (22)
Actuarial gain (28) (6) (1)
Benefit obligation at end of year 205 204 199
Plan assets at fair value:

Expected return on plan assets 19 27 28
Contributions 10 8 2
Actuarial gain/(loss) 75 10 (67)
Plan assets at end of year 284 311 247


2007 2008 2009

Rm Rm Rm
30. EMPLOYEE BENEFITS (continued)

The Telkom Pension Fund (continued)
Present value of funded obligation 205 204 199
Fair value of plan assets (284) (311) (247)
Fund surplus (79) (107) (48)

Unrecognised net actuarial gain/(loss) 25 23 (46)
Fund surplus (54) (84) (94)

Recognised net asset (54) (55) (55)

Actuarial return/(loss) on plan assets 75 10 (67)
Actual return/(loss) on plan assets 94 37 (39)
Principal actuarial assumptions were as follows:

Discount rate (%) 7.5 9.0 8.7
Yield on government bonds (%) 7.5 9.0 8.7
Long-term return on equities (%) 10.5 11.0 12.0
Long-term return on cash (%) 5.5 7.0 7.5
Expected return on plan assets (%) 9.7 9.8 10.5
Salary inflation rate (%) 6.0 7.5 7.2
Pension increase allowance (%) 2.9 4.3 4.0
The overall long-term expected rate of return on assets is 10.5%. This is

based on the portfolio as a whole and not the sum of the returns of
individual asset categories. The expected return takes into account the
asset allocation of the Telkom Pension Fund and expected long-term
return of these assets, of which South African equities and bonds
are the largest contributors.
The assumed rates of mortality are determined by reference to the

SA85-90 (Light) Ultimate table, as published by the Actuarial Society
of South Africa, for pre-retirement purposes and the PA(90) Ultimate
table, minus one year age rating as published by the Institute and
Faculty of Actuaries in London and Scotland, for retirement purposes.
Funding level per statutory actuarial valuation (%) 100.0 100.0 100.0
The number of employees registered under the Telkom Pension Fund 153 146 123
The fund portfolio consists of the following:
Equities (%) 74 54 57
Bonds (%) 5 5 25
Cash (%) 3 23 3
Foreign investments (%) 16 18 15
Insurance policies (%) 2 – –
The total expected contributions payable to the pension fund for the next financial year are R1 million.


The Telkom Retirement Fund
The Telkom Retirement Fund was established on July 1, 1995 as a hybrid defined benefit and defined contribution plan. Existing employees
were given the option to either remain in the Telkom Pension Fund or to be transferred to the Telkom Retirement Fund. All pensioners of the
Telkom Pension Fund and employees who retired after July 1, 1995 were transferred to the Telkom Retirement Fund. Upon transfer the
government ceased to guarantee the deficit in the Telkom Retirement Fund. Subsequent to July 1, 1995 further transfers of existing employees
occurred.
The Telkom Retirement Fund is a defined contribution fund with regard to in-service members. On retirement, an employee is transferred
from the defined contribution plan to a defined benefit plan. Telkom, as a guarantor, is contingently liable for any deficit in the Telkom
Retirement Fund. Moreover, all of the assets in the fund, including any potential excess, belong to the participants of the scheme. Telkom
is unable to benefit from the excess in the form of future reduced contributions or refunds.
Telkom guarantees any actuarial shortfall of the pensioner pool in the retirement fund. This liability is initially funded through assets of the
retirement fund. The latest actuarial valuation performed at March 31, 2009 indicates that the retirement fund is in a surplus funding position
of R1,549 million after unrecognised losses.
The Telkom Retirement Fund is governed by the Pension Funds Act 24 of 1956. In terms of section 37A of this Act, the pension benefits
payable to the pensioners cannot be reduced. If therefore the present value of the funded obligation were to exceed the fair value of plan
assets. Telkom would be required to fund the statutory deficit.
The information presented below is intended only to comply with the disclosure requirements of IAS19 (revised) and not to suggest that
Telkom has a potential asset with regard to this fund.
The funded status of the Telkom Retirement Fund is disclosed below:
2007 2008 2009

Rm Rm Rm

The net periodic retirement costs include the following components:
Recognised actuarial gain (145) – –
Net periodic pension expense not recognised (asset limitation) (322) (193) (180)
Retirement fund contributions (refer to note 5.1) 439 460 460

Benefit obligation:
At beginning of year 4,377 6,581 7,101
Interest 312 493 616
Benefits paid (486) (488) (520)
Liability for new pensioners 44 14 143
Actuarial loss/(gain) 2,334 501 (636)
Benefit obligation at end of year 6,581 7,101 6,704

Benefits paid (486) (488) (520)
Asset backing new pensioners’ liabilities 44 14 143
Actuarial gain/(loss) 1,641 118 (1,735)
Plan assets at end of year 7,661 7,991 6,675


2007 2008 2009

Rm Rm Rm

The Telkom Retirement Fund (continued)
Present value of funded obligation 6,581 7,101 6,704
Fair value of plan assets (7,661) (7,991) (6,675)
Fund (surplus)/deficit (1,080) (890) 29

Unrecognised net actuarial loss (96) (478) (1,578)
Unrecognised net asset (1,176) (1,368) (1,549)

Actuarial gain/(loss) on plan assets 1,641 118 (1,735)
Actual gain/(loss) on plan assets 2,130 804 (939)
Included in the fair value of plan assets is:

Office buildings occupied by Telkom 371 596 619
Telkom bonds 21 10 –
Telkom shares 284 141 132
The Telkom Retirement Fund invests its funds in South Africa and internationally.
Twelve fund managers invest in South Africa and five of these managers
specialise in trades with bonds on behalf of the Retirement Fund. The
international investment portfolio consists of global equity and hedged funds.
2007 2008 2009

The overall long-term expected rate of return on assets is 10.7%. This is based on the portfolio as a whole and not the sum of the returns
of individual asset categories. The expected return takes into account the asset allocation of the Retirement Fund and expected long-term
return on these assets, of which South African equities, foreign investments and South African index-linked bonds are the largest contributors.

2007 2008 2009

Funding level per statutory actuarial valuation (%) 100 100 100
The number of pensioners registered under the Telkom Retirement Fund 14,451 14,255 13,617
The number of in-service employees registered under the Telkom
Retirement Fund 25,766 24,939 23,389

Equities (%) 59 70 55
Property (%) 2 2 –
Bonds (%) 19 11 5
Cash (%) 7 1 5
Index linked (%) – – 15
The total expected pension benefit payments for the year ending March 31, 2010 are R541,000.
Medical benefits
Telkom makes certain contributions to medical funds in respect of current and retired employees. The scheme is a defined benefit plan. The
expense in respect of current employees’ medical aid is disclosed in note 5.1. The amounts due in respect of post-retirement medical
benefits to current and retired employees have been actuarially determined and provided for as set out in note 29. Telkom has terminated
future post-retirement medical benefits in respect of employees joining after July 1, 2000.
There are three major categories of members entitled to the post-retirement medical aid: pensioners who retired before 1994 (Pre-94); those
who retired after 1994 (Post-94); and the in-service members. The Post-94 and the in-service members’ liability is subject to a Rand cap,
which increases annually with the average salary increase.
Eligible employees must be employed by Telkom until retirement age to qualify for the post-retirement medical aid benefit. The most recent
actuarial valuation of the benefit was performed as at March 31, 2009.
Telkom has allocated certain investments to fund this liability as set out in note 14.

2007 2008 2009

Rm Rm Rm

Medical benefits (continued)
Medical aid
Benefit obligation:
Benefits paid from plan assets (94) (125) (141)
Contributions paid by Telkom (78) (61) (63)

At beginning of year – 1,961 1,929
Plan asset – initial recognition 1,720 – –
Actuarial gain/(loss) 147 (164) (393)

Funded status 2,423 2,921 3,792

Unrecognised net actuarial loss (1,284) (1,565) (2,047)
Liability as disclosed in the balance sheet (refer to note 29) 1,139 1,356 1,745

Actuarial return on plan assets 147 (164) (393)
Actual return on plan assets 335 93 (170)
2007 2008 2009

Medical inflation rate (%) 6.5 8.0 7.7
The assumed rates of mortality are determined by reference to the SA85-90

(Light) Ultimate table, as published by the Actuarial Society of South Africa,
for pre-retirement purposes and the PA(90) Ultimate table, minus one year
age rating as published by the Institute and Faculty of Actuaries in London
and Scotland, for retirement purposes.
Contractual retirement age 65 65 65

Average retirement age 60 60 60
Number of members 17,119 15,526 13,883
Number of pensioners 8,494 8,430 8,397


The valuation results are extremely sensitive to changes in the underlying assumptions. The following table provides an indication of the
impact of changing some of the valuation assumptions above:
The Trudon benefit obligation of R21 million has been excluded from the sensitivity analysis below.
Current assumption Decrease Increase

Rm Rm Rm
Medical cost inflation rate 7.7% -1.0% +1.0%
Benefit obligation 5,389 (736) 921

Percentage change (13.7)% 17.1%
Service cost and interest cost 2009/2010 555 (84) 108

Percentage change (15.1)% 19.5 %
Discount rate 8.7% -1.0% +1.0%
Benefit obligation 5,389 933 (734)

Percentage change 17.3% (13.6)%
Service cost and interest cost 2009/2010 555 46 (37)

Post-retirement mortality rate PA(90) Ultimate-1 -10.0% +10.0%


2007 2008 2009

Equities (%) 59 56 30
Bonds (%) 3 2 2
Cash and money market investments (%) 21 33 10
Insurance policies (%) 8 – 49
Telephone rebates
Telkom provides telephone rebates to its pensioners. The most recent
actuarial valuation was performed as at March 31, 2009. Eligible
employees must be employed by Telkom until retirement age to qualify
for the telephone rebates. The scheme is a defined benefit plan.
2007 2008 2009

Rm Rm Rm
The status of the telephone rebate liability is disclosed below:

Benefit obligation opening balance 251 307 443
Service cost 4 3 6
Actuarial (gain)/loss (39) 133 19
Amendments 93 – –
Present value of unfunded obligation 307 443 484

Unrecognised net actuarial loss and service cost* (25) (156) (159)
Liability as disclosed in the balance sheet (refer to note 29) 282 287 325
* The major increase in 2008 is attributable to the change in the rebate inflation rate.

2007 2008 2009

Telephone rebates (continued)
Rebate inflation rate (%) 0.0 4.0 4.0
The assumed rates of mortality are determined by reference

to the PA(90) Ultimate table, minus one year age rating as
published by the Institute and Faculty of Actuaries
in London and Scotland.

Telkom Conditional Share Plan

Telkom’s shareholders approved the Telkom Conditional Share Plan at the January 2004 Annual General Meeting. The scheme covers both
operational and management employees and is aimed at giving shares to Telkom employees, at a RNil exercise price, at the end of the
vesting period. The vesting period for the operational employees shares awarded in 2004 and 2005 is 0% in year one, 33% in each of
the three years thereafter, while the shares allocated in 2006 and 2007 together with management shares vest fully after three years.
Although the number of shares awarded to employees will be communicated at the grant date, the ultimate number of shares that vest may
differ based on certain performance conditions being met (refer to note 24).
The Telkom Board approved the fourth enhanced allocation of shares to employees as at September 24, 2007, with a grant date of
September 27, 2007, the day that the employees and Telkom shared a common understanding of the terms and conditions of the grant.
A total number of 6,089,810 shares were granted.
The Board has also approved an enhanced allocation for the November 2006 grant on September 4, 2007 with a grant date of
September 27, 2007. The number of additional shares granted with regard to the 2006 allocation is 4,966,860 shares.
The weighted average remaining vesting period for the shares outstanding as at March 31, 2009 is 0.71 years (2008: 1.25 years;
2007: 1.75 years).
2007 2008 2009
The following table illustrates the movement of the maximum number of

shares that will vest to employees for the August 2004 grant:
Outstanding at beginning of the year 2,414,207 1,883,991 420,590
Granted during the year 1,212 252 –
Forfeited during the year (80,923) (43,790) (3,985)
Vested during the year (450,505) (1,419,863) (416,605)
Outstanding at end of the year 1,883,991 420,590 –
The following table illustrates the movement of the maximum number of

shares that will vest to employees for the June 2005 grant:
Outstanding at beginning of the year 1,930,687 1,864,041 1,435,387
Granted during the year 1,005 3,469 52,954
Vested during the year – (323,946) (1,135,424)
Outstanding at end of the year 1,864,041 1,435,387 307,729


2007 2008 2009

Telkom Conditional Share Plan (continued)
The following table illustrates the movement of the maximum
number of shares that will vest to employees for the
November 2006 grant:
Outstanding at beginning of the year – 1,773,361 1,640,980
Granted during the year 1,825,488 833 –
Outstanding at end of the year 1,773,361 1,640,980 1,508,366

number of shares that will vest to employees relating to
the additional November 2006 grant:
Outstanding at beginning of the year – – 4,812,305

Granted during the year – 4,984,693 25,775
Forfeited during the year – (172,388) (389,357)
Outstanding at end of the year – 4,812,305 4,448,723

number of shares that will vest to employees for the
September 2007 grant:

The fair value of the shares granted have been calculated by an actuary using Black-Scholes-Merton model and the following values at
grant date:
August 8, June 23, November 2, September 4,
2004 2005 2006 2007
Grant Grant Grant Grant
Market share price (R) 77.50 111.00 141.25 173.00

Dividend yield (%) 2.60 3.60 3.50 3.50
2007 2008 2009
The principal assumptions used in calculating the

expected number of shares that will vest
are as follows:
Employee turnover (%) 5 5 9
Meeting specified performance criteria (%) 100 100 75


The amounts for the current and previous four years are as follows:
2005 2006 2007 2008 2009

Rm Rm Rm Rm Rm
Telkom Pension Fund

Defined benefit obligation (186) (281) (205) (204) (199)
Plan assets 231 243 284 311 247
Surplus/(deficit) 45 (38) 79 107 48

Asset limitation – – – (29) (39)
Unrecognised actuarial loss/(gain) 89 118 (25) (23) 46
Unrecognised/recognised net asset 134 80 54 55 55
Experience adjustment on assets – – 75 10 (67)

Experience adjustment on liabilities – – 25 (6) 1
Telkom Retirement Fund

Defined benefit obligation (4,020) (4,377) (6,581) (7,101) (6,704)
Plan assets 4,477 5,973 7,661 7,991 6,675
Surplus/(deficit) 457 1,596 1,080 890 (29)

Unrecognised actuarial gain/(loss) 312 (742) 96 478 1,578
Unrecognised net asset 769 854 1,176 1,368 1,549
Experience adjustment on assets* – – 1,641 118 (1,735)

Experience adjustment on liabilities* – – 1,234 485 (645)
Medical benefits
Plan assets – – 1,961 1,929 1,618
Deficit (3,079) (3,904) (2,423) (2,921) (3,792)

Unrecognised actuarial loss 649 1,297 1,284 1,565 2,047
Liability recognised (2,430) (2,607) (1,139) (1,356) (1,745)
Experience adjustment on assets – – 147 (164) (393)

Experience adjustment on liabilities – – 28 193 246
Telephone rebates
Unrecognised actuarial (gain)/loss (2) 53 25 156 159
Liability recognised (179) (198) (282) (287) (325)
Experience adjustment on liabilities – – (25) 2 2
The experience adjustments on asset and liabilities for each of the financial periods ended March 31, 2005 and 2006 have not been
disclosed due to the fact that it was impractical to determine the information.
* During the March 31, 2007 year end Telkom actuaries performed a full valuation while for the March 31, 2006 year end a roll forward method was
used, as permitted under IAS19, to determine the present value of the benefit obligation and the fair value of the plan assets using the March 31, 2005
statutory valuation as a base applying the relevant assumptions determined by management to arrive at the present value of the benefit obligation, and
the fair value of the plan assets.
This change in estimate resulted in a movement to the actuarial loss of R700 million and the fair value of the plan assets of R350 million in respect of the
March 31, 2007 estimates. The remaining R1,291 million is a result of the actual investment returns exceeding the expected return for the March 31, 2007
year end.

2007 2008 2009

Rm Rm Rm
31. TRADE AND OTHER PAYABLES 7,237 8,771 5,538
Trade payables 5,511 6,768 2,955

Finance cost accrued 22 39 156
Accruals and other payables 1,704 1,964 2,427
Accruals and other payables mainly represent amounts payable for

goods received, net of Value Added Taxation obligations.
32. RECONCILIATION OF PROFIT FOR THE YEAR TO CASH

GENERATED FROM OPERATIONS*
Cash generated from operations 20,520 21,256 20,394

Finance charges and fair value movements 1,125 1,803 3,765
Taxation 4,731 4,704 3,681
Investment income (235) (197) (216)
Interest received from debtors (190) (257) (273)
Non-cash items 6,582 6,930 10,292
Depreciation, amortisation, impairment and write-offs 5,315 6,130 8,155

Cost of equipment disposed when recognising finance leases 240 88 71
Increase in provisions 1,107 857 1,387
Profit on disposal of property, plant and equipment and intangible assets (29) (147) (29)
Vodacom broad-based black economic empowerment charge – – 691
Profit on disposal of investment and subsidiaries (52) – –
Loss on disposal of property, plant and equipment and intangible assets 1 2 17
(Increase)/decrease in working capital (342) 101 (1,102)
Inventories (393) (354) (1,130)

Accounts receivable (758) (784) (812)
Accounts payable 809 1,239 840
33. FINANCE CHARGES PAID* (1,115) (1,077) (2,164)
Finance charges per income statement (1,125) (1,803) (3,765)

Non-cash items 10 726 1,601
Movements in interest accruals (119) 101 105

Net discount amortised 409 568 698
Capitalised finance leases – – 178
Capitalised foreign exchange – – 38
Fair value adjustment (338) (243) 183
Unrealised gain 58 300 399
* Cash flows includes the cash flows related to assets held for sale and disposal groups.

2007 2008 2009

Rm Rm Rm
34. TAXATION PAID* (5,690) (4,277) (3,947)
Taxation payable at beginning of year (1,549) (74) (314)

Current taxation (excluding deferred taxation) (3,545) (3,807) (3,412)
Foreign currency translation reserve – (32) 2
Business combinations – – 2
Secondary taxation on companies (670) (678) (425)
Taxation payable at end of year 74 314 200
Reconciliation of net taxation liability at end of year** (74) (314) (200)
Income taxation receivable 520 9 125
Continuing operations 520 9 91

Disposal groups – – 34
Income taxation payable (594) (323) (325)
Continuing operations (594) (323) (50)

Disposal groups – – (275)
* Cash flows includes the cash flows related to assets held for sale
and disposal groups.
** The split income taxation receivable and income taxation payable was split in 2009
to disclose the effect of the discontinued operations.
35. DIVIDEND PAID (4,784) (5,732) (3,336)
Dividend payable at beginning of year (4) (15) (20)

Declared during the year – Dividend on ordinary shares: (4,678) (5,627) (3,306)
Final dividend for 2006: 500 cents (2,599) – –

Special dividend for 2006: 400 cents (2,079) – –
Final dividend for 2007: 600 cents – (3,069) –
Special dividend for 2007: 500 cents – (2,558) –
Final dividend for 2008: 660 cents – – (3,306)
Dividends paid to minority interest (117) (110) (33)

Dividend payable at end of year 15 20 23

36. ACQUISITION AND DISPOSALS OF SUBSIDIARIES, JOINT VENTURES AND MINORITY INTERESTS
36.1 Acquisitions
By Telkom
2007 2008 2009
Rm Rm Rm
Multi-Links Telecommunications Limited (Multi-Links Telecommunications) (25%)
Telkom International (Proprietary) Limited acquired 75% of the issued
share capital of Multi-Links Telecommunications Limited from Kenston
Investment Limited on May 1, 2007. Telkom also granted Kenston the
irrevocable right and option (put option) to require Telkom to acquire all
of the shares held by Kenston (25% shareholding) in Multi-Links, at any
time during the 90 day period following the second anniversary of the
effective date. On initial recognition, a liability of R661 million,
representing the higher of the transaction share price and the fair value,
was recognised under non-current other financial liabilities.
A corresponding debit was recognised in non-distributable reserves.
The put option was exercised on January 21, 2009 for R1,328 million
(US$130 million at US$1 = R10.2188). The liability was derecognised
and a corresponding credit consisting of R661 million reversal of equity
and R667 million relating to changes in the fair value of the put option
subsequent to initial recognition, was recognised directly in equity.
Put option – – 1,328
Africa Online Limited (Africa Online)

On February 23, 2007 Telkom acquired a 100% shareholding of Africa
Online from African Lakes Corporation for a total cost of R150 million,
with a resulting goodwill of R145 million.
Africa Online is an internet service provider active in Cote d’Ivoire, Ghana,

Kenya, Namibia, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
Africa Online is incorporated in the Republic of Mauritius.
At acquisition date the company was not IFRS compliant and thus no fair
value information based on IFRS was available.
The process of calculating a fair value of the identified assets, liabilities

and contingent liabilities has been finalised.
The fair value of the assets and liabilities acquired were determined as follows:
Fair value of intangible assets (licences R1 million, brand R42 million) 43 – –
Less: Deferred taxation raised on intangible assets (12) – –
Less: Net liabilities acquired (excluding fair value of intangible assets) (26) – –
Fair value of net assets acquired 5 – –

Goodwill 145 – –
Purchase price 150 – –
The goodwill has been allocated to the various cash-generating units (’CGU’) representative of the countries in which Africa Online Limited
operates.

2007 2008 2009

Rm Rm Rm
36. ACQUISITION AND DISPOSALS OF SUBSIDIARIES, JOINT

VENTURES AND MINORITY INTERESTS (continued)
36.1 Acquisitions (continued)
By the Group’s subsidiaries
Multi-Links Telecommunications Limited (’Multi-Links Telecommunications’) (75%)
On May 1, 2007 Telkom acquired a 75% shareholding in Multi-Links
Telecommunications through Telkom International, a wholly owned
South African subsidiary, for a total cost of R1,985 million.
Multi-Links Telecommunications is a Nigerian Private Telecommunications

Operator with a Unified Access Licence providing fixed, mobile, data, long
distance and international telecommunications services throughout Nigeria.
Multi-Links is domiciled and incorporated in Nigeria.
The purchase price allocation was completed during the 2008 financial year,
and has resulted in goodwill being adjusted.
The following intangible assets were identified and valued

at the end of the year:
Customer relationship – 61 –
Licence – 36 –
Brand – 105 –
Fair value of intangible assets – 202 –
The fair value of the assets and liabilities acquired were determined as follows:
Net assets acquired (excluding fair value of intangible assets) – 236 –
Fair value of intangible assets – 202 –
Less: Contingencies recognised – (35) –
Less: Deferred taxation raised on intangible assets – (65) –
Fair value of net assets acquired – 338 –

Less: Minority interest – (80) –
Goodwill – 1,727 –
Purchase price* – 1,985 –
* The purchase price was settled in cash.
Disposal group
By the Group’s 50% joint venture, Vodacom
Storage Technology Services (Proprietary) Limited – – 69
Gateway – – 2,846
Smartphone SP (Proprietary) Limited and subsidiaries 168 468 –
Smartcom (Proprietary) Limited 4 9 –
Africell Cellular Services (Proprietary) Limited 40 – –
InterConnect s.p.r.l 10 – –
Cointel VAS (Proprietary) Limited 73 – –
Disposals
By the Group’s 50% joint venture, Vodacom
Ithuba Smartcall (Proprietary) Limited – – –
Stand 13 Eastwood Road Dunkeld (Proprietary) Limited – 8 –

37. UNDRAWN BORROWING FACILITIES AND GUARANTEES

37.1 Rand denominated facilities and guarantees
Telkom has general banking facilities of R6,226 million. The facilities are unsecured, when drawn bear interest at a rate linked to prime,
have no specific maturity date and are subject to annual review. R3,000 million of these undrawn facilities were committed.
37.2 Foreign denominated facilities and guarantees

2007 2008 2009
Guarantor Details Beneficiary Rm Rm Rm
Telkom SA Limited Punctual payment and performance by Various US$3 million – 23 26

Africa Online under the Trade Finance (2008:
Facility Agreement to various banks US$3 million)
First Bank of Nigeria plc Guarantee on lending facility from Export Nortel Networks US$18 million – 147 171
(on behalf of Multi-links Bank of Canada to Nortel Networks for Canada (2008:
Telecommunications the purchase of Telecommunications US$18 million)
Limited) equipment phases – 9a, 9b, 9c and 9d
Zenith Bank plc (on Guarantee payment to Gilat Satcom Gilat Satcom US$0.1 million – 1 1
behalf of Multi-links Limited in respect of interconnect Limited (2008:
Telecommunications service (standby letter of credit) US$0.1 million)
Limited)
Zenith Bank plc (on Support the bid award of the contract NCC US$0.1 million – 1 1
behalf of Multi-links for the submission of the proposal to (2008:
Telecommunications provide wire to Nigerian Telecommuni- US$0.1 million)
Limited) cations Services
Zenith Bank plc (on Issued in favour of Huawei Technology Huawei US$31 million – 250 294
behalf of Multi-links Investment Company Limited for the Technology (2008:
Telecommunications supply of core telecommunications Investment US$31 million)
Limited) services Company
Limited
Zenith Bank plc (on Issued in favour of Huawei Technology Huawei US$11 million – 88 104
behalf of Multi-links Investment Company Limited for the Technology (2008:
Telecommunications supply of core telecommunications Investment US$11 million)
Limited) services Company
Limited
– 510 597
Disposal group
Rand denominated facilities and guarantees
The Group exposure is 50% of the following items:
Vodacom has Rand denominated credit facilities totalling R15,675 million with R12,335 million utilised as at March 31, 2009. The
facilities that are uncommitted can also be utilised for loans to foreign entities and are subject to review at various dates (usually on an
annual basis). Certain of the facilities are still subject to the Group’s final acceptance.

37. UNDRAWN BORROWING FACILITIES AND GUARANTEES (continued)

37.2 Foreign denominated facilities and guarantees
Rand denominated facilities and guarantees (continued)
2007 2008 2009
Vodacom (Proprietary) All guarantees individually less than Various 3 2 2

Limited R2 million
Vodacom Service All guarantees individually less than Various 3 3 2

Provider Company R2 million
(Proprietary) Limited
Vodacom Service Guarantee in respect of receipt of SA Insurance 27 32 35

Provider Company independent intermediaries of premiums Association
(Proprietary) Limited on behalf of short-term insurers and for benefit
Lloyd’s underwriters, and relating to of insurers
short-term insurance business carried on
in RSA. Renewable annually
Smartcom (Proprietary) Guarantees for salary bank account Various 3 – –

Limited and debit orders
Cointel VAS (Proprietary) Guarantees for operating lease Various 1 – –

Limited and debit orders
Vodacom (Proprietary) Letter of undertaking in respect of land Attorneys 7 17 33

Limited
Vodacom Properties Lease guarantees Various – – 3

No.2 (Proprietary)
Limited
44 54 75
The Group exposure is 50% of the following items:

Vodacom Congo (RDC) s.p.r.l. has various facilities of US$31 million which was fully utilised as at March 31, 2009. Vodacom
International Limited has a revolving term loan of US$180 million which was fully utilised at March 31, 2009. Vodacom Lesotho
(Proprietary) Limited has overdraft facilities with various banks of M25 million of which M13 million was utilised at March 31, 2009.
Vodacom Tanzania Limited has medium-term loans for US$47 million and TZS54,000 million of which US$40 million and TZSNil was
utilised at March 31, 2009. Foreign currency term facilities are predominantly US Dollar based, at various maturities and are utilised for
bridging and short-term working capital needs.
2007 2008 2009

Vodacom Group Guarantees issued for the obligation of Standard Bank US$180 million 1,312 1,463 1,735
(Proprietary) Limited Vodacom International Limited’s term plc and RMB (2008:
loan facility*# International US$180 million;
(Dublin) Limited 2007:
US$180 million)
1,312 1,463 1,735
* Foreign denominated guarantees amounting to R1,735 million (2008: R1,463 million; 2007: R1,312 million) issued in support of Vodacom Congo (RDC)
s.p.r.l. are included as liabilities in the disposal group held for sale.
# The Group is in compliance with the covenants attached to the term loan facility.
Companies within the Group have provided the following guarantees:

Vodacom (Proprietary) Limited provides an unlimited guarantee for borrowings entered into by Vodacom Group (Proprietary) Limited.

2007 2008 2009

Rm Rm Rm
38. COMMITMENTS
Capital commitments
Capital commitments authorised 11,167 15,198 7,928
Fixed-line 7,000 7,000 6,991

Mobile 4,159 5,211 –
Other 8 2,632 90
Commitments against authorised capital expenditure 1,099 3,504 1,393
Fixed-line 506 652 539

Mobile 591 800 –
Other 2 1,697 7
Authorised capital expenditure not yet contracted 10,068 11,694 6,535
Fixed-line 6,494 6,348 6,452

Mobile 3,568 4,411 –
Multi-Links – – –
Other 6 935 83
Capital commitments comprise commitments for property, plant and

equipment and software included in Intangible assets.
Management expects these commitments to be financed from

proceeds of the Vodacom sale.
2010 FIFA World Cup commitments

The FIFA World Cup commitment is an executory contract which requires Telkom to develop the fixed-line components of the necessary
telecommunications infrastructure needed to broadcast this event to the world. This encompasses the provisioning of the fixed-line
telecommunications related products and services and, where applicable, the services of qualified personnel necessary for the planning,
management, delivery, installation and de-installation, operation, maintenance and satisfactory functioning of these products and services.
Furthermore as a National Supporter. Telkom owns a tier 3 sponsorship that grants Telkom a package of advertising, promotional and
marketing rights that are exercisable within the borders of South Africa. Telkom entered into a barter transaction in return for which it has
an outstanding commitment to FIFA of R243 million (2008: R260 million) as at March 31, 2009. This has been recognised in intangible
assets (note 12) and has been included in the disclosure note.
Total <1 year 1 – 5 years >5 years

Rm Rm Rm Rm
Operating lease commitments and receivables

2009
Land and buildings 583 290 281 12
Rental receivable on buildings (271) (99) (170) (2)
Vehicles 1,137 261 876 –
Equipment 15 6 9 –
Customer premises equipment receivables (87) (48) (39) –
Total 1,377 410 957 10


38. COMMITMENTS (continued)

Total <1 year 1 - 5 years >5 years
Rm Rm Rm Rm
Operating lease commitments and receivables (continued)

2008
Land and buildings 2,061 341 913 807
Transmission and data lines 709 134 490 85
Vehicles 1,444 233 1,211 –
Sport and marketing contracts 680 282 395 3
Total 4,557 861 2,804 892
2007
Land and buildings 1,465 289 771 405
Transmission and data lines 262 68 159 35
Vehicles 573 568 5 –
Sport and marketing contracts 441 164 275 2
Total 2,438 974 1,026 438
Customer premises equipment receivable

The disclosed information relates to those arrangements which were assessed to be operating leases in terms of IAS17.
Operating leases
The Group leases certain buildings, vehicles and equipment. The majority of the lease terms negotiated for equipment-related premises are
10 years with other leases signed for five and three years. The majority of the leases contain an option clause entitling Telkom to renew
the lease agreements for a period usually equal to the main lease term.
The minimum lease payments under these agreements are subject to annual escalations, which range from 6% to 15%.
Penalties in terms of the lease agreements are only payable should Telkom vacate a premises and negotiate to terminate the lease
agreement prior to the expiry date, in which case the settlement payment will be negotiated in accordance with the market conditions of
the premises. Future minimum lease payments under operating leases are included in the above note. Onerous leases for buildings, of
which Telkom has no further use, no possibility of sub-lease and no option to cancel, are provided for in full and included in other provisions
(refer to note 29).
The master lease agreement for vehicles was for a period of five years and then extended for an additional three years which resulted in
the lease expiring on March 31, 2008. During August 2007 new terms were negotiated and approved and as a result the operating
lease commitments for vehicles are based on the new agreement which expires on March 31, 2013.
In accordance with this agreement Telkom is not allowed to lease any similar vehicle as specified in the contract from any other service
provider during the five year period except for the rentals at airport which are utilised in cases of subsistence and travel as well as vehicles
which are not part of the agreement.
The agreement is structured to have no lease increases on vehicles that are continually leased from the lessor. If a vehicle is, however,
replaced by a new similar vehicle, the lease costs of the newest vehicle will increase by the Consumer Price Index. All leased vehicles are,
however, subject to any variance in the interest rate fluctuations and are adjusted as and when the adjustments are announced by the South
African Reserve Bank. The leases of individual vehicles are renewed annually.
The master lease agreements for office equipment are with two suppliers with initial periods of 36 months effective from November 25,
2005. Upon expiry of the initial lease agreement on November 25, 2008, an extension of the lease was negotiated until November 24,
2009. In terms of these agreements the leases of individual equipment shall be valid for 36 months at a fixed fee for the entire period.


Rm Rm Rm Rm
Finance lease commitments

2009
Building
Minimum lease payments 1,654 113 546 995
Finance charges (822) (112) (426) (284)
Finance lease obligation 832 1 120 711
Equipment
Minimum lease payments 7 5 2 –
Finance charges (2) (1) (1) –
Finance lease obligation 5 4 1 –
Vehicles
2008
Building
Minimum lease payments 2,198 257 791 1,150
Finance charges (1,031) (152) (496) (383)
Finance lease obligation 1,167 105 295 767
Equipment
Finance charges (2) – (2) –
Vehicles
2007
Building
Finance charges (1,198) (166) (540) (492)
Finance lease obligation 1,214 61 313 840
Equipment
Minimum lease payments 6 – 6 –
Finance charges – – – –
Finance lease obligation 6 – 6 –
Finance leases
Finance leases on vehicles relates to the lease of Swap bodies. The lease term for the Swap bodies is April 2008 to April 2013.
A major portion of the finance leases relates to the sale and lease-back of the Group’s office buildings. The lease term negotiated for the
buildings is for a period of 25 years ending 2019. The minimum lease payments are subject to an annual escalation of 10% p.a. Telkom
has the right to sublet part of the buildings. In case of breach of contract, the lessor is entitled to cancel the lease agreement and claim
damages.
Finance leases on equipment mainly relates to office equipment. The lease term negotiated for the finance leases is for a period of three
years ending in 2011.

2007 2008 2009

Rm Rm Rm
39. CONTINGENCIES
Third parties 28 27 18
Fixed-line 19 18 18
Mobile 4 4 –
Multi-Links – – –
Other 5 5 –
Third parties
These amounts represent sundry disputes with suppliers that are not individually significant and that the Group does not intend to settle.
Supplier dispute
Telcordia instituted arbitration proceedings against Telkom in March 2001 before a single arbitrator of the International Court of Arbitration,
operating under the auspices of the International Chamber of Commerce. Telcordia is seeking to recover approximately US$130 million
for monies outstanding and damages, plus costs and interest at a rate of 15.5% per year which was increased by Telcordia to
US$172 million in the 2007 financial year and subsequently decreased to US$128 million in the 2008 financial year. The arbitration
proceeding relates to the cancellation of an agreement entered into between Telkom and Telcordia during June 1999 for the development
and supply of an integrated end-to-end customer assurance and activation system by Telcordia.
In September 2002, the arbitrator found that Telkom had wrongfully repudiated the contract and a partial award was issued by the
arbitrator in favour of Telcordia. Telkom subsequently filed an application in the South African High Court to review and set aside the partial
award. On November 27, 2003, the South African High Court set aside the partial award and issued a cost order in favour of Telkom.
On May 3, 2004, the South African High Court dismissed an application by Telcordia for leave to appeal and ordered Telcordia to pay
the legal costs of Telkom.
On November 29, 2004 the Supreme Court of Appeals granted Telcordia leave to appeal. Telcordia filed a notice of appeal and also
petitioned the United States District Court for the District of Columbia to confirm the partial award, which petition was dismissed, along
with a subsequent appeal. Following the dismissal of the appeal, Telcordia filed a similar petition in the United States District Court of New
Jersey. The United States District Court of New Jersey also dismissed Telcordia’s petition, reaffirming the decision of the United States District
Court of Columbia. Telcordia appealed this dismissal, which was later dismissed by the Appeals Court of New Jersey.
The appeal by Telcordia in the Supreme Court of Appeals was set down for and heard on October 30 and October 31, 2006. Following
the successful upholding of the appeal, Telkom filed an application for leave to appeal to the Constitutional Court on only the issue revolving
around the Supreme Court of Appeals’ failure to recognise Telkom’s rights of access to the courts under the South African Arbitration Act.
The Constitutional Court has since dismissed Telkom’s appeal with costs. The Constitutional Court judgment brought finality to the dispute
over the merits of Telcordia’s claim against Telkom and the parties reconvened the arbitration in May 2007 to deal with the amount of
damages to which Telcordia is entitled.
Two hearings were held at the International Dispute Resolutions Centre (IDRC). The first hearing was held in London on May 21, 2007
and was a ’directions hearing’, in terms of which the parties consented to a ruling by the arbitrator setting out a consolidated list of
proposals and issues to form part of the damages hearing.
The second hearing was held in London at the IDRC on June 25 and 26, 2007 and dealt with the application by Telcordia for the striking
out of part of Telkom’s defence on the basis that Telkom had raised issues in its defence that had already been heard by the arbitrator prior
to his partial award. This application was dismissed by the arbitrator. The arbitrator also made a ruling compelling Telcordia to provide
certain particulars requested by Telkom with regard to the claims by Telcordia. In his ruling, the arbitrator also set out a list of issues for
determination of the damages.

39. CONTINGENCIES (continued)

Supplier dispute (continued)
The mediation took place in London in February and April of 2008 without success. In the interim the parties agreed to the appointment
by the arbitrator of a third party expert to deal with the technical issues in relation to the software that was required to be provided by
Telcordia, who will make a recommendation to the arbitrator in dealing with the amount of the claims. A further hearing was held before
the arbitrator in October 2008 during which the arbitrator permitted Telkom to amend its statement of defence. Further hearings were held
before the software expert in November 2008 and he has made his report available.
The parties have now agreed that the whole question of “integration” of the software will be done at an experts only hearing (no lawyers)
before Mr P Burns, a software expert in Johannesburg during October 2009. The hearings before the software expert will have an impact
on the quantum of the other claims. The arbitrator has confirmed that the final hearing will be from January 25 to February 10, 2010, in
Johannesburg.
Although Telkom is currently unable to predict the exact amount that it may eventually be required to pay Telcordia, it has made provisions
for estimated liabilities in respect of the Telcordia claim in the sum of US$70 million (R664 million), including interest and legal fees. Telkom
will be required to fund any payments to Telcordia from cash flows or the incurrence of debt and the amount of any damages above
Telkom’s provision would increase Telkom’s liabilities and decrease its net profit, which could have a material adverse effect on its financial
condition, cash flows and results of operations.
A provision has been raised based on management’s best estimate of the probable payments in this regard.
2007 2008 2009

Rm Rm Rm
Supplier dispute liability included in current portion of provisions 527 569 664*
The provision has not increased from March 31, 2007, except for foreign exchange movements.
* US$70 million (2008: US$70 million; 2007: US$70 million).
Competition Commission
Telkom is party to a number of legal and arbitration proceedings filed by parties with the South African Competition Commission alleging
anti-competitive practices described below. If Telkom were found to have committed prohibited practices as contained in the Competition
Act, 1998, as amended. Telkom could be required to cease these practices, divest these businesses and be fined a penalty of up to 10%
of Telkom’s annual turnover, excluding the turnover of subsidiaries and joint ventures, for each complaint for the financial years prior to the
dates of the complaints. The Competition Commission has to date not imposed the maximum penalty on any offender.
On July 31, 2008, Telkom received a summons issued by the Competition Commission requesting information in connection with
investigations being conducted by the Competition Commission into five complaints against Telkom described in greater detail below by the
Internet Service Association, MWEB, Internet Solutions and Verizon SA Limited. The summons was subsequently withdrawn by the Competition
Commission following an agreement with Telkom in a co-operative process with the Competition Commission as part of the Competition
Commission’s ongoing investigations into these complaints. The investigation is expected to be finalised in the 2009 calendar year.
As competition continues to increase, Telkom expects that we will become involved in an increasing number of disputes regarding the
legality of services and products provided by Telkom and third parties. These disputes may range from court lawsuits to complaints lodged
by or against Telkom with various regulatory bodies. Telkom is currently unable to predict the amount that it may eventually be required to
pay in these proceedings. However, Telkom has not included provisions for any of these claims in our financial statements. In addition,
Telkom might need to spend substantial amounts defending or prosecuting these claims even if it is ultimately successful. If Telkom is required
to cease these practices, divest from the relevant businesses or pay significant fines, Telkom’s business and financial condition could be
materially and adversely affected and its revenue and net profit could decline. Telkom may be required to fund any penalties or damages
from cash flows or drawings on our credit facilities, which could cause its indebtedness to increase.
Independent Cellular Services Provider Association of South Africa (ICSPA)

In 2002, the ICSPA filed a complaint against Telkom at the Competition Commission in terms of the Competition Act, alleging that Telkom
had entered into contracts with large corporations, providing large discounts with the effect of discouraging the corporates from using the
’premicell’ device installed by their members. ICSPA also alleged various contraventions of the Competition Act by Telkom. Telkom provided
the Competition Commission with certain information requested. Telkom also referred the Competition Commission to its High Court
application in respect of utilisation of the ’premicell’ device. The Competition Commission declined to refer the matter to the Competition
Tribunal. ICSPA then referred the matter to the Competition Tribunal on September 18, 2003. Telkom filed its answering affidavit on
November 28, 2003. ICSPA has taken no further action since then.


Competition Commission (continued)
The South African Value Added Network Services (SAVA)
On May 7, 2002, the South African Value Added Network Services Providers’ Association, an association of VANS providers, filed
complaints against Telkom at the Competition Commission of the Republic of South Africa under the South African Competition Act, 89 of
1998, alleging, among other things, that Telkom was abusing its dominant position in contravention of the Competition Act, 89 of 1998,
and that it was engaged in price discrimination. The Competition Commission determined, among other things, that several aspects of
Telkom’s conduct contravened the Competition Act, 89 of 1998, and referred certain of the relevant complaints to the Competition Tribunal
for adjudication. The referred complaints deal with Telkom’s alleged refusal to provide telecommunications facilities to certain VANS
providers to construct their networks, refusal to lease access facilities to VANS providers, provision of bundled and cross subsidised
competitive services with monopoly services, discriminatory pricing with regard to leased line services and alleged refusal to peer with
certain VANS providers.
Telkom brought an application for review against the Competition Commission and the Competition Tribunal in the South African High
Court, in respect of the decision by the Competition Commission to refer the matters to the Competition Tribunal. Telkom is of the view that
the Competition Tribunal does not have jurisdiction to adjudicate these matters and argued that ICASA has the requisite jurisdiction. In the
review application, Telkom also sought to set aside the decision by the Competition Commission to refer the complaints to the Competition
Tribunal on the basis that the Competition Commission was biased, that the referral was out of time and that the Competition Commission
had not adhered to the memorandum of understanding between it and ICASA. Only the Competition Commission opposed the application
and filed an answering affidavit.
The main complaint at the Competition Commission was held over pending the outcome of the review application.
The application for review was heard on April 24 and 25, 2008. The South African High Court judge set aside the decision of the
Competition Commission to refer the SAVA complaints and the Omnilink complaint against Telkom discussed below to the Competition
Tribunal. The decision was made based on three grounds, namely that:
• the Competition Commission failed to comply with the peremptory provisions of the memorandum of understanding between the
Competition Commission and ICASA;
• the referral was out of time, on the basis that the agreements with the complainants to extend the time which the Competition Commission
was allowed to investigate the complaints were invalid; and
• the Competition Commission’s reliance on a report by the Link Centre created reasonable apprehension of bias, since some of the
complainants contribute financially to the Link Centre and the Link Centre’s advisory board includes employees of the complainants in
the SAVA complaints.
The judge did not make a decision on the question of jurisdiction (ie, whether ICASA or the Competition Tribunal has the jurisdiction to
deal with competition matters in the electronic communications industry).
On July 3, 2008 the Competition Commission filed an application for leave to appeal the decision of the High Court on the basis that the
judge erred on the issue of bias as well as his finding that issues surrounding the extension of time to investigate the issues constitutes a
ground for review. Telkom then filed an application for leave to cross-appeal on July 11, 2008. The main basis of Telkom’s cross-appeal
is that Telkom believes that the judge erred in failing to make a decision as to whether ICASA or the Competition Commission and
Competition Tribunal should deal with this type of complaint. The application for leave to appeal as well as the application for leave to
cross-appeal were granted by the Pretoria High Court on October 9, 2008. The parties are attending to the filing of the record of
proceedings before the High Court as well as the parties’ heads of argument, after which the Registrar of the Supreme Court of Appeal
will inform the parties of the date for the hearing. The main complaint before the Competition Tribunal will continue to be held over pending
the outcome of the appeal and cross-appeal.
This matter is not expected to be finalised within the 2010 financial year.


Omnilink
On August 22, 2002 Omnilink filed a complaint against Telkom at the Competition Commission alleging that Telkom was abusing its
dominance by discriminating in its price for Diginet services as against those charged to VANS and the price charged to customers who
apply for a Telkom VPN solution. The Competition Commission conducted an enquiry and subsequently referred the complaint, together
with the SAVA complaint, to the Competition Tribunal for adjudication. This matter is currently being dealt with together with the SAVA matter
discussed previously.
Orion/Telkom (Standard Bank and Edcon): Competition Tribunal

In April 2003, Orion filed a complaint against Telkom, Standard Bank and Edcon at the Competition Commission concerning Telkom’s
discounts offered on public switched telecommunication services to corporate customers. In terms of the rules of the Competition
Commission, the Competition Commission, who acts as an investigator, had one year to investigate the complaint. Orion, simultaneously
with the filing of the complaint, also filed an application against Telkom, Standard Bank and Edcon at the Competition Tribunal, for an
interim order interdicting and restraining Telkom from offering Orion’s corporate customers reduced rates associated with Telkom’s Cellsaver
discount plan.
The Competition Commission completed its investigation and decided that there was no prima facie evidence of any contravention of the
Competition Act. Orion however referred the matter to the Competition Tribunal in terms of section 51 of the Competition Act, which allows
for parties to refer matters to the Competition Tribunal themselves. Telkom has not yet filed its answering affidavit in the main complaint
before the Competition Tribunal. To date there have been no further developments on this matter.
The Internet Service Providers Association (ISPA)

In December 2005, the ISPA, an association of ISPs, filed complaints against Telkom at the Competition Commission regarding alleged
anti-competitive practices on the part of Telkom. The complaints deal with the cost of access to SAIX, the prices offered by TelkomInternet,
the alleged delay in provision of facilities to ISPs and the alleged favourable installation timelines offered to TelkomInternet customers. The
Competition Commission has formally requested Telkom to provide it with certain records of orders placed for certain services, in an attempt
to first investigate the latter aspects of the complaint. Telkom provided the Competition Commission with the information.
MWEB and Internet Solutions (IS)

On June 29, 2005, MWEB and Internet Solutions, or IS, jointly lodged a complaint with the Competition Commission against Telkom and
also requested interim relief at the Competition Tribunal. The complaint at the Competition Commission mainly deals with Telkom’s pricing
for ADSL retail products and its IP Connect products, the termination of the peering link between Telkom and IS, the wholesale pricing of
SAIX bandwidth for ADSL users of other internet service providers, the architecture of Telkom’s ADSL access route and the manner in which
internet service providers can only connect to Telkom’s edge service router via IP Connect as well as alleged excessive pricing for bandwidth
on Telkom’s international undersea cable. The application for interim relief at the Competition Tribunal dealt with allegations that Telkom
should maintain the peering link between IS and Telkom in terms of its current peering agreement, and demanded that Telkom treat the
traffic generated by ADSL customers of MWEB as traffic destined for the peering link and that Telkom upgrade its peering link to
accommodate the increased ADSL traffic emanating from MWEB and maintain a maximum of 65% utilisation. Telkom filed its answering
affidavit, and is awaiting IS and MWEB’s replying affidavit.
Since then, Telkom has entered into a new peering agreement with IS and has responded to numerous documentation and information
requests from the Competition Commission. To date neither MWEB nor IS has filed a replying affidavit in the interim relief application.


MWEB
On June 5, 2007, MWEB brought an application against Telkom for interim relief at the Competition Tribunal with regard to the manner
in which Telkom provides wholesale ADSL internet connections. MWEB requested the Competition Tribunal to grant an order of interim
relief against Telkom to charge MWEB a wholesale price for the provision of ADSL internet connections which is not higher than the lowest
retail price. MWEB further applied for an order that Telkom implement the migration of end customers from Telkom PSTS ADSL access to
MWEB without interruption of the service. Telkom raised the objection that the Competition Tribunal does not have jurisdiction to hear the
matter in its answering affidavit filed at the Competition Tribunal. Telkom still had to “plead over” as to the merits of the matter. Telkom also
filed an application in the Transvaal Provincial Division of the South African High Court on July 3, 2007 for an order declaring that the
Competition Tribunal does not have jurisdiction to hear the application for interim relief made to it by MWEB.
The application before the High Court was set down for hearing during the first quarter of the 2009 financial year. The parties however
entered into settlement negotiations, which resulted in the withdrawal of the interim relief application at the Competition Tribunal by MWEB
as well as a withdrawal of the jurisdictional challenge filed at the South African High Court by Telkom. The parties are in further
negotiations.
Verizon SA Limited (Verizon)

Verizon filed a complaint against Telkom on March 22, 2007 alleging that Telkom charges an excessive price on services rendered to
Verizon thereby inducing Verizon’s customers not to deal with Verizon, engages in exclusionary conduct through “margin squeeze” in
offering prices to end-users which are lower than the prices at which it sells rights of access to its infrastructure on a wholesale basis to
Verizon, and that Telkom engages in price discrimination against Verizon.
Internet Solutions (IS)

IS filed a complaint against Telkom at the Competition Commission during December 2007. The complaint alleges abusive conduct by
Telkom. IS specifically alleges that Telkom is charging excessive prices that bear no reasonable relation to the economic value of the goods
or services, that Telkom has raised the wholesale cost to downstream competitors, while also reducing the downstream retail price to clients;
engaging in margin squeeze, that Telkom has introduced a series of bundled products (namely Telkom Closer Products) that limit the ability
of rivals in particular markets to compete effectively, and Telkom is offering discriminatory prices in relation to a number of infrastructural
and service items that IS is compelled to purchase from Telkom.
While that complaint was being investigated by the Competition Commission IS brought an application to the Competition Commission
for interim relief requesting: that Telkom be ordered to charge IS a wholesale price for telecommunication facilities to provide virtual private
network services to its customers no higher than the lowest retail price for such connection charged to Telkom’s VPN Supreme customers
and ordering that the costs of the application be paid by Telkom.
Telkom opposed the application of by IS at the Competition Tribunal although it is unable to finalise its opposing papers due to difficulties
associated with the manner in which IS claimed confidentiality over the application. No further activity has taken place with regard to the
interim relief application to date.


Telecom and Broadcasting (Proprietary) Limited (Maredi)
Maredi
Maredi served a notice of motion on Telkom, Ericsson SA and Telsaf Data (Pty) Ltd on January 8, 2009. The matter relates to a tender
published by Telkom for the supply of point-to-point split mount microwave equipment. Maredi, Telsaf, Ericsson and a fourth company,
Mobax, were shortlisted. The tender was awarded by Telkom to Telsaf and Ericsson.
Maredi applied for a court order, with a court hearing date set for February 3, 2009, requesting that the court prevent Telkom from entering
into a contract with Ericsson and Telsaf or either party, and from ordering goods or services from Ericsson and Telsaf pursuant to the tender.
Maredi also requested an order that the court review and set aside the award of the tender to Telsaf and Ericsson or either of the
aforementioned parties, and refer the tender back to Telkom in order for Telkom to reconsider its award. Maredi alleged that there were
certain irregularities in the tender process in that Telkom did not follow fair procedures by failing to comply with its own mandatory
procedural requirements, that Telkom acted arbitrarily and in bad faith, that Telkom was biased in favour of Ericsson and that Ericsson should
have been disqualified as it failed to meet Telkom’s critical criteria as set out in the tender.
Numerous allegations in the application, including accusations against certain members of the Procurement Review Council and allegations
by Maredi of compliance by them to the technical critical criteria, were refuted by Telkom. Telkom and Ericsson opposed the application
and filed their respective opposing affidavits. Telsaf did not oppose the application. The matter was ultimately set down for hearing on
February 20, 2009 and Maredi’s application was dismissed with costs. However, Maredi is proceeding with a review application in the
ordinary course and Telkom is opposing the application.
Telkom is not currently able to predict when these disputes may be resolved or the amount that Telkom may eventually be required to pay,
however, Telkom has not included provisions for all of these claims in our consolidated financial statements. In addition, Telkom may need
to spend substantial amounts defending or prosecuting these claims even if Telkom is ultimately successful. If Telkom were to lose these or
future legal and arbitration proceedings, Telkom could be prohibited from engaging in certain business activities and could be required to
pay substantial penalties and damages, which could cause Telkom’s revenue and net profit to decline and have a material adverse impact
on the business and financial condition. Telkom may be required to fund any penalties or damages from cash flows or drawings on our
credit facilities, which could cause Telkom’s indebtedness to increase.
Telkom is party to various additional proceedings and lawsuits in the ordinary course of our business, which management does not believe
will have a material adverse impact.
Negative working capital ratio

At each of the financial years ended March 31, 2009, 2008 and 2007 the Group had a negative working capital ratio. A negative
working capital ratio arises when current liabilities are greater than current assets. Current liabilities are intended to be financed from
operating cash flows, new borrowings and borrowings available under existing credit facilities.

40. DIRECTORS’ INTERESTS

ST Arnold, RJ Huntley, E Spio-Garbrah, KST Matthews and VB Lawrence, five of Telkom’s Board members, are the South African
Government’s representatives on Telkom’s Board of directors. At March 31, 2009, the Government held 39.76% (2008: 39.42%; 2007:
38.83%) of Telkom’s shares.
B Molefe is a Public Investment Corporation (PIC) representative on Telkom’s Board of directors. As at March 31, 2009 the PIC held
15.63% (2008: 15.23%, 2007: 15.27%) of Telkom’s shares.
Beneficial Non-beneficial
Direct Indirect Direct Indirect
Directors’ shareholding (Number of shares)

2009
Executive
RJ September 90,815 1,820 – –
PG Nelson 19,182 –
Total 109,997 1,820 – –
Non-executive
PG Joubert – 15,000 – –
D Barber – 1,200 – –
– 16,200 – –
2008
Executive
RJ September 7,155 – – –
Total 7,155 – – –
Non-executive
At March 31, 2008 there were no non-executive directors’ shareholdings.
2007
Non-executive
TF Mosololi 455 – – –
Total 455 – – –
The directors’ shareholding changed between the balance sheet date and the date of issue of the financial statements and this has been
reflected in the above information.
2007 2008 2009

Rm Rm Rm
Directors’ emoluments 7 36 20
Executive
For services as directors 4 31 15
Non-executive

40. DIRECTORS’ INTEREST (continued)

Directors’ emoluments (continued)
Performance Fringe and
Fees Remuneration bonus other benefits Total
R R R R R
2009
Emoluments per director:
Non-executive 5,028,084 – – – 5,028,084
ST Arnold 1,030,000 – – – 1,030,000

B du Plessis 498,000 – – – 498,000
PSC Luthuli 642,000 – – – 642,000
KST Matthews 441,000 – – – 441,000
B Molefe 159,551 – – – 159,551
AG Rhoda 124,001 – – – 124,001
RJ Huntley 533,000 – – – 533,000
Dr E Spio-Garbrah** 622,750 – – – 622,750
Dr VB Lawrence** 359,000 – – – 359,000
DD Barber 293,667 – – – 293,667
PG Joubert 302,778 – – – 302,778
Executive – 4,530,912 2,289,947 7,848,357 14,669,216
RJ September CEO* – 3,555,800 1,841,396 7,430,452 12,827,648

PG Nelson CFO* – 975,112 448,551 417,905 1,841,568
Total emoluments – paid by Telkom 5,005,747 4,530,912 2,289,947 7,848,357 19,674,963
2008
Non-executive 4,633,933 – – – 4,633,933
ST Arnold 1,124,373 – – – 1,124,373

B du Plessis 393,967 – – – 393,967
MJ Lamberti – – – – –
PSC Luthuli 502,117 – – – 502,117
TD Mahloele 357,684 – – – 357,684
KST Matthews 501,217 – – – 501,217
TF Mosololi 174,960 – – – 174,960
M Mostert*** 229,433 – – – 229,433
DD Tabata 250,583 – – – 250,583
YR Tenza 305,633 – – – 305,633
PL Zim 5,333 – – – 5,333
B Molefe 20,497 – – – 20,497
A Rhoda 14,286 – – – 14,286
RJ Huntley 193,833 – – – 193,833
Dr E Spio-Garbrah** 273,841 – – – 273,841
Dr VB Lawrence** 286,176 – – – 286,176
Executive – 14,489,833 3,436,308 13,244,896 31,171,037
R September* – 2,453,757 3,436,308 13,218,772 19,108,837
CEO – 1,016,524 3,436,308 10,438,538 14,891,370

Acting CEO – 1,437,233 – 2,780,234 4,217,467
LRR Molotsane* – 12,036,076 – 26,124 12,062,200


40. DIRECTORS’ INTEREST (continued)

R R R R R
2007
Non-executive 2,641,168 – – – 2,641,168
NE Mtshotshisa 463,050 – – – 463,050

ST Arnold 353,719 – – – 353,719
TCP Chikane 32,670 – – – 32,670
B du Plessis 213,367 – – – 213,367
PSC Luthuli 205,417 – – – 205,417
TD Mahloele 166,667 – – – 166,667
KST Matthews 109,643 – – – 109,643
TF Mosololi 214,417 – – – 214,417
M Mostert 232,417 – – – 232,417
DD Tabata 175,367 – – – 175,367
YR Tenza 321,767 – – – 321,767
PL Zim 152,667 – – – 152,667
Executive – 2,272,785 – 1,653,202 3,925,987
LRR Molotsane* – 2,272,785 – 1,653,202 3,925,987
Total emoluments – paid by Telkom 2,641,168 2,272,785 – 1,653,202 6,567,155
*Included in fringe and other benefits is a pension contribution for LRR Molotsane of RNil (2008: R4,690; 2007: R295,462), RJ September of R462,254
(2008: R280,261; 2007: RNil) and PG Nelson of R125,765 (2008: RNil; 2007: RNil) at March 31, 2009 paid to the Telkom Retirement Fund.
** Foreign directors.
*** In the absence of an internal corporate finance division, and pending the structuring and staffing thereof, the Telkom Board resolved that it was in the
best interest of the Company and shareholders to deploy the highest quality skills currently resident in Telkom, to evaluate, structure and make
recommendations to the Board on major transactions. During 2008, Dr Mostert led all efforts in this regard and was remunerated accordingly. Moreover,
in compliance with the principles of good governance, the Board took legal advice and established that there was no conflict of interest arising out of
this involvement in the transaction evaluated.

2007 2008 2009

Rm Rm Rm
41. SEGMENT INFORMATION

Eliminations represent the inter-segmental transactions that have been
eliminated against segment results. The mobile segment represents the
Group’s joint venture Vodacom.
Business segment
Consolidated operating revenue 32,441 33,611 35,940
Fixed-line 32,345 32,572 33,659

Elimination (772) (830) (817)
Other 873 1,040 1,214
Elimination (5) (16) (16)
Discontinued operations 19,178 22,674 26,174
Mobile 20,573 24,089 27,594

Elimination (1,494) (1,519) (1,531)
Other 106 108 123
Consolidated other income 338 472 343

Other 50 61 64
Discontinued operations 46 62 129
Mobile 42 56 119
Other 4 6 10
Consolidated operating expenses 23,028 25,014 29,895
Fixed-line 24,083 24,962 29,849

Elimination (1,505) (1,709) (3,624)
Elimination – 56 469
Other 512 928 801
Mobile 15,185 17,898 21,704

Elimination (745) (805) (876)
Other 77 245 607

2007 2008 2009

Rm Rm Rm
41. SEGMENT INFORMATION (continued)

Consolidated operating profit 9,751 9,069 6,388
Fixed-line 8,596 8,107 4,334

Elimination 687 793 2,562
Multi-Links – (97) (522)
Elimination – (56) (469)
Other 411 173 477
Elimination 57 149 6
Mobile 5,430 6,247 6,009

Elimination (749) (714) (655)
Other 33 (131) (474)
Consolidated investment income 199 168 181
Fixed-line 3,041 3,975 2,807

Elimination (2,850) (3,832) (2,646)
Multi-Links – 7 5
Other 8 18 15
Mobile 37 27 33
Other – 2 2
Consolidated finance charges 857 1,556 2,843
Fixed-line 857 1,277 1,464

Multi-Links – (4) 1,201
Other – 318 353
Mobile 269 240 921

Other – 7 1
Consolidated taxation 2,803 2,647 1,660
Fixed-line 2,652 2,630 560

Elimination – – 825
Multi-Links – (131) 141
Elimination – – (24)
Other 151 148 158

2007 2008 2009

Rm Rm Rm

Mobile 1,918 2,055 2,023

Other 10 2 (2)
Minority interests 94 123 26
Multi-Links – 12 (96)
Other 94 111 122
Mobile 109 73 51
Other – 1 –
Profit attributable to equity holders of Telkom 6,196 4,911 2,040
Fixed-line 8,128 8,175 5,117

Elimination (2,163) (3,039) (909)
Multi-Links – 33 (1,763)
Other 174 (386) (141)
Mobile 3,171 3,906 3,047

Elimination (749) (714) (655)
Other 23 (139) (471)
Consolidated assets 57,426 68,259 59,712
Fixed-line 44,224 47,829 54,593

Elimination (1,547) (1,604) (1,167)
Mobile 14,026 16,743 –
Elimination (353) (278) –
Multi-Links – 2,451 5,834
Other 1,188 3,283 1,285
Elimination (112) (165) 27
Disposal group – – 23,215
Mobile 23,412
Elimination (269)
Other 94
Elimination (22)

2007 2008 2009

Rm Rm Rm

Investments 1,461 1,499 1,383
Fixed-line 1,621 4,917 10,910

Elimination (341) (3,607) (9,540)
Mobile 181 176 –
Other – 13 13
Disposal group – –
Mobile 194
Other financial assets 259 614 1,202
Fixed-line 230 445 1,200

Mobile 28 169 –
Other 1 – 2
Disposal group
Mobile – – 73
Total assets 59,146 70,372 85,779
Consolidated liabilities 15,951 19,689 14,247
Fixed-line 10,154 11,892 13,002

Elimination (458) (495) (514)
Mobile 7,416 8,871 –
Elimination (1,468) (1,542) –
Other 374 332 165
Elimination (67) (8) 295
Mobile 9,611
Elimination (1,128)
Other 15
Interest-bearing debt 10,364 15,733 18,275
Fixed-line 9,082 13,362 17,704

Mobile 1,278 1,815 –
Other 4 24 21
Mobile 7,052
Other –

2007 2008 2009

Rm Rm Rm

Other financial liabilities 229 1,290 228

Mobile 158 204 –
Other 13 919 2
Disposal group
Mobile – – 48
Taxation liabilities 594 323 50
Fixed-line – 7 12
Mobile 556 290 –
Other 38 26 38
Disposal group – – 275
Mobile 275
Other –
Other segment information

Capital expenditure for property, plant and equipment 8,648 10,108 8,725
Fixed-line 5,545 6,044 5,866

Mobile 3,069 2,475 –
Multi-Links – 1,312 2,754
Other 34 277 105
Mobile 2,979
Other 34
Capital expenditure for intangible assets 1,598 1,791 906
Fixed-line 1,049 749 824

Mobile 539 985 –
Multi-Links – – 37
Other 10 57 45
Disposal group – – 590
Mobile 590
Other –
Depreciation and amortisation 3,316 3,621 4,458
Fixed-line 3,298 3,470 4,037

Other 18 32 50

2007 2008 2009

Rm Rm Rm

Mobile 1,681 1,955 2,341

Other 22 25 32
Impairment and asset write-offs 284 514 822

Other – 229 39
Mobile 12 15 57
Other – – –
Workforce reduction expense – Fixed-line 24 3 8
Geographical segment
Consolidated operating revenue 32,441 33,611 35,940
South Africa 32,428 32,671 33,847

Other African countries 29 956 2,093
Elimination (16) (16) –
Disposal group 19,178 22,674 26,174
South Africa 17,130 19,997 22,298

Other African countries 2,070 2,697 3,932
Consolidated operating profit 9,751 9,069 6,388
South Africa 9,744 9,254 7,435

Other African countries 18 (169) (533)
Disposal group 4,719 5,413 5,089
South Africa 4,622 5,089 4,726

Other African countries 276 414 400
Consolidated assets 59,146 70,372 62,297
South Africa 56,797 63,772 57,056

Other African countries 3,489 8,785 6,101
Eliminations (1,140) (2,185) (860)

2007 2008 2009

Rm Rm Rm

South Africa 20,693

Other African countries 9,597
Elimination (6,808)
Capital expenditure for property, plant and equipment and intangible assets 10,246 11,899 9,631
South Africa 9,459 9,780 6,735

Other African countries 787 2,119 2,896
South Africa 2,443

Other African countries 1,213
Elimination (53)
’South Africa’, which is also the country of domicile for Telkom, comprises the segment information relating to Telkom and its South African
subsidiaries as well as Vodacom’s South African-based mobile communications network, the segment information of its service providers is
included in the disposal group.
‘Other African countries’ comprises Telkom’s subsidiaries Africa Online Limited and Multi-Links Telecommunications Limited as well as
Vodacom’s mobile communications network in Tanzania, Lesotho, the Democratic Republic of the Congo and Mozambique.

42. RELATED PARTIES

Details of material transactions and balances with related parties not disclosed separately in the consolidated annual financial statements
were as follows:
2007 2008 2009
Rm Rm Rm
With joint venture:

Vodacom Group (Proprietary) Limited
Related party balances
Trade receivables 61 51 61
Trade payables (353) (346) (325)
Related party transactions

Revenue (755) (816) (891)
Expenses 1,494 1,525 1,533
Audit fees 3 3 2
Revenue includes interconnect fees and lease and installation of transmission lines.
Expenses mostly represent interconnect expenses.
With shareholders:
Public Investment Corporation
There were no material transactions between Telkom and the
Public Investment Corporation.
Government

Revenue (2,458) (2,623) (2,767)
With entities under common control:

Major public entities
The outstanding balances are unsecured and will be settled in cash in

the ordinary course of business.

Revenue (435) (486) (446)
Expenses 238 243 212
Rent received (29) (21) (20)
Rent paid 27 22 19
Key management personnel compensation:

(Including directors’ emoluments)
Short-term employee benefits 116 155 62
Post-employment benefits 4 4 6
Termination benefits – 27 –
Equity compensation benefits 8 29 39
Other long-term benefits 17 – –
The fair value of the shares that vested in the current year is R11 million (2008: R12 million; 2007: RNil).
Terms and conditions of transactions with related parties

The sales to and purchases from related parties of telecommunication services are made at arm’s length prices. Except as indicated above,
outstanding balances at the year end are unsecured, interest-free and settlement occurs in cash. Apart from the bank guarantee to the
amount not exceeding R23 million provided to Africa Online Limited, there have been no guarantees provided or received for related party
receivables or payables.

43. INTEREST IN MATERIAL SUBSIDIARIES

Country of incorporation: RSA – Republic of South Africa; TZN – Tanzania; LES – Lesotho; MZ – Mozambique; DRC – Democratic Republic
of Congo; MAU – Mauritius; NIG – Nigeria; GUE – Guernsey.
Nature of business: C – Cellular; S – Satellite; MSC – Management services company; PROP – Property company; OTH – Other.
* Dormant at March 31, 2008.
Interest in issued
Issued share capital ordinary share capital
Country of 2007 2008 2009 2007 2008 2009
incorporation % % %
Directory advertising
Trudon (Proprietary) Limited (formerly trading as TDS Directory
Operations (Proprietary) Limited) RSA R100,000 R100,000 R100,000 64.9 64.9 64.9
Other group entities
Rossal No 65 (Proprietary) Limited RSA R100 R100 R100 100 100 100
Acajou Investments (Proprietary) Limited RSA R100 R100 R100 100 100 100
Africa Online Limited MAU US$1,000 US$1,000 US$1,000 100 100 100
Multi-Links Telecommunications Limited NIG – NGN300,000,000 NGN300,000,000 – 75 100

Telkom Management Services (Proprietary) Limited RSA – – R100 – – 100
Intekom (Proprietary) Limited RSA R10,001,000 R10,001,000 R10,001,000 100 100 100
Q-Trunk (Proprietary) Limited RSA R10,001,000 R10,001,000 R10,001,000 100 100 100
Telkom International (Proprietary) Limited RSA R100 R100 R100 100 100 100
The aggregate net loss of the nine subsidiaries is

R2,168 million (2008: R186 million) and profit of
(2007: R564 million)
Disposal group
Telkom Media (Proprietary) Limited RSA R100 R100 R100 100 100 100
Swiftnet (Proprietary) Limited RSA R25,000,000 R5,000,000 R5,000,000 100 100 100
Vodacom has an interest in the following companies

(Group share: 50% of the interest in ordinary share
capital as indicated):
Cellular network operators

Vodacom (Proprietary) Limited (C) RSA R100 R100 R100 100 100 100
Vodacom Lesotho (Proprietary) Limited (C) LES M4,180 M4,180 M4,180 88.3 88.3 88.3
Vodacom Tanzania Limited (C) TZN TZS10,000 TZS10,000 TZS10,000 65 65 65
VM, S.A.R.L. (C) MZ US$60,000,000 US$60,000,000 US$60,000,000 98 90 90
Vodacom Congo (RDC) s.p.r.l. (C) DRC US$1,000,000 US$1,000,000 US$1,000,000 51 51 51
Service providers
Vodacom Service Provider Company (Proprietary) Limited (C) RSA R20 R20 R20 100 100 100
Smartphone SP (Proprietary) Limited (C)* RSA R20,000 R20,000 R20,000 70 100 100
Smartcom (Proprietary) Limited (C)* RSA R1,000 R1,000 R1,000 61.7 100 100
Cointel VAS (Proprietary) Limited (C)* RSA R10,204 R10,204 R10,204 70 100 100
Other significant subsidiaries of the Group’s Joint Venture

Vodacom Service Provider Holdings Company (Proprietary)
Limited (MSC)* RSA R1,020 R1,023 R1,023 100 100 100
Vodacom Satellite Services (Proprietary) Limited (OTH)* RSA R100 R100 R100 100 100 100
GSM Cellular (Proprietary) Limited (OTH)* RSA R1,200 R1,200 R1,200 100 100 100
Vodacom Venture No.1 (Proprietary) Limited (OTH)* RSA R810 R810 R810 100 100 100
Vodacom Equipment Company (Proprietary) Limited (OTH)* RSA R100 R100 R100 100 100 100
Vodacare (Proprietary) Limited* (OTH) RSA R100 R100 R100 100 100 100

43. INTEREST IN MATERIAL SUBSIDIARIES (continued)

Interest in issued
Issued share capital ordinary share capital
Country of 2007 2008 2009 2007 2008 2009
incorporation % % %
Vodacom International Holdings (Proprietary) Limited (MSC) RSA R100 R100 R100 100 100 100
Vodacom International Limited (MSC) MAU US$100 US$100 US$100 100 100 100
Vodacom Properties No.1 (Proprietary) Limited (PROP) RSA R100 R100 R100 100 100 100
Vodacom Properties No.2 (Proprietary) Limited (PROP) RSA R1,000 R1,000 R1,000 100 100 100
Stand 13 Eastwood Road Dunkeld West (Proprietary)
Limited (PROP) RSA R100 – – 70 – –
Ithuba Smartcall (Proprietary) Limited (OTH) RSA R100 – – 36.4 – –
Smartcall Smartlife (Proprietary) Limited (OTH) RSA R100 – – 63 – –
Vodacom Tanzania Limited (Zanzibar) (OTH)* TZN TZS10,000 TZS10,000 TZS10,000 99 99 99
Joycell Shops (Proprietary) Limited (OTH)* RSA R100 R100 R100 100 100 100
Marble Gold Investments (Proprietary) Limited (OTH) * RSA R100 R100 R100 100 100 100
Vodacom Ventures (Proprietary) Limited (OTH) RSA R120 R120 R120 100 100 100
Skyprops 134 (Proprietary) Limited (PROP) RSA R100 R100 R100 100 100 100
Storage Technology Services (Proprietary) Limited RSA – – R136 – – 51
Gateway Telecommunications Plc UK – – £49,567,569 – – 100
Gateway Communications Africa (UK) Limited UK – – £1 – – 100
Gateway Communications SA BLG – – e62,000 – – 100
Gateway Telecoms Integrated Services Limited NIG – – NGN1,250,000 – – 100
GS Telecom Limited GUE – – US$193 – – 100
Indebtedness of Telkom subsidiary companies Rm Rm Rm
Intekom (Proprietary) Limited RSA – – – – – (23)

Q-Trunk (Proprietary) Limited RSA – – – 30 26 22
Rossal No 65 (Proprietary) Limited RSA – – – – 30 (342)
Acajou Investments (Proprietary) Limited RSA – – – – – 285
Africa Online Limited MAU – – – – 74 236
Multi-Links Telecommunications Limited NIG – – – – 841 5,225
Telkom International (Proprietary) Limited RSA – – – – 1,985 1,985
Disposal group
Swiftnet (Proprietary) Limited RSA – – – – – 10
Telkom Media (Proprietary) Limited RSA – – – – 326 470

44. SIGNIFICANT EVENTS

Telkom Renaissance
On November 14, 2008, Telkom’s Board of directors approved the new organisation structure which is designed to fit Telkom’s defend
and growth strategy. The new structure is effective April 1, 2009 and is being managed through a project called Telkom Renaissance.
The Group has been restructured into three operating Business Units namely Telkom South Africa, Telkom International and Telkom Data
Centre Operations. The Telkom Renaissance initiative will occur over the next 24 months to ensure that all the necessary remodelling,
reorganising, revitalising and re-engineering happens in order to make the new structure function optimally.
This initiative is a complete transformation of the way Telkom focuses on servicing its customers and creating value for its stakeholders. It is
a positive, purposeful change towards a more accountable and competitive company. This change is a necessary part of Telkom’s strategy
to maintain and grow market share in South Africa whilst building a strong footprint on the African continent.
Capability Management
Telkom will seek to manage costs and address service delivery constraints by realigning its structure and resources to better match its
transforming information, communications and technology business.
The transformation of the communications industry and increasing market and competitive pressure has put communication companies such
as Telkom under increasing revenue and expense constraints while being required to improve customer service. As a result Capability
Management is designed to ensure that the capabilities needed to succeed in a converged communications market are established through
the optimal utilisation of external as well as internal capabilities, extracting efficiencies, where possible, through scale of a rapidly maturing
retail and wholesale market and better organised functional areas in a more deregulated and liberalised communications market.
Capability Management includes the internal consolidation of certain functional areas and the optimisation of strategic supplier and service
provider relationships improving performance in other functional areas.
Capability Management will be concerned with assisting in addressing the margin and service delivery pressures by reassessing the
operational service delivery methodology currently deployed with a view of increasing flexibility, reducing expense while improving service
delivery across the Telkom Group.
Given the challenges Telkom faces in rolling out broadband, converged and data services, maintaining our legacy network and expanding
our operations across the African continent, employees’ skills and performance must be aligned with our strategy to ensure financial,
operational and transformational targets, customer expectations and shareholder expectations are met.
The immediate objective therefore is to remodel service delivery. This is one of the strategic initiatives under Project Renaissance and will
focus on the following:
• Identify and assess existing capabilities;
• Establish a Telkom Group Capability Inventory;
• Determine future capability requirements;
• Identify and develop a set of optimal service delivery options for achieving current and future strategic objectives; and
• Enable Telkom South Africa, Telkom International and Telkom Data Centre Operations to:
– Improve resource efficiency;
– Improve capital productivity; and
– Improve service delivery.
A memorandum of understanding was entered into between Telkom and organised labour which included issues such as the deferment of
the Managed Services Partner outsourcing project implementation post April 2009 and the establishment of a Restructuring Forum where
all restructuring initiatives will be debated between the parties concerned.
Telkom Management Services (Proprietary) Limited (TMS)

TMS was registered as a company during August 2008. Telkom’s Board approved the establishment of TMS as a part of Telkom’s strategic
plan to grow revenue and expand geographic reach.
Appointment of director
On November 10, 2008 Telkom announced the appointment of Mr Peter Nelson as Chief Financial Officer and director in Telkom with
effect from December 8, 2008.

45. SUBSEQUENT EVENTS

Dividends
The Telkom Board declared an ordinary dividend of 115 cents (2008: 660 cents, 2007: 600 cents) per share and a special dividend
of 260 cents (2008: Nil cents, 2007: 500 cents) per share on June 19, 2009, payable on July 20, 2009 to shareholders registered on
July 17, 2009.
Acquisition of MWEB Africa Limited and majority equity stake in MWEB Namibia (Proprietary) Limited
On November 10, 2008, Telkom International (Proprietary) Limited, a wholly owned subsidiary of Telkom, announced it has entered into
agreements to acquire 100% of MWEB Africa Limited ("MWEB Africa") and 75% of MWEB Namibia (Proprietary) Limited
(“MWEB Namibia”). The purchase price for the MWEB Africa Group including AFSAT and MWEB Namibia is US$55 million
(approximately R498 million) with a deferred payment of US$14.18 million due when the profits of MWEB Group for the year ended
March 31, 2009 are finalised. These shareholdings will be acquired from Multichoice Africa Limited and MIH Holdings Limited
respectively, which are members of the Naspers Limited Group.
MWEB Africa is an internet services provider in sub-Saharan Africa (excluding South Africa) which also provides network access services
in some countries and is headquartered in Mauritius with operations in Namibia, Nigeria, Kenya, Tanzania, Uganda and Zimbabwe, an
agency arrangement in Botswana and distributors in 26 sub-Saharan African countries.
The acquisition of MWEB is part of the Group’s strategy of growing its broadband and solidifying its market position through acquisitions.
Based on an independent valuation, the MWEB Africa Group does not have any significant contingent liabilities at acquisition date.
The only possible contingent liability, the AFSAT bonus scheme, is reasonably quantified and included in the balance sheet of MWEB Africa
Group at March 31, 2009.
The purchase price of US$69.168 million was determined as follows:
• Namibian cash-generating unit for US$1.5 million;
• Mauritian cash-generating unit for US$53.5 million; and
• US$14.18 million deferred until the profits of the MWEB Group for the year ended March 31, 2009 are finalised.
The successful conclusion of the agreements being entered into is subject to conditions precedent, including regulatory approvals being
obtained in certain African jurisdictions.
Subsequent to year end, on April 21, 2009, the conditions precedent to the sale were fulfilled.
The acquisition will have the following effect on the Group’s assets and liabilities on acquisition:
Carrying amounts Fair values
Rm Rm
Fixed assets 43 43
Intangible assets 138 209
Deferred taxation asset 2 2
Cash and cash equivalents 75 75
Trade and other receivables 26 26
Inventory 16 16
Deferred taxation liability (18) (19)
Taxation (4) (4)
Trade and other payables (69) (69)
Fair value of net assets acquired 209 279

Minority interests (2) (2)
Net asset value 207 277

Goodwill on acquisition – 352
Purchase price* – 629

Capitalised transaction costs – 3
Total cash consideration – 632
* Of the R629 million purchase price, R498 million has been settled. The outstanding amount of US$14.18 million (approximately R105 million) is deferred
payment.

45. SUBSEQUENT EVENTS (continued)

The goodwill from the acquisition is partially attributable to the following:
• Certain licences that could not be valued separately from the MWEB Group as no secondary licensing market exists, but contribute
significantly to goodwill as the MWEB business’s would cease to exist without the licence rights.
• The skills and technical talent of the acquired business’s workforce, and the synergies expected to be achieved from integrating the
acquiree into the Group’s existing internet service provision.
• The goodwill is also attributable to the MWEB Group’s position as Africa’s largest satellite-based internet service provider in Sub-Saharan
Africa.
There was RNil revenue in the consolidated annual financial statements.
AT&T strategic agreement

On April 16, 2009, Telkom and AT&T, the global communications leader, entered into a strategic agreement which aims to extend AT&T’s
global networking reach to sub-Saharan Africa and boost Telkom’s strategy to grow a strong ICT footprint on the African continent. The
agreement will allow both companies to explore ways to provide global seamless communication and technology solutions and services
to multinational customers, either based in or seeking to extend their operations in sub-Saharan Africa.
Under the terms of the memorandum of understanding, the two companies will begin work towards definitive agreements that would:
• directly connect the Telkom regional network and the AT&T global network;
• deliver a wider geographic footprint of telecommunication services, in both sub-Saharan Africa and other global points;
• enhance mobile service capabilities for corporate customers in sub-Saharan Africa;
• extend global VPN (Virtual Private Network) services to support the state of art network requirements of customers either headquartered
in or seeking to expand sites in sub-Saharan Africa;
• explore other potential opportunities in areas such as Telepresence, hosting and professional services; and
• expand the existing global wholesale voice services relationship between Telkom Group and AT&T.
Telkom Media (Proprietary) Limited (Telkom Media)

On August 31, 2006 Telkom created a new subsidiary, Telkom Media (Proprietary) Limited, with a black economic empowerment (’BEE’)
shareholding. ICASA awarded Telkom Media a commercial satellite and cable subscription broadcast licence on September 12, 2007.
On March 31, 2008, the Telkom Board took a decision to substantially reduce its investment in Telkom Media and as such Telkom Media
reduced its operational expenses and commitments to a minimum. Telkom Media did not meet the held for sale criteria at year end as
management were unable to sell the disposal group for its expected price and therefore decided to abandon it.
Subsequent to year end Telkom was approached by potential buyers of Telkom’s interest in Telkom Media and negotiations with the potential
buyer were concluded. On May 4, 2009, Telkom sold its 75% interest in Telkom Media to Shenzhen Media South Africa (Proprietary)
Limited for a nominal amount.
Disposal and unbundling of stake in Vodacom

In 2008 Telkom announced a decision to dispose of its entire shareholding in Vodacom through selling 15% of its shareholding to
Vodafone, a wholly owned subsidiary of Vodafone Group plc, and unbundling its remaining 35% shareholding to its shareholders pursuant
to a listing of Vodacom on the main board of JSE Limited.
On May 18, 2009 Vodacom was successfully listed on the main board of JSE Limited and a special divided of R19 was distributed to all
Telkom shareholders. Telkom successfully completed the unbundling of Vodacom shares to its shareholders on May 25, 2009.


Bookbuilding of Vodacom Group (Proprietary) Limited shares
On June 2, 2009 Telkom announced the successful completion of the accelerated bookbuilding of Vodacom shares, raising R1,540 million
for "ineligible shareholders". The directors of Telkom, in consultation with Vodafone, determined that Telkom shareholders in the United States
of America would be regarded as "ineligible shareholders" for the unbundling of Vodacom shares to shareholders of Telkom, which was
completed on May 25, 2009, and would therefore not receive Vodacom shares in such distributions.
The proceeds from the offering, net of applicable fees, expenses, taxes and charges, will be distributed to the "ineligible shareholders" in
proportion to their entitlement to Vodacom shares.
New York Stock Exchange listing

Given the current global economic climate and the absolute necessity for Telkom to reduce its cost profile, the Board has decided to delist
from the New York Stock Exchange. Maintaining a listing in the United States of America is expensive and takes considerable management
time. The methodology employed and discipline gained from Sarbanes-Oxley reporting requirements will be retained to ensure strict
governance compliance and transparent financial reporting.
Telkom is comfortable that the Johannesburg Stock Exchange provides sufficient access to capital for both South African and global
investors. Telkom intends to maintain a level 1 American Depository Receipt programme to facilitate over-the-counter- trading in the United
States of America.
Telkom Communications International (Proprietary) Limited

The Abacus Financial Services (Mauritius) Limited issued a notice under section 265 (5) of the Companies Act 1984 that Telkom
Communications International (Proprietary) Limited has been dissolved with effect from May 12, 2009.
Other matters
The directors are not aware of any other matter or circumstance since the financial year ended March 31, 2009 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.
46. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

The Group has not early adopted the following standards, interpretations and amendments that have been issued and are not yet effective:
IFRS1 First-time Adoption of International Financial Reporting Standards: Cost of an Investment in a Subsidiary, Jointly Controlled Entity
or Associate (amended)
This amendment is effective for annual periods beginning on or after January 1, 2009. This standard is amended to allow an entity, in its
separate financial statements, to determine the cost of investments in subsidiaries, jointly controlled entities or associates (in its opening IFRS
financial statements) as one of the following amounts:
• Cost determined in accordance with IAS27
• At the fair value of the investment at the date of the transition to IFRS, determined in accordance with IAS39 Financial Instruments:
Recognition and Measurement
• The previous GAAP carrying amount of the investment at the date of transition to IFRS
This determination is made for each investment, rather than being a policy decision.
The amendment does not have an impact on the annual financial statements.

46. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED (continued)

IFRS2 Share-Based Payment: Vesting Conditions and Cancellations (amended)
This amendment is effective for annual periods beginning on or after January 1, 2009. The amendments to IFRS2 Share-Based Payment
clarifies the definition of vesting conditions and the accounting treatment of cancellations by the counterparty to a share-based arrangement.
The amendment will not have a material impact on the consolidated financial statements.
IFRS2 Share-Based Payment: Group Cash-Settled Share-Based Payment Arrangements (amended)

This amendment is effective for annual periods beginning on or after January 1, 2010. The amendment clarifies how an individual
subsidiary in a group should account for some share-based payment arrangements in its own financial statements. The amendment will not
have a material impact on the Company’s/Group’s financial statements.
IFRS3 Business Combinations (revised)

The revisions are effective for annual periods beginning on or after 1 July 2009 .The revised standard still applies the acquisition method
of accounting for business combinations, with some significant changes. For example, all payments to purchase a business are to be
recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income
statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair
value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed.
The impact of the revised standard is being evaluated.
IFRS7 Financial Instruments: Disclosures (amended)

The interpretation is applicable for annual periods beginning on or after January 1, 2009. The amendment requires enhanced disclosures
about fair value measurements and liquidity risk. The impact of the amendment is being evaluated.
IFRS8 Operating Segments

This standard is effective for annual periods beginning on or after January 1, 2009. The standard requires operating segments to be
identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker
in order to allocate resources to the segment and to assess its performance. The impact of this standard is currently being evaluated.
IFRIC9 Reassessment of Embedded Derivatives (amended)

The amendment is effective for annual periods ending on or after June 30, 2009. The amendment clarifies that on reclassification of a
financial asset out of the ’fair value through profit or loss’ category, all embedded derivatives have to be assessed and, if necessary,
separately accounted for in financial statements. The amendment will not have an impact on the consolidated financial statements as the
Group does not have material embedded derivatives.
IFRIC13 Customer Loyalty Programmes

The interpretation is effective for annual periods beginning on or after July 1, 2008. The interpretation requires loyalty award credits granted
to customers in connection with a sales transaction to be accounted for as a separate component of the sales transaction. The consideration
received in the sales transaction would, therefore, be allocated between the loyalty award credits and the other components of the sale.
The interpretation is not relevant to the Group’s operations because none of the Group entities operate any loyalty programmes.
Where the cost of fulfilling the awards is expected to exceed the consideration received, the Group will have to recognise an onerous
contract liability. The impact of this interpretation is being evaluated.
IFRIC15 Agreements for the Construction of Real Estate

The interpretation is effective for annual periods beginning on or after January 1, 2009. The aim of this interpretation is to determine
whether an agreement for the construction of real estate is within the scope of IAS11 Construction Contracts or IAS18 Revenue.
This interpretation is not relevant to the Group’s operations as the Group does not construct real estates.


IFRIC16 Hedges of a Net Investment in a Foreign Operation
The interpretation is effective for annual periods beginning on or after October 1, 2008. The interpretation provides guidance in respect
of hedges of foreign currency gains and losses on a net investment in a foreign operation. This includes the fact that net investment hedging
relates to differences in functional currency and not presentation currency, and hedging instruments may be held anywhere in the Group.
The interpretation will not have an impact on the consolidated annual financial statements.
IFRIC17 Distributions of Non-Cash Assets to Owners

The interpretation is effective for annual periods beginning on or after July 1, 2009. The interpretation provides guidance on how an entity
should account for non-cash distributions to its owners and/or distributions that give owners a choice of receiving either non-cash assets or
a cash alternative. The impact of this interpretation is being evaluated.
IFRIC18 Transfer of Assets from Customers

The interpretation is effective for annual periods beginning on or after July 1, 2009. The interpretation clarifies the requirements of IFRSs
for agreements in which an entity receives from a customer an item of property, plant and equipment (’PPE’) that the entity must then use
either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. The
interpretation also provides guidance where an entity receives cash from a customer that must be used only to acquire or construct an item
of PPE in order to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services. The
impact of this interpretation is currently being evaluated.
IAS1 Presentation of Financial Statements (revised)

The revised standard is effective for annual periods beginning on or after January 1, 2009.
IAS1R introduces a statement of comprehensive income with two optional formats and refers to the balance sheet and cash flow statement
by different names: the ’statement of financial position’ and ’statement of cash flows’, respectively. The revision to the standard will result in
changes in the way the consolidated annual financial statements are presented.
IAS7 Cash Flow Statement: Consequential Amendments Arising from Amendments to IAS16
The amendment is effective for annual periods beginning on or after January 1, 2009. IAS7 as amended requires cash receipts and
payments relating to purchase, rental and sale of property, plant and equipment held for rental to be treated as cash flows from operating
activities. The impact of this amendment is being evaluated.
IAS23 Borrowing Costs (revised)

The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or
after January 1, 2009. The revised standard requires all borrowing costs that are directly attributable to the acquisition, construction or
production of qualifying assets to be capitalised. The Group does not expect the adoption of the standard to have a material impact.
IAS27 Consolidated and Separate Financial Statements (revised)

The revisions are effective for annual periods beginning on or after July 1, 2009. The revised standard requires the effects of all transactions
with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill
or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to
fair value, and a gain or loss is recognised in profit or loss. The impact of the revised standard is being evaluated.
IAS27 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
(amended)
The amended standard is effective for annual periods beginning on or after January 1, 2009. The amended standard is for the following
changes in respect of the holding company’s separate financial statements:
• The deletion of the ’cost method’. Making the distinction between pre- and post- acquisition profits is no longer required. All dividends
will be recognised in profit or loss. However, the payment of such dividends requires the entity to consider whether there is an indicator
of impairment; and
• In cases of reorganisations where a new parent is inserted above an existing parent of the group (subject to meeting specific
requirements), the cost of the subsidiary is the previous carrying amount of its share of equity items in the subsidiary rather than its fair
value. The impact of this amended standard is currently being evaluated.


Amendment to IAS32 Financial Instruments Presentation and IAS1 Presentation of Financial Statements, Puttable Financial Instruments
The amendment is effective for periods beginning January 1, 2009. The amendments classify puttable financial instruments, or components
of instruments, that impose on the entity an obligation to deliver to another party a pro-rata share of the net assets of the entity only on
liquidation, as equity, provided they have particular features and meet specific conditions. The impact of this amendment is being
evaluated.
IAS39 Financial Instruments: Recognition and Measurement (amended)

financial asset out of the ’fair value through profit or loss’ category, all embedded derivatives have to be assessed and, if necessary,
separately accounted for in financial statements. The amendment will not have an impact on the financial statements as Telkom does not
have material embedded derivatives.
IAS39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (amended)
The amendment to the standard is effective for annual periods beginning on or after July 1, 2009. The amendment clarifies that an entity
is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. The
amendment will not have an impact on the financial statements as Telkom does not apply hedge accounting.
Changes as a result of the annual improvements project

A number of standards were amended as a result of the annual improvements project of the IASB in May 2008 effective for annual periods
beginning on or after January 1, 2009, with the exception of IFRS5 which is effective for annual periods beginning on or after July 1,
2009. These standards were as follows:
IFRS5 Non-Current Assets Held for Sale and Discontinued Operations

IAS1 Presentation of Financial Statements – Non-Current/Current Classification of Derivatives
IAS16 Property, Plant and Equipment
IAS19 Employee Benefits
IAS20 Government Grants
IAS23 Borrowing Costs – Components of Borrowing Costs
IAS27 Consolidated and Separate Financial Statements
IAS28 Investments in Associates
IAS29 Financial Reporting in Hyperinflationary Economies
IAS31 Interests in Joint Ventures
IAS36 Impairment of Assets
IAS38 Intangible Assets
IAS39 Financial Instruments: Recognition and Measurement
IAS40 Investment Property
IAS41 Agriculture
The Group will adopt the changes to these standards during the 2010 financial year with the exception of IFRS5, which will be adopted
during the 2011 financial year. The Group is currently evaluating the effects of the improvements.
fixed
Company financial statements
Company income statement 250
Company balance sheet 251
Company statement of changes in equity 252
Company cash flow statement 253
Notes to the Company annual financial statements 254
business shows
resilience
Company
Financial
Information
6
Telkom fins (company) NEW 8/12/09 6:58 PM Page 250
Company income statement

2007 2008 2009

Notes Rm Rm Rm
Total revenue 3.1 35,818 36,641 37,058
Operating revenue 3.2 32,340 32,571 33,659

Other income 4 655 498 524
Operating expenses 24,089 24,953 29,837
Employee expenses 5.1 7,077 7,386 7,990

Payments to other operators 5.2 6,461 6,902 7,536
Selling, general and administrative expenses 5.3 3,970 3,904 6,580
Service fees 5.4 2,236 2,410 2,760
Operating leases 5.5 762 619 613
Depreciation, amortisation, impairment and write-offs 5.6 3,583 3,732 4,358

Investment income 6 3,202 3,739 2,907
Finance charges and fair value movements 7 1,027 1,289 1,460
Interest 1,142 1,499 1,655

Foreign exchange and fair value movement gain (115) (210) (195)
Profit before taxation 11,081 10,566 5,793

Taxation 8 2,690 2,599 516

Company balance sheet

at March 31, 2009
2007 2008 2009

Notes Rm Rm Rm
ASSETS
Non-current assets 37,533 43,360 50,796
Property, plant and equipment 9 32,614 35,273 37,345

Intangible assets 10 3,502 3,806 3,988
Investments 11 887 3,883 7,693
Finance lease receivables 13 136 160 166
Deferred taxation 14 340 183 1,549
Deferred expenses 25 54 55 55
Current assets 7,754 8,763 10,090
Inventories 15 839 873 1,331

Income tax receivable 31 519 – 91
Current portion of finance lease receivables 13 71 105 109
Trade and other receivables 17 5,920 6,859 6,420
Other financial assets 18 229 443 1,198
Cash and cash equivalents 19 176 483 941
Assets held for sale and discontinued operations 16 – – 34
Total assets 45,287 52,123 60,920
EQUITY AND LIABILITIES

Capital and reserves 25,714 26,693 29,086
Share capital 20 5,329 5,208 5,208

Treasury share reserve 21 (1,778) (1,642) (1,521)
Share-based compensation reserve 22 257 643 1,076
Retained earnings 21,906 22,484 24,323
Non-current liabilities 6,580 11,181 14,766
Interest-bearing debt 23 3,308 7,336 10,193

Provisions 24 1,203 1,445 1,830
Deferred revenue 26 739 870 996
Deferred taxation 14 1,330 1,530 1,747
Current liabilities 12,993 14,249 17,068
Trade and other payables 27 4,333 4,923 5,424

Shareholders for dividend 32 15 20 23
Current portion of interest-bearing debt 23 5,775 6,026 7,511
Current portion of provisions 24 1,706 1,640 1,953
Current portion of deferred revenue 26 1,107 1,424 1,826
Income tax payable 31 – 7 –
Other financial liabilities 18 57 168 225
Credit facilities utilised 19 – 41 106
Total equity and liabilities 45,287 52,123 60,920

Company statement of changes in equity

Treasury Share-based
Share Share share compensation Retained
capital premium reserve reserve earnings Total
Rm Rm Rm Rm Rm Rm
Balance at April 1, 2006 5,449 1,342 (1,786) 151 18,534 23,690

Total income and expense for the year – – – – 8,391 8,391
Dividend declared (refer to note 32) – – – – (4,885) (4,885)
Payment made for treasury shares – – (27) – – (27)
reserve (refer to note 22) – – – 141 – 141
Shares vested and re-issued (refer to
note 22) – – 35 (35) – –
(refer to note 20) (120) (1,342) – – (134) (1,596)
Balance at March 31, 2007 5,329 – (1,778) 257 21,906 25,714

note 22) – – 136 (136) – –
(refer to note 20) (121) – – – (1,526) (1,647)
Balance at March 31, 2008 5,208 – (1,642) 643 22,484 26,693

note 22) – – 121 (121) – –
Balance at March 31, 2009 5,208 – (1,521) 1,076 24,323 29,086

Company cash flow statement

Restated Restated
2007 2008 2009
Notes Rm Rm Rm
Cash flows from operating activities 6,383 8,172 9,948
Cash receipts from customers 32,109 32,375 34,239

Cash paid to suppliers and employees (19,449) (19,713) (22,212)
Cash generated from operations 28 12,660 12,662 12,027

Interest received 385 390 343
Dividends received 29 2,950 3,536 3,242
Finance charges paid 30 (886) (842) (466)
Taxation paid 31 (3,852) (1,716) (1,764)
Cash generated from operations before dividend paid 11,257 14,030 13,382
Dividend paid 32 (4,874) (5,858) (3,434)
Cash flows from investing activities (6,662) (9,994) (12,129)
Proceeds on disposal of property, plant and equipment and

intangible assets 4 164 21
Additions to property, plant and equipment and intangible
assets (6,598) (6,763) (6,428)
Expansions to property, plant and equipment and intangible

assets (2,409) (4,142) (3,344)
Maintenance to property, plant and equipment and
intangible assets (3,189) (2,621) (3,084)
Acquisition of subsidiary and minority interest in subsidiary 11 (150) – (1,339)

Loans to subsidiaries – (3,395) (4,383)
Loans repaid by subsidiaries 82 – –
Cash flows from financing activities (2,777) 2,088 2,574
Loans raised 5,624 23,878 18,168

Loans repaid (6,843) (20,204) (14,649)
Shares bought back and cancelled (1,596) (1,647) –
Decrease/(increase) in net financial assets 38 61 (945)
Net (decrease)/increase in cash and cash equivalents (3,056) 266 393

Net cash and cash equivalents at beginning of the year 3,232 176 442
Net cash and cash equivalents at end of the year 19 176 442 835
Notes to the annual financial statements

1. CORPORATE INFORMATION are measured at fair value and share-based payments which are
Telkom SA Limited (the Company) is a company incorporated measured at grant date fair value. Details of the Company’s
and domiciled in the Republic of South Africa (’South Africa’) significant accounting policies are set out below, and are
whose shares are publicly traded. The Company’s main consistent with those applied in the previous financial year
objective and main business is to supply telecommunication, except for the following:
broadcasting, multimedia, technology, information and other
• The Company has adopted certain amendments to IAS39
related information technology services to the general public.
and IFRS7, and adopted IFRIC12 and IFRIC14, which
The principal activities of the Company’s services and products
are applicable for annual periods beginning on or after
include:
January 1, 2008.
• fixed-line subscription and connection services to post-paid,
The principal effects of these changes are discussed below.
prepaid and private payphone customers using PSTN (Public
Switched Telephone Network) lines, including ISDN Adoption of amendments to standards and new
(Integrated Service Digital Network) lines, and the sale of interpretations
subscription based value-added voice services and customer IAS39 Financial Instruments: Recognition and Measurement
premises equipment rental and sales; and IFRS7 Financial Instruments: Disclosures –
Reclassification of Financial Assets (amended)
• fixed-line traffic services to post-paid, prepaid and payphone
The amendments which are effective on or after July 1, 2008,
customers, including local, long distance, fixed-to-mobile,
permit an entity to reclassify non-derivative financial assets (other
international outgoing and international voice-over-internet
than those designated at fair value through profit or loss by the
protocol traffic services;
entity upon initial recognition) out of the fair value through profit
• interconnection services, including terminating and transiting or loss category in particular circumstances. The amendments
traffic from South African mobile operators, as well as from also permit an entity to transfer from the available-for-sale
international operators and transiting traffic from mobile to category to the loans and receivables category a financial asset
international destinations; that would have met the definition of loans and receivables (if
the financial asset had not been designated as available-for-
• fixed-line data and internet services, including domestic and
sale), if the entity has the intention and ability to hold that
international data transmission services, such as point-to-point
financial asset for the foreseeable future. The amendments do
leased lines, ADSL (Asymmetrical Digital Subscriber Line)
not have an impact on the annual financial statements.
services, packet-based services, managed data networking
services and internet access and related information IFRIC12 Service Concession Arrangements
technology services; and The interpretation which is effective for annual periods
beginning on or after January 1, 2008, sets out general
• W-CDMA (Wideband Code Division Multiple Access), a
principles on recognising and measuring the obligations and
3G next generation network, including fixed voice services,
related rights in service concession arrangements from an
data services and nomadic voice services.
operator’s perspective. This interpretation does not have an
These separate annual financial statements are prepared in impact on the annual financial statements.
compliance with the South African Companies Act, 1973. In
IFRIC14 The Limit on a Defined Benefit Asset, Minimum
addition, the Group presents consolidated financial statements
Funding Requirements and their Interaction
which include all subsidiaries, special purpose entities and joint
The interpretation which is effective for annual periods
ventures, which are included in these financial statements as
beginning on or after January 1, 2008, provides guidance on
investments.
assessing the limit in IAS19 on the amount of the surplus that can
2. SIGNIFICANT ACCOUNTING POLICIES be recognised as an asset. It also explains how the pension
Basis of preparation asset or liability may be affected by a statutory or contractual
The financial statements comply with the International Financial minimum funding requirement. This interpretation does not have
Reporting Standards (IFRS) of the International Accounting any impact on the annual financial statements, as the Company
Standards Board (IASB) and the Companies Act of South Africa, is not subject to minimum funding requirements.
1973.
The financial statements are prepared on the historical cost

basis, with the exception of certain financial instruments which
Notes to the annual financial statements (continued)

2. SIGNIFICANT ACCOUNTING POLICIES (continued) capital funding and required return on assets and equity to
Significant accounting judgements, estimates and determine the optimum useful life expectation for each of the
assumptions individual categories of property, plant, equipment and
The preparation of financial statements requires the use of intangible assets. Due to the rapid technological advancement
estimates and assumptions that affect the reported amounts of in the telecommunications industry as well as the Company’s
assets and liabilities and disclosure of contingent assets and plan to migrate to a next generation network over the next few
liabilities at the date of the financial statements and the reported years, the estimation of useful lives could differ significantly on
amounts of revenue and expenses during the reporting periods. an annual basis due to unexpected changes in the roll-out
Although these estimates and assumptions are based on strategy. The impact of the change in the expected useful life of
management’s best knowledge of current events and actions that property, plant and equipment is described more fully in note
the Company may undertake in the future, actual results may 5.6. The estimation of residual values of assets is also based on
ultimately differ from those estimates and assumptions. management’s judgement whether the assets will be sold or
used to the end of their useful lives and what their condition will
The presentation of the results of operations, financial position
be like at that time.
and cash flows in the financial statements of the Company is
dependent upon and sensitive to the accounting policies, For intangible assets that incorporate both a tangible and
assumptions and estimates that are used as a basis for the intangible portion, management uses judgement to assess which
preparation of these financial statements. Management has element is more significant to determine whether it should be
made certain judgements in the process of applying the treated as property, plant and equipment or intangible assets.
Company’s accounting policies. These, together with the key
Asset retirement obligations
estimates and assumptions concerning the future, and other key
Management judgement is exercised when determining whether
sources of estimation uncertainty at the balance sheet date, are
an asset retirement obligation exists, and in determining the
as follows:
present value of expected future cash flows and discount rate
Revenue recognition when the obligation to dismantle or restore the site arises, as
To reflect the substance of each transaction, revenue recognition well as the estimated useful life of the related asset.
criteria are applied to each separately identifiable component
Impairments of property, plant and equipment and
of a transaction. In order to account for multiple-element revenue
intangible assets
arrangements in developing its accounting policies, the
Management is required to make judgements concerning the
Company considered the guidance contained in the United
cause, timing and amount of impairment as indicated on notes
States Financial Accounting Standards Board (FASB) Emerging
9 and 10. In the identification of impairment indicators,
Issues Task Force No 00-21 Revenue Arrangements with
management considers the impact of changes in current
Multiple Deliverables. Judgement is required to separate those
competitive conditions, cost of capital, availability of funding,
revenue arrangements that contain the delivery of bundled
technological obsolescence, discontinuance of services and
products or services into individual units of accounting, each
other circumstances that could indicate that an impairment
with its own earnings process, when the delivered item has
exists. The Company applies the impairment assessment to its
stand-alone value and the undelivered item has fair value.
separate cash-generating units. This requires management to
Further judgement is required to determine the relative fair values
make significant judgements concerning the existence of
of each separate unit of accounting to be allocated to the total
impairment indicators, identification of separate cash-generating
arrangement consideration. Changes in the relative fair values
units, remaining useful lives of assets and estimates of projected
could affect the allocation of arrangement consideration
cash flows and fair value less costs to sell. Management
between the various revenue streams.
judgement is also required when assessing whether a previously
Judgement is also required to determine the expected customer recognised impairment loss should be reversed.
relationship period. Any changes in these assessments may
have a significant impact on revenue and deferred revenue.
Property, plant and equipment and intangible assets

The useful lives of assets are based on management’s
estimation. Management considers the impact of changes in
technology, customer service requirements, availability of

2. SIGNIFICANT ACCOUNTING POLICIES (continued) incentives received from the lessor) are charged to the income
Significant accounting judgements, estimates and statement on a straight-line basis over the period of the lease.
assumptions (continued) A lease is classified as a finance lease if it transfers substantially
Impairments of property, plant and equipment and all the risks and rewards incidental to ownership.
intangible assets (continued)
Deferred taxation asset
Where impairment indicators exist, the determination of the Management judgement is exercised when determining the
recoverable amount of a cash-generating unit requires probability of future taxable profits which will determine whether
management to make assumptions to determine the fair value deferred tax assets should be recognised or derecognised. The
less costs to sell and value in use. Key assumptions on which realisation of deferred tax assets will depend on whether it is
management has based its determination of fair value less costs possible to generate sufficient taxable income, taking into
to sell include the existence of binding sale agreements, and for account any legal restrictions on the length and nature of the
the determination of value in use include the weighted average taxation asset. When deciding whether to recognise unutilised
cost of capital, projected revenues, gross margins, average taxation credits, management needs to determine the extent that
revenue per customer, capital expenditure, expected customer the future obligation is likely to be available for set-off. In the
bases and market share. The judgements, assumptions and event that the assessment of future payments and future utilisation
methodologies used can have a material impact on the fair changes, the change in the recognised deferred tax asset must
value and ultimately the amount of any impairment. be recognised in profit or loss.
Impairment of other financial assets Taxation

At each balance sheet date management assesses whether The taxation rules and regulations in South Africa within which
there are indicators of impairment of financial assets, including the Company operates are highly complex and subject to
equity investments. If such evidence exists, the estimated present interpretation. Additionally, for the foreseeable future,
management expects South African taxation laws to further
value of the future cash flows of that asset is determined.
develop through changes in South Africa’s existing taxation
Management judgement is required when determining the
structure as well as clarification of the existing taxation laws
expected future cash flows. To determine whether any decline in
through published interpretations and the resolution of actual tax
fair value of available-for-sale investments is prolonged, reliance
cases (refer to notes 8 and 14).
is placed on an assessment by management regarding the
future prospects of the investee. In measuring impairments, Management has made a judgement that all outstanding
quoted market prices are used, if available, or projected taxation credits relating to secondary taxation on companies
business plan information from the investee is used for those (STC) will be available for utilisation before the taxation regime
financial assets not carried at fair value. change, from STC to withholding taxation, is effective.
Impairment of receivables The Company is regularly subject to evaluation by the South
An impairment is recognised on trade receivables that are African taxation authorities of its historical income taxation filings
and in connection with such reviews disputes can arise with the
assessed to be impaired (refer to notes 12 and 17). The
taxing authorities over the interpretation or application of certain
impairment is based on an assessment of the extent to which
taxation rules to the business of the Company. These disputes
customers have defaulted on payments already due and an
may not necessarily be resolved in a manner that is favourable
assessment on their ability to make payments based on their
for the Company. Additionally the resolution of the disputes
credit worthiness and historical write-offs experience. Should the
could result in an obligation for the Company that exceeds
assumptions regarding the financial condition of the customer
management’s estimate. The Company has historically filed,
change, actual write-offs could differ significantly from the
and continues to file, all required income taxation returns.
impaired amount.
Management believes that the principles applied in determining
Leases the Company’s taxation obligations are consistent with the
The determination of whether an arrangement is, or contains a principles and interpretations of the South African taxation laws.
lease is based on whether, at the date of inception, the fulfilment Deferred taxation rate
of the arrangement is dependent on the use of a specific asset Management makes judgements on the taxation rate applicable
or assets or the arrangement conveys a right to use the asset. based on the Company’s expectations at balance sheet date on
Leases in which a significant portion of the risks and rewards of how the asset is expected to be recovered or the liability is
ownership are retained by the lessor are classified as operating expected to be settled.
leases. Payments made under operating leases (net of any

2. SIGNIFICANT ACCOUNTING POLICIES (continued) and, where appropriate, the risks specific to the liability, all of
Significant accounting judgements, estimates and which requires management judgement. The Company is
assumptions (continued) required to recognise provisions for claims arising from litigation
Employee benefits when the occurrence of the claim is probable and the amount
The Company provides defined benefit plans for certain post- of the loss can be reasonably estimated. Liabilities provided for
employment benefits. The Company’s net obligation in respect legal matters require judgements regarding projected outcomes
of defined benefits is calculated separately for each plan by and ranges of losses based on historical experience and
estimating the amount of future benefits earned in return for recommendations of legal counsel. Litigation is however
services rendered. The obligation and assets related to each of unpredictable and actual costs incurred could differ materially
the post-retirement benefits are determined through an actuarial from those estimated at the balance sheet date.
valuation. The actuarial valuation relies heavily on assumptions Held-to-maturity financial assets
as disclosed in note 25. The assumptions determined by Management has reviewed the Company’s held-to-maturity
management make use of information obtained from the financial assets in the light of its capital management and
Company’s employment agreements with staff and pensioners, liquidity requirements and has confirmed the Company’s positive
market related returns on similar investments, market related intention and ability to hold those assets to maturity.
discount rates and other available information. The assumptions
concerning the expected return on assets and expected change Summary of significant accounting policies
in liabilities are determined on a uniform basis, considering Operating revenue
long-term historical returns and future estimates of returns and The Company provides fixed-line and data communication
medical inflation expectations. In the event that further changes services and communication-related products. The Company
in assumptions are required, the future amounts of post- provides such services to business, residential and payphone
employment benefits may be affected materially. customers. Revenue represents the fair value of fixed or
determinable consideration that has been received or is receivable.
The discount rate reflects the average timing of the estimated
defined benefit payments. The discount rate is based on long- Revenue for services is measured at amounts invoiced to
term South African government bonds with the longest maturity customers and excludes Value Added Tax.
period as reported by the Bond Exchange of South Africa. The Revenue is recognised when there is evidence of an arrangement,
discount rate is expected to follow the trend of inflation. collectability is probable, and the delivery of the product or
The overall expected rate of return on assets is determined service has occurred. In certain circumstances, revenue is split into
based on the market prices prevailing at that date, applicable separately identifiable components and recognised when the
to the period over which the obligation is to be settled. related components are delivered in order to reflect the substance
of the transaction. The value of components is determined using
Telkom provides equity compensation to its employees in the
verifiable objective evidence. The Company does not provide
form of the Telkom Conditional Share Plan. The related expense
customers with the right to a refund.
and reserve are determined through an actuarial valuation
which relies heavily on assumptions. The assumptions include Dealer incentives
employee turnover percentages and whether specified The Company provides incentives to its retail payphone card
performance criteria will be met. Changes to these assumptions distributors as trade discounts. Incentives are based on sales
could affect the amount of expense ultimately recognised in the volume and value. Revenue for retail payphone cards is recorded
financial statements. An actuarial valuation relies heavily on the as traffic revenue, net of these discounts as the cards are used.
actual plan experience assumptions as disclosed in note 25. Subscriptions, connections and other usage
Provisions and contingent liabilities The Company provides telephone and data communication
Management judgement is required when recognising and services under post-paid and prepaid payment arrangements.
measuring provisions and when measuring contingent liabilities Revenue includes fees for installation and activation, which are
as set out in notes 24 and 35 respectively. The probability that deferred and recognised over the expected customer
an outflow of economic resources will be required to settle the relationship period. Costs incurred on first time installations that
obligation must be assessed and a reliable estimate must be form an integral part of the network are capitalised and
made of the amount of the obligation. Provisions are discounted depreciated over the expected average customer relationship
where the effect of discounting is material based on period. All other installation and activation costs are expensed
management’s judgement. The discount rate used is the rate that as incurred.
reflects current market assessments of the time value of money

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Directory services

Summary of significant accounting policies (continued) Included in other revenue are directory services. Revenue is
Operating revenue (continued) recognised when printed directories are released for
Subscriptions, connections and other usage (continued) distribution, as the significant risks and rewards of ownership
Post-paid and prepaid service arrangements include have been transferred to the buyer. Electronic directories’
subscription fees, typically monthly fees, which are recognised revenue is recognised on a monthly basis, as earned.
over the subscription period.
Sundry revenue
Revenue related to sale of communication equipment, products
Sundry revenue is recognised when the economic benefit flows
and value-added services is recognised upon delivery and
to the Company and the earnings process is complete.
acceptance of the product or service by the customer.
Interest on debtors’ accounts
Traffic (domestic, fixed-to-mobile and international)
Interest is raised on overdue accounts by using the effective
Prepaid
interest rate method and recognised in the income statement.
Prepaid traffic service revenue collected in advance is deferred
and recognised based on actual usage or upon expiration of Marketing
the usage period, whichever comes first. The terms and Marketing costs are recognised as an expense as incurred.
conditions of certain prepaid products allow the carry over of
unused minutes. Revenue related to the carry over of unused Incentives
minutes is deferred until usage or expiration. Incentives paid to service providers and dealers for products
delivered to the customer are expensed as incurred. Incentives
Payphones
paid to service providers and dealers for services delivered are
Payphone service coin revenue is recognised when the service
expensed in the period that the related revenue is recognised.
is provided.
Distribution incentives paid to service providers and dealers for
Payphone service card revenue collected in advance is deferred
exclusivity are deferred and expensed over the contractual
and recognised based on actual usage or upon expiration of
the usage period, whichever comes first. relationship period.
Post-paid Investment income

Revenue related to local, long distance, network-to-network, Dividends from investments are recognised on the date that the
roaming and international call connection services is recognised Company is entitled to the dividend. Interest is recognised on a
when the call is placed or the connection provided. time proportionate basis taking into account the principal
amount outstanding and the effective interest rate.
Interconnection
Interconnection revenue for call termination, call transit and Taxation
network usage is recognised as the traffic flow occurs. Current taxation
Data The charge for current taxation is based on the results for the
The Company provides data communication services under year and is adjusted for non-taxable income and non-deductible
post-paid and prepaid payment arrangements. Revenue expenditure. Current taxation is measured at the amount
includes fees for installation and activation, which are deferred expected to be paid to the taxation authorities, using taxation
over the expected average customer relationship period. Costs rates and laws that have been enacted or substantively enacted
incurred on first time installations that form an integral part of the by the balance sheet date.
network are capitalised and depreciated over the life of the
Deferred taxation
expected average customer relationship period. All other
installation and activation costs are expensed as incurred. Post- Deferred taxation is accounted for using the balance sheet
paid and prepaid service arrangements include subscription liability method on all temporary differences at the balance
fees, typically monthly fees, which are recognised over the sheet date between taxation bases of assets and liabilities and
subscription period. their carrying amounts for financial reporting purposes.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) and non-refundable purchase taxes, after deducting trade
Summary of significant accounting policies (continued) discounts and rebates. The recognised cost includes any directly
Taxation (continued) attributable costs for preparing the asset for its intended use.
Deferred taxation (continued)
The cost of an item of property, plant and equipment is
Deferred taxation is not provided on the initial recognition of
recognised as an asset if it is probable that the future economic
goodwill or initial recognition of assets or liabilities which is not
benefits associated with the item will flow to the Company and
a business combination and at the time of the transaction affects
the cost of the item can be measured reliably.
neither accounting nor taxable profit or loss.
Property, plant and equipment is stated at historical cost less
A deferred taxation asset is recognised to the extent that it is
accumulated depreciation and any accumulated impairment
probable that future taxable profits will be available against
losses. Each component of an item of property, plant and
which the associated unused taxation losses, unused taxation
equipment with a cost that is significant in relation to the total
credits and deductible temporary differences can be utilised.
cost of the item is depreciated separately. Depreciation is
The carrying amount of deferred taxation assets is reviewed at
charged from the date the asset is available for use on a
each balance sheet date and is reduced to the extent that it is
straight-line basis over the estimated useful life and ceases at the
no longer probable that the related taxation benefit will be
earlier of the date that the asset is classified as held for sale or
realised. In respect of deductible temporary differences
the date the asset is derecognised. Idle assets continue to attract
associated with investments in subsidiaries, associates and
depreciation.
interest in joint ventures, deferred income tax assets are
recognised only to the extent that it is probable that temporary The estimated useful life of individual assets and the
differences will reverse in the foreseeable future and taxable depreciation method thereof are reviewed on an annual basis
profit will be available against which temporary differences can at balance sheet date. The depreciable amount is determined
be utilised. after taking into account the residual value of the asset. The
residual value is the estimated amount that the Company would
Deferred taxation relating to items recognised directly in equity
currently obtain from the disposal of the asset, after deducting
is recognised in equity and not in the income statement.
the estimated cost of disposal, if the asset were already of the
Deferred taxation assets and liabilities are measured at the age and in the condition expected at the end of its useful life.
taxation rates that are expected to apply to the period when the The residual values of assets are reviewed on an annual basis
asset is realised or the liability is settled, based on taxation rates at balance sheet date.
(and taxation laws) that have been enacted or substantively
Assets under construction represents freehold buildings,
enacted by the balance sheet date.
operating software, network and support equipment and
Deferred taxation assets and deferred taxation liabilities are includes all direct expenditure as well as related borrowing
offset, if a legally enforceable right exists to set off current costs capitalised, but excludes the costs of abnormal amounts of
taxation assets against current taxation liabilities and the waste material, labour or other resources incurred in the
deferred taxes relate to the same taxable entity and the same production of self-constructed assets.
taxation authority.
Freehold land is stated at cost and is not depreciated. Amounts
Secondary taxation on companies paid by the Company on improvements to assets which are held
Secondary taxation on companies (’STC’) is provided for at a in terms of operating lease agreements are depreciated on a
rate of 10% (12.5% before October 1, 2007) on the amount straight-line basis over the shorter of the remaining useful life of
by which dividends declared by the Company exceed the applicable asset or the remainder of the lease period.
dividends received. Deferred taxation on unutilised STC credits Where it is reasonably certain that the lease agreement will be
is recognised to the extent that STC payable on future dividend renewed, the lease period equals the period of the initial
payments is likely to be available for set-off. agreement plus the renewal periods.

At initial recognition acquired property, plant and equipment
are recognised at their purchase price, including import duties

2. SIGNIFICANT ACCOUNTING POLICIES (continued) the end of its useful life. Due to the nature of the asset the
Summary of significant accounting policies (continued) residual value is assumed to be zero unless there is a
Property, plant and equipment (continued) commitment by a third party to purchase the asset at the end of
The estimated useful lives assigned to groups of property, plant its useful life or when there is an active market that is likely to
and equipment are: exist at the end of the asset’s useful life, which can be used to
estimate the residual values. The residual values of intangible
Years
assets and their useful lives are reviewed on an annual basis at
Freehold buildings 15 to 40 balance sheet date.
Leasehold buildings 7 to 25
Intangible assets with indefinite useful lives and intangible assets
Network equipment:
not yet available for use are tested for impairment annually
Cables 20 to 40
either individually or at the cash-generating unit level. Such
Switching equipment 2 to 18
intangibles are not amortised. The useful life of an intangible
Transmission equipment 5 to 18
asset with an indefinite life is reviewed annually to determine
Other 1 to 20
whether indefinite life assessment continues to be supportable. If
Support equipment 5 to 13
not, the change in the useful life assessment from indefinite to
Furniture and office equipment 2 to 15
finite is made on a prospective basis.
Data processing equipment and software 3 to 10
Other 2 to 20 Assets under construction represent application and other non-
integral software and includes all direct expenditure as well as
An item of property, plant and equipment is derecognised upon
related borrowing costs capitalised, but excludes the costs of
disposal or when no future economic benefits are expected from
abnormal amounts of waste material, labour or other resources
its use or disposal. Any gain or loss arising on derecognition of
incurred in the production of self-constructed assets.
the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in Intangible assets are derecognised when they have been
the income statement in the year the asset is derecognised. disposed of or when the asset is permanently withdrawn from use
and no future economic benefit is expected from its disposal. Any
Assets held under finance leases are depreciated over their
gains or losses on the retirement or disposal of assets are
expected useful lives on the same basis as owned assets or,
recognised in the income statement in the year in which they arise.
where shorter, the term of the relevant lease if there is no
reasonable certainty that the Company will obtain ownership by The expected useful lives assigned to intangible assets are:
the end of the lease term.
Years
Intangible assets
Licences 5 to 30
At initial recognition acquired intangible assets are recognised at
Software 2 to 10
their purchase price, including import duties and non-refundable
Trademarks, copyrights and other including
purchase taxes, after deducting trade discounts and rebates. The
FIFA brand 1 to 15
recognised cost includes any directly attributable costs for preparing
the asset for its intended use. Internally generated intangible assets Asset retirement obligations
are recognised at cost comprising all directly attributable costs Asset retirement obligations related to property, plant and
necessary to create and prepare the asset to be capable of equipment and intangible assets are recognised at the present
operating in the manner intended by management. Licences, value of expected future cash flows when the obligation to
software, trademarks, copyrights and other intangible assets are dismantle or restore the site arises. The increase in the related
carried at cost less accumulated amortisation and any accumulated asset’s carrying value is depreciated over its estimated useful
impairment losses. Amortisation commences when the intangible life. The unwinding of the discount is included in finance
assets are available for their intended use and is recognised on a charges and fair value movements. Changes in the
straight-line basis over the assets’ expected useful lives. Amortisation measurement of an existing liability that result from changes in
ceases at the earlier of the date that the asset is classified as held the estimated timing or amount of the outflow of resources
for sale and the date that the asset is derecognised. required to settle the liability, or a change in the discount rate,
are accounted for as increases or decreases to the original cost
The residual value of intangible assets is the estimated amount
of the recognised assets. If the amount deducted exceeds the
that the Company would currently obtain from the disposal of
carrying amount of the asset, the excess is recognised
the asset, after deducting the estimated cost of disposal, if the
immediately in profit and loss.
asset were already of the age and in the condition expected at

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Borrowing costs

Summary of significant accounting policies (continued) Financing costs directly associated with the acquisition or
Non-current assets held for sale construction of assets that require more than three months to
Non-current assets and disposal groups are classified as held complete and place in service are capitalised at interest rates
for sale if their carrying amount will be recovered through a sale relating to loans specifically raised for that purpose, or at the
transaction rather than through continuing use. This condition is weighted average borrowing rate where the general pool of
regarded as met only when the sale is highly probable and the Company borrowings was utilised. Other borrowing costs are
asset (or disposal group) is available for immediate sale in its expensed as incurred.
present condition. Management must be committed to the sale,
Deferred revenue and expenses
which should be expected to qualify for recognition as a
Activation revenue and costs are recognised in accordance with
complete sale within one year from the date of classification.
the principles contained in Emerging Issues Task Force Issue
Assets are no longer depreciated when they are classified into
No 00-21, Revenue Arrangements with Multiple Deliverables
this category.
(’EITF 00-21’), issued in the United States. This results in
Non-current assets (and disposal groups) classified as held for activation revenue and costs up to the amount of the deferred
sale are measured at the lower of the assets’ previous carrying revenue being deferred and recognised systematically over the
amount and fair value less costs to sell. expected duration of the customer relationship because it is
considered to be part of the customers’ ongoing rights to
Impairment of property, plant and equipment and
telecommunication services and the operator’s continuing
intangible assets
involvement. Any excess of the costs over revenues is expensed
The Company regularly reviews its non-financial assets and
immediately.
cash-generating units for any indication of impairment. When
indicators, including changes in technology, market, economic, Subsidiaries and joint venture
legal and operating environments occur and could result in Investments in subsidiaries, special purpose entities and joint
changes of the asset’s or cash-generating unit’s estimated ventures are carried at cost and adjusted for any impairment
recoverable amount, an impairment test is performed. losses.
The recoverable amount of assets or cash-generating units is Inventories

measured using the higher of the fair value less costs to sell and Installation material, maintenance and network equipment
its value in use, which is the present value of projected cash inventories are stated at the lower of cost, determined on a
flows covering the remaining useful lives of the assets. weighted average basis and estimated net realisable value.
Impairment losses are recognised when the asset’s carrying Merchandise inventories are stated at the lower of cost,
value exceeds its estimated recoverable amount. Where determined on a first-in first-out (’FIFO’) basis and estimated net
applicable, the recoverable amount is determined for the cash- realisable value. Write-down of inventories arises when, for
generating unit to which the asset belongs. example, goods are damaged or when net realisable value is
lower than carrying value.
Previously recognised impairment losses are reviewed annually
for any indication that it may no longer exist or may have Financial instruments
decreased. If any such indication exists, the recoverable amount Recognition and initial measurement
of the asset is estimated. Such impairment losses are reversed All financial instruments are initially recognised at fair value,
through the income statement if the recoverable amount has plus, in the case of financial assets and liabilities not at fair
increased as a result of a change in the estimates used to value through profit or loss, transaction costs that are directly
determine the recoverable amount, but not to an amount higher attributable to the acquisition or issue. Financial instruments are
than the carrying amount that would have been determined (net recognised when the Company becomes a party to their
of depreciation or amortisation) had no impairment loss been contractual arrangements. All regular way transactions are
recognised in prior years. accounted for on settlement date. Regular way purchases or
sales are purchases or sales of financial assets that require
Repairs and maintenance
delivery of assets within the period generally established by
The Company expenses all costs associated with repairs and
regulation or convention in the marketplace.
maintenance, unless it is probable that such costs would result in
increased future economic benefits flowing to the Company,
and the costs can be reliably measured.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Available-for-sale financial assets

Summary of significant accounting policies (continued) Available-for-sale financial assets are those non-derivative assets
Financial instruments (continued) that are designated as available-for-sale, or are not classified in
Subsequent measurement any of the three preceding categories. Equity instruments are all
Subsequent to initial recognition, the Company classifies treated as available-for-sale financial instruments. After initial
financial assets as ’at fair value through profit or loss’, ’held-to- recognition, available-for-sale financial assets are measured at
maturity investments’, ’loans and receivables’, or ’available-for- fair value, with gains and losses being recognised as a
sale'. Financial liabilities are classified ’at fair value through separate component of equity, net of taxation. Dividend income
profit or loss’ or ’other financial liabilities’. The measurement of is recognised in the income statement as part of other income
each is set out below and presented in a table in note 12. when the Company’s right to receive payment is established.
The fair value of financial assets and liabilities that are actively Changes in the fair value of monetary items denominated in a
traded in financial markets is determined by reference to quoted foreign currency and classified as available-for-sale are
market prices at the close of business on the balance sheet date. analysed between translation differences resulting from changes
Where there is no active market, fair value is determined using in amortised cost of the security and other changes in carrying
valuation techniques such as discounted cash flow analysis. amount of the item. The translation differences on monetary
items are recognised in profit or loss, while translation
Financial assets at fair value through profit or loss
differences on non-monetary securities are recognised in equity.
The Company classifies financial assets that are held for trading
Changes in the fair value of monetary and non-monetary items
in the category ’financial assets at fair value through profit or
classified as available-for-sale are recognised directly in equity.
loss’. Financial assets are classified as held for trading if they
When an investment is derecognised or determined to be
are acquired for the purpose of selling in the future. Derivatives
impaired, the cumulative gain or loss previously recorded in
not designated as hedges are also classified as held for trading.
equity is recognised in profit or loss.
On remeasurement to fair value the gains or losses on held for
trading financial assets are recognised in net finance charges Financial liabilities at fair value through profit or loss
and fair value movements for the year. Financial liabilities are classified as ‘at fair value through profit
or loss’ (’FVTPL’) where the financial liability is held for trading.
Gains and losses arising from changes in the fair value of the
’financial assets at fair value through profit or loss’ category are A financial liability is classified as held for trading:
presented in the income statement within ’finance charges and
• if it is acquired for the purpose of settling in the near term; or
fair value movements’ in the period which they arise.
• if it is a derivative that is not designated and effective as a
hedging instrument.
The Company classifies non-derivative financial assets with fixed
or determinable payments and fixed maturity dates as held-to- Financial liabilities at a FVTPL are stated at fair value, with any
maturity when the Company has the positive intention and resultant gains or losses recognised in profit or loss. The net gain
ability to hold to maturity. These assets are subsequently or loss recognised in profit or loss incorporates any interest paid
measured at amortised cost. Amortised cost is computed as the on the financial liability.
amount initially recognised minus principal repayments, plus or Other financial liabilities
minus the cumulative amortisation using the effective interest Other financial liabilities are subsequently measured at
method. This calculation includes all fees paid or received amortised cost using the effective interest rate method, with
between parties to the contract. For investments carried at interest expense recognised in finance charges and fair value
amortised cost, gains and losses are recognised in net profit or movements, on an effective interest rate basis.
loss when the investments are sold or impaired.
The effective interest rate is the rate that accurately discounts
Loans and receivables estimated future cash payments through the expected life of the
Loans and receivables are non-derivative financial assets with financial liability or, where appropriate, a shorter period.
fixed or determinable payments that are not quoted in an active
market. Such assets are carried at amortised cost using the
effective interest method. Trade receivables are subsequently
measured at the original invoice amount where the effect of
discounting is not material.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) the asset or the group of assets. In the case of equity securities
Summary of significant accounting policies (continued) classified as available-for-sale, a significant or prolonged
Financial instruments (continued) decline in the fair value of the security below its cost is
Financial guarantee contracts considered as an indicator that the securities are impaired. For
Financial guarantee contracts are subsequently measured at the loans and receivables carried at amortised cost, if there is
higher of the amount determined in accordance with IAS37 objective evidence that an impairment loss has been incurred,
Provisions, Contingent Liabilities and Contingent Assets or the the amount of the loss is measured at the difference between the
amount initially recognised less, when appropriate, cumulative asset’s carrying amount and the present value of estimated future
amortisation, recognised in accordance with IAS18 Revenue. cashflows. The carrying amount of the asset is reduced through
the use of an allowance account and the amount of the loss is
Cash and cash equivalents
recognised in the income statement.
Cash and cash equivalents are measured at amortised cost. This
comprises cash on hand, deposits held on call and term If any such evidence exists for available-for-sale assets, the
deposits with an initial maturity of less than three months when cumulative loss – measured as the difference between the
entered into. acquisition cost and the current fair value, less any impairment
loss on that financial asset previously recognised in profit or loss
For the purpose of the cash flow statement, cash and cash
– is removed from equity and recognised in the income
equivalents consist of cash and cash equivalents defined above,
statement. Impairment losses recognised in the income statement
net of credit facilities utilised.
on equity instruments are not reversed through the income
Capital and money market transactions statement. The recoverable amount of financial assets carried at
New bonds and commercial paper bills issued are subsequently amortised cost is calculated as the present value of expected
measured at amortised cost using the effective interest rate future cash flows discounted at the original effective interest rate
method. of the asset.
Bonds issued where the Company is a buyer and seller of last If, in a subsequent period, the amount of the impairment loss for
resort are carried at fair value. The Company does not actively financial assets decreases and the decrease can be related
trade in bonds. objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is
Derecognition
reversed except for those financial assets classified as available-
A financial instrument or a portion of a financial instrument will
for-sale and carried at cost that are not reversed. Any
be derecognised and a gain or loss recognised when the
subsequent reversal of an impairment loss is recognised in the
Company’s contractual rights expire, financial assets are
income statement, to the extent that the carrying value of the
transferred or financial liabilities are extinguished. On
asset does not exceed its amortised cost at the reversal date.
derecognition of a financial asset or liability, the difference
Reversals in respect of equity instruments classified as available-
between the consideration and the carrying amount on the
for-sale are not recognised in profit and loss. Reversals of
settlement date is included in finance charges and fair value
impairment losses on debt instruments classified as available-for-
movements for the year. For available-for-sale assets, the fair
sale are reversed through the income statement, if the increase
value adjustment relating to prior revaluations of assets is
in fair value of the instrument can be objectively related to an
transferred from equity and recognised in finance charges and
event occurring after the impairment loss was recognised
fair value movements for the year.
through the income statement.
Bonds and commercial paper bills are derecognised when the
Embedded derivatives
obligation specified in the contract is discharged. The difference
The Company assesses whether an embedded derivative is
between the carrying value of the bond and the amount paid to
required to be separated from the host contract and accounted
extinguish the obligation is included in finance charges and fair
for as a derivative when it first becomes party to the contract.
value movements for the year.
The Company reassesses the contract when there is a change
Impairment of financial assets in the terms of the contract which significantly modifies the cash
At each balance sheet date an assessment is made of whether flows that would otherwise be required under the contract.
there are any indicators of impairment of a financial asset or a
group of financial assets based on observable data about one
or more loss events that occurred after the initial recognition of

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Where the Company enters into a service agreement as a
Summary of significant accounting policies (continued) supplier or a customer that depends on the use of a specific
Financial instruments (continued) asset, and conveys the right to control the use of the specific
Financial instruments: Disclosures asset, the arrangement is assessed to determine whether it
The Company groups its financial instruments into classes of contains a lease. Once it has been concluded that an
similar instruments and where disclosure is required, it discloses arrangement contains a lease, it is assessed against the criteria
them by class. It also discloses information about the nature and in IAS17 to determine if the arrangement should be recognised
extent of risks arising from its financial instruments (refer to as a finance lease or operating lease.
note 12). The land and buildings elements of a lease of land and
Foreign currencies buildings are considered separately for the purposes of lease
The functional and presentation currency of the Company is the classification unless it is impractical to do so.
South African Rand (ZAR). Lessee
Transactions denominated in foreign currencies are measured at Operating lease payments are recognised in the income
statement on a straight-line basis over the lease term.
the rate of exchange at transaction date. Monetary items
denominated in foreign currencies are remeasured at the rate of Assets acquired in terms of finance leases are capitalised at the
exchange at settlement date or balance sheet date, whichever lower of fair value and the present value of the minimum lease
occurs first. Exchange differences on the settlement or translation payments at inception of the lease and depreciated over the
of monetary assets and liabilities are included in finance lesser of the useful life of the asset and the lease term. The
charges and fair value movements in the period in which they capital element of future obligations under the leases is included
arise. Non-monetary items that are measured in terms of as a liability in the balance sheet. Lease finance costs are
historical cost in a foreign currency are translated using the amortised in the income statement over the lease term using the
exchange rates as at the dates of the initial transactions. Non- interest rate implicit in the lease. Where a sale and leaseback
monetary items measured at fair value in a foreign currency are transaction results in a finance lease, any excess of sale
translated using the exchange rates at the date when the fair proceeds over the carrying amount is deferred and recognised
value is determined. in the income statement over the term of the lease.
Treasury shares Lessor

Where the Company acquires, or in substance acquires, its Operating lease revenue is recognised in the income statement
own shares, such shares are measured at cost and disclosed as on a straight-line basis over the lease term.
a reduction of equity. No gain or loss is recognised in profit or Assets held under a finance lease are recognised in the balance
loss on the purchase, sale, issue or cancellation of the sheet and presented as a receivable at an amount equal to the
Company’s own equity instruments. Such shares are not net investment in the lease. The recognition of finance income
remeasured for changes in fair value. is based on a pattern reflecting a constant periodic rate of return
Where the Company chooses or is required to buy equity on the net investment in the finance lease.
instruments from another party to satisfy its obligations to its Employee benefits
employees under the share-based payment arrangement by Post-employment benefits
delivery of its own shares, the transaction is accounted for as The Company provides defined benefit and defined contribution
equity-settled. This applies regardless of whether the employee’s plans for the benefit of employees. These plans are funded by
rights to the equity instruments were granted by the Company the employees and the Company, taking into account
itself or by its shareholders or was settled by the Company itself recommendations of the independent actuaries. The post-
or its shareholders. retirement telephone rebate liability is unfunded.
Leases Defined contribution plans

A lease is classified as a finance lease if it transfers substantially The Company’s funding of the defined contribution plans is
all the risks and rewards incidental to ownership. All other charged to employee expenses in the same year as the related
leases are classified as operating leases. service is provided.

2. SIGNIFICANT ACCOUNTING POLICIES (continued) Workforce reduction

Summary of significant accounting policies (continued) Workforce reduction expenses are payable when employment
Employee benefits (continued) is terminated before the normal retirement age or when an
Defined benefit plans employee accepts voluntary redundancy in exchange for
The Company provides defined benefit plans for pension, benefits. Workforce reduction benefits are recognised when the
retirement, post-retirement medical aid benefits and telephone entity is demonstrably committed and it is probable that the
rebates to qualifying employees. The Company’s net obligation expenses will be incurred. In the case of an offer made to
in respect of defined benefits is calculated separately for each encourage voluntary redundancy, the measurement of
plan by estimating the amount of future benefits earned in return termination benefits is based on the number of employees
for services rendered. expected to accept the offer.
The amount recognised in the balance sheet represents the Share-based compensation
present value of the defined benefit obligations, calculated by The grants of equity instruments, made to employees in terms of
using the projected unit credit method, as adjusted for the Telkom Conditional Share Plan, are classified as equity-
unrecognised actuarial gains and losses, unrecognised past settled share-based payment transactions. The expense relating
service costs and reduced by the fair value of the related plan to the services rendered by the employees, and the
assets. The amount of any surplus recognised and reflected as corresponding increase in equity, is measured at the fair value
a defined benefit asset is limited to unrecognised actuarial of the equity instruments at their date of grant based on the
losses and past service costs plus the present value of available market price at grant date, adjusted for the lack of entitlement to
refunds and reductions in future contributions to the plan. To the dividends during the vesting period. This compensation cost is
extent that there is uncertainty as to the entitlement to the surplus, recognised over the vesting period, based on the best available
no asset is recognised. No gain is recognised solely as a result estimate at each balance sheet date of the number of equity
of an actuarial loss or past service cost in the current period and instruments that are expected to vest.
no loss is recognised solely as a result of an actuarial gain or
Short-term employee benefits
past service cost in the current period.
The cost of all short-term employee benefits is recognised during
Actuarial gains and losses are recognised as employee the year the employees render services, unless the Company
expenses when the cumulative unrecognised gains and losses uses the services of employees in the construction of an asset
for each individual plan exceed 10% of the greater of the and the benefits received meet the recognition criteria of an
present value of the Company’s obligation and the fair value of asset, at which stage it is included as part of the related
plan assets at the beginning of the year. These gains or losses property, plant and equipment or intangible asset item.
are amortised on a straight-line basis over 10 years for all the
Provisions
defined benefit plans, except gains or losses related to the
Provisions are recognised when the Company has a present
pensioners in the Telkom Retirement Fund or unless the standard
obligation (legal or constructive) as a result of a past event, it is
requires faster recognition. For the Telkom Retirement Fund
probable that an outflow of resources will be required to settle
pensioners, the cumulative unrecognised actuarial gains and
the obligation, and a reliable estimate can be made of the
losses in excess of the 10% corridor at the beginning of the year
amount of the obligation. Provisions are reviewed at each
are recognised immediately.
balance sheet date and adjusted to reflect the current best
Past service costs are recognised immediately to the extent that estimate. Where the effect of the time value of money is
the benefits are vested, otherwise they are recognised on a material, the amount of the provision is the present value of the
straight-line basis over the average period the benefits become expenditures expected to be required to settle the obligation.
vested.
Leave benefits
Annual leave entitlement is provided for over the period that the
leave accrues and is subject to a cap of 22 days.

2007 2008 2009

Rm Rm Rm
3. REVENUE
3.1 Total revenue 35,818 36,641 37,058
Operating revenue 32,340 32,571 33,659

Other income (excluding profit on disposal of property, plant and
equipment, intangible assets and investments, refer to note 4) 276 331 492
Investment income (refer to note 6) 3,202 3,739 2,907
3.2 Operating revenue 32,340 32,571 33,659
Subscriptions, connections and other usage 6,286 6,330 6,614

Traffic 16,740 15,949 15,323
Domestic (local and long distance) 7,563 6,327 5,670

Fixed-to-mobile 7,646 7,557 7,420
International (outgoing) 988 986 933
Subscription based calling plans 543 1,079 1,300
Interconnection 1,639 1,757 2,084

Data 7,489 8,308 9,310
Sundry revenue 186 227 328
4. OTHER INCOME 655 498 524
Other income (included in Total revenue, refer to note 3) 276 331 492
Interest received from trade receivables 181 211 214

Other interest 8 37 189
Sundry income 87 83 89
Profit on disposal of property, plant and equipment and intangible

assets 15 167 32
Profit on disposal of investment 364 – –
The increase in the current year’s other interest is a result of the

increase in loans to subsidiaries (refer to note 11).

2007 2008 2009

Rm Rm Rm
5. OPERATING EXPENSES
Operating expenses comprise:
5.1 Employee expenses 7,077 7,386 7,990
Salaries and wages 5,076 5,519 5,742

Medical aid contributions 377 407 404
Retirement contributions 439 460 460
Post-retirement pension and retirement fund (refer to note 25) 33 5 29

Actuarial gain (136) (16) –
Asset limitation 322 222 220
Post-retirement medical aid (refer to note 25) 329 277 455


Share-based compensation expense (refer to note 22 and 25) 141 522 554
Other benefits* 1,274 969 1,021
Employee expenses capitalised (696) (800) (736)
* Other benefits include annual leave, performance incentive,

service bonuses, skills development and workforce
reduction expenses.
5.2 Payments to other operators 6,461 6,902 7,536

Payments to other network operators consist of expenses in
respect of interconnection with other network operators.
5.3 Selling, general and administrative expenses 3,970 3,904 6,580
Selling and administrative expenses 1,329 1,108 3,428

Maintenance 1,900 1,996 2,293
Marketing 604 583 574
Bad debts (refer to note 17) 137 217 285
Included in the current year’s selling and administrative expenses, a total impairment loss of R2,178 million (2008: R229 million;
2007: RNil) has been recognised on investments.

2007 2008 2009

Rm Rm Rm
5. OPERATING EXPENSES (continued)

5.4 Service fees 2,236 2,410 2,760
Facilities and property management 1,140 1,221 1,261

Consultancy services 209 160 324
Security and other 833 978 1,122
Auditors’ remuneration 54 51 53
Audit services 53 51 50
Company auditors 47 46 46
Current year 47 43 46
Prior year underprovision – 3 –
Other auditors – current year 6 5 4
Other services 1 – 3
Included in the current year’s consultancy services is an amount

of R177 million relating to services rendered in respect of the
transaction to dispose of the Company’s stake in Vodacom
Group (Proprietary) Limited.
The increase in the current year’s security and other costs is mainly
attributable to the new contract negotiated to secure the copper
network in the Company’s drive to cutting down on cable thefts.
5.5 Operating leases 762 619 613
Land and buildings 131 142 166

Equipment 79 49 58
Vehicles 552 428 389
5.6 Depreciation, amortisation and write-offs 3,583 3,732 4,358
Depreciation of property, plant and equipment (refer to note 9) 2,994 3,062 3,398
Amortisation of intangible assets (refer to note 10) 305 408 638
Write-offs of property, plant and equipment and intangible assets 284 262 322
Included in the current year’s amortisation of intangible assets is an

amount of R134 million relating to the FIFA brand intangible asset.
In recognition of the changed usage patterns of certain items of property,

plant and equipment and intangible assets, the Company revised their
remaining useful lives as at March 31. The assets affected were
individual items of Network equipment, Data processing equipment,
Support equipment, Freehold land and buildings and Intangible assets.
The revised estimated useful lives of these assets as set out below,
resulted in a decrease of the current year depreciation and amortisation
charges of R11,4 million (2008: R196 million; 2007: R942 million).
Previous life Revised life

Years Years

Other 2 – 15 2 – 20

2007 2008 2009

Rm Rm Rm
6. INVESTMENT INCOME 3,202 3,739 2,907
Interest income 196 142 160

Dividend income from joint venture 2,700 2,970 2,600
Dividend income from subsidiaries 306 627 147
Included in investment income is an amount of R160 million

(2008: R142 million; 2007: R196 million) which relates to
interest earned from financial assets not measured at fair value
through profit or loss.
7. FINANCE CHARGES AND FAIR VALUE MOVEMENTS 1,027 1,289 1,460
Finance charges on interest-bearing debt 1,142 1,499 1,655
Local debt 1,303 1,675 1,818

Finance charges capitalised (161) (176) (163)
Foreign exchange gains and losses and fair value movements (115) (210) (195)
Foreign exchange losses/(gains) 58 116 (318)

Fair value adjustments on derivative instruments (173) (326) 123
Capitalisation rate 14.8% 12.6% 12.4%
Included in finance charges is an amount of R1,655 million (2008: R1,499 million; 2007: R1,142 million) which relates to interest paid
on financial liabilities not measured at fair value through profit or loss.

2007 2008 2009

Rm Rm Rm
8. TAXATION 2,690 2,599 516
South African normal company taxation 1,874 1,879 1,510
Current taxation 1,907 1,879 1,540

Overprovision for prior year (33) – (30)
Deferred taxation 521 357 (1,150)
Temporary differences – normal company taxation 561 255 111

Temporary difference – secondary taxation on companies
(’STC’) taxation credits (raised)/utilised (41) 157 (87)
Capital gains taxation (’CGT’) – – (1,280)
Change in taxation rate – (55) –
Underprovision in prior year 1 – 106
Secondary taxation on companies 295 363 156
Reconciliation of taxation rate % % %

Effective rate 24.2 24.6 8.9
South African normal rate of taxation 29.0 29.0 28.0
Adjusted for: (4.8) (4.4) (19.1)
Change in taxation rate – (0.5) –

Exempt income (8.3) (10.6) (13.9)
Disallowable expenditure 1.5 1.8 13.8
STC taxation credits (raised)/utilised (0.4) 1.5 (1.5)
STC taxation charge 2.7 3.4 2.7
CGT asset – – (22.1)
Other – – 0.6
Net (overprovision)/underprovision for prior year (0.3) – 1.3
The Company has historically filed, and continues to file, all required income taxation returns. Management believes that the principles
applied in determining the Company’s taxation obligations are consistent with the principles and interpretations of South African taxation
laws.
Included in the current year’s deferred taxation expense is an amount of R1,280 million relating to the deferred taxation on the CGT
base cost of the investments which are held for sale.
The decrease in the deferred taxation expense is mainly due to the temporary difference on CGT as well as the decrease in STC
taxation credits.
South African normal rate of taxation has decreased from 29% to 28% effective from the March 31, 2009 financial year.

2007 2008 2009

Accumulated Carrying Accumulated Carrying Accumulated Carrying
Cost depreciation value Cost depreciation value Cost depreciation value
9. PROPERTY,
PLANT AND
EQUIPMENT
Freehold land
and buildings 4,381 (1,829) 2,552 4,581 (1,988) 2,593 4,886 (2,128) 2,758
Leasehold
buildings 496 (299) 197 534 (348) 186 519 (355) 164
Network
equipment 49,780 (25,774) 24,006 52,952 (27,366) 25,586 57,438 (29,470) 27,968
Support
equipment 3,584 (2,209) 1,375 3,863 (2,377) 1,486 3,916 (2,479) 1,437
Furniture and
office
equipment 345 (236) 109 372 (265) 107 387 (286) 101
Data processing
equipment and
software 4,758 (3,022) 1,736 4,951 (3,103) 1,848 5,041 (3,309) 1,732
Under
construction 2,530 – 2,530 3,362 – 3,362 2,907 – 2,907
Other 456 (347) 109 476 (371) 105 694 (416) 278
66,330 (33,716) 32,614 71,091 (35,818) 35,273 75,788 (38,443) 37,345
Fully depreciated assets with a cost of R155 million (2008: R498 million; 2007: R1,225 million) were derecognised in the 2009 financial
year. This has reduced both the cost and accumulated depreciation of property, plant and equipment.
Property, plant and equipment with a carrying value of R158 million (2008: R188 million; 2007: R203 million) are pledged as security.
Details of the loans are disclosed in note 23.

9. PROPERTY, PLANT AND EQUIPMENT (continued)

The carrying amounts of property, plant and equipment can be reconciled as follows:
Carrying Carrying
value at Write-offs value at
beginning and end
of year Additions Transfers reversals Disposals Depreciation of year
Rm Rm Rm Rm Rm Rm Rm
2009
Freehold land and buildings 2,593 258 81 (5) (2) (167) 2,758
Leasehold buildings 186 2 – – – (24) 164
Network equipment 25,586 2,830 2,292 (141) (71) (2,528) 27,968
Support equipment 1,486 127 118 (12) – (282) 1,437
Furniture and office equipment 107 7 8 – – (21) 101
and software 1,848 145 63 (4) – (320) 1,732
Under construction 3,362 2,281 (2,627) (109) – – 2,907
Other 105 216 14 (1) – (56) 278
35,273 5,866 (51) (272) (73) (3,398) 37,345
2008
Freehold land and buildings 2,552 198 22 (3) (8) (168) 2,593
Leasehold buildings 197 7 30 – – (48) 186
Network equipment 24,006 2,693 1,308 (96) (88) (2,237) 25,586
and software 1,736 268 161 (14) – (303) 1,848
Under construction 2,530 2,588 (1,725) (31) – – 3,362
Other 109 7 10 – – (21) 105
32,614 6,044 (76) (151) (96) (3,062) 35,273
2007
Freehold land and buildings 2,610 102 (8) 17 – (169) 2,552
Leasehold buildings 240 – – – (14) (29) 197
Network equipment 23,253 2,599 847 (190) (240) (2,263) 24,006
and software 1,779 303 (48) (9) – (289) 1,736
Under construction 1,316 2,163 (912) (37) – – 2,530
Other 52 16 72 (1) – (30) 109
30,488 5,546 61 (233) (254) (2,994) 32,614
Full details of land and buildings are available for inspection at the registered offices of the Company.
The Company does not have temporarily idle property, plant and equipment.
A major portion of this capital expenditure relates to the expansion of existing networks and services. An extensive build programme that
provides capacity for growth in services, with focus on the Next Generation Network technologies, has resulted in an increase in property,
plant and equipment additions which is expected to continue over the next few years.
Included in the current year’s additions in the other category is an amount of R179 million (2008: R31 million; 2007: RNil) that relates
to finance leases.
An amount of R71 million (2008: R88 million; 2007: R240 million) under property, plant and equipment disposals relates to the
reclassification of Customer Premises Equipment at the start of the lease. These disposals are as a result of the Company entering into a
leasing arrangement.

2007 2008 2009

Accumulated Carrying Accumulated Carrying Accumulated Carrying
Cost amortisation value Cost amortisation value Cost amortisation value
10. INTANGIBLE
ASSETS
Trademarks,
copyrights
and FIFA brand 52 (52) – 197 (59) 138 457 (203) 254
Software 5,306 (2,913) 2,393 6,239 (3,312) 2,927 7,031 (3,785) 3,246
Under
construction 1,109 – 1,109 741 – 741 488 – 488
6,467 (2,965) 3,502 7,177 (3,371) 3,806 7,976 (3,988) 3,988
The carrying amounts of intangible assets can be reconciled as follows:

Carrying Carrying
value at value at
beginning end
of year Additions Transfers Write-offs Disposals Amortisation of year
Rm Rm Rm Rm Rm Rm Rm
2009
and FIFA brand 138 260 – – – (144) 254
Software 2,927 207 607 (1) – (494) 3,246
Under construction 741 357 (555) (55) – – 488
3,806 824 52 (56) – (638) 3,988
2008
Trademarks and copyrights – 144 – – – (6) 138
Software 2,393 250 688 (2) – (402) 2,927
Under construction 1,109 353 (612) (109) – – 741
3,502 747 76 (111) – (408) 3,806
2007
Software 1,804 323 575 (4) – (305) 2,393
Under construction 1,063 729 (636) (47) – – 1,109
2,867 1,052 (61) (51) – (305) 3,502
There are no intangible assets whose title is restricted, or that have been pledged as security for liabilities at March 31, 2009.
Intangible assets that are material to the Company consist of Software, Copyrights and Trademarks whose average remaining amortisation
period is 5.6 years (2008: 5.9 years; 2007: 6.58 years).
No intangible asset has been assessed as having an indefinite useful life.


2007 2008 2009

Rm Rm Rm
11. INVESTMENTS 887 3,883 7,693
Special purpose entity – cell captive

Cost 535 535 535
Subsidiaries 352 3,348 7,158
Trudon (formerly TDS Directory Operations) (Proprietary) Limited

64.90% shareholding at cost 167 167 167
Swiftnet (Proprietary) Limited**
100% shareholding at cost 25 25 –
Rossal No 65 (Proprietary) Limited – – –
100% shareholding at cost (R100) – – –
Acajou Investments (Proprietary) Limited
Intekom (Proprietary) Limited
100% shareholding at cost 10 10 10
Q-Trunk (Proprietary) Limited – – –

Loan 30 26 22
Impairment (40) (36) (32)
Telkom Media (Proprietary) Limited** – 109 –
75% shareholding at cost (R2,868) – – –

Loan – 326 –
Impairment of loan – (217) –
Africa Online Limited 150 212 275

Impairment of investment – (12) (97)
Loan – 74 222
Multi-Links Telecommunications Limited* – 840 5,595
25% shareholding at cost – – 1,339

Impairment of investment – – (969)
Loan – 840 5,225

Telkom International (Proprietary) Limited* – 1,985 1,111

Loan – 1,985 1,985
Impairment of loan – – (874)
Available-for-sale
Unlisted investment
Rascom
0.69% (2008: 0.69%; 2007: 0.69%) interest in Regional African
Satellite Communications Organisation, headquartered in Abidjan,
Ivory Coast, at cost – – –
Cost 1 1 1
Impairment (1) (1) (1)
Incorporation
The subsidiaries and joint venture are all incorporated in the Republic of South Africa, with the exception of Telkom Communications
International (Proprietary) Limited and Africa Online Limited that are incorporated in the Republic of Mauritius, and Multi-Links
Telecommunications (Proprietary) Limited, which is incorporated in Nigeria.
* The 75% shareholding in Multi-Links Telecommunications Limited is an indirect investment through Telkom International (Proprietary) Limited.
** The investments Swiftnet (Proprietary) Limited and Telkom Media (Proprietary) Limited are both classified as assets held for sale in the 2009 financial year
in terms of IFRS5. (Refer to note 16.)
The aggregate directors’ valuation of the above investments is R321 million (2008: R7,658 million; 2007: R6,690 million) based on net
asset values.

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Risk management
Exposure to continuously changing market conditions has made management of financial risk critical for the Company. Treasury policies,
risk limits and control procedures are continuously monitored by the Board of Directors through its audit and risk committee.
The Company holds or issues financial instruments to finance its operations, for the temporary investment of short-term funds and to manage
currency and interest rate risks. In addition, financial instruments such as trade receivables and payables arise directly from the Company’s
operations.
The Company finances its operations primarily by a mixture of issued share capital, retained earnings, long-term and short-term loans. The
Company uses derivative financial instruments to manage its exposure to market risks from changes in interest and foreign exchange rates.
The derivatives used for this purpose are principally interest rate swaps and forward exchange contracts. The Company does not speculate
in derivative instruments.
The table below sets out the classification of financial assets and liabilities:
At fair
value
through Financial
profit liabilities
or loss at Loans Available Total
held for amortised Held-to- and for carrying Fair
trading cost maturity receivables sale value value
Notes Rm Rm Rm Rm Rm Rm Rm
Classes of financial instruments

per balance sheet
2009
Assets 154 – 1,044 15,062 34 16,294 16,460
Trade and other receivables* 17 – – – 6,153 – 6,153 6,153

Investments 11 – – – 7,693 – 7,693 7,693
Finance lease receivable 13 – – – 275 – 275 275
Assets held for sale and
discontinued operations 16 – – – – 34 34 200
Other financial assets 154 – 1,044 – – 1,198 1,198
Repurchase agreements 18 – – 1,044 – – 1,044 1,044

Interest rate swaps 18 4 – – – – 4 4
Forward exchange contracts 18 150 – – – – 150 150
Cash and cash equivalents 19 – – – 941 – 941 941
Liabilities (225) (23,257) – – – (23,482) (24,555)

Interest rate swaps 18 (72) – – – – (72) (72)

Forward exchange contracts 18 (153) – – – – (153) (153)
(71) (23,257) 1,044 15,062 34 (7,188) (8,095)



At fair value
through Financial
profit or liabilities at Total
loss held amortised Held-to- Loans and Available carrying Fair
for trading cost maturity receivables for sale value value

per balance sheet
2008
Assets 443 – – 11,224 – 11,667 11,667

Investments 11 – – – 3,883 – 3,883 3,883
Liabilities (168) (18,346) – – – (18,514) (19,029)
Interest bearing debt 23 – (13,362) – – – (13,362) (13,877)

275 (18,346) – 11,224 – (6,847) (7,362)

per balance sheet
2007
Assets 229 – – 7,025 – 7,254 7,254

Investments 11 – – – 887 – 887 887
Bills of exchange 18 98 – – – – 98 98
Liabilities (155) (13,333) – – – (13,488) (14,849)
Interest bearing debt 23 (98) (8,985) – – – (9,083) (10,444)

Credit facilities utilised 19 – – – – – – –
Interest rate swaps 18 (26) – – – – (26) (26)

74 (13,333) – 7,025 – (6,234) (7,595)

12.1. Fair value of financial instruments

Carrying value of all financial instruments noted in the balance sheet approximates fair value except as disclosed below.
The estimated net fair values as at March 31, 2009, 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 Company 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 balance sheet date.
The carrying value of receivables, bank balances, repurchase agreements and other liquid funds, payables and accruals, approximate
their fair value due to the short-term maturities of these instruments.
The fair values of the borrowings disclosed above 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 values of listed investments are based on quoted market prices.
12.2 Interest rate risk management

Interest rate risk arises from the repricing of the Company’s forward cover and floating rate debt as well as incremental funding or new
borrowings and the refinancing of existing borrowings.
The Company’s policy is to manage interest cost through the utilisation of a mix of fixed and floating rate debt. In order to manage this mix
in a cost efficient manner and to hedge specific exposure in the interest rate repricing profile of the existing borrowings and anticipated
peak additional borrowings, the Company makes use of interest rate derivatives as approved in terms of the Company policy limits. Fixed
rate debt represents approximately 64.86% (2008: 57.03%; 2007: 98.83%) of the total debt. The debt profile of mainly fixed rate debt
has been maintained to limit the Company’s exposure to interest rate increases given the size of the Company’s debt portfolio. There were
no changes in the policies and processes for managing and measuring the risk from the previous period.
The table below summarises the interest rate swaps outstanding as at March 31:
Weighted
average
Notional coupon
Average amount rate
maturity Currency Rm %
2009
Pay fixed 2-5 years ZAR 2,000 10.84
2008
Pay fixed – – – –
2007
Pay fixed < 1 year ZAR 1,000 14.67
Pay fixed
The floating rate is based on the three months JIBAR, and is settled quarterly in arrears. The interest rate swaps are used to manage
interest rate risk on debt instruments.


12.3. Credit risk management
Credit risk is the risk due to uncertainty in a counterparty’s ability to meet its obligations as they fall due.
Credit risk arises from derivative contracts entered into with financial institutions with a rating of A1 or better. The Company is not exposed
to significant concentrations of credit risk. Credit limits are set on an individual basis. The maximum exposure to the Company from
counterparties in respect of derivative contracts is a net favourable position of R29 million (2008: R289 million; 2007: R103 million). No
collateral is required when entering into derivative contracts. Credit limits are reviewed on an annual basis or when information becomes
available in the market. The Company limits the exposure to any counterparty and exposures are monitored daily. The Company expects
that all counterparties will meet their obligations.
With regard to credit risk arising from other financial assets of the Company, which comprises held-to-maturity investments, financial assets
held at fair value through profit or loss, loans and receivables and available-for-sale assets (other than equity investments), the Company’s
exposure to credit risk arises from a potential default by a counterparty, with a maximum exposure equal to the carrying amount of these
instruments.
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each type of customer. Management reduces
the risk of irrecoverable debt by improving credit management through credit checks and limits. To reduce the risk of counterparty failure,
limits are set based on the individual ratings of counterparties by well-known ratings agencies. Trade receivables comprise a large
widespread customer base, covering residential, business, government, wholesale, global and corporate customer profiles.
Credit checks are performed on all customers, other than prepaid customers, on application for new services on an ongoing basis where
appropriate.
The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other
receivables. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets as well
as expected future cash flows. Refer to note 17.
The Company has provided a financial guarantee to Africa Online Limited for bank loans. At March 31, 2009 there was R26 million
(2008: R23 million; 2007: RNil) outstanding.
Telkom guarantees a certain portion of employees’ housing loans. The amount guaranteed differs depending on facts such as employment
period and salary rates. When an employee leaves the employment of Telkom, any housing debt guaranteed by Telkom is settled before
any pension payout can be made to the employee. The Company recognises a provision when it becomes probable that a guarantee will
be called. There is no provision outstanding in respect of these contingencies. The maximum amount of the guarantee in the event of the
default is R12 million. The fair value of the guarantee at March 31, 2009 was RNil (2008: RNil; 2007: RNil).
Given the deterioration of credit markets, stricter objectives, policies and processes were applied for managing and measuring the risk than
in the previous period.


The maximum exposure to credit risk for financial assets at the reporting date by type of customer was:
Carrying amount
2007 2008 2009
Rm Rm Rm
Business and residential 1,924 1,824 1,870

Global, corporate and wholesale 1,701 1,950 1,921
Government 318 368 444
Other 41 334 209
Impairment of trade receivables (153) (160) (205)
Derivatives 229 443 154

Loans receivable – 3,008 6,558
Other receivables* 1,924 2,277 1,914
5,984 10,044 12,865
* Excluding prepayments.
The ageing of trade receivables at the reporting date was:

2007 2008 2009
Rm Rm Rm
Not past due/current 3,250 3,654 3,361

Ageing of past due but not impaired
21 to 60 days 290 320 379
61 to 90 days 70 83 92
91 to 120 days 41 55 62
120+ days 180 204 345
3,831 4,316 4,239
The ageing in the allowance for the impairment of trade

receivables at reporting date was:
Ageing of impaired trade receivables:

Current defaulted 24 26 23
21 to 60 days 21 25 29
61 to 90 days 14 23 18
91 to 120 days 13 16 28
120+ days 81 70 107
153 160 205
The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in note 17.
Included in the allowance for doubtful debts are individually impaired receivables with a balance of R49 million (2008: R32 million; 2007:
R49 million) which have been identified as being unable to service their debt obligation. The impairment recognised represents the
difference between the carrying amount of these trade receivables and the present value of the expected liquidation proceeds. The
Company does not hold any collateral over these balances.
During the 2009 year end the Company renegotiated the terms of trade receivables amounting to R1.9 million from a long outstanding
customer. No impairment losses were recognised.


12.4. Liquidity risk management
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company is exposed to
liquidity risk as a result of uncertain cash flows as well as capital commitments of the Company. Liquidity risk is managed by Telkom’s
Corporate Finance division in accordance with policies and guidelines formulated by Telkom’s executive committee. In terms of its borrowing
requirements the Company ensures that sufficient facilities exist to meet its immediate obligations. In terms of its long-term liquidity risk, the
Company maintains a reasonable balance between the period over which assets generate funds and the period over which the respective
assets are funded. Short-term liquidity gaps may be funded through repurchase agreements and commercial paper bills.
There were no material changes in the exposure to liquidity risk and its objectives, policies and processes for managing and measuring
the risk during the 2009 financial year.
The table below summarises the maturity profile of the Company’s financial liabilities based on undiscounted contractual cash flow at the
balance sheet date:
Contractual
Carrying cash <6 6 – 12 1–2 2–5
amount flows months months years years > 5 years
2009
finance leases) 23 16,720 18,297 5,059 2,500 1,815 5,167 3,756
Credit facilities utilised 19 106 106 106 – – – –
Trade and other payables 27 5,424 5,528 5,399 129 – – –
Finance lease liabilities 34 984 1,846 82 82 171 516 995

Other financial liabilities 18 225 235 147 6 82 – –
Interest rate swaps 72 82 – – 82 – –

Forward exchange contracts 153 153 147 6 – – –
23,459 26,012 10,793 2,717 2,068 5,683 4,751
2008
finance leases) 23 12,505 14,403 4,882 1,200 3,900 1,823 2,598
Credit facilities utilised 19 41 41 41 – – – –
Finance lease liabilities 34 857 1,794 64 62 123 395 1,150

Forward exchange contracts 18 168 168 83 85 – – –
18,494 21,329 9,679 1,661 4,023 2,218 3,748



12.4. Liquidity risk management (continued)
Contractual
Carrying cash <6 6 – 12 1–2 2–5
amount flows months months years years > 5 years
2007
finance leases) 23 8,231 10,416 1,350 4,680 – 1,806 2,580
Finance lease liabilities 34 852 1,903 59 61 137 356 1,290

Other financial liabilities 18 57 57 51 6 – – –
Interest rate swaps 26 26 26 – – – –

Forward exchange contracts 31 31 25 6 – – –
13,473 16,709 5,347 5,193 137 2,162 3,870
12.5. Foreign currency exchange rate risk management

The Company manages its foreign currency exchange rate risk by economically hedging all identifiable exposures via various financial
instruments suitable to the Company’s risk exposure.
Forward exchange contracts have been entered into to reduce the foreign currency exposure on the Company’s operations and liabilities.
The Company also enters into foreign forward exchange contracts to economically hedge interest expense and purchase and sale
commitments denominated in foreign currencies (primarily United States dollars and euros). The purpose of the Company’s foreign currency
hedging activities is to protect the Company from the risk that the eventual net cash flows will be adversely affected by changes in exchange
rates.
There were no changes in the exposure to foreign currency exchange rate risk and its objectives, policies and processes for managing and
measuring the risk from the previous period.


12.5. Foreign currency exchange rate risk management (continued)
The following table details the foreign forward exchange contracts outstanding at year end:
Foreign
contract Forward
To buy m Rm Rm
2009
Currency
US$ 155 1,477 14
Euro 92 1,205 (24)
Other 36 69 (3)
2,751
2008
Currency
US$ 123 915 107
Euro 173 1,923 319
Other 40 166 17
3,004
2007
Currency
US$ 165 1,209 2
Euro 102 991 12
Other 68 80 2
2,280
To sell
2009
Currency
US$ 99 947 (22)
Euro 35 485 28
Other 21 43 4
1,475
2008
Currency
US$ 78 593 (67)
Euro 69 803 (98)
Other 22 105 (2)
1,501
2007
Currency
US$ 122 994 88
Euro 50 483 (5)
Other 31 40 1
1,517


12.5. Foreign currency exchange rate risk management (continued)
The Company has various monetary assets and liabilities in currencies other than the Company’s functional currency. The following table
represents the net currency exposure (net carrying amount of foreign denominated monetary assets and liabilities) of the Company
according to the different foreign currencies.
United
States
Euro Dollar Other
Rm Rm Rm
2009
South African rand 203 6,097 19
2008
South African rand 219 1,117 51
2007
South African rand 282 90 70
Currency swaps
There were no currency swaps in place at March 31, 2009, 2008 and 2007.


12.6 Sensitivity analysis
Interest rate risk
The following table illustrates the sensitivity to a reasonably possible change in the interest rates, with all other variables held constant:

Other Other
movements movements
Rm Rm Rm Rm

2009
Assets
Investments 56 – (56)
Repurchase agreements 10 – (10) –

Liabilities
Interest-bearing debt (62) 62
42 – (42) –
2008
Assets
Investments 9 – (9) –
Liabilities
(43) – 43 –


Interest rate risk (continued)
Other Other
movements movements
Rm Rm Rm Rm
2007
Assets
Liabilities
Interest-bearing debt 1 – – –
7 – (6) –
Foreign exchange currency risk

The following table illustrates the sensitivity to a reasonably possible change in the exchange rates, with all other variables held constant.
Other Other
movements movements
Rm Rm Rm Rm

2009
Assets
Forward exchange contract 1 – (1)
Liabilities
640 – (640) –


Foreign exchange currency risk (continued)
Other Other
movements movements
Rm Rm Rm Rm
2008
Assets
Liabilities
Forward exchange contract (153) – 153 –
174 – (174) –
2007
Assets
Liabilities
45 – (45) –
2007 2008 2009

R R R
12.7. Exchange rate table (closing rate)
United States dollar 7.248 8.132 9.484
Euro 9.649 12.854 12.617
Pound Sterling 14.189 16.166 13.555
Swedish krona 1.033 1.370 1.153
Japanese yen 0.061 0.082 0.097


12.8. Capital management
The Board’s policy is to maintain a strong capital base so as to sustain investor, creditor, market confidence and future development of the
business. Capital comprises equity attributable to equity holders of the Company. The Company monitors capital using net debt to EBITDA
ratio. The Company’s policy is to keep the net debt to EBITDA ratio of between 1 and 2 times. Included in net debt are interest-bearing
debts, credit facilities and other financial liabilities, less cash and cash equivalents and other financial assets.
Telkom plans on continuing its share buy-back strategy based on certain criteria, including market conditions, availability of cash and other
investment opportunities and needs.
All of Telkom’s issued and outstanding ordinary shares, including the class A ordinary share and the class B ordinary share, rank equal for
dividends. No dividend may be declared to a holder of the class A ordinary share or class B ordinary share, unless the same dividend is
declared to holders of all ordinary shares. Telkom’s current dividend policy aims to provide shareholders with a competitive return on their
investment, while assuring sufficient reinvestment of profits to enable us to achieve our strategy. Telkom may revise its dividend policy from
time to time. The determination to pay dividends, and the amount of the dividends, will depend upon, among other things, the earnings,
financial position, capital requirements, general business conditions, cash flows, net debt levels and share buy-back plans.
The Company has access to financing facilities, the total unused amount of which is R6,226 million at the balance sheet date.
There were no changes in the Company’s approach to capital management during the year.
The Company is not subject to externally imposed capital requirements.
The net debt to EBITDA ratio is as follows:

2007 2008 2009
Rm Rm Rm
Non-current portion of interest-bearing debt 3,308 7,336 10,193

Current portion of interest -bearing debt 5,775 6,026 7,511
Other financial liabilities 57 168 225
Less: Cash and cash equivalents (176) (483) (941)
Plus: Credit facilities utilised – 41 106
Less: Other financial assets (229) (443) (1,198)
Net debt 8,735 12,645 15,896
EBITDA 12,489 11,848 8,704
Net debt to EBITDA ratio 0.70 1.07 1.83


13. FINANCE LEASE RECEIVABLES

The Company provides voice and non-voice services to its customers, which make use of router and PABX equipment that is dedicated to
specific customers. The disclosed information relates to certain customer arrangements which were assessed to be finance leases in terms
of IAS17.
Total < 1 year 1 – 5 years > 5 years

Rm Rm Rm Rm
2009
2008
2007


2007 2008 2009

Rm Rm Rm
14. DEFERRED TAXATION (990) (1,347) (198)
Opening balance (469) (990) (1,347)

Income statement movements (521) (357) 1,149
Temporary differences (520) (412) 1,255
Capital allowances (467) (446) (310)

Provisions and other allowances (94) 191 199
Capital gains taxation asset – – 1,279
Secondary taxation credits raised/(utilised) 41 (157) 87
Underprovision prior year (1) – (106)

Change in taxation rate – 55 –
The balance comprises: (990) (1,347) (198)
Capital allowances (2,527) (2,870) (3,181)

Provisions and other allowances 1,197 1,340 1,434
Capital gains taxation asset – – 1,279
STC taxation credits 340 183 270
Deferred taxation balance is made up as follows: (990) (1,347) (198)
Deferred taxation assets 340 183 1,549

Deferred taxation liabilities (1,330) (1,530) (1,747)
Unutilised STC credits 2,718 1,830 2,700
Secondary taxation on companies (STC) is provided for at a rate of 10% on the amount by which dividends declared by the Company
exceeds dividends received. The deferred taxation asset is raised as it is probable that it will be utilised in future. The asset will be released
as a taxation expense when dividends are declared.
The deferred taxation asset represents STC credits on past dividends received that are available to be utilised against dividends declared.
The deferred taxation asset also includes deferred tax on capital gains tax (CGT) base cost of the Vodacom Group (Proprietary) Limited
and Swiftnet (Proprietary) Limited (Swiftnet) investments that will be utilised against the future CGT liability on the Vodacom and Swiftnet
transactions. It is considered probable that these credits will be utilised in the future. The asset will be released as a taxation expense when
dividends are declared and when the CGT liability arises.
The deferred taxation liability increased mainly due to the increase in the difference between the carrying value and taxation value of
assets, as a result of the change in the estimate of useful lives of assets.

2007 2008 2009

Rm Rm Rm
15. INVENTORIES 839 873 1,331
Gross inventories 972 1,072 1,522

Write-down of inventories to net realisable value (133) (199) (191)
Inventories consist of the following categories: 839 873 1,331
Installation material, maintenance material and

network equipment 771 827 1,048
Merchandise 68 46 284
Write-down of inventories to net realisable value 133 199 191

Inventories written-off (82) (98) (174)
Inventory levels as at March 31, 2009, 2008 and 2007 have

increased due to the accelerated roll-out of the Next Generation
Network required to improve customer service, and the
acquisition of merchandise for the W-CDMA roll-out.
16. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 34

16.1 Assets held for sale 34
Joint venture
Vodacom Group (Proprietary) Limited (Vodacom) –
50% shareholding at cost (R50)
In the current financial year the Company announced a decision

to dispose of its entire shareholding in Vodacom through selling
15% of its shareholding to Vodafone, a wholly owned subsidiary
of Vodafone Group Plc and unbundling its remaining 35% stake
to its shareholders pursuant to a listing of Vodacom on the main
board of the JSE Limited. The decision was taken in line with the
Company’s strategy to unlock shareholder value.
This investment is reclassified as held-for-sale in terms of IFRS5

as all the requirements for being classified as held-for-sale are met.
Subsidiary
Swiftnet (Proprietary) Limited (Swiftnet) 34
100% shareholding at cost 25

Loan 9
In February 2009, Telkom’s management took a decision to dispose of its 100% investment in Swiftnet, trading under the name Fastnet
Wireless Services. Swiftnet has been classified as held for sale as all criteria for this classification have been met.

16. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (continued)

16.2 Discontinued operations
Subsidiary
On August 31, 2006, Telkom created a new subsidiary, Telkom Media (Proprietary) Limited with a black economic empowerment (BEE)
reduced its operational expenses and commitments to a minimum.
Telkom Media was classified as held for sale in September 2008 interim financial statements. At year end the investment did not meet the
held for sale criteria as management was unable to sell the investment for its expected price and therefore decided to abandon it.
2007 2008 2009

Rm Rm Rm
17. TRADE AND OTHER RECEIVABLES 5,920 6,859 6,420
Gross trade receivables 3,984 4,476 4,444

Impairment of receivables (153) (160) (205)
Prepayments and other receivables 2,089 2,543 2,181
Impairment allowance account for receivables 153 160 205

Receivables written-off (168) (210) (240)
Refer to note 12 for detailed credit risk analysis.
18. OTHER FINANCIAL ASSETS AND LIABILITIES 229 443 1,198

Other financial assets consist of:
Held-to-maturity
Repurchase agreements – – 1,044
At fair value through profit or loss 229 443 154
Bills of exchange 98 – –
Derivative instruments (refer to note 12) 131 443 154
Repurchase agreements
The Company manages a portfolio of repurchase agreements in the
South African capital and money markets, with a view to generating
additional investment income on the favourable interest rates provided
on these transactions. Interest received from the borrower is based on
the current market related yield. There were no repurchase agreements
held at March 31, 2008 and 2007.
Bills of exchange
The fair value of bills of exchange has been calculated with reference
to the Bond Exchange of South Africa quoted prices.
Derivative instruments
Derivative assets at fair value consists of interest rate swaps of R4 million
(2008: RNil; 2007: RNil) and forward exchange contracts of R150 million
Other financial liabilities consist of:

At fair value through profit or loss
Derivative instruments (57) (168) (225)
Derivative liabilities at fair value consists of interest rate swaps of R72 million (2008: RNil; 2007: R26 million) and forward exchange
contracts of R153 million (2008: R168 million; 2007: R31 million).

2007 2008 2009

Rm Rm Rm
19. CASH AND CASH EQUIVALENTS

Cash shown as current assets 176 483 941
Cash and bank balances 76 83 601

Short-term deposits 100 400 340
Credit facilities utilised – (41) (106)
Net cash and cash equivalents 176 442 835
Undrawn borrowing facilities 6,566 5,894 6,226

The undrawn borrowing facilities are unsecured when drawn, bear interest at a rate that will be mutually agreed between the borrower
and lender at the time of drawdown, have no specific maturity date, are subject to annual review and are in place to ensure liquidity. At
March 31, 2009, R3,000 million of these undrawn facilities were committed.
Borrowing powers
To borrow money, Telkom’s directors may mortgage or encumber Telkom’s property or any part thereof and issue debentures, whether
secured or unsecured, whether outright or as security for debt, liability or obligation of Telkom or any third party. For this purpose the
borrowing powers of Telkom are unlimited, but are subject to restrictive financial covenants of the loan facility as indicated on note 23.

2007 2008 2009

Rm Rm Rm
20. SHARE CAPITAL

Authorised and issued share capital and share premium are
made up as follows:
Authorised 10,000 10,000 10,000
999,999,998 ordinary shares of R10 each 10,000 10,000 10,000

1 class A ordinary share of R10 – – –
1 class B ordinary share of R10 – – –
Issued and fully paid 5,329 5,208 5,208
520,783,898 (2008: 520,784,184; 2007: 532,855,528)

ordinary shares of R10 each 5,329 5,208 5,208
1 (2008: 1; 2007: 1) class A ordinary share of R10 – – –
1 (2008: 1; 2007: 1) class B ordinary share of R10 – – –
The following table illustrates the movement in the number of shares issued:
Number of Number of Number of

shares shares shares
Shares in issue at beginning of year 544,944,901 532,855,530 520,784,186

Shares bought back and cancelled (12,089,371) (12,071,344) (286)
Shares in issue at end of year 532,855,530 520,784,186 520,783,900
Full details of the voting rights of ordinary, class A and class B shares are documented in the articles of association of the Company.
Share buy-back
During the financial year Telkom bought back 286 ordinary shares at a total consideration of R30,425. The shares were bought back and
cancelled in order to allow Telkom shareholders to participate in the proposed unbundling of Vodacom Group on a one to one basis. This
reduced share capital by R2,860 and retained earnings by R27,565.
During the year ended March 31, 2008 Telkom bought back 12,071,344 ordinary shares at a total consideration of R1,647 million.
This reduced share capital by R121 million and retained earnings by R1,526 million.
During the year ended March 31, 2007, Telkom bought back 12,089,371 ordinary shares at a total consideration of R1,596 million.
This reduced share capital by R120 million, share premium by R1,342 million and retained earnings by R134 million.
Capital management
Refer to note 12 for detailed capital management disclosure.

2007 2008 2009

Rm Rm Rm
21. TREASURY SHARE RESERVE (1,778) (1,642) (1,521)
This reserve represents amounts paid by Telkom to Rossal No 65

(Proprietary) Limited and Acajou Investments (Proprietary) Limited,
subsidiaries, for the acquisition of the Company’s shares to be
utilised in terms of the Telkom Conditional Share Plan (TCSP).
Treasury shares
At March 31, 2009, 11,646,680 (2008: 10,493,141;
2007: 12,237,016) and 8,143,556 (2008: 10,849,058;
2007: 10,849,058) ordinary shares in Telkom, with a fair value of
R1,229 million (2008: R1,377 million; 2007: R2,031 million) and
R859 million (2008: R1,423 million; 2007: R1,801 million) are
held as treasury shares by its subsidiaries Rossal No 65 (Proprietary)
Limited and Acajou Investments (Proprietary) Limited, respectively.
The shares held by Rossal No 65 (Proprietary) Limited and Acajou

Investments (Proprietary) Limited are reserved for issue in terms of the TCSP.
The decrease in the number of treasury shares is due to 1,552,029

(2008: 1,743,375; 2007: 450,505) shares that vested in terms
of the TCSP during the current financial year.
The fair value of these shares at the date of vesting was R228 million
22. SHARE-BASED COMPENSATION RESERVE

This reserve represents the cumulative grant fair value of the equity-
settled share-based payment transactions recognised in employee
expenses over the vesting period of the equity instruments granted
to employees in terms of the Telkom Conditional Share Plan
(refer to note 25).
No consideration is payable on the shares issued to employees,

but performance criteria will have to be met in order for the granted
shares to vest. The ultimate number of shares that will vest may differ
based on certain individual and Telkom performance conditions being
met. The related compensation expense is recognised over the vesting
period of the shares granted, commencing on the grant date.
The following table illustrates the movement within the share-based

compensation reserve:
Net increase in equity 106 386 433
Employee cost 141 522 554

Vesting and transfer of shares (35) (136) (121)
Balance at end of year 257 643 1,076
At March 31, 2009 the estimated total compensation expense to be recognised over the vesting period was R1,824 million (2008:
R2,151 million; 2007: R580 million), of which R554 million (2008: R522 million; 2007: R141 million) was recognised in employee
expenses for the year.

2007 2008 2009

Rm Rm Rm
23. INTEREST-BEARING DEBT

Non-current interest-bearing debt 3,308 7,336 10,193
Total interest-bearing debt (refer to note 12) 9,083 13,362 17,704
Gross interest-bearing debt 10,416 14,403 18,296

Discount on debt instruments issued (2,185) (1,898) (1,576)
Finance leases 852 857 984
Less: Current portion of interest-bearing debt (5,775) (6,026) (7,511)
Local debt (5,771) (6,000) (7,476)
Locally registered Telkom debt instruments (4,432) – –

Call borrowings – (2,600) –
Term loans – – (2,000)
Commercial paper bills (1,339) (3,400) (5,476)
Foreign debt – – –
Finance leases (4) (26) (35)
Total interest-bearing debt is made up as follows: 9,083 13,362 17,704
(a) Local debt 8,125 12,365 16,582
Locally registered Telkom debt instruments 6,786 8,164 11,106
Name, maturity, rate p.a., nominal value

TK01, 2008, 10%, RNil (2008: RNil; 2007: R4,680 million) 4,432 – –
TL12, 2012, 12.45%, R1,060 million (2008: RNil;
2007: RNil) – – 1,059
TL15, 2015, 11.9%, R1,160 million (2008: RNil;
2007: RNil) – – 1,159
TL20, 2020, 6%, R2,500 million (2008: R2,500 million;
2007: R2,500 million) 1,246 1,283 1,325
PP02, 2010, 0%, R430 million (2008: R430 million;
2007: R430 million) 264 304 349
PP03, 2010, 0%, R1,350 million (2008: R1,350 million;
2007: R1,350 million) 844 977 1,131
Call borrowings, 2009, 11.58%, RNil (2008: R2,600 million;
2007: RNil) – 2,600 –
Term loans, 2010, 9.67%, R2,000 million (2008: R3,000 million;
2007: RNil) – 3,000 2,000
Syndicated loans, 2014, 11.46%, R4,100 million (2008: RNil;
2007: RNil) – – 4,083
Total interest-bearing debt is made up of R17,704 million debt at amortised cost (2008: R13,362 million debt at amortised cost; 2007:
R8,985 million debt at amortised cost and R98 million debt at fair value through profit or loss).

2007 2008 2009

Rm Rm Rm

Local bonds
The local Telkom bonds are unsecured, but a Side letter to the Subscription
Agreement (as amended) of the TL20 bond contains a number of restrictive
covenants which, if not met, could result in the early redemption of the loan.
The local bonds limit Telkom’s ability to create encumbrances on revenue or
assets, and secure any indebtedness without securing the outstanding bonds
equally and rateably with such indebtedness. The term loan agreements
limit Telkom’s ability to encumber, cede, assign, sell or otherwise dispose
of a material portion of its assets without prior written consent of the Lenders,
which will not be unreasonably withheld. The syndicated loan agreement
contains restrictive covenants as well as restrictions on encumbrances,
disposals, Group guarantees and Group loans.
Commercial paper bills 1,339 4,201 5,476

Rate p.a., nominal value
2009, 11.44% (2008: 11.71%; 2007: 9.04%), R5,559 million
(2008: R4,383 million; 2007: R1,350 million)
(b) Foreign debt 106 140 138

Maturity, rate p.a., nominal value
Euro: 2010 – 2025, 0.10% – 0.14% (2008: 0.10% – 0.14%;
2007: 0.10% – 0.14%), e11 million (2008: e11 million;
2007: e11 million)
(c) Finance leases 852 857 984

The finance leases are secured by buildings with a carrying value of
R152 million (2008: R174 million; 2007: R197 million) and office
equipment with a book value of R6 million (2008: R14 million;
2007: R6 million) (refer to note 9). These amounts are repayable
within periods ranging from 1 to 11 years. Interest rates vary
between 13.43% and 37.78%.
Included in non-current and current debt is:

Debt guaranteed by the South African Government 4,537 140 138
The Company may issue or re-issue locally registered debt instruments in terms of the Post Office Amendment Act 85 of 1991. The
borrowing powers of the Company are set out as per note 19.
Repayments/refinancing of current portion of interest-bearing debt

The Company issued new local bonds, the TL12 and TL15 with a nominal value of R1,060 million and R1,160 million respectively and
entered into a syndicated loan agreement with a nominal value of R4,100 million during the current year. Commercial Paper Bills with a
nominal value of R11,025 million were issued and Commercial Paper debt with a nominal value of R9,849 million was repaid during the
current year.
The R7,559 million nominal value of current portion of interest-bearing debt as at March 31, 2009 is expected to be repaid/refinanced
from proceeds of the Vodacom sale.
Management believes that sufficient funding facilities will be available at the date of repayment/refinancing.

2007 2008 2009

Rm Rm Rm
24. PROVISIONS 1,203 1,445 1,830
Employee related 2,351 2,477 3,079
Annual leave 363 364 415

Leave paid (6) (9) (15)
Post-retirement medical aid (refer to note 25) 1,120 1,336 1,723
Balance at beginning of year 2,589 1,120 1,336

Plan asset – initial recognition (1,720) – –
Contributions paid (78) (61) (63)

Bonus 586 490 616

Payments made (707) (569) (451)
Non-employee related 558 608 704
Supplier dispute (refer to note 35) 527 569 664
Balance at beginning of year – 527 569

Net movements 527 42 95
Other 31 39 40
Less: Current portion of provisions (1,706) (1,640) (1,953)
Annual leave (363) (364) (415)

Post-retirement medical aid (185) (185) (224)
Telephone rebates (26) (26) (29)
Bonus (586) (490) (616)
Supplier dispute (refer to note 35) (527) (569) (664)
Other (19) (6) (5)

24. PROVISIONS (continued)

Annual leave
In terms of the Company’s policy, employees are entitled to accumulate vested leave benefits not taken within a leave cycle, to a cap of
22 days which must be taken within an 18 month leave cycle. The leave cycle is reviewed annually and is in accordance with legislation.
Bonus
The bonus scheme consists of performance bonuses which are dependent on achievement of certain financial and non-financial targets.
The bonus is payable to all qualifying employees bi-annually after the Company’s results have been made public.
Supplier dispute
The Company provided R664 million (2008: R569 million; 2007: R527 million) for its estimate of the probable liability as discussed in
note 35. The net movement in the provision of R95 million consists of finance charges and fair value movements.
Other
Included in other provisions is an amount provided for asset retirement obligations.
25. EMPLOYEE BENEFITS

The Company provides benefits for all its permanent employees through the Telkom Pension Fund and the Telkom Retirement Fund.
Membership to one of the funds is compulsory. In addition, certain retired employees receive medical aid benefits and a telephone rebate.
The liabilities for all of the benefits are actuarially determined in accordance with accounting requirements each year. In addition, statutory
funding valuations for the retirement and pension funds are performed at intervals not exceeding three years.
At March 31, 2009, the Company employed 23,520 employees (2008: 24,879; 2007: 25,864).
Actuarial valuations were performed by qualified actuaries to determine the benefit obligation, plan asset and service costs for the pension
and retirement funds for each of the financial periods presented.

The Telkom Pension Fund is a defined benefit fund that was established in terms of the Post Office Amendment Act 85, of 1991.
The latest actuarial valuation performed at March 31, 2009 indicates that the pension fund is in a surplus position of R94 million after
unrecognised gains. The recognition of the surplus is limited due to the application of the asset limitation criteria in IAS19 (revised).
With effect from July 1, 1995, the Telkom Pension Fund was closed to new members. During the year ended March 31, 2007 a settlement
event occurred in the Telkom Pension Fund whereby 106 members were transferred to the Telkom Retirement Fund. The funded status of the
Telkom Pension Fund is disclosed below.

2007 2008 2009

Rm Rm Rm

Recognised actuarial loss/(gain) 9 (16) –
Net periodic pension expense recognised 33 5 29
Pension fund contributions (refer to note 5.1) 8 5 (1)
The status of the pension plan obligation is as follows:

Interest and service cost 22 21 21
Employee contributions 2 2 2
Actuarial gain (28) (6) (1)
Benefit obligation at end of year 205 204 199

Contributions 10 8 2
Actuarial gain/(loss) 75 10 (67)
Plan assets at end of year 284 311 247


2007 2008 2009

Rm Rm Rm

The Telkom Pension Fund (continued)
Present value of funded obligation 205 204 199
Fair value of plan assets (284) (311) (247)
Fund surplus (79) (107) (48)

Unrecognised net actuarial gain/(loss) 25 23 (46)
Net surplus (54) (84) (94)

Recognised net asset (54) (55) (55)

Actuarial return/(loss) on plan assets 75 10 (67)
Actual return/(loss) on plan assets 94 37 (39)

The overall long-term expected rate of return on assets is 10.5%.

This is based on the portfolio as a whole and not the sum of the
returns of individual asset categories. The expected return takes
into account the asset allocation of the Telkom Pension Fund
and expected long-term return of these assets, of which South
African equities and bonds are the largest contributors.
The assumed rates of mortality are determined by reference to

the SA85-90 (Light) Ultimate table, as published by the Actuarial
Society of South Africa, for pre-retirement purposes and the PA(90)
Ultimate table, minus one year age rating as published by the
Institute and Faculty of Actuaries in London and Scotland, for
retirement purposes.
Funding level per statutory actuarial valuation (%) 100.0 100.0 100.0
The number of employees registered under the Telkom Pension Fund 153 146 123
Equities (%) 74 54 57
Bonds (%) 5 5 25
Cash (%) 3 23 3
Insurance policies (%) 2 – –
The total expected contributions payable to the pension fund for the next financial year are R1 million.


The Telkom Retirement Fund was established on July 1, 1995 as a hybrid defined benefit and defined contribution plan. Existing employees
were given the option to either remain in the Telkom Pension Fund or to be transferred to the Telkom Retirement Fund. All pensioners of the
Telkom Pension Fund and employees who retired after July 1, 1995 were transferred to the Telkom Retirement Fund. Upon transfer the
Government ceased to guarantee the deficit in the Telkom Retirement Fund. Subsequent to July 1, 1995 further transfers of existing
employees occurred.
The Telkom Retirement Fund is a defined contribution fund with regard to in-service members. On retirement, an employee is transferred
from the defined contribution plan to a defined benefit plan. Telkom, as a guarantor, is contingently liable for any deficit in the Telkom
Retirement Fund. Moreover, all of the assets in the Fund, including any potential excess, belong to the participants of the scheme. The
Company is unable to benefit from the excess in the form of future reduced contributions.
Telkom guarantees any actuarial shortfall of the pensioner pool in the retirement fund. This liability is initially funded through assets of the
retirement fund. The latest actuarial valuation performed at March 31, 2009 indicates that the retirement fund is in a surplus funding position
of R1,549 million after unrecognised losses.
The Telkom Retirement Fund is governed by the Pension Funds Act 24 of 1956. In terms of section 37A of this Act, the pension benefits
payable to the pensioners cannot be reduced. If therefore the present value of the funded obligation were to exceed the fair value of plan
assets, Telkom would be required to fund the statutory deficit.
The information presented below is intended only to comply with the disclosure requirements of IAS19 (revised) and not to suggest that the
Company has a potential asset with regard to this Fund.
The funded status of the Telkom Retirement Fund is disclosed below:
2007 2008 2009

Rm Rm Rm

Recognised actuarial gain (145) – –
Net periodic pension expense not recognised (asset limitation) (322) (193) (180)
Retirement fund contributions (refer to note 5.1) 439 460 460
Benefit obligation:
Benefits paid (486) (488) (520)
Liability for new pensioners 44 14 143
Actuarial loss/(gain) 2,334 501 (636)

Benefits paid (486) (488) (520)
Asset backing new pensioners’ liabilities 44 14 143
Actuarial gain/(loss) 1,641 118 (1,735)


2007 2008 2009

Rm Rm Rm

Fund (surplus)/deficit (1,080) (890) 29

Unrecognised net actuarial loss (96) (478) (1,578)
Unrecognised net asset (1,176) (1,368) (1,549)

Actuarial gain/(loss) on plan assets 1,641 118 (1,735)
Actual gain/(loss) on plan assets 2,130 804 (939)
Included in the fair value of plan assets is:

Office buildings occupied by Telkom 371 596 619
Telkom bonds 21 10 –
Telkom shares 284 141 132
The Telkom Retirement Fund invests its funds in South Africa and
internationally. Twelve fund managers invest in South Africa and
five of these managers specialise in trades with bonds on behalf
of the Retirement Fund. The international investment portfolio
consists of global equity and hedged funds.

The overall long-term expected rate of return on assets is 10.7%. This is

based on the portfolio as a whole and not the sum of the returns of
individual asset categories. The expected return takes into account the
asset allocation of the Telkom Retirement Fund and expected long-
term return on these assets, of which South African equities, foreign
investments and South African index-linked bonds are the largest contributors.

SA85-90 (Light) Ultimate table, as published by the Actuarial Society of
South Africa, for pre-retirement purposes and the PA(90) Ultimate table,
minus one year age rating as published by the Institute and Faculty of
Actuaries in London and Scotland, for retirement purposes.
Funding level per statutory actuarial valuation (%) 100 100 100
The number of pensioners registered under the Telkom Retirement Fund 14,451 14,255 13,617
The number of in-service employees registered under the Telkom
Retirement Fund 25,766 24,939 23,389

2007 2008 2009

Rm Rm Rm

Equities (%) 59 70 55
Property (%) 2 2 –
Bonds (%) 19 11 5
Cash (%) 7 1 5
Index linked (%) – – 15
The expected pension benefits payments for the year ending March 31, 2010 are R541,000.
Medical benefits
The Company makes certain contributions to medical funds in respect of current and retired employees. The scheme is a defined benefit
plan. The expense in respect of current employees’ medical aid is disclosed in note 5.1. The amounts due in respect of post-retirement
medical benefits to current and retired employees have been actuarially determined and provided for as set out in note 24. The Company
has terminated future post-retirement medical benefits in respect of employees joining after July 1, 2000.
There are three major categories of members entitled to the post-retirement medical aid: pensioners who retired before 1994 (Pre-94); those
who retired after 1994 (Post-94); and the in-service members. The Post-94 and the in-service members’ liability is subject to a Rand cap,
which increases annually with the average salary increase.
Eligible employees must be employed by Telkom until retirement age to qualify for the post-retirement medical aid benefit. The most recent
actuarial valuation of the benefit was performed as at March 31, 2009.
The Company has allocated certain investments to fund this liability as set out in note 11.
2007 2008 2009

Rm Rm Rm
Medical aid
Benefit obligation:
Contributions paid by the Company (78) (61) (63)


2007 2008 2009

Rm Rm Rm

At beginning of year – 1,961 1,929
Plan asset – initial recognition 1,720 – –
Actuarial gain/(loss) 147 (164) (393)

Fund deficit 2,405 2,902 3,771

Unrecognised net actuarial loss (1,285) (1,566) (2,048)
Liability as disclosed in the balance sheet (refer to note 24) 1,120 1,336 1,723

Actuarial return on plan assets 147 (164) (393)
Actual gain/(loss) on plan assets 335 93 (170)

Medical inflation rate (%) 6.5 8.0 7.7




The valuation results are sensitive to changes in the underlying assumptions. The following table provides an indication of the impact of
changing some of the valuation assumptions:
Current
assumption Decrease Increase
Rm Rm Rm
Medical cost inflation rate 7.7% -1.0% +1.0%
Benefit obligation 5,389 (736) 921

Service cost and interest cost 2009/2010 555 (84) 108

Discount rate 8.7% -1.0% +1.0%

Post-retirement mortality rate PA(90) ultimate- 1 -10.0% +10.0%

2007 2008 2009

Equities (%) 59 56 30
Bonds (%) 3 2 2
Cash and money market investments (%) 21 33 10
Insurance policies (%) 8 – 49


Telephone rebates
The Company provides telephone rebates to its pensioners. The most recent actuarial valuation was performed at March 31, 2009.
Eligible employees must be employed by the Company until retirement age to qualify for the telephone rebates. The scheme is a defined
benefit plan.
The status of the telephone rebate liability is disclosed below:
2007 2008 2009

Rm Rm Rm
Benefit obligation opening balance 251 307 443
Service cost 4 3 6
Actuarial (gain)/loss (39) 133 19
Amendments 93 – –
Present value of unfunded obligation 307 443 484

Unrecognised net actuarial loss and past service cost (25) (156) (159)
Liability as disclosed in the balance sheet (refer to note 24) 282 287 325

Rebate inflation rate (%) – 4.0 4.0

standard published mortality table PA (90) Ultimate standard tables,
as published by the Institute and Faculty of Actuaries in London
and Scotland, rated down one year to value the pensioners.

Telkom Conditional Share Plan

Telkom’s shareholders approved the Telkom Conditional Share Plan at the January 2004 Annual General Meeting. The scheme covers both
operational and management employees and is aimed at giving shares to Telkom employees, at a RNil exercise price, at the end of the
vesting period. The vesting period for the operational employees awarded in 2004 and 2005 is 0% in year one and 33% in each of the
three years thereafter, while the shares allocated in 2006 and 2007 together with management shares vest fully after three years.
Although the number of shares awarded to employees will be communicated at the grant date, the ultimate number of shares that vest may
differ based on certain performance conditions being met.
The Telkom Board approved the fourth enhanced allocation of shares to employees as at September 4, 2007, with a grant date of
September 27, 2007, the day that the employees and the Company shared a common understanding of the terms and conditions of the
grant. A total number of 6,089,810 shares were granted.
The Board has also approved an enhanced allocation for the November 2006 grant on September 4, 2007 with a grant date of
September 27, 2007. The number of additional shares granted with regard to the 2006 allocation is 4,966,860 shares.


The weighted average remaining vesting period for the shares outstanding as at March 31, 2009 is 0.71 years (2008: 1.25 years;
2007: 1.75 years).
2007 2008 2009
The following table illustrates the movement of the maximum number

of shares that will vest to employees for the August 2004 grant:
Outstanding at beginning of the year 2,414,207 1,883,991 420,590
Granted during the year 1,212 252 –
Vested during the year (450,505) (1,419,863) (416,605)
Outstanding at end of the year 1,883,991 420,590 –

of shares that will vest to employees for the June 2005 grant:
Outstanding at beginning of the year 1,930,687 1,864,041 1,435,387
Granted during the year 1,005 3,469 52,954
Vested during the year – (323,946) (1,135,424)
Outstanding at end of the year 1,864,041 1,435,387 307,729

of shares that will vest to employees for the November 2006 grant:
Outstanding at beginning of the year – 1,773,361 1,640,980
Granted during the year 1,825,488 833 –
Outstanding at end of the year 1,773,361 1,640,980 1,508,366

of shares that will vest to employees relating to the additional
November 2006 grant:

of shares that will vest to employees for the September 2007 grant:



The fair value of the shares granted have been calculated by an actuary using the Black-Scholes-Merton model and the following values
at grant date:
August 8, June 23, November 2, September 4,
2004 2005 2006 2007
Grant Grant Grant Grant
Market share price (R) 77.50 111.00 141.25 173.00

Dividend yield (%) 2.60 3.60 3.50 3.50
2007 2008 2009

Rm Rm Rm
The principal assumptions used in calculating the expected number

of shares that will vest are as follows:
Employee turnover (%) 5 5 9
Meeting specified performance criteria (%) 100 100 75
The amounts for the current and previous four years are as follows:
2005 2006 2007 2008 2009
Rm Rm Rm Rm Rm
Telkom Pension Fund

Plan assets 231 243 284 311 247
Surplus/(deficit) 45 (38) 79 107 48

Asset limitation – – – (29) (39)
Unrecognised actuarial loss/(gain) 89 118 (25) (23) 46
Recognised net asset 134 80 54 55 55
Experience adjustment on assets 75 10 (67)

Experience adjustment on liabilities 28 (6) 1

Plan assets 4,477 5,973 7,661 7,991 6,675
Surplus/(deficit) 457 1,596 1,080 890 (29)

Unrecognised actuarial gain/(loss) 312 (742) 96 478 1,578
Unrecognised net asset 769 854 1,176 1,368 1,549
Experience adjustment on assets* 1,641 118 (1,735)

Experience adjustment on liabilities* 1,234 485 (645)

2005 2006 2007 2008 2009

Rm Rm Rm Rm Rm

Medical benefits
Plan assets – – 1,961 1,929 1,618
Deficit (3,057) (3,889) (2,405) (2,902) (3,771)

Unrecognised actuarial loss 648 1,300 1,285 1,566 2,048
Liability recognised (2,409) (2,589) (1,120) (1,336) (1,723)
Experience adjustment on assets 147 (164) (393)

Experience adjustment on liabilities 28 193 246
Telephone rebates
Unrecognised actuarial (gain)/loss (2) 53 25 156 159
Liability recognised (179) (198) (282) (287) (325)
Experience adjustment on liabilities (25) 2 2
The experience adjustments on assets and liabilities for each of the financial periods ended March 31, 2005 and 2006 have not been
disclosed due to the fact that it was impractical to determine the information.
* During the March 31, 2007 year end Telkom actuaries performed a full valuation while for the March 31, 2006 year end a roll forward method was used,
as permitted under IAS19, to determine the present value of the benefit obligation and the fair value of the plan assets using the March 31, 2005 statutory
valuation as a base applying the relevant assumptions determined by management to arrive at the present value of the benefit obligation, and the fair value
of plan assets.
This change in estimate resulted in a movement to the actuarial loss of R700 million and the fair value of the plan assets of R350 million in respect of the
March 31, 2007 estimates. The remaining R1,291 million is a result of the actual investment returns exceeding the expected return for the March 31, 2007
year end.
2007 2008 2009

Rm Rm Rm
26. DEFERRED REVENUE 1,846 2,294 2,822
Non-current deferred revenue 739 870 996

Current portion of deferred revenue 1,107 1,424 1,826
Included in deferred revenue is profit on the sale and leaseback of certain Telkom buildings of R107 million, consisting of a non-current
portion of R96 million (2008: R107 million; 2007: R118 million) and a current portion of R11 million (2008: R11 million; 2007:
R11 million). A profit of R11 million per annum is recognised in income on a straight-line basis, over the period of the lease ending 2019
(refer to note 34).

2007 2008 2009

Rm Rm Rm
27. TRADE AND OTHER PAYABLES 4,333 4,923 5,424
Trade payables 2,761 3,267 3,035

Finance cost accrued 22 39 156
Accruals and other payables 1,550 1,617 2,233
Accruals and other payables mainly represent amounts payable

for goods received, net of Value Added Tax obligations and
licence fees.
Included in accruals and other payables are amounts owed

to Rossal No 65 (Proprietary) Limited of R342 million
(2008: RNil; 2007: R148 million) and Intekom (Proprietary) Limited
of R23 million (2008: R13 million; 2007: R5 million).
28. RECONCILIATION OF PROFIT FOR THE YEAR TO CASH

GENERATED FROM OPERATIONS
Cash generated from operations 12,660 12,662 12,027

Finance charges and fair value movements 1,027 1,289 1,459
Taxation 2,690 2,599 516
Investment income (3,202) (3,739) (2,906)
Interest received from debtors (189) (248) (404)
Non-cash items 4,565 4,637 7,981
Depreciation, amortisation and write-offs 3,583 3,732 4,358

Cost of equipment disposed when recognising finance leases 240 88 71
Recognition of the FIFA brand intangible asset from deferred revenue – – (261)
Increase in provisions 1,103 757 1,439
Profit on disposal of property, plant and equipment and intangible
assets (15) (167) (32)
Profit on disposal of investment (364) – –
Interest received from subsidiaries – – 221
Loss on disposal of property, plant and equipment and intangible
assets 1 2 6
Impairment of investments and loans 17 225 2,179
(Increase)/decrease in working capital (622) 157 104
Inventories (459) (202) (627)

Accounts receivable (319) (196) 848
Accounts payable 156 555 (117)

2007 2008 2009

Rm Rm Rm
29. DIVIDEND RECEIVED 2,950 3,536 3,242
Dividend income per income statement (refer to note 6) 3,006 3,597 2,747
Dividend accrued for the previous year 1,479 1,535 1,595
Dividend accrued for the current year (1,535) (1,596) (1,100)
Dividend received consists of: 2,950 3,536 3,242
Dividend received from joint venture 2,650 2,825 3,095

Dividend received from subsidiaries 300 711 147
30. FINANCE CHARGES PAID (886) (842) (466)
Finance charges per income statement (1,027) (1,289) (1,460)

Non-cash items 141 447 994
Movements in interest accruals (81) 49 255

Net discount amortised 409 568 698
Fair value adjustment (172) (275) (29)
Unrealised (loss)/gain (15) 105 70
31. TAXATION PAID (3,852) (1,716) (1,764)
Taxation (payable)/receivable at beginning of year (1,164) 519 (7)

South African normal company taxation (excluding deferred taxation) (1,874) (1,879) (1,510)
Secondary taxation on companies (295) (363) (156)
Taxation (payable)/receivable at end of year (519) 7 (91)
32. DIVIDEND PAID (4,874) (5,858) (3,435)
Dividend payable at beginning of year (4) (15) (20)

Declared during the year – dividend on ordinary shares: (4,885) (5,863) (3,438)
Final dividend for 2006: 500 cents (2,714) – –

Special dividend for 2006: 400 cents (2,171) – –
Final dividend for 2007: 600 cents – (3,198) –
Special dividend for 2007: 500 cents – (2,665) –
Final dividend for 2008 : 660 cents (3,438)
Dividend payable at end of year 15 20 23


33. ACQUISITION OF MINORITY INTEREST IN SUBSIDIARY

Multi-Links Telecommunications (Proprietary) Limited (Multi-Links)
Telkom acquired 75% of the issued share capital of Multi-Links Telecommunications Limited through Telkom International (Proprietary) Limited,
from Kenston Investment Limited on May 1, 2007. Telkom also granted Kenston the irrevocable right and option (put option) to require
Telkom to acquire all of the shares held by Kenston (25% shareholding) in Multi-Links, at any time during the 90 day period following
the second anniversary of the effective date. The put option was exercised on January 21, 2009 for R1,328 million (US$130 million at
US$1 = R10,2188).
2007 2008 2009

Rm Rm Rm
34. COMMITMENTS
Capital commitments
Capital commitments authorised 7,000 7,000 6,991
Commitments against authorised capital expenditure 507 652 539

Authorised capital expenditure not yet contracted 6,493 6,348 6,452
Capital commitments comprise commitments for property, plant and equipment and software included in intangible assets.
Management expects these commitments to be financed from proceeds of Vodacom sale.
2010 FIFA World Cup commitments

The FIFA World Cup commitment is an executory contract which requires the Company to develop the fixed-line components of the
necessary telecommunications infrastructure needed to broadcast this event to the world. This encompasses the provisioning of the fixed-
line telecommunications related products and services and, where applicable, the services of qualified personnel necessary for the
planning, management, delivery, installation and de-installation, operation, maintenance and satisfactory functioning of these products and
services. Furthermore as a National Supporter, Telkom owns a tier 3 sponsorship that grants Telkom a package of advertising, promotional
and marketing rights that are exercisable within the borders of South Africa. Telkom entered into a barter transaction in return for which it
has an outstanding commitment to FIFA of R243 million (2008: R260 million). This has been recognised in intangible assets (note 10).


Rm Rm Rm Rm

Operating lease commitments and receivables
2009
Cash flow
Vehicles 1,137 261 876 –
Customer premises equipment receivable 88 49 39 –
Total cash flow 1,401 375 1,016 10
The above figures represent actual cash flows relating

to operating leases expected during the periods
specified. However, due to the straight-lining effect of
operating leases, the amounts that would be recognised
in the income statement in the periods specified, would
be as follows:
Income statement
Vehicles 1,137 261 876 –
Customer premises equipment receivable 88 49 39 –
Total to be recognised in the income statement 1,389 372 1,008 9
Vehicles, equipment and customer premises equipment

have no fixed annual escalation, therefore the cash
flows and income statement recognition would be
the same.
2008
Cash flow
Vehicles 1,430 226 1,204 –
Customer premises equipment receivable (84) (45) (39) –
Total cash flow 1,459 238 1,223 (2)
Income statement
Vehicles 1,430 226 1,204 –
Total to be recognised in the income statement 1,443 232 1,212 (1)



Rm Rm Rm Rm

Operating lease commitments and receivables (continued)
2007
Cash flow
Vehicles 564 564 – –
Total cash flow 632 583 52 (3)
Income statement
Vehicles 564 564 – –
Total to be recognised in the income statement 613 578 37 (2)
Operating leases
The Company leases certain buildings, vehicles and equipment. The majority of the lease terms negotiated for equipment-related premises
are ten years with other leases signed for five and three years. The majority of the leases normally contain an option clause entitling Telkom
to renew the lease agreements for a period usually equal to the main lease term.
The minimum lease payments under these agreements are subject to annual escalations, which range from 6% to 15%.
Penalties in terms of the lease agreements are only payable should Telkom vacate the premises and negotiate to terminate the lease
agreement prior to the expiry date, in which case the settlement payment will be negotiated in accordance with the market conditions of
the premises. Future minimum lease payments under operating leases are included in the note above. Onerous leases for buildings, of
which the Company has no further use, no possibility of sub-lease and no option to cancel, are provided for in full and included in other
provisions, refer to note 24.
The master lease agreement for vehicles was for a period of five years and then extended for an additional three years which resulted in
the lease expiring on March 31, 2008. During August 2007 new terms were negotiated and approved and as a result the operating
lease commitments for vehicles are based on the new agreement which expires on March 31, 2013.
In accordance with this agreement Telkom is not allowed to lease any similar vehicle as specified in the contract from any other service
provider during the five year period except for the rentals at airports which are utilised in cases of subsistence and travel as well as vehicles
which are not part of the agreement.
The agreement is structured to have no lease increases on vehicles that are continually leased from the lessor. If a vehicle is, however,
replaced by a new similar vehicle, the lease costs of the newest vehicle will increase by the Consumer Price Index. All leased vehicles are,
however, subject to any variance in the interest rate fluctuations and are adjusted as and when the adjustments are announced by the South
African Reserve Bank. The leases of individual vehicles are renewed annually.


Operating leases (continued)
The master lease agreements for office equipment are with two suppliers with initial periods of 36 months effective from November 25,
2005. Upon expiry of the initial lease agreement on November 25, 2008, an extension of the lease was negotiated until November 24,
2009. In terms of these agreements the leases of individual equipment shall be valid at a fixed fee for the entire period.

Rm Rm Rm Rm
Finance lease commitments
Vehicles
2009
2008
Buildings
2009
Minimum lease payments 1,652 111 545 995
Finance charges (822) (111) (426) (284)
Finance lease obligation 830 – 119 711
2008
Finance charges (936) (114) (439) (383)
Finance lease obligation* 842 12 63 767
2007
Finance charges (1,051) (116) (446) (489)
Finance lease obligation 846 4 41 801
Equipment
2009
*These prior year figures have been restated to include the finance lease obligation with regard to the Campus property.

Total <1 year 1 - 5 years >5 years

Rm Rm Rm Rm

Finance lease commitments (continued)
Equipment (continued)
2008
Finance charges (2) – (2) –
2007
Finance charges – – – –
Finance leases
Finance leases on vehicles relates to the lease of Swap bodies. The lease term for the Swap bodies is April 2008 to April 2013.
A major portion of the finance leases on buildings relates to the sale and lease-back of the Company’s office buildings. The lease term
negotiated for the buildings is for a period of 25 years ending 2019. The minimum lease payments are subject to an annual escalation
of 10% p.a. Telkom has the right to sublet part of the buildings. In case of breach of contract, the lessor is entitled to cancel the lease
agreement and claim damages.
Finance charges accruing on one of the Company’s building leases exceed the lease payments for the next three years. Minimum lease
payments for the next five years do not result in any income accruing to the Company.
Finance leases on equipment mainly relates to office equipment. The lease term negotiated for the finance leases is for the period of three
years ending in 2011.
35. CONTINGENCIES
Supplier dispute
Telcordia instituted arbitration proceedings against Telkom in March 2001 before a single arbitrator of the International Court of Arbitration,
operating under the auspices of the International Chamber of Commerce. Telcordia is seeking to recover approximately US$130 million
for monies outstanding and damages, plus costs and interest at a rate of 15.5% per year which was increased by Telcordia to
US$172 million in the 2007 financial year and subsequently decreased to US$128 million in the 2008 financial year. The arbitration
proceeding relates to the cancellation of an agreement entered into between Telkom and Telcordia during June 1999 for the development
and supply of an integrated end-to-end customer assurance and activation system by Telcordia.
In September 2002, the arbitrator found that Telkom had wrongfully repudiated the contract and a partial award was issued by the
arbitrator in favour of Telcordia. Telkom subsequently filed an application in the South African High Court to review and set aside the partial
award.
On November 27, 2003, the South African High Court set aside the partial award and issued a cost order in favour of Telkom. On
May 3, 2004, the South African High Court dismissed an application by Telcordia for leave to appeal and ordered Telcordia to pay the
legal costs of Telkom.
On November 29, 2004, the Supreme Court of Appeals granted Telcordia leave to appeal. Telcordia filed a notice of appeal and also
petitioned the United States District Court for the District of Columbia to confirm the partial award, which petition was dismissed, along
with a subsequent appeal. Following the dismissal of the appeal, Telcordia filed a similar petition in the United States District Court of New
Jersey. The United States District Court of New Jersey also dismissed Telcordia’s petition, reaffirming the decision of the United States District
Court of Columbia. Telcordia appealed this dismissal, which was later dismissed by the Appeals Court of New Jersey.


Supplier dispute (continued)
The appeal by Telcordia in the Supreme Court of Appeals was set down for and heard on October 30 and October 31, 2006. Following
the successful upholding of the appeal, Telkom filed an application for leave to appeal to the Constitutional Court on only the issue revolving
around the Supreme Court of Appeals’ failure to recognise Telkom’s rights of access to the courts under the South African Arbitration Act.
The Constitutional Court has since dismissed Telkom’s appeal with costs. The Constitutional Court judgment brought to finality the dispute
over the merits of Telcordia’s claim against Telkom and the parties reconvened the arbitration in May 2007 to deal with the amount of
damages to which Telcordia is entitled.
Two hearings were held at the International Dispute Resolutions Centre, or IDRC. The first hearing was held in London on May 21, 2007
and was a ’directions hearing’, in terms of which the parties consented to a ruling by the arbitrator setting out a consolidated list of
proposals and issues to form part of the damages hearing.
The second hearing was held in London at the IDRC on June 25 and 26, 2007 and dealt with the application by Telcordia for the striking
out of part of Telkom’s defence on the basis that Telkom had raised issues in its defence that had already been heard by the arbitrator prior
to his partial award. This application was dismissed by the arbitrator. The arbitrator also made a ruling compelling Telcordia to provide
certain particulars requested by Telkom with regard to the claims by Telcordia. In his ruling, the arbitrator also set out a list of issues for
determination of the damages.
The mediation took place in London in February and April of 2008 without success. In the interim the parties have agreed to the
appointment by the arbitrator of a third party expert to deal with the technical issues in relation to the software that was required to be
provided by Telcordia, who will make a recommendation to the arbitrator in dealing with the amount of the claims. A further hearing was
held before the arbitrator in October 2008 during which the arbitrator permitted Telkom to amend its statement of defence. Further hearings
were held before the software expert in November 2008 and he has made his report available. Further hearings took place before the
arbitrator in April 2009.
The parties have now agreed that the whole question of “integration” of the software will be done at an experts only hearing (no lawyers)
before Mr P Burns, a software expert in Johannesburg during October 2009. The hearings before the software expert will have an impact
on the quantum of the other claims. The arbitrator has confirmed that the final hearing will be from January 25 to February 10, 2010 in
Johannesburg.
Although Telkom is currently unable to predict the exact amount that it may eventually be required to pay Telcordia, it has made provisions
for estimated liabilities in respect of the Telcordia claim in the sum of US$70 million (R664 million), including interest and legal fees. Telkom
will be required to fund any payments to Telcordia from cash flows or the incurrence of debt and the amount of any damages above
Telkom’s provision would increase Telkom’s liabilities and decrease its net profit, which could have a material adverse effect on its financial
condition, cash flows and results of operations.
A provision has been raised based on management’s best estimate of the probable payments in this regard.
2007 2008 2009

Rm Rm Rm
Supplier dispute liability included in current portion of provisions 527 569 664*
The provision has increased from March 31, 2007 due to exchange rate movements.
* US$70 million (2008: US$70 million; 2007 US$70 million).


Competition Commission
Telkom is a party to a number of legal and arbitration proceedings filed by parties with the South African Competition Commission alleging
anti-competitive practices described below. If Telkom were found to have committed prohibited practices as contained in the Competition
Act, 1998, as amended, Telkom could be required to cease these practices, divest these businesses and be fined a penalty of up to 10%
of Telkom’s annual turnover, excluding the turnover of subsidiaries and joint ventures, for each complaint for the financial years prior to the
dates of the complaints. The Competition Commission has to date not imposed the maximum penalty on any offender.
On July 31, 2008, Telkom received a summons issued by the Competition Commission requesting information in connection with
investigations being conducted by the Competition Commission into five complaints against Telkom described in greater detail below by
the Internet Service Association, MWEB, Internet solutions and Verizon SA Limited. The summons was subsequently withdrawn by the
Competition Commission following on agreement with Telkom in a co-operative process with the Competition Commission as part of the
Competition Commission’s ongoing investigations into these complaints. The investigation is expected to be finalised in the 2009 calendar
year.
As competition continues to increase, we expect that we will become involved in an increasing number of disputes regarding the legality
of services and products provided by us and third parties. These disputes may range from court lawsuits to complaints lodged by or against
us with various regulatory bodies. We are currently unable to predict the amount that we may eventually be required to pay in these
proceedings, however, we have not included provisions for any of these claims in our financial statements. In addition, we may need to
spend substantial amounts defending or prosecuting these claims even if we are ultimately successful. If Telkom is required to cease these
practices, divest itself of the relevant businesses or pay significant fines, Telkom’s business and financial condition could be materially
adversely affected and its revenue and net profit could decline. We may be required to fund any penalties or damages from cash flows
or drawings on our credit facilities, which could cause our indebtedness to increase.
Independent Cellular Services Provider Association of South Africa (ICSPA)

In 2002, the ICSPA filed a complaint against Telkom at the Competition Commission in terms of the Competition Act, alleging that Telkom
had entered into contracts with large corporations, providing large discounts with the effect of discouraging the corporates from using the
‘premicell’ device installed by their members. ICSPA also alleged various contraventions of the Competition Act by Telkom. Telkom provided
the Competition Commission with certain information requested. Telkom also referred the Competition Commission to its High Court
application in respect of utilisation of the ‘premicell’ device. The Competition Commission declined to refer the matter to the Competition
Tribunal. ICSPA then referred the matter to the Competition Tribunal on September 18, 2003. Telkom filed its answering affidavit on
November 28, 2003. ICSPA has taken no further action since then.
The South African Value Added Network Services (SAVA)

On May 7, 2002, the South African Value Added Network Services Providers’ Association, an association of VANS providers, filed
complaints against Telkom at the Competition Commission of the Republic of South Africa under the South African Competition Act, 89 of
1998, alleging, among other things, that Telkom was abusing its dominant position in contravention of the Competition Act, 89 of 1998,
and that it was engaged in price discrimination. The Competition Commission determined, among other things, that several aspects of
Telkom’s conduct contravened the Competition Act, 89 of 1998, and referred certain of the relevant complaints to the Competition Tribunal
for adjudication. The referred complaints deal with Telkom’s alleged refusal to provide telecommunications facilities to certain VANS
providers to construct their networks, refusal to lease access facilities to VANS providers, provision of bundled and cross subsidised
competitive services with monopoly services, discriminatory pricing with regard to leased line services and alleged refusal to peer with
certain VANS providers.


The South African Value Added Network Services (SAVA) (continued)
Telkom brought an application for review against the Competition Commission and the Competition Tribunal in the South African High
Court, in respect of the decision by the Competition Commission to refer the matters to the Competition Tribunal. Telkom is of the view that
the Competition Tribunal does not have jurisdiction to adjudicate these matters and argued that ICASA has the requisite jurisdiction. In the
review application, Telkom also sought to set aside the decision by the Competition Commission to refer the complaints to the Competition
Tribunal on the basis that the Competition Commission was biased, that the referral was out of time and that the Competition Commission
had not adhered to the memorandum of understanding between it and ICASA. Only the Competition Commission opposed the application
and filed an answering affidavit.
The main complaint at the Competition Commission was held over pending the outcome of the review application.
The application for review was heard on April 24 and 25, 2008. The South African High Court judge set aside the decision of the
Competition Commission to refer the SAVA complaints and the Omnilink complaint against Telkom discussed below to the Competition
Tribunal. The decision was made based on three grounds, namely that:
• the Competition Commission failed to comply with the peremptory provisions of the memorandum of understanding between the
Competition Commission and ICASA;
• the referral was out of time, on the basis that the agreements with the complainants to extend the time which the Competition Commission
was allowed to investigate the complaints were invalid; and
• the Competition Commission’s reliance on a report by the Link Centre created reasonable apprehension of bias, since some of the
complainants contribute financially to the Link Centre and the Link Centre’s advisory board includes employees of the complainants in
the SAVA complaints.
The judge did not make a decision on the question of jurisdiction (ie, whether ICASA or the Competition Tribunal has the jurisdiction to
deal with competition matters in the electronic communications industry).
On july 3, 2008, the Competition Commission filed an application for leave to appeal the decision of the High Court on the basis that
the judge erred on the issue of bias as well as his finding that issues surrounding the extension of time to investigate the issues constitutes
a ground for review. Telkom then filed an application for leave to cross-appeal on July 11, 2008. The main basis of Telkom’s cross-appeal
is that Telkom believes that the judge erred in failing to make a decision as to whether ICASA or the Competition Commission and
Competition Tribunal should deal with this type of complaint. The application for leave to appeal as well as the application for leave to
cross-appeal were granted by the Pretoria High Court on October 9, 2008. The parties are attending to the filing of the record of
proceedings before the High Court as well as the parties’ heads of argument, after which the Registrar of the Supreme Court of Appeal
will inform the parties of the date for the hearing. The main complaint before the Competition Tribunal will continue to be held over pending
the outcome of the appeal and cross-appeal.
This matter is not expected to be finalised within the 2010 financial year.
Omnilink
On August 22, 2002, Omnilink filed a complaint against Telkom at the Competition Commission alleging that Telkom was abusing its
dominance by discriminating in its price for Diginet services as against those charged to VANS and the price charged to customers who
apply for a Telkom VPN solution. The Competition Commission conducted an enquiry and subsequently referred the complaint, together
with the SAVA complaint, to the Competition Tribunal for adjudication. This matter is currently being dealt with together with the SAVA matter
discussed above.


Orion/Telkom (Standard Bank and Edcon): Competition Tribunal
In April 2003, Orion filed a complaint against Telkom, Standard Bank and Edcon at the Competition Commission concerning Telkom’s
discounts offered on public switched telecommunication services to corporate customers. In terms of the rules of the Competition
Commission, the Competition Commission, who acts as an investigator, had one year to investigate the complaint. Orion simultaneously
with the filing of the complaint, also filed an application against Telkom, Standard Bank and Edcon at the Competition Tribunal, for an
interim order interdicting and restraining Telkom from offering Orion’s corporate customers reduced rates associated with Telkom’s Cellsaver
discount plan.
The Competition Commission completed its investigation and decided that there was no prima facie evidence of any contravention of the
Competition Act. Orion however referred the matter to the Competition Tribunal in terms of section 51 of the Competition Act, which allows
for parties to refer matters to the Competition Tribunal themselves. Telkom has not yet filed its answering affidavit in the main complaint
before the Competition Tribunal. To date there have been no further developments on this matter.
The Internet Service Providers Association (ISPA)

In December 2005, the ISPA, an association of ISPs, filed complaints against Telkom at the Competition Commission regarding alleged
anti-competitive practices on the part of Telkom. The complaints deal with the cost of access to SAIX, the prices offered by TelkomInternet,
the alleged delay in provision of facilities to ISPs and the alleged favourable installation timelines offered to TelkomInternet customers. The
Competition Commission has formally requested Telkom to provide it with certain records of orders placed for certain services, in an attempt
to first investigate the latter aspects of the complaint. Telkom provided the Competition Commission with the information.
MWEB and Internet Solutions (IS)

On June 29, 2005, MWEB and Internet Solutions, or IS, jointly lodged a complaint with the Competition Commission against Telkom and
also requested interim relief at the Competition Tribunal. The complaint at the Competition Commission mainly deals with Telkom’s pricing
for ADSL retail products and its IP Connect products, the termination of the peering link between Telkom and IS, the wholesale pricing of
SAIX bandwidth for ADSL users of other internet service providers, the architecture of Telkom’s ADSL access route and the manner in which
internet service providers can only connect to Telkom’s edge service router via IP Connect as well as alleged excessive pricing for bandwidth
on Telkom’s international undersea cable. The application for interim relief at the Competition Tribunal dealt with allegations that Telkom
should maintain the peering link between IS and Telkom in terms of its current peering agreement, and demanded that Telkom treat the
traffic generated by ADSL customers of MWEB as traffic destined for the peering link and that Telkom upgrade its peering link to
accommodate the increased ADSL traffic emanating from MWEB and maintain a maximum of 65% utilisation. Telkom filed its answering
affidavit, and is awaiting IS and MWEB’s replying affidavit.
Since then, Telkom has entered into a new peering agreement with IS and has responded to numerous documentation and information
requests from the Competition Commission. To date neither MWEB nor IS has filed a replying affidavit in the interim relief application.
MWEB
On June 5, 2007, MWEB brought an application against Telkom for interim relief at the Competition Tribunal with regard to the manner
in which Telkom provides wholesale ADSL internet connections. MWEB requested the Competition Tribunal to grant an order of interim
relief against Telkom to charge MWEB a wholesale price for the provision of ADSL internet connections which is not higher than the lowest
retail price. MWEB further applied for an order that Telkom implement the migration of end customers from Telkom PSTS ADSL access to
MWEB without interruption of the service. Telkom raised the objection that the Competition Tribunal does not have jurisdiction to hear the
matter in its answering affidavit filed at the Competition Tribunal. Telkom still had to “plead over” as to the merits of the matter. Telkom also
filed an application in the Transvaal Provincial Division of the South African High Court on July 3, 2007 for an order declaring that the
Competition Tribunal does not have jurisdiction to hear the application for interim relief made to it by MWEB.


MWEB (continued)
The application before the High Court was set down for hearing during the first quarter of the 2009 financial year. The parties however
entered into settlement negotiations, which resulted in the withdrawal of the interim relief application at the Competition Tribunal by MWEB
as well as a withdrawal of the jurisdictional challenge filed at the South African High Court by Telkom. The parties are in further
negotiations.
Verizon SA Limited (Verizon)

Verizon filed a complaint against Telkom on March 22, 2007 alleging that Telkom charges an excessive price on services rendered to
Verizon, thereby inducing Verizon’s customers not to deal with Verizon, engages in exclusionary conduct through “margin squeeze” in
offering prices to end-users which are lower than the prices at which it sells rights of access to its infrastructure on a wholesale basis to
Verizon, and that Telkom engages in price discrimination against Verizon.
Internet Solutions (IS)

IS filed a complaint against Telkom at the Competition Commission during December 2007. The complaint alleges abusive conduct by
Telkom. IS specifically alleges that Telkom is charging excessive prices that bear no reasonable relation to the economic value of the goods
or services, that Telkom has raised the wholesale cost to downstream competitors, while also reducing the downstream retail price to clients;
engaging in margin squeeze, that Telkom has introduced a series of bundled products (namely Telkom Closer Products) that limit the ability
of rivals in particular markets to compete effectively, and Telkom is offering discriminatory prices in relation to a number of infrastructural
and service items that IS is compelled to purchase from Telkom.
While that complaint was being investigated by the Competition Commission, IS brought an application to the Competition Commission
for interim relief requesting: that Telkom be ordered to charge IS a wholesale price for telecommunication facilities to provide virtual private
network services to its customers no higher than the lowest retail price for such connection charged to Telkom’s VPN Supreme customers
and ordering that the costs of the application be paid by Telkom.
Telkom opposed the application by IS at the Competition Tribunal although it is unable to finalise its opposing papers due to difficulties
associated with the manner in which IS claimed confidentiality over the application. No further activity has taken place with regard to the
interim relief application to date.
Maredi Telecom and Broadcasting (Proprietary) Limited (Maredi)

Maredi served a notice of motion on Telkom, Ericsson SA and Telsaf Data (Pty) Limited on January 8, 2009. The matter relates to a tender
published by Telkom for the supply of point-to-point split mount microwave equipment. Maredi, Telsaf, Ericsson and a fourth company,
Mobax, were shortlisted. The tender was awarded by Telkom to Telsaf and Ericsson.


Maredi Telecom and Broadcasting (Proprietary) Limited (Maredi) (continued)
Maredi applied for a court order, with a court hearing date set for February 3, 2009, requesting that the court prevent Telkom from entering
into a contract with Ericsson and Telsaf or either party, and from ordering goods or services from Ericsson and Telsaf pursuant to the tender.
Maredi also requested an order that the court review and set aside the award of the tender to Telsaf and Ericsson or either of the
aforementioned parties, and refer the tender back to Telkom in order for Telkom to reconsider its award. Maredi alleged that there were
certain irregularities in the tender process in that Telkom did not follow fair procedures by failing to comply with its own mandatory
procedural requirements, that Telkom acted arbitrarily and in bad faith, that Telkom was biased in favour of Ericsson and that Ericsson should
have been disqualified as it failed to meet Telkom’s critical criteria as set out in the tender.
Numerous allegations in the application, including accusations against certain members of the Procurement Review Council and allegations
by Maredi of compliance by them to the technical critical criteria, were refuted by Telkom. Telkom and Ericsson opposed the application
and filed their respective opposing affidavits. Telsaf did not oppose the application. The matter was ultimately set down for hearing on
February 20, 2009 and Maredi’s application was dismissed with costs. However, Maredi is proceeding with a review application in the
ordinary course and Telkom is opposing the application.
Telkom is not currently able to predict when these disputes may be resolved or the amount that it may eventually be required to pay,
however, it has not included provisions for all of these claims in its annual financial statements. In addition, Telkom may need to spend
substantial amounts defending or prosecuting these claims even if it was ultimately successful. If Telkom were to lose these or future legal
and arbitration proceedings, it could be prohibited from engaging in certain business activities and could be required to pay substantial
penalties and damages, which could cause its revenue and net profit to decline and have a material adverse impact on its business and
financial condition. Telkom may be required to fund any penalties or damages from cash flows or drawings on its credit facilities, which
could cause its indebtedness to increase.
Telkom is party to various additional proceedings and lawsuits in the ordinary course of its business, which management does not believe
will have a material adverse impact on Telkom.
Negative working capital ratio

At each of the financial periods ended March 31, 2009, 2008 and 2007 the Company had a negative working capital ratio. A negative
working capital ratio arises when current liabilities are greater than current assets. Current liabilities are intended to be financed from
operating cash flows, new borrowings and borrowings available under existing credit facilities.

36. DIRECTORS’ INTERESTS

ST Arnold, RJ Huntley, E Spio-Garbrah, KST Matthews and VB Lawrence, five of Telkom’s Board members, are the South African
Government’s representative on Telkom’s Board of Directors. At March 31, 2009, the Government held 39.76% (2008: 39.42%, 2007:
38.83%) of Telkom’s shares.
B Molefe is a Public Investment Corporation (‘PIC’) representative on Telkom’s Board of Directors. As at March 31, 2009 the PIC held
15.63% (2008: 15.23%, 2007: 15.27%) of Telkom’s shares.
Beneficial Non-beneficial
Direct Indirect Direct Indirect
Directors’ shareholding (Number of shares)

2009
Executive
RJ September 90,815 1,820 – –
PG Nelson 19,182 – – –
109,997 1,820 – –
Non-executive
PG Joubert – 15,000 – –
D Barber – 1,200 – –
– 16,200 – –
2008
Executive
RJ September 7,155 – – –
Total 7,155 – – –
2007
Non-executive
TF Mosololi 455 – – –
Total 455 – – –
The directors’ shareholding changed between the balance sheet date and the date of issue of the financial statements and this has been
reflected in the above information.
2007 2008 2009

Rm Rm Rm
Directors’ emoluments 7 36 20
Executive
Non-executive

36. DIRECTORS’ INTERESTS (continued)

R R R R R
2009
Non-executive 5,028,084 – – – 5,028,084
ST Arnold 1,030,000 – – – 1,030,000

B du Plessis 498,000 – – – 498,000
PSC Luthuli 642,000 – – – 642,000
KST Matthews 441,000 – – – 441,000
B Molefe 159,551 – – – 159,551
AG Rhoda 124,001 – – – 124,001
RJ Huntley 533,000 – – – 533,000
Dr E Spio-Garbrah** 622,750 – – – 622,750
Dr VB Lawrence** 359,000 – – – 359,000
DD Barber 293,667 – – – 293,667
PG Joubert 302,778 – – – 302,778
Executive – 4,530,912 2,289,947 7,848,357 14,669,216
RJ September* – 3,555,800 1,841,396 7,430,452 12,827,648

PG Nelson* – 975,112 448,551 417,905 1,841,568
2008
Non-executive 4,633,933 – – – 4,633,933
ST Arnold 1,124,373 – – – 1,124,373

B du Plessis 393,967 – – – 393,967
MJ Lamberti – – – – –
PSC Luthuli 502,117 – – – 502,117
TD Mahloele 357,684 – – – 357,684
KST Matthews 501,217 – – – 501,217
TF Mosololi 174,960 – – – 174,960
M Mostert *** 229,433 – – – 229,433
DD Tabata 250,583 – – – 250,583
YR Tenza 305,633 – – – 305,633
PL Zim 5,333 – – – 5,333
B Molefe 20,497 – – – 20,497
A Rhoda 14,286 – – – 14,286
RJ Huntley 193,833 – – – 193,833
Dr E Spio-Garbrah** 273,841 – – – 273,841
Dr VB Lawrence** 286,176 – – – 286,176
Executive – 14,489,833 3,436,308 13,244,896 31,171,037
RJ September* – 2,453,757 3,436,308 13,218,772 19,108,837
CEO – 1,016,524 3,436,308 10,438,538 14,891,370

Acting CEO – 1,437,233 – 2,780,234 4,217,467
LRR Molotsane* – 12,036,076 – 26,124 12,062,200


36. DIRECTORS’ INTERESTS (continued)

R R R R R
2007
Non-executive 2,641,168 – – – 2,641,168
NE Mtshotshisa 463,050 – – – 463,050

ST Arnold 353,719 – – – 353,719
TCP Chikane 32,670 – – – 32,670
B du Plessis 213,367 – – – 213,367
PSC Luthuli 205,417 – – – 205,417
TD Mahloele 166,667 – – – 166,667
K Matthews 109,643 – – – 109,643
TF Mosololi 214,417 – – – 214,417
M Mostert 232,417 – – – 232,417
DD Tabata 175,367 – – – 175,367
YR Tenza 321,767 – – – 321,767
PL Zim 152,667 – – – 152,667
Executive – 2,272,785 – 1,653,202 3,925,987
LRR Molotsane* – 2,272,785 – 1,653,202 3,925,987
Total emoluments – paid

by Telkom 2,641,168 2,272,785 – 1,653,202 6,567,155
* Included in fringe and other benefits is a pension contribution for LRR Molotsane of RNil (2008: R4,690; 2007: R295,462), RJ September of
R462,254 (2008: R280,261; 2007: RNil) and PG Nelson of R126,765 (2008: RNil; 2007: RNil) at March 31, 2009 paid to the Telkom Retirement
Fund.
** Foreign directors.
*** In the absence of an internal corporate finance division, and pending the structuring and staffing thereof, the Telkom Board resolved that it was in the best
interest of the Company and the shareholders to deploy the highest quality skills currently resident in Telkom, to evaluate, structure and make
recommendations to the Board on major transactions. During 2008 M Mostert led all efforts in this regard and was remunerated accordingly. Moreover
in compliance with the principles of good governance, the Board took legal advice and established that there was no conflict of interest arising out of
his involvement in the transaction evaluated.

37. RELATED PARTIES

Details of material transactions and balances with related parties not disclosed separately in the annual financial statements were as
follows:
2007 2008 2009
Rm Rm Rm
With joint venture:
Vodacom Group (Proprietary) Limited
Dividend receivable 1,450 1,595 1,100

Revenue (1,510) (1,632) (1,781)
Expenses 2,974 3,050 3,066
Dividend received (2,700) (2,970) (2,600)
Audit fees 6 5 4
Revenue includes interconnect fees and lease and installation

of transmission lines.
Expenses mostly represent interconnect expenses.
With shareholders:
Public Investment Corporation
There were no material transactions between the Company and
the Public Investment Corporation.
Government

Revenue (2,458) (2,623) (2,767)
With subsidiaries:
Trudon Proprietary Limited (formerly trading as TDS Directory
Operations (Proprietary) Limited)
Dividend receivable 84 – –

Revenue (57) (59) (62)
Expenses 12 20 15
Dividend received (149) (120) (47)

2007 2008 2009

Rm Rm Rm
37. RELATED PARTIES (continued)

With subsidiaries: (continued)
Swiftnet (Proprietary) Limited
Trade receivables – – 1
Loan from subsidiary – – 10

Revenue (16) (18) (17)
Expenses – – 1
Income includes data calls and billing fees.
Rossal No 65 (Proprietary) Limited

Accruals and other payables (148) – (342)
Loan to subsidiary – 30 –
The loan is unsecured, interest-free and has no fixed repayment

terms. The loan has been subordinated in favour of other creditors.

Dividend paid 110 115 59
Acajou Investments (Proprietary) Limited

(Accruals and other payables)/receivables (98) – 285

Dividend paid 98 119 72
Intekom (Proprietary) Limited

Accruals and other payables (5) (13) (23)

Expenses 7 8 10
Q-Trunk (Proprietary) Limited

Loan to subsidiary 30 26 22
Impairment of loan (30) (26) (22)
The loan is unsecured, interest-free and has

no fixed repayment terms. The loan has been
subordinated in favour of other creditors.

Expenses 6 6 6

2007 2008 2009

Rm Rm Rm

Special purpose entity – cell captive
Investment – sinking fund (refer to note 11) 535 535 535

Investment income (19) – –
Africa Online Limited (Africa Online)

Loan to subsidiary – 74 236
Trade payables – (4) –

Revenue – (4) –
Investment income – (2) (11)
The loan is unsecured and bears interest at 3 month

US$ LIBOR plus 5%. The loan has no fixed repayment terms.
Multi-Links Telecommunications (Proprietary) Limited (Multi-Links)

Loan to subsidiary – 840 5,225
Trade payables – (21) –

Revenue – (21) (55)
Investment income – (34) (178)
The loan is unsecured and bears interest at 3 month US$ LIBOR

plus 5%. The loan may be prepaid in full or in whole, provided
that each part prepayment may not be less than US$1 million.
The advances must be repaid on May 1, 2009, July 1,
2009 and January 29, 2010.
Telkom International (Proprietary) Limited

Loan to subsidiary – 1,985 1,985
Impairment of loan – – (874)
The loan has been used to purchase a 75% shareholding in

Multi-Links Telecommunications (Proprietary) Limited. The loan
is unsecured and has no fixed repayment term.

2007 2008 2009

Rm Rm Rm

Loan to subsidiary – 326 471
Impairment of loan – (217) (471)
The loan is interest-free and has no repayment terms.
Telkom Foundation
Expenses 54 58 54
With entities under common control:

Major public entities
The outstanding balances are unsecured and will be settled in

cash in the ordinary course of business.

Revenue (400) (485) (445)
Expenses 206 201 180
Rent received (29) (21) (20)
Rent paid 18 18 19
Income with major public entities for the year ended March 31,
2007 has been restated due to additional BAN numbers being
included in our calculation of income with major public entities.
The effect of this is only on the disclosure of the related party
note and has a RNil effect on the Company’s profit.
Key management personnel compensation:

(Including directors’ emoluments)
Short-term employee benefits 108 114 54
Post-employment benefits 3 3 5
Termination benefits – 27 –
Equity compensation benefits 8 24 36
The fair value of the shares that vested in the current

year is R11 million (2008: R12 million; 2007: RNil).


Terms and conditions of transactions with related parties
The sales to and purchases from related parties of telecommunication services are made at arm’s length prices. Except as indicated above,
outstanding balances at the year end are unsecured, interest-free (except for interest charged on overdue telephone accounts) and settlement
occurs in cash. Apart from the bank guarantee to the amount not exceeding R23 million (US$3 million) provided to Africa Online Limited,
there have been no guarantees provided or received for related party receivables or payables. Except as indicated above for the year
ended March 31, 2009, the Company has not impaired any amounts owed by related parties (2008: RNil; 2007: RNil). This assessment
is undertaken each financial year through examining the financial position of the related party and the market in which the related party
operates.
38. SIGNIFICANT EVENTS

Telkom Renaissance
On November 14, 2008, Telkom’s Board of Directors approved the new organisation structure which is designed to fit Telkom’s defend
and growth strategy. The new structure is effective April 1, 2009 and is being managed through a project called Telkom Renaissance.
The Group has been restructured into three operating Business Units namely Telkom South Africa, Telkom International and Telkom Data
Centre Operations. The Telkom Renaissance initiative will occur over the next 24 months to ensure that all the necessary remodelling,
reorganising, revitalising and re-engineering happens in order to make the new structure function optimally.
This initiative is a complete transformation of the way Telkom focuses on servicing its customers and creating value for its stakeholders. It is
a positive, purposeful change towards a more accountable and competitive company. This change is a necessary part of Telkom’s strategy
to maintain and grow market share in South Africa whilst building a strong footprint on the African continent.
Capability Management
Telkom will seek to manage costs and address service delivery constraints by realigning its structure and resources to better match its
transforming information, communications and technology business.
The transformation of the communications industry and increasing market and competitive pressure has put communication companies such
as Telkom under increasing revenue and expense constraints while being required to improve customer service. As a result capability
management is designed to ensure that the capabilities needed to succeed in a converged communications market are established through
the optimal utilisation of external as well as internal capabilities, extracting efficiencies, where possible, through scale of a rapidly maturing
retail and wholesale market and better organised functional areas in a more deregulated and liberalised communications market.
Capability management includes the internal consolidation of certain functional areas and the optimisation of strategic supplier and service
provider relationships improving performance in other functional areas.
Capability Management will be concerned with assisting in addressing the margin and service delivery pressures by reassessing the
operational service delivery methodology currently deployed with a view of increasing flexibility, reducing expense while improving service
delivery across Telkom.
Given the challenges Telkom faces in rolling out broadband, converged and data services, maintaining our legacy network and expanding
our operations across the African continent, employees’ skills and performance must be aligned with our strategy to ensure financial,
operational and transformational targets, customer expectations and shareholder expectations are met.
The immediate objective therefore is to remodel service delivery. This is one of the strategic initiatives under Project Renaissance and will
focus on the following:
• Identify and assess existing capabilities;
• Establish a Telkom Capability Inventory;
• Determine future capability requirements;
• Identify and develop a set of optimal service delivery options for achieving current and future strategic objectives; and

38. SIGNIFICANT EVENTS (continued)

Capability Management (continued)
• Enable Telkom South Africa, Telkom International and Telkom Data Centre Operations to:
– Improve resource efficiency;
– Improve capital productivity; and
– Improve service delivery.
A memorandum of understanding was entered into between Telkom and organised labour which included issues such as the deferment of
the Managed Services Partner outsourcing project implementation post April 2009 and the establishment of a restructuring forum where all
restructuring initiatives will be debated between the parties concerned.
Telkom Management Services (Proprietary) Limited (TMS)

TMS was registered as a company during August 2008. Telkom’s Board approved the establishment of TMS as a part of Telkom’s strategic
plan to grow revenue and expand geographic reach.
Appointment of director
On November 10, 2008, Telkom announced the appointment of Mr Peter Nelson as Chief Financial Officer and director of the Company
with effect from December 8, 2008.
39. SUBSEQUENT EVENTS

Dividends
The Telkom Board declared an ordinary dividend of 115 cents (2008: 660 cents, 2007: 600 cents) per share and a special dividend
of 260 cents (2008: Nil cents, 2007: 500 cents) per share on June 19, 2009, payable on July 20, 2009 to shareholders registered on
July 17, 2009.
Acquisition of MWEB Africa Limited and majority equity stake in MWEB Namibia (Proprietary) Limited
On November 10, 2008, Telkom International (Proprietary) Limited, a wholly owned subsidiary of Telkom, announced it had entered into
agreements to acquire 100% of MWEB Africa Limited (‘MWEB Africa’) and 75% of MWEB Namibia (Proprietary) Limited (’MWEB
Namibia‘) . The purchase price for the MWEB Africa Group including AFSAT and MWEB Namibia is US$55 million (approximately R498
million) with a deferred payment of US$14,18 million due when the profits of MWEB Group for the year ended March 31, 2009 are
finalised. These shareholdings will be acquired from Multichoice Africa Limited and MIH Holdings Limited respectively, which are members
of the Naspers Limited Group.
MWEB Africa is an internet services provider in sub-Saharan Africa (excluding South Africa) which also provides network access services
in some countries and is headquartered in Mauritius with operations in Namibia, Nigeria, Kenya, Tanzania, Uganda and Zimbabwe, an
agency arrangement in Botswana and distributors in 26 sub-Saharan African countries.
The acquisition of MWEB is part of the Group’s strategy of growing its broadband and solidifying its market position through acquisitions.
The successful conclusion of the agreements being entered into is subject to conditions precedent, including regulatory approvals being
obtained in certain African jurisdictions.
Subsequent to year end, on April 21, 2009, the conditions precedent to the sale were fulfilled.
AT&T strategic agreement

On April 16, 2009, Telkom and AT&T, the global communications leader, entered into a strategic agreement which aims to extend AT&T’s
global networking reach to sub-Saharan Africa and boost Telkom’s strategy to grow a strong ICT footprint on the African continent. The
agreement will allow both companies to explore ways to provide global seamless communication and technology solutions and services
to multinational customers, ether based in or seeking to extend their operations in sub-Saharan Africa.
Under the terms of the memorandum of understanding, the two companies will begin work towards definitive agreements that would
• directly connect the Telkom regional network and the AT&T global network;
• deliver a wider geographic footprint of telecommunication services, in both sub-Saharan Africa and other global points;
• enhance mobile service capabilities for corporate customers in sub-Saharan Africa;
• extend global VPN (Virtual Private Network) services to support the state of art network requirements of customers either headquartered
in or seeking to expand sites in sub-Saharan Africa;
• explore other potential opportunities in areas such as Telepresence, hosting and professional services; and
• expand the existing global wholesale voice services relationship between Telkom Group and AT&T.


Telkom Media (Proprietary) Limited (Telkom Media)
On August 31, 2006, Telkom created a new subsidiary, Telkom Media (Proprietary) Limited, with a black economic empowerment (‘BEE’)
reduced its operational expenses and commitments to a minimum. Telkom Media did not meet the held for sale criteria at year end as
management were unable to sell the disposal group for its expected price and therefore decided to abandon it.
Subsequent to year end Telkom was approached by potential buyers of Telkom’s interest in Telkom Media and negotiations with the potential
buyer were concluded. On May 4, 2009, Telkom sold its 75% interest in Telkom Media to Shenzhen Media South Africa (Proprietary)
Limited for a nominal amount.
Disposal and unbundling of stake in Vodacom

In 2008 Telkom announced a decision to dispose of its entire stake in Vodacom through selling of 15% of its stake to Vodafone, a wholly
owned subsidiary of Vodafone Group plc and unbundling its remaining 35% stake to its shareholders pursuant to a listing of Vodacom on
the main board of JSE Limited.
On May 18, 2009 Vodacom was successfully listed on the main board of the JSE Limited and a special dividend of R19 was distributed
to all Telkom shareholders. Telkom successfully completed the unbundling of Vodacom shares to its shareholders on May 25, 2009.
Bookbuilding of Vodacom Group (Proprietary) Limited shares

On June 2, 2009, Telkom announced the successful completion of the accelerated bookbuilding of Vodacom shares, raising R1,540 million
for "ineligible shareholders". The directors of Telkom, in consultation with Vodafone, determined that Telkom shareholders in the United States
of America would be regarded as "ineligible shareholders" for the unbundling of Vodacom shares to shareholders of Telkom, which was
completed on May 25, 2009, and would therefore not receive Vodacom shares in such distributions.
The proceeds from the offering, net of applicable fees, expenses, taxes and charges, will be distributed to the "ineligible shareholders" in
proportion to their entitlement to Vodacom shares.
New York Stock Exchange listing

Given the current global economic climate and the absolute necessity for Telkom to reduce its cost profile, the Board has decided to delist
from the New York Stock Exchange. Maintaining a listing in the United States of America is expensive and takes considerable management
time. The methodology employed and discipline gained from Sarbanes-Oxley reporting requirements will be retained to ensure strict
governance compliance and transparent financial reporting.
Telkom is comfortable that the Johannesburg Stock Exchange provides sufficient access to capital for both South African and global
investors. Telkom intends to maintain a level 1 American Depository Receipt programme to facilitate over-the-counter- trading in the United
States of America.

The Abacus Financial Services (Mauritius) Limited issued a notice under section 265 (5) of the Companies Act 1984 that Telkom
Communications International (Proprietary) Limited has been dissolved with effect from May 12, 2009.
Other matters
The directors are not aware of any other matter or circumstance since the financial year ended March 31, 2009 and the date of this
report, or otherwise dealt with in the financial statements, which significantly affects the financial position of the Company and the results
of its operations.

40. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

The Company has not early adopted the following standards, interpretations and amendments that have been issued and are not yet
effective:
IFRS1 First-time Adoption of International Financial Reporting Standards: Cost of an Investment in a Subsidiary, Jointly Controlled Entity
or Associate (amended)
This amendment is effective for annual periods beginning on or after January 1, 2009. This standard is amended to allow an entity, in its
separate financial statements, to determine the cost of investments in subsidiaries, jointly controlled entities or associates (in its opening IFRS
financial statements) as one of the following amounts:
• Cost determined in accordance with IAS27
• At the fair value of the investment at the date of the transition to IFRS, determined in accordance with IAS39 Financial Instruments:
Recognition and Measurement
• The previous GAAP carrying amount of the investment at the date of transition to IFRS
This determination is made for each investment, rather than being a policy decision.
The amendment does not have an impact on the annual financial statements.
IFRS2 Share-based Payment: Vesting Conditions and Cancellations (amended)

This amendment is effective for annual periods beginning on or after January 1, 2009. The amendments to IFRS2 Share-based Payment
clarifies the definition of vesting conditions and the accounting treatment of cancellations by the counterparty to a share-based arrangement.
The amendment will not have a material impact on the Company’s financial statements.
IFRS2 Share-Based Payment: Group Cash-Settled Share-Based Payment Arrangements (amended)

This amendment is effective for annual periods beginning on or after January 1, 2010. The amendment clarifies how an individual
subsidiary in a group should account for some share-based payment arrangements in its own financial statements. The amendment will not
have a material impact on the Company’s financial statements.
IFRS3 Business Combinations (revised)

The revisions are effective for annual periods beginning on or after July 1, 2009 .The revised standard still applies the acquisition method
of accounting for business combinations, with some significant changes. For example, all payments to purchase a business are to be
recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income
statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value
or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The
revised standard will not have an impact on the annual financial statements.
IFRS7 Financial Instruments: Disclosures (amended)

The interpretation is applicable for annual periods beginning on or after January 1, 2009. The amendment requires enhanced disclosures
about fair value measurements and liquidity risk. The impact of the amendment is being evaluated.
IFRS8 Operating Segments

This standard is effective for annual periods beginning on or after January 1, 2009. The standard requires operating segments to be
identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker
in order to allocate resources to the segment and to assess its performance. The impact of this standard is currently being evaluated.
IFRIC9 Reassessment of Embedded Derivatives (amended)

financial asset out of the ‘fair value through profit or loss’ category, all embedded derivatives have to be assessed and, if necessary,


IFRIC13 Customer Loyalty Programmes
The interpretation is effective for annual periods beginning on or after July 1, 2008. The interpretation requires loyalty award credits granted
to customers in connection with a sales transaction to be accounted for as a separate component of the sales transaction. The consideration
received in the sales transaction would, therefore, be allocated between the loyalty award credits and the other components of the sale.
IFRIC13 is not relevant to the Company’s operations because none of the Company’s companies operate any loyalty programmes.
Where the cost of fulfilling the awards is expected to exceed the consideration received, the entity will have to recognise an onerous
contract liability. The impact of this amendment is being evaluated.
IFRIC15 Agreements for the Construction of Real Estate

The interpretation is effective for annual periods beginning on or after January 1, 2009. The aim of this interpretation is to determine
whether an agreement for the construction of real estate is within the scope of IAS11 Construction Contracts or IAS18 Revenue.
This interpretation is not relevant to the Company’s operations as the Company does not construct real estates.
IFRIC16 Hedges of a Net Investment in a Foreign Operation

The interpretation is effective for annual periods beginning on or after October 1, 2008. The interpretation provides guidance in respect
of hedges of foreign currency gains and losses on a net investment in a foreign operation. This includes the fact that net investment hedging
relates to differences in functional currency and not presentation currency, and hedging instruments may be held anywhere in the Group.
The interpretation will not have an impact on the Company’s financial statements.
IFRIC17 Distributions of Non-Cash Assets to Owners

The interpretation is effective for annual periods beginning on or after July 1, 2009. The interpretation provides guidance on how an entity
should account for non-cash distributions to its owners and/or distributions that give owners a choice of receiving either non-cash assets or
a cash alternative. The impact of the amendment is being evaluated.
IFRIC 18 Transfer of Assets from Customers

The interpretation is effective for annual periods beginning on or after July 1, 2009.
IFRIC18 clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and
equipment (‘PPE’) that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access
to a supply of goods or services. The IFRIC also provides guidance where an entity receives cash from a customer that must be used only
to acquire or construct an item of PPE in order to connect the customer to a network or provide the customer with ongoing access to a
supply of goods or services. The impact of this interpretation is currently being evaluated.
IAS1 Presentation of Financial Statement (revised)

The revised standard is effective for annual periods beginning on or after January 1, 2009.
IAS1R introduces a statement of comprehensive income with two optional formats and refers to the balance sheet and cash flow statement
by different names: the ‘statement of financial position’ and ‘statement of cash flows’, respectively. The revision to the standard will result
in changes in the way the annual financial statements are presented.
IAS7 Cash Flow Statement: Consequential Amendments arising from Amendments to IAS16
The amendment is effective for annual periods beginning on or after January 1, 2009. IAS7 as amended requires cash receipts and
payments relating to purchase, rental and sale of property, plant and equipment held for rental to be treated as cash flows from operating
activities. The impact of this amendment is being evaluated.
IAS23 Borrowing Costs (revised)

The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or
after January 1, 2009. The revised standard requires all borrowing costs that are directly attributable to the acquisition, construction or
production of qualifying assets to be capitalised. The Company does not expect the adoption of the standard to have a material impact.


IAS27 Consolidated and Separate Financial Statements (revised)
The revisions are effective for annual periods beginning on or after July 1, 2009. The revised standard requires the effects of all transactions
with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill
or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to
fair value, and a gain or loss is recognised in profit or loss. The impact of the revised standard is being evaluated.
IAS27 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
(amended)
The amended standard is effective for annual periods beginning on or after January 1, 2009. The amended standard is for the following
changes in respect of the holding company’s separate financial statements:
• The deletion of the ‘cost method’. Making the distinction between pre- and post-acquisition profits is no longer required. All dividends
will be recognised in profit or loss. However, the payment of such dividends requires the entity to consider whether there is an indicator
of impairment; and
• In cases of reorganisations where a new parent is inserted above an existing parent of the Group (subject to meeting specific
requirements), the cost of the subsidiary is the previous carrying amount of its share of equity items in the subsidiary rather than its fair
value. The impact of this amended standard is currently being evaluated.
Amendment to IAS32 Financial Instruments Presentation and IAS1 Presentation of Financial Statements, Puttable Financial Instruments
The amendment is effective for periods beginning January 1, 2009. The amendments classify puttable financial instruments, or components
of instruments, that impose on the entity an obligation to deliver to another party a pro-rata share of the net assets of the entity only on
liquidation, as equity, provided they have particular features and meet specific conditions. The impact of this amended standard is being
evaluated.
IAS39: Financial Instruments: Recognition and Measurement (amended)

financial asset out of the ‘fair value through profit or loss’ category, all embedded derivatives have to be assessed and, if necessary,
IAS39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (amended)
The amendment to the standard is effective for annual periods beginning on or after July 1, 2009. The amendment clarifies that an entity
is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. The
amendment will not have an impact on the financial statements as Telkom does not apply hedge accounting.


Changes as a result of the annual improvements project
A number of standards were amended as a result of the annual improvements project of the IASB in May 2008 effective for annual periods
beginning on or after January 1, 2009, with the exception of IFRS5 which is effective for annual periods beginning on or after July 1,
2009. These standards were as follows:
IFRS5 Non-Current Assets Held for Sale and Discontinued Operations

IAS1 Presentation of Financial Statements
IAS16 Property, Plant and Equipment
IAS19 Employee Benefits
IAS20 Accounting for Government Grants and Disclosure of Government Assistance
IAS23 Borrowing Costs
IAS27 Consolidated and Separate Financial Statements
IAS28 Investments in Associates
IAS29 Financial Reporting in Hyperinflationary Economies
IAS31 Interests in Joint Ventures
IAS36 Impairment of Assets
IAS38 Intangible Assets
IAS39 Financial Instruments: Recognition and Measurement
IAS40 Investment Property
IAS41 Agriculture.
The Company will adopt the changes to these standards during the 2010 financial year with the exception of IFRS5, which will be adopted
during the 2011 financial year. The Company is currently evaluating the effects of the amendments.
Shareholder analysis
at March 31, 2009
Number of
shareholders % Holdings %
Range of shareholders
1 – 100 shares 68,789 71.69 2,392,802 0.46
101 – 1 000 shares 24,353 25.38 6,839,429 1.31
1 001 – 10 000 shares 2,031 2.12 5,683,371 1.09
10 001 – 50 000 shares 380 0.40 9,281,138 1.78
50 001 – 100 000 shares 157 0.16 11,252,414 2.16
100 001 – 1 000 000 shares 217 0.23 59,384,767 11.40
1 000 001 and more shares 33 0.03 425,949,977 81.80
95,960 100.00 520,783,898 100.00
Type of shareholder
Banks 147 0.15 56,436,518 10.84
Close corporations 163 0.17 236,071 0.05
Empowerment 1 0.00 37,506,809 7.20
Endowment funds 232 0.24 734,227 0.14
Individuals 91,625 95.48 11,570,245 2.22
Insurance companies 78 0.08 26,072,715 5.01
Investment companies 67 0.07 13,538,084 2.60
Medical aid schemes 20 0.02 437,317 0.08
Mutual funds 422 0.44 40,790,503 7.83
Nominees and trusts 2,438 2.54 2,869,011 0.55
Other corporations (including the Government of the
Republic of South Africa) 126 0.13 207,218,515 39.79
Own holdings 2 0.00 19,790,236 3.80
Retirement funds 350 0.36 101,615,937 19.51
Private companies 263 0.27 1,583,493 0.30
Public companies 25 0.03 375,871 0.07
Share trusts 1 0.00 8,346 0.00
95,960 100.00 520,783,898 100.00
Geographical holdings by owner

South Africa 95,522 99.54 447,187,584 85.87
United States 128 0.13 51,178,233 9.83
United Kingdom 99 0.10 15,573,222 2.99
Europe 65 0.07 5,506,841 1.06
Other 146 0.15 1,338,018 0.26
95,960 100.00 520,783,898 100.00
Beneficial shareholders of more than 2%

The government of the Republic of South Africa 207,038,058 39.76
Black Ginger 33 (Proprietary) Limited 46,604,996 8.95
Public Investment Corporation 34,773,817 6.67
Elephant Consortium NewShelf 772 (Proprietary) Limited 37,506,809 7.20
Liberty Group 18,151,712 3.49
Rossal No 65 (Proprietary) Limited Equities 11,646,680 2.24
355,722,072 68.31
Shareholder analysis continued

at March 31, 2009
Holdings %
Public and non-public shareholders

Non-public shareholders 260,388,774 50.78
The Government of the Republic of South Africa 207,038,058 39.76

Empowerment 37,506,809 7.20
Government buffer account 9,461 0.00
Diabo share trust 8,346 0.00
Telkom Treasury Stock 19,790,236 3.80
Executive and non-executive directors* 83,544 0.02
Subsidiaries directors* 24,098 0.00
Public shareholders
Institutional and retail investors 256,323,346 49.22
520,783,898 100.00
* Director holdings consists of direct and indirect holdings.

The information above is based on registered shareholders, except where only beneficial shareholders’ information was available.
Definitions
3G CARRIER PRE-SELECTION
The generic term, 3G, is used to denote the next generation of mobile Carrier pre-selection is usually initiated by the telecoms Regulator.
systems designed to support high-speed data transmission (144 Kbps
It enables individuals to choose which telecom will carry their traffic
and higher) and Internet Protocol (IP)-based services in fixed, portable
(mainly long distance) by a signalling contract rather than having to
and mobile environments. As envisaged by the ITU, the 3G system will
dial extra digits.
integrate different service coverage zones and be a global platform
and the necessary infrastructure for the distribution of converged CDMA (CODE DIVISION MULTIPLE ACCESS)
service, whether mobile or fixed, voice or data, telecommunications, CDMA is one of many technologies for digital transmission of radio
content or computing. signals between, for example, mobile telephones and radio base
stations. In CDMA, which is a spread-spectrum modulation technology,
ADSL (ASYMMETRICAL DIGITAL SUBSCRIBER LINE)
each call is assigned a unique “pseudorandom” sequence of
ADSL is a broadband access standard which uses existing copper lines
frequency shifts that serve as a code to distinguish it. The mobile phone
to offer high-speed digital connections over the local loop. ADSL
is then instructed to decipher only a particular code to pluck, as it were,
transmits data asymmetrically, meaning that the bandwidth usage is
the right conversation off the air.
much higher in one direction than the other. ADSL provides greater
bandwidth from the exchange to the customer (ie. downloading) than CIRCUIT
from the customer to the exchange (ie. sending). A circuit is a connection or line between two points. This connection
can be made through various media, including copper, coaxial cable,
ARPU
fibre or microwave. A telephone exchange is a circuit switch.
Vodacom’s average monthly revenue per customer, or ARPU, is
calculated by dividing the average monthly revenue during the period DECT (DIGITAL ENHANCED CORDLESS
by the average monthly total reported customer base during the period. TELECOMMUNICATIONS)
ARPU excludes revenue from equipment sales, other sales and services DECT is the standard for cordless telephones. DECT phones
and revenue from national and international users roaming on communicate using the PSTN (public switched telephone network)
Vodacom’s networks. through a small base station in the home or office and have a working
radius of between 50 and 300 metres.
ATM (ASYNCHRONOUS TRANSFER MODE)
ATM is a high-speed Wide Area Network (WAN), connection- EBITDA
oriented, packet-switching data communications protocol that allows EBITDA represents profit for the year before taxation, finance charges,
voice, data and video to be delivered across existing local and Wide investment income and depreciation, amortisation, impairment and
Area Networks. ATM divides data into cells and can handle data write-offs.
traffic in bursts. It is asynchronous, in that the stream of cells from one
EDGE (ENHANCED DATA FOR GSM EVOLUTION)
particular user is not necessarily continuous.
EDGE is a technology designed to enhance GSM and TDMA systems
BANDWIDTH with respect to data rates and is widely considered to be the GSM
Bandwidth is a measure of the quantity of signals that can travel over evolution beyond GPRS. It enhances the data capabilities of GSM and
a transmission medium such as copper or a glass fibre strand. It is the TDMA systems by altering the RF modulation scheme to allow greater
available space available to carry a signal. The greater the data rates per time slot. Because it uses a different modulation
bandwidth, the greater the information carrying capacity. Bandwidth is technique across the air-interface, EDGE requires different mobile
measured in bits per second. terminals/ handsets than those designed for the GSM air-interface.
BROADBAND EFFECTIVE TAX RATE

Broadband is a method of measuring the capacity of different types of The effective tax rate is the tax charge in the income statement divided
transmission. Digital bandwidth is measured in the rate of bits by pre-tax profit.
transmitted per second (bps). For example, an individual ISDN channel
ETHERNET
has a bandwidth of 64 Kbps, meaning that it transmits 64,000 bits
Ethernet is a protocol that defines how data is transmitted to and
(digital signals) every second.
received from LANs. It is the most prevalent LAN protocol, with speeds
CAGR of up to 10 Mbps.
Compound Annual Growth Rate.
Definitions continued
EVDO (EVOLUTION-DATA OPTIMISED OR EVOLUTION- local area networks and between end-points in a wide area network.
DATA ONLY) The network effectively provides a permanent circuit, which means that
EVDO is a telecommunications standard for the wireless transmission of the customer sees a continuous, dedicated connection, but does not
data through radio signals, typically for broadband Internet access. pay for a full-time leased line.
It uses multiplexing techniques including code division multiple access
GPRS (GENERAL PACKET RADIO SERVICE)
(CDMA) as well as time division multiple access (TDMA) to maximise
GPRS is a packet rather than a circuit-based technology. GPRS allows
both individual user’s throughput and the overall system throughput.
for faster data transmission speed to both GSM and TDMA (IS-136)
FIBRE OPTICS networks. GPRS is a packet-switched technology that overlays the
Fibre optics is where messages or signals are sent via light rather than circuit-switched GSM network. The service can be introduced to
electrical signals down a very thin strand of glass. Light transmission cellular networks by infrastructure.
enables much higher data rates than conventional wire, coaxial cable
GSM (GLOBAL SYSTEM FOR MOBILE)
and many forms of radio. Signals travel at the speed of light and do
GSM is a second generation digital mobile cellular technology using
not generate nor are subject to interference.
a combination of frequency division multiple access (FDMA) and time
FIBRE RINGS division multiple access (TDMA). GSM operates in several frequency
Fibre rings have come to be used in many fibre networks as it provides bands: 400 MHz, 900 MHz and 1800 MHz. On the TDMA side,
more network resiliency: if there is a failure along a route and a ring is there are eight timeslots or channels carrying calls, which operate on
broken, the direction of the traffic can be reversed and the traffic will the same frequency. Unlike other cellular systems, GSM provides a
still reach its final destination. high degree of security by using subscriber identity module (SIM) cards
and GSM encryption.
FIXED ACCESS LINES
Fixed access lines are comprised of public switched HSDPA
telecommunications network lines, or PSTN lines, including integrated High Speed Downlink Packet Access.
services digital network channels, or ISDN channels, and public and
IAS
private payphones, but excluding internal lines in service.
International Accounting Standards.
FIXED ACCESS LINES PER EMPLOYEE
IFRS
To calculate the number of access lines per employee the total number
International Financial Reporting Standards.
of access lines is divided by the number of employees at the end of the
period. INTERCONNECTION
Interconnection refers to the joining of two or more networks. Networks
FIXED-LINE PENETRATION
need to interconnect to enable traffic to be transmitted to and from
Fixed-line penetration or teledensity is based on the total number of
destinations. The amounts paid and received by the operators vary
telephone lines in service at the end of the period per 100 persons in
according to distance, time, the direction of traffic, and the type of
the population of South Africa. Population is the estimated South
networks involved.
African population at the mid-year in the periods indicated as
published by Statistics South Africa, a South African Government INTEREST COVER
department. Interest cover is calculated by dividing EBIT by the net interest charge
in the income statement. It is a measure of income gearing.
FIXED-LINE TRAFFIC
Fixed-line traffic, other than international outgoing mobile traffic, ISDN (INTEGRATED SERVICES DIGITAL NETWORK)
international interconnection traffic and international Voice over Internet ISDN is a data communications standard used to transmit digital
Protocol traffic, is calculated by dividing traffic operating revenue for signals over ordinary copper telephone cables. This is one technology
the particular category by the weighted average tariff for such for overcoming the “last mile” of copper cables from the local
category during the relevant period. Fixed-line international outgoing exchange to the subscribers premises, which has proved a bottleneck
mobile traffic and international interconnection traffic are based on the for Internet access, for example. ISDN allows to carry voice and data
traffic registered through the respective exchanges and reflected in simultaneously, in each of at least two channels capable of carrying
international interconnection invoices. International Voice over Internet 64 Kbps. It provides up to 128 Kbps and a total capacity of 144
Protocol traffic is based on the traffic reflected in invoices. Kbps exist.
FRAME RELAY ITU (INTERNATIONAL TELECOMMUNICATIONS UNION)

Frame relay is a widely implemented telecommunications service ITU is the global technical standard-setting body for
designed for cost-efficient data transmission for data traffic between telecommunications services.
LAN (LOCAL AREA NETWORK) NET DEBT TO TOTAL EQUITY

A LAN is a group of devices that communicate with each other within Net debt to total equity is a measure of book leverage (gearing): net
a limited geographic area, such as an office. debt in the balance sheet divided by total equity (the sum of
shareholders’ funds plus minority interests).
LEASED LINE
A leased line is a telecommunications transmission circuit that is NGN (NEXT GENERATION NETWORK)
reserved by a communications provider for the private use of a A Next Generation Network is a packet-based network able to
customer. provide services including telecommunication services and able to
make use of multiple broadband, QoS-enabled transport technologies.
LIBOR
It offers unrestricted access by users to different service providers.
London Interbank Offer Rate.
OPERATING FREE CASH FLOW
LOCAL LOOP
Operating free cash flow is defined as cash flow from operating
The local loop is the final connection between the exchange and the
activities, after interest and taxation, before dividends paid, less cash
home or office. It is also known as the last mile.
flow from investing activities.
MICROWAVE
PACKET SWITCHING
Microwave is radio transmission using very short wavelengths.
Packet switching is designed specifically for data traffic, as it cuts the
MMS (MULTIMEDIA MESSAGING SERVICES) information up into small packets, which are each sent across the
MMS is a service developed jointly together with 3GPP, allows users network separately and are then reassembled at the final destination.
to combine sounds with images and text when sending messages, This allows more users to share a given amount of bandwidth. X.25,
much like the text-only SMS. ATM and frame relay are all packet switching techniques.
MOBILE CHURN POP (POINT OF PRESENCE)

Vodacom’s churn is calculated by dividing the average monthly number A POP is a service provider’s location for connecting to users.
of disconnections during the period by the average monthly total Generally, POPs refer to the location where people can dial into the
reported customer base during the period. provider’s computer. Most providers have several POPs to allow low-
cost local access via telephone lines.
MOBILE PENETRATION
Vodacom calculates penetration, or teledensity, based on the total PSTN (PUBLIC SWITCHED TELEPHONE NETWORK)
number of customers at the end of the period per 100 persons in the The PSTN is a collection of interconnected voice telephone networks,
population of South Africa. Population is the estimated South African either for a given country or the whole world. It is the sum of the parts.
population at the mid-year in the periods indicated as published by
It was originally entirely analog, but now increasingly digital (indeed
Statistics South Africa, a South African Governmental department.
in many developed countries digitisation has reached 100%), these
MOBILE TRAFFIC networks can be either state-owned or commercially owned. PSTN is
Vodacom’s traffic comprises total traffic registered on Vodacom’s distinct from closed private networks (although these may interconnect
network, including bundled minutes, outgoing international roaming to the PSTN) and from public data networks (PDN).
calls and calls to free services, but excluding national and incoming REVENUE PER FIXED ACCESS LINE
international roaming calls. Revenue per fixed access line is calculated by dividing total fixed-line
revenue during the period, excluding data and directories and other
MOU (MOBILE MINUTES OF USE)
revenue, by the average number of fixed access lines during the
Vodacom’s average monthly minutes of use per customer, or average
period.
MOU, is calculated by dividing the average monthly minutes during
the period by the average monthly total reported customer base during RICA
the period. MOU excludes calls to free services, bundled minutes and Regulation of Interception of Communication and Provision of
data minutes. Communication- related Information Act.
NET DEBT ROA (RETURN ON ASSETS)

Net debt is all interest-bearing debt finance (long-term and short-term) Return on Assets is calculated by dividing net profit (annualised) by total
less cash and marketable securities. assets.
ROE (RETURN ON EQUITY) WAN (WIDE AREA NETWORK)

Return on Equity is calculated by dividing net income by the average A WAN comprises LANs in different geographic locations that are
of the shareholders’ funds. connected, often over the public network.
SDH (SYNCHRONOUS DIGITAL HIERARCHY) WAP (WIRELESS APPLICATION PROTOCOL)

SDH is used in most modern systems, where multimedia can be WAP is an application environment designed to bridge the gap
transmitted at high speeds. The networks are shaped in a ring, so that between the mobile and Internet worlds. It is a set of communication
if there is a problem, the traffic can be redirected in the other direction protocols for wireless devices designed to provide vendor-neutral and
and the caller will not detect the interruption. technology- neutral access to the Internet and advanced
telecommunications services.
SMS (SHORT MESSAGE SERVICE)
SMS refers to short, usually text-based messages sent by or to a W-CDMA (WIDEBAND CODE DIVISION MULTIPLE ACCESS)
wireless subscriber. They are not delivered to the recipient instantly and W-CDMA is a 3G mobile network that supports services like high-
have some degree of transmission time delay. SMS messages are speed Internet access, video and high quality voice transmission.
usually limited to total character lengths of 140 to 160 characters.
WIMAX
SWITCH WiMAX is a standard for extending broadband wireless access to new
A switch is a computer that acts as a conduit and director of traffic. It locations and over longer distances. The technology is expected to
is a means of sharing resources as a network. enable multimedia applications with wireless connectivity and typically
with a range of up to 30 km. It is a standard for fixed wireless access
TOTAL INTEREST-BEARING DEBT
with substantially higher bandwidth capabilities than cellular networks.
Total interest-bearing debt is defined as short- and long-term interest-
bearing debt, including credit facilities, finance leases and other The emergence of further enhancements to the standard will enable
financial liabilities. nomadic data communications across an entire metropolitan area
network linking homes and businesses to the core telecommunications
UMTS (UNIVERSAL MOBILE TELECOMMUNICATIONS
network. WiMAX can be viewed as a technology complementing
SYSTEM)
existing ADSL broadband offerings.
UMTS is the Western European name for the 3G WCDMA standard
adopted as an evolutionary path by the GSM world. However, it
utilises the radio spectrum in a fundamentally different manner than
GSM. UMTS is based on DCMA technology and the GSM standard
is based on TDMA technology.
VOIP (VOICE OVER INTERNET PROTOCOL)

Voice over Internet Protocol is a protocol enabling voice calls to be
made over the Internet. Rather than a dedicated circuit being set up
between the caller and receiver, as with ordinary phone calls, the
voice conversation is digitised and transmitted over Internet Protocol
using packet-switched data networks.
Special note regarding forward-looking statements
Many of the statements included in this annual report, as well as oral Competition Commission and others; any requirements that we
statements that may be made by us or by officers, directors or unbundle the local loop, our ability to negotiate favourable terms, rates
employees acting on behalf of us, constitute or are based on forward and conditions for the provision of interconnection services and
looking statements within the meaning of the U.S. Private Securities facilities leasing services or if ICASA finds that we have significant
Litigation Reform Act of 1995, specifically Section 27A of the U.S. market power or otherwise imposes unfavourable terms and conditions
Securities Act of 1933, as amended, and Section 21E of the U.S. on us; our ability to implement and recover the substantial capital and
Securities Exchange Act of 1934, as amended. All statements, other operational costs associated with carrier preselection, number
than statements of historical facts, including, among others, statements portability and the monitoring, interception and customer registration
regarding our mobile and other strategies, future financial position and requirements contained in the South African Regulation of Interception
plans, objectives, capital expenditures, projected costs and of Communications and Provisions of Communication-Related
anticipated cost savings and financing plans, as well as projected Information Act and the impact of these requirements on our business;
levels of growth in the communications market, are forward looking Telkom’s ability to comply with the South African Public Finance
statements. Forward looking statements can generally be identified by Management Act and South African Public Audit Act and the impact of
the use of terminology such as “may”, “will”, “should”, “expect”, the Municipal Property Rates Act; fluctuations in the value of the Rand
“envisage”, “intend”, “plan”, “project”, “estimate”, “anticipate”, and inflation rates; the impact of unemployment, poverty, crime, HIV
“believe”, “hope”, “can”, “is designed to” or similar phrases, although infection, labour laws and labour relations, exchange control
the absence of such words does not necessarily mean that a statement restrictions and power outages in South Africa; and other matters not
is not forward looking. yet known to us or not currently considered material by us.
These forward looking statements involve a number of known and We caution you not to place undue reliance on these forward looking
unknown risks, uncertainties and other factors that could cause our statements. All written and oral forward looking statements attributable
actual results and outcomes to be materially different from historical to us, or persons acting on our behalf, are qualified in their entirety by
results or from any future results expressed or implied by such forward these cautionary statements. Moreover, unless we are required by law
looking statements. Among the factors that could cause our actual to update these statements, we will not necessarily update any of these
results or outcomes to differ materially from our expectations are those statements after the date of this annual report, either to conform them
risks identified in the Sustainability report – Enterprise Risk Management to actual results or to changes in our expectations.
– Risk factors, including, but not limited to, the effect of global
economic and financial conditions on us, any changes to our mobile
strategy and our inability to successfully implement such strategy and
organisational changes thereto, our ability to turn around Multi-Links’s
financial performance; increased competition in the South African
communications and data communications markets; our ability to
implement our strategy of transforming from basic voice and data
connectivity to fully converged solutions, developments in the regulatory
environment; continued mobile growth and reductions in Telkom’s net
interconnect margins; Telkom’s ability to expand its operations and
make investments and acquisitions in other African countries and the
general economic, political, social and legal conditions in South Africa
and in other countries where Telkom invests; our ability to improve and
maintain our management information and other systems; our ability to
attract and retain key personnel and partners; our ability to replace
revenue, profits and cash flows previously received from Vodacom with
revenue, profits and cash flows from our existing and new businesses;
our negative working capital; changes in technology and delays in the
implementation of new technologies; our ability to reduce theft,
vandalism, network and payphone fraud and lost revenue to non-
licensed operators; the amount of damages Telkom is ultimately
required to pay to Telcordia Technologies Incorporated; the outcome of
regulatory, legal and arbitration proceedings, including tariff
approvals, and the outcome of Telkom’s hearings before the
Notice of annual general meeting
Telkom SA Limited
(Incorporated in the Republic of South Africa)
(Registration number 1991/005476/06
(JSE and NYSE share code: TKG)
ISIN: ZAE000044897)
(Telkom or the Company)
Notice is hereby given that the seventeenth annual general meeting of members will be held on Wednesday 16 September 2009 in The Bill
Gallagher Room, Sandton Convention Centre, Maude Street, Sandton, South Africa at 10:00 to conduct the following business:
1. To receive and consider the annual financial statements for the year ended 31 March 2009.
2. To elect Mr DD Barber as a director who in terms of the articles of association retires by rotation. Being eligible, Mr Barber is available for
re-election. His profile may be found on page 29 of the annual report.
3. To re-appoint Ernst & Young Inc as auditors of the Company, to hold office until the conclusion of the next annual general meeting of the
Company and to note that the individual registered auditor who will undertake the audit during the financial year ending 31 March 2010
is Mr R Hillen.
SPECIAL BUSINESS
To consider and if deemed fit, pass the following special resolutions:
Special resolution number 1

It is resolved that the Company’s articles of association be and are hereby amended as follows –
1. In article 1.1.1.58 in line 4 the words “and the Company’s subsidiaries expressly include Vodacom and its subsidiaries” are deleted
2. Article 1.1.1.66 is deleted.
Reason for and effect of special resolution number 1:

The reason for and effect of special resolution number 1 is to clean up the Articles by deleting all references in the Articles that are no longer
applicable, namely references to Vodacom, as Vodacom is no longer an associate company of the Company.
Special resolution number 2

RESOLVED THAT the directors of the Company be and are hereby authorised to approve the purchase by the Company, or by any of its
subsidiaries, of the Company’s ordinary shares subject to the provisions of the Companies Act, 1973, as amended, and the Listings Requirements
of JSE Limited (JSE) provided that:
a) the general authority granted to the directors shall be valid only until the Company’s next annual general meeting and shall not extend beyond
15 (fifteen) months from the date of this resolution;
b) any general purchase by the Company and/or any of its subsidiaries of the Company’s ordinary shares in issue shall not in aggregate in
any one financial year exceed 20% (twenty percent) of the Company’s issued ordinary share capital at the time that the authority is granted;
c) no acquisition may be made at a price more than 10% (ten percent) above the weighted average of the market value of the ordinary share
for the 5 (five) business days immediately preceding the date of such acquisition;
d) the repurchase of the ordinary shares are effected through the order book operated by the JSE trading system and done without any prior
understanding or arrangement between the Company and the counter party (reported trades are prohibited);
e) the Company may only appoint one agent at any point in time to effect any repurchase(s) on the Company’s behalf;
f) the Company or its subsidiary may not repurchase ordinary shares during a prohibited period;
g) the general authority may be varied or revoked by special resolution of the members prior to the next annual general meeting of the Company;
and
h) should the Company or any subsidiary cumulatively repurchase, redeem or cancel 3% (three percent) of the initial number of the Company’s
ordinary shares in terms of this general authority and for each 3% (three percent) in aggregate of the initial number of that class acquired
thereafter in terms of this general authority, and announcement shall be made in terms of the Listings Requirements of the JSE.”
Having considered the effect on the Company of the maximum repurchase under this general authority, the directors are of the opinion that:
• the Company and the Group will be able in the ordinary course of business to pay its debts for a period of 12 (twelve) months after the date
of this notice of annual general meeting;
• the assets of the Company and the Group will be in excess of the liabilities of the Company and the Group for a period of 12 (twelve) months
after the date of this notice of annual general meeting which assets and liabilities have been valued in accordance with the accounting
policies used in the audited financial statements of the Group for the year ended March 31, 2009;
• the share capital and reserves of the Company and the Group will be adequate for the ordinary business purposes for a period of 12 (twelve)
months after the date of this notice of annual general meeting; and
• the working capital of the Company and Group are considered adequate for ordinary business purposes for a period of 12 (twelve) months
after the date of this notice of annual general meeting.
The Board will ensure that the Company’s sponsor provides the JSE with the necessary report on the adequacy of the working capital of the
Company and its subsidiaries in terms of the JSE Listings Requirements prior to the commencement of any share repurchase in terms of this special
resolution.
Reasons for and effect of special resolution number 2:

The reason for this special resolution is to grant the Company’s directors a renewable general authority or permit a subsidiary Company to acquire
ordinary shares of the Company. The effect of this special resolution is to confer a general authority on the directors of the Company to repurchase
ordinary shares of the Company which are in issue from time to time.
The Board has considered the impact of a repurchase of up to 20% (twenty percent) of the Company’s shares, being the maximum permissible
under a general authority in terms of the JSE Listings Requirements. Should the opportunity arise and should the directors deem it in all respects to
be advantageous to the Company to repurchase such shares, it is deemed appropriate that the directors be authorised to repurchase the
Company’s shares.
Additional disclosures required in terms of the JSE Listings Requirements

Directors and management – refer to pages 28 to 32 of the annual report.
Major shareholders – refer to page 3 of the annual report.
Directors’ interests in securities – refer to page 229 of the annual report.
Share capital of the Company – refer to page 196 of the annual report.
Directors’ responsibility statement

The directors, whose names appear on pages 28 and 29 of the annual report collectively and individually accept full responsibility for the accuracy
of the information pertaining to this special resolution and certify to the best of their knowledge and belief there are no facts that have been omitted
which would make any statement false or misleading and that all reasonable enquiries to ascertain such facts have been made and that this special
resolution contains all information required by the Listings Requirements of the JSE.
Litigation statement
The directors, whose names appear on pages 28 and 29 of the annual report , are not aware of any legal or arbitration proceedings, including
proceedings that are pending or threatened other than what has been disclosed on page 223, that may have or have had in the previous twelve
months a material effect on the Group’s financial position.
Material change
Other than the facts and developments reported on in the annual report which was posted to shareholders [with this notice/or similar wording],
there have been no material changes in the affairs or financial position of the Company and its subsidiaries since the date of signature of the
annual financial statements and the date of this notice.
Notice of annual general meeting continued
VOTING AND PROXIES

Ordinary shareholders are entitled to attend, speak and vote at the annual general meeting.
Ordinary shareholders may appoint a proxy to attend, speak and vote in their stead. A proxy need not be a shareholder of the Company.
Shareholders holding dematerialised shares, but not in their own name, must furnish their Central Securities Depositary Participant (CSDP) or broker
with their instructions for voting at the annual general meeting. If your CSDP or broker, as the case may be, does not obtain instructions from you,
it will be obliged to act in terms of your mandate furnished to it, or if the mandate is silent in this regard, complete the relevant form of proxy
attached.
Unless you advise your CSDP or broker, in terms of the agreement between you and your CSDP or broker by the cut off time stipulated therein,
that you wish to attend the annual general meeting or send a proxy to represent you at this annual general meeting, your CSDP or broker will
assume that you do not wish to attend the annual general meeting or send a proxy.
If you wish to attend the annual general meeting or send a proxy, you must request your CSDP or broker to issue the necessary letter of authority
to you. Shareholders holding dematerialised shares in their own name, or holding shares that are not dematerialised, and who are unable to
attend the annual general meeting and wish to be represented thereat, must complete the relevant form of proxy attached in accordance with the
instructions therein and lodge it with or mail it to the transfer secretaries.
Forms of proxy should be forwarded to reach the transfer secretaries, Computershare Investor Services (Pty) Ltd by no later than 10:00 on Tuesday
15 September 2009.
The completion of a form of proxy will not preclude a shareholder from attending the annual general meeting.
By order of the Board
Per: ML Lephadi
Group Secretary
10 July 2009
Form of proxy
Telkom SA Limited
(Incorporated in the Republic of South Africa)
(Registration number 1991/005476/06
(JSE and NYSE share code: TKG)
ISIN: ZAE000044897)
(Telkom or the Company)
(For completion by certificated shareholders and own-name dematerialised shareholders . Members entitled to attend and vote at the annual
general meeting may appoint one or more proxies to attend ,vote and speak at the annual general meeting in his stead.Such proxy/ies
need not be a member/s of Telkom.)
For use at the seventeenth annual general meeting of shareholders of Telkom to be held on Wednesday 16 September 2009 in The Bill Gallagher
Room, Sandton Convention Centre, Maude Street, Sandton, South Africa, South Africa at 10:00
I/We (name in BLOCK LETTERS)
Of (address in BLOCK LETTERS)
Being a member/members of the Company holding ordinary shares in the Company,
do hereby appoint:
of
or failing him/her
of
or
of
or failing him/her, the Chairman of the annual general meeting as my/our proxy to represent me/us at the annual general meeting to be held on
Wednesday 16 September 2009 at 10:00 or at any adjournment thereof, as follows:
For Against Abstain
1. To receive and adopt the annual financial statements for the year
ended 31 March 2009
2. To re-elect Mr DD Barber as a director in terms of the company’s articles of association
3. To re-appoint Ernst & Young Inc as auditors of the company, to hold office until the
conclusion of the next annual general meeting
4. Special resolution number 1
5. Special resolution number 2
and generally to act as my/our proxy at the said annual general meeting.
(Indicate with an “x” or the relevant number of shares, in the applicable space, how you wish your votes to be cast.)
Unless otherwise directed the proxy will vote as he/she thinks fit.
Signed at this day of 2009
Signature of member assisted by (where applicable)
Please read the notes on the reverse side hereof.

Notes
1. A member entitled to attend and vote at the annual general meeting may appoint one or more proxies to attend, vote and speak in his/her
stead at the annual general meeting. A proxy need not be a member of the Company.
2. A shareholder may insert the name of a proxy or the names of two alternative proxies of his/her choice in the space(s) provided, with or
without deleting “the Chairman of the annual general meeting”, but any such deletion or insertion must be initialled by the shareholder. Any
insertion or deletion not complying with the aforegoing will be declared not to have been validly effected. The person whose name stands
first on this form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose
names follow. In the event that no names are
3. A shareholder’s instructions to the proxy must be indicated by the insertion of an “X” or the relevant number of votes exercisable by that
shareholder in the appropriate box provided. An “X” in the appropriate box indicates the maximum number of votes exercisable by that
shareholder. Failure to comply with the above will be deemed to authorise the proxy to vote or abstain from voting at the annual general
meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. A shareholder or his/her proxy is not obliged to use
all the votes exercisable by the shareholder or by his/her proxy, but the total of the votes cast and in respect of which abstention is recorded,
may not exceed the maximum number of votes exercisable by the shareholder or by his/her proxy
4. To be effective, completed forms of proxy must be lodged with the company’s South African transfer secretaries, Computershare Investor
Services (Proprietary) Limited, no less than 24 hours before the time appointed for the holding of the annual general meeting, excluding
Saturdays, Sundays and public holidays. As the annual general meeting is to be held at 10:00 on Wednesday, 16 September 2009 forms
of proxy must be lodged no later than 10:00 on Tuesday, 15 September 2009.
5. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and
speaking and voting in person thereat instead of any proxy appointed in terms hereof.
6. The Chairman of the annual general meeting may reject or accept any form of proxy which is not completed and/or received other than in
compliance with these notes.
7. Any alteration to this form, of proxy other than a deletion of alternatives, must be initialled by the signatory.
8. Documentary evidence establishing the authority of the person signing this form of proxy in a representative or other legal capacity must be
attached to this form of proxy unless previously recorded by the Company or the transfer secretaries or waived by the Chairman of the annual
general meeting.
9. Where there are joint holders of shares:
• any one holder may sign this form of proxy; and
• the vote of the senior shareholder (for that purpose, seniority will be determined by the order in which the names of the shareholders appear
in the Company’s register) who tenders a vote (whether in person or by proxy) will
10. This form of proxy is not for completion by those shareholders who have dematerialised their shares (other than those whose shareholding is
recorded in their own name in the sub-register maintained by their Central Securities Depository Participant (CSDP). Such shareholders should
provide their CSDP, broker or nominee with their voting instructions.
South African transfer secretaries

Computershare Investor Services (Proprietary) Limited
Ground Floor, 70 Marshall Street
Johannesburg, South Africa, 2001
(PO Box 61051, Marshalltown, 2107)

Document 0 21 023 2010

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Document 0 21 023 2010

Hochgeladen von

Copyright:

Verfügbare Formate

Telkom AR front.

qxp 8/12/09 6:18 PM Page 1

Telkom Annual Report 2009 1

for more information please visit our

2 Telkom Annual Report 2009

Telkom Group structure and revenue contribution as at March 31, 2009

Africa Online – 100%

Joint venture – Vodacom Group – 50%

Telkom Media – 75%

Telkom Annual Report 2009 3

Telkom shareholding as at March 31, 2009

Government Black Ginger 33 Public Investment

Elephant Telkom Treasury Free float

a Black Economic 11,646,680 shares, 2.2% the Company’s issued share

issued share capital.

4 Telkom Annual Report 2009

Group Strategy – The evolution of Telkom

Defend profitable revenue

• Increase annuity • Build customer loyalty by providing superior

Grow profitable revenue through broadband and converged services

• Expand our broadband footprint.

Telkom Annual Report 2009 5

Transform fixed-line business to incorporate key

Grow profitable revenue internationally

Become a Pan-African integrated service

6 Telkom Annual Report 2009

Financial review summary

Solid revenue growth EPS & HEPS

Operating revenue Annuity revenue

Data revenue Operating expenditure

Operating profit Headline earnings per share

0 high inflationary environment. increased finance charges. 0

Telkom Annual Report 2009 7

Operational review summary

Quality, value for money products delivering strong

93% ADSL coverage 27.3% increase

58% increase in Do 7.4% increase in

57% self-install ADSL 141 W-CDMA base

Our self-install option is very deployed

8 Telkom Annual Report 2009

Closing price 131.20 105.49 65.43 44.93

130 12 500 000 60 150

Share price (R) Volume Share price (US$) Volume

All share -31.2 S&P Telecoms -36.8

S&P 500 -39.7

Telkom Annual Report 2009 9

The telecommunications industry

Conclusion of Vodacom transaction gives Telkom

Competition in the South African fixed-line communications market

In the areas where we currently face competition, and expect to

approved its acquisition of Transtel without any conditions.

10 Telkom Annual Report 2009

The telecommunications industry (continued)

All existing licences have been

Telkom is in the process of challenging the proposed

Telkom Annual Report 2009 11

regulation that stipulated standard levels of service. The standards

• The construction, maintenance and operation of a national

• Interconnection with Telkom’s network.

In terms of the licence agreement, Swiftnet was required to have

Swiftnet, assisted by Telkom, has subsequently had two meetings

Swiftnet received a new licence from ICASA on January 16, 2009