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| Chief Executive
Officer's review |
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| Recognition of the value of our employees |
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| Telkom's skilled and experienced workforce is our
competitive advantage and is also highly attractive to our
competition. Rapidly changing technology, increasing
specialization and capacity requirements necessitate
ongoing development and training of our employees. |
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Telkom continues to invest significantly in our employees to
ensure that the appropriate business skills are available to
meet customer requirements.
For the year ended March 31, 2007, Telkom spent
R425.9 million (2006: R400.1 million) on training and
development and employees participated in 189,645
(2006: 160,274) facilitator led training days.
Telkom continues to identify high potential individuals within
the Company that can be developed for future senior
management positions to ensure all future employee
requirements are met. In addition, Telkom's expansion into
other parts of Africa and competitor poaching of our talent,
demands that our succession plans are robust.
The Company has demonstrated the strength of its
succession plans by appointing 60% of senior management
vacancies from within the Company, utilising the existing
skills and potential of the current employee base, while at
the same time increasing the skills pool with outside
appointments. |
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| Key NGN and capacity achievements |
| Increased demand and bandwidth hungry applications
have required Telkom to upgrade its capacity. The following
are the key investment areas: |
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Telkom has grown its national and international
IP network capacity by 53% to 28.9 Gbps and 60% to
2.4 Gbps, respectively; |
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The bandwidth of the local and national transport
networks have increased 12% to 5.7 Tbps and 20% to
1.2 Tbps respectively; |
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Data networks have seen Diginet and Diginet Plus
Services increase bandwidth by 20% to 20.8 Gbps; |
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The ATM network has grown 30% to 104 Gbps to cater
for increased ADSL services; and |
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The SAT-3 cable's capacity has trebled to 120 Gbps from
40 Gbps. |
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| Telkom company spent R6,599 million during the year
ended March 31, 2007 in line with its 5 year R30 billion
capital expenditure programme. Projects are prioritised
according to internal rate of return for Telkom. Existing
infrastructure is optimised to decrease capital requirements
for service provisioning. It is estimated that Telkom
Company will spend approximately R7.0 billion on capital
expenditure in the financial year ending March 31, 2008. |
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| Data – driving revenue |
| The focus on building a world class NGN is already
delivering benefits through our ability to provide innovative
and value adding voice and data solutions particularly to
the corporate market. |
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The growth of data products and broadband is a key focus
area for the fixed-line business. ADSL subscribers increased
78.1% to 255,633 and are targeted to reach 420,000 for
the year ending March 31, 2008. Telkom aims to achieve
ADSL penetration of 15% – 20% of fixed access lines by
2010/2011 with the introduction of new service offerings
and aggressive price reductions.
The exciting new do Broadband offering, which bundles
ADSL access and a TelkomInternet account at discounted
rates, should stimulate ADSL demand and provide Telkom
customers with quality, speed and content services.
Vodacom's data revenue increased by 64.0% to
R3,342 million (50% share: R1,671 million) for the year
ended March 31, 2007 contributing 8.1% (2006: 6.0%) to
mobile operating revenue.
The need to increase our ability to deliver broadband
solutions has seen Telkom launch WiMAX to extend our
ADSL footprint. Telkom has successfully trialled WiMAX and
14 sites with base stations are currently operational in
Pretoria, Cape Town and Durban. A further 57 sites with
base stations will be built as WiMAX begins to complement
the ADSL roll-out countrywide. |
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| Strong mobile performance |
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Vodacom performed exceptionally well in the year ended
March 31, 2007, retaining its market share at
approximately 58%, and increasing net profit by 27.6% to
R6,560 million (50% share: R3,280 million) and
maintained its EBITDA margin with a slight decrease from
34.7% to 34.6% in the year ended March 31, 2007.
Vodacom's South African customer base increased by a net
of 2.8 million customers to 23.0 million customers as at
March 31, 2007.
Vodacom's focus on customer care and retention saw South
African contract churn at 9.7% (2006:10.0%) and prepaid
churn at 37.5% (2006: 18.8%) for the year ended March
31, 2007. Prepaid churn has increased primarily as a result
of the disconnection of 3 million prepaid sim cards in a
once-off clean-up of the South African customer base during
June to August 2006. The blended South African ARPU over
the year was R125 (2006: R139) supported in part by the
clean-up of the customer base.
Vodacom's other African operations contributed 10.1%
(2006: 8.7%) to revenue with 7.1 million (2006:
4.4 million) customers. These operations constitute 23.7% of
the total customer base. All of Vodacom's other African
operations, with the exception of Vodacom Mozambique,
are profitable. Mozambique remains a tough market but the
outlook, and particularly the competitive landscape, has
improved and we remain confident that in the medium to
long-term it will contribute to the overall growth of Vodacom. |
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| As a result of sound cost management, Vodacom has
ensured that its revenue growth has been translated into
increased profits from operations, which grew by 22.4% to
R10.9 billion (50% share: R5.4 billion) for the year ended
March 31, 2007 from R8.9 billion (50% share: R4.4 billion)
for the year ended March 31, 2006. Vodacom's EBITDA
increased in the year ended March 31, 2007 by 20.6% to
R14.2 billion (50% share: R7.1 billion) from R11.8 billion
(50% share: R5.9 billion). |
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| Telkom Media |
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On August 31, 2006 Telkom announced the creation of
Telkom Media (Pty) Limited. Telkom Media has applied to
the Independent Communication Authority of South Africa
(ICASA) for a commercial satellite and cable subscription
broadcast licence. This licence was granted on September
12, 2007. Telkom Media's vision is to be Africa's "digital
media provider of choice" and is developing a set of new
digital media services to address the diverse needs of both
the consumer and business markets. Telkom Media will
provide services through a wide range of digital platforms,
positioning itself in new, high growth areas of the
information, communication and entertainment market.
Telkom Media is seeking to develop a digital service
portfolio across three core service areas: |
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Content over the Internet (online content services and
ISP services); |
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Content over satellite (Satellite TV and radio); and |
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Content over a "Quality of Service" network (IPTV
including broadcast and on-demand TV and interactive
services). |
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| Africa Online |
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Africa Online is an Internet Services Provider with operations
in Kenya, Tanzania, Cote d'Ivoire, Ghana, Uganda, Namibia,
Swaziland, Zambia and Zimbabwe. The Company was
acquired for R150 million during February 2007.
The investment approach focuses on brand development,
creation and development of customer channels, improve -
ment of network systems, human resources development and
an expansion drive targeting other African countries. |
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