Slide 1: Telkom SA Limited Group Interim Results
Telkom SA Limited Group Interim Results for the 6 months ended September 30, 2004 Inspiring a nation to touch tomorrow
Slide 2: Cautionary language concerning forward looking statements
Cautionary language concerning forward looking statements All statements contained herein, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of the Telkom Group, that are not statements of historical fact constitute “forward-looking statements”
Slide 3: Group highlights
Section 1 Group highlights
Slide 4: Group interim financial highlights
Group interim financial highlights Maintained high level of operating free cash flow in first six months In ZAR millions 7% growth in group operating revenue 40% group EBITDA margin 19% growth in group operating profit 60% growth in HEPS to 537 cents 27% reduction in net debt Operating free cash flo
Slide 5: Clear strategic goals
2. Driving operational excellence Clear strategic goals 1. Customer centric approach
Slide 6: Operational highlights
Section 2 Operational highlights
Slide 7: Net growth in fixed-access lines
Operation “Jika” Increased credit limits Property deals Tele-selling Discounted connection campaigns Free relocation In thousands Net growth in fixed-access lines
Slide 8: New product bundles
New product bundles © Xtratime400 — discounted local © Xtratime200 — discounted long distance © Surfmore Anytime — reduced price for internet minutes © R1.50 ILD special — Reduced per minute calls to US and UK for Nov 2004
Slide 9: Keeping prices competitive
Keeping prices competitive 2.2% overall increase in 2004 0.2% overall increase filed for 2005, below government’s target range for inflation Still a need to rebalance in response to competition % change for Jan 2005 Proposed tariff adjustments for 2005
Slide 10: Successfully moving minutes to ADSL
4+ Successfully moving minutes to ADSL Movement in traffic minutes + Local traffic growth as a result of {nmilions growth in internet dial-up traffic + Successfully slowed fixed-to- Increase in local _ minutes excl minutes mobile minute loss through moved ta ADSL q 5 ‘Cellsaver + Loss on internation
Slide 11: Accelerating broadband adoption
Accelerating broadband adoption In thousands 57% growth in internet customers 14% growth in ISDN 36,716 ADSL customers 24 month ADSL contract with free modem HomeDSL 384, cheaper product Internet customers
Slide 12: Preferred partner for business market
Preferred partner for business market 13% growth in fixed-line data revenues 36% growth in managed data network sites VPN Supreme launched as IP/MPLS solution Managed data network sites
Slide 13: Trial with Intel
@ X trial with Intel ty of their service performance international voice national 7 network in 2005
Slide 14: Improved, efficient service delivery
Improved, efficient service delivery Simplification of customer contact centres 96% of customers paying on time compared to 91% in 2001 Bad debts below 1% of revenue 23% of customer service branches rebranded - TelkomDirect
Slide 15: Strong mobile SA customers growth
Strong mobile SA customers growth In thousands SA mobile customers 2.7 million gross connections in the 6 months 33% growth to 11.3 million customers 56% estimated market share Lowest contract churn ever at 8.6% ARPU decline 8% to R165
Slide 16: Growth in customers outside South Africa
97% growth in customers to 903,000 48% est market share Over 2 million customers outside of ~ South Africa on = 76% growth in customers to 952,000 = 58% est market share ee ry ee 5 * 72% growth in customers = 164,000 customers = 24% est market share to 122,000 ig" 80% est market share @ &
Slide 17: Financial overview
Section 3 Financial overview
Slide 18: Segment contribution overview
Segment contribution overview Operating revenue Operating profit Net profit Net debt 6 months ended September 30, 2004, after segment eliminations
Slide 19: Solid group revenue growth
Solid group revenue growth Data growth driven by volumes not tariffs In ZAR millions (Sep-04 movement on Sep-03) In ZAR millions Fixed-line revenue growth 7.4% 20.8% 2.5% Group operating revenue
Slide 20: Cutting out the costs in fixed-line
Cutting out the costs in fixed-line In ZAR millions (Sep-04 movement on Sep-03) In ZAR millions 3.5% Fixed-line operating expenses 3.9% 25.1% Group operating expenses
Slide 21: Continued margin expansion
Continued margin expansion Group EBITDA Fixed-line 8% growth in EBITDA to R6,574 million 2% expansion in EBITDA margin to 41.8% Mobile 13% growth in EBITDA to R2,096 million 2% decline in mobile EBITDA margin to 31.0% due to growth in gross connections
Slide 22: Investing capital for growth
September 30, 2004 Investing capital for growth In ZAR millions Fixed-line capital expenditure Group capital expenditure
Slide 23: 27% decrease in group net debt
27% decrease in group net debt In ZAR millions In ZAR millions Group net debt Group interest expense
Slide 24: Maintained high level of free cash flow
Maintained high level of free cash flow In ZAR millions Maintained high level of operating free cash flow of R3,9 billion Despite higher cash taxes and capex R2.3 billion debt repaid R1.7 billion on share repurchase R3.1 billion cash on hand Group operating free cash flow
Slide 25: Outlook
Section 4 Outlook
Slide 26: The regulatory environment
The regulatory environment Regulatory financial statements submitted to ICASA in September 2004 on historical cost basis SNO licence granted ICASA commenced Telkom tariff review Clarity on September 2004 policy announcements expected Finalisation of ICT BEE charter – 2004/2005
Slide 27: Strategic focus in liberalised market
Strategic focus in liberalised market Operational excellence Customer centric Accelerate broadband and managed data networks Competitive pricing Product bundles Customer service IP network evolution Field force efficiencies
Slide 28: Creating a sustainable market place
Creating a sustainable market place A 9% increase in employee training expenditure to R198 million in first 6 months A 21% increase in BEE procurement spend of R2.3 billion, or 60% of total spend Over R230 million equity value created for current Khulisa shareholders
Slide 29: Outlook for March 2005
Outlook for March 2005 Guidance unchanged EBITDA margin At least 1% improvement on adjusted base of 38% Capex to revenue Between 12% -15% Net debt to equity Between 50% - 70%
Slide 30: Investor Relations
Investor Relations t elkomir@telkom.co.za Tel: +27 12 311 5720 Fax: +27 12 311 5721
Slide 31: We are one of South Africa's leading brands because
We are one of South Africa’s leading brands because we help shape the future by investing in: Education To prepare young South Africans for tomorrow's technological challenges Empowerment To support our marketplaces to ensure sustainoble growth for our ‘company and the country Our Employees re entit