Telkom SA Reports H1

Group operating revenue was up 8.3% to R27.23M, basic earnings decreased by 16.6% to 724.3 cents per share

November 19, 2007

3 Min Read

JOHANNESBURG, South Africa -- Telkom SA Limited(JSE and NYSE: TKG) today announced reviewed Group results for thesix months ended September 30, 2007.

The Group announced a 15.1% decline in headline earnings per sharecompared to the six months ended September 30, 2006. Theperformance is primarily reflective of price reductions and valuepropositions through bundled services offered by the fixed-linecompany together with increased operational expenditure as aresult of the fixed-line business continued drive to improvecustomer services, maintain and improve the network and build afirst class Next Generation Network (NGN) capable of deliveringconverged Information, Communication and Technology (ICT) servicesto its customers in South Africa and Africa. Vodacom once againdelivered a commendable performance.

Group Financial Key Performance Areas For The Six Months EndedSeptember 30, 2007

  • Group operating revenue up 8.3% to R27,227 million

  • 4.8% decline in group operating profit to R7,313 million

  • 37.5% group EBITDA margin

  • 50.9% net debt increase to R17,732 million, and a net debt toequity ratio of 60.0%

  • Headline earnings decreased by 15.1% to 742.3 cents per share

  • Basic earnings decreased by 16.6% to 724.3 cents per share

Statement by Reuben September, Acting Chief Executive Officer:

“The Telkom Group has delivered continued revenue growth largelyas a result of the 17.2% revenue growth delivered by the VodacomGroup. The fixed-line segment’s revenue increased by 0.5% toR16,108 million. This performance is primarily reflective of theincreased competition in the telecommunications landscape togetherwith Telkom’s commitment to reducing the cost oftelecommunications services through price reductions andsignificant value propositions to our customers.

Telkom has embarked on its mobile review strategy in order todrive the value of a converged services offering through the NGNfor the benefit of the South African and other African countries’consumer and for the benefit of our shareholders. In addition,Telkom is undergoing a structural transformation in order toleverage efficiencies and capability management within the fixedlinebusiness. The fixed-line segment faces significantoperational challenges as a result of increasing competition,fixed to mobile substitution, deregulation and rapidly changingbusiness models within the ICT sector. It is therefore imperativethat the fixed-line business strives towards an integrated offering to defend and grow its revenue streams. These strategicinitiatives are essential to the future strength of Telkom’soffering.

Vodacom again delivered an exceptional performance increasing itstotal subscriber base 22.6% to 31.6 million customers for the sixmonths ended September 30, 2007 and maintaining its EBITDA marginat 33.3% compared to 33.8% in the six months ended September 30,2006 .

Telkom’s infrastructure building process is progressing well. Weare proceeding according to our timelines and are significantlyincreasing the network bandwidth, capacity and availability ofadvanced solutions. It is vital that we deliver the capacity toall our customers especially as applications grow more and morebandwidth hungry. Telkom is also a key partner in delivering the2010 World Cup Soccer to the global community and our ability todo so seamlessly is dependant on the investment in our network. Webelieve that the acquisitions of Africa Online and Multi-Linksprovide a good platform for execution of our Pan African ServiceProvider Strategy which intends to expand the internationalconnectivity and availability of internet and data solutions tomajor African cities as well as expand the global footprint forSouth African Multinational companies. The creation of TelkomMedia will provide Telkom with another converged service offeringand the deployment of NGN transport and access technologies,products and services will enhance Telkom‘s ability to diversifyand grow its revenue streams. We acknowledge that Telkom facesmany challenges but are also excited about the new opportunitiespresenting themselves through the opportunity to provide convergedproducts and services.”

Telkom SA Ltd. (NYSE/Johannesburg: TKG)

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