Telkom Cover Final 8/12/09 6:45 PM Page 1
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Telkom cover final 8/12/09 6:45 PM Page 1 Administration Telkom SA Limited Annual Report 2009 COMPANY REGISTRATION NUMBER REGULATORY AND PUBLIC POLICY 1991/005476/06 Adv. Ouma Rasethaba Tel: +27 12 311 4785 HEAD OFFICE [email protected] Telkom Towers North 152 Proes Street AUDITORS Pretoria 0002 Ernst & Young Inc. Wanderers Office Park 52 Corlett Drive POSTAL ADDRESS Illovo 2196 Telkom SA Limited We Private Bag X14 Private Bag X881 Northlands 2116 Pretoria 0001 Creating synergy Tel: +27 11 772 3000 TELKOM SHARE REGISTER HELPLINE Fax: +27 11 772 4000 Annual Report 2009 SA Telkom 0861 100 948 TRANSFER AGENTS to give business the CUSTOMER CALL CENTRE Computershare Investor Services 2004 (Pty) Ltd 10219 70 Marshall Street COMPANY SECRETARY Johannesburg, 2001 Mmathoto Lephadi PO Box 61051 Tel: +27 12 311 7743 Marshalltown 2107 [email protected] BUSINESS CALL CENTRE MEDIA RELATIONS 10217 Ajith Bridgraj INVESTOR RELATIONS Tel: +27 12 311 7720 Nicola White [email protected] Tel: +27 12 311 5720 UNITED STATES ADR DEPOSITARY [email protected] The Bank of New York [email protected] Shareholder Relations Department SPONSORS PO Box 11258 UBS Securities South Africa (Pty) Limited New York edge 64 Wierda Road East Wierda valley Sandton 2196 NY 10286-1258 Tel: +1 888 643 4269 e-mail: [email protected] CORPORATE COMMUNICATIONS Brenda Kali Tel: +27 12 311 4301 [email protected] Telkom SA www.telkom.co.za Annual Report 2009 Telkom cover final 8/12/09 6:46 PM Page 2 Contents 1 Group overview Telkom SA Limited Telkom Group structure and revenue contribution 2 Telkom shareholding 3 Group strategy 4 Annual Report 2009 Financial review summary 6 Operational review summary 7 Equity markets 8 The Telecommuniations Industry 9 The independent benchmarking of Telkom’s pricing 13 2 Management review 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 We have the 3 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 4 Performance review Five year operational review 86 Operational review 87 Three year financial review 104 Financial review 105 5 Annual financial statements Directors’ responsibility statement 137 Certificate from Group Company Secretary 137 Report of the 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 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 6 Shareholder information Shareholder analysis 337 Definitions 339 Special note regarding forward-looking statements 343 Administration ibc 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. and resources to Group create a powerful overview Management communications platform 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 AR front.qxp 8/12/09 6:18 PM Page 3 Telkom Annual Report 2009 3 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 The free float of 33.6% Consortium Stock Management review The Elephant Consortium is Rossal No 65 (Pty) Ltd holds makes up the remainder of 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 retail shareholders Performance issued share capital. Conditional Share Plan. 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 Telkom AR front.qxp 8/12/09 6:18 PM Page 4 4 Telkom Annual Report 2009 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. Telkom AR front.qxp 8/12/09 6:18 PM Page 5 Telkom Annual Report 2009 5 Grow profitable revenue through wireless voice and mobile data