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| Operational review |
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| Overview of its business |
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| Telkom is one of the largest communication service
providers in South Africa, providing fixed-line voice and
data services. In addition, Telkom participate in the South
African mobile communications market through its 50%
interest in Vodacom, the largest mobile communications
network operator in South Africa based on total estimated
customers. Telkom also provides directory services, wireless
data services and other internet services outside South
Africa through its subsidiaries, TDS Directory Operations
(Pty) Limited, Swiftnet (Pty) Limited and newly acquired
Africa Online, respectively. |
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| Telkom’s fixed-line services consist of: |
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fixed-line subscription and connection services to
postpaid, prepaid and private payphone customers using
PSTN lines, including ISDN lines, and the sale of
subscription based value- added voice services and
customer premises equipment rental and sales; |
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fixed-line traffic services to postpaid, prepaid and
payphone customers, including local, long distance,
fixed-to-mobile, international outgoing and international
voice over internet protocol traffic services; |
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interconnection services, including terminating and
transiting traffic from South African mobile operators, as
well as from international operators and transiting traffic
from mobile to international destinations; |
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fixed-line data services, including domestic and
international data transmission services, such as point to
point leased lines, ADSL services, packet-based services,
managed data networking services and internet access
and related information technology services; and |
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directory services, through its TDS Directory Operations
subsidiary, wireless data services, through its Swiftnet
subsidiary and internet services outside South Africa,
through its newly acquired Africa Online subsidiary. |
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| Acquisitions and new ventures |
| Africa Online |
| On February 23, 2007, Telkom acquired 100% of the
issued share capital of Africa Online from African Lakes
Corporation for a total cost of R150 million. Africa Online
is an internet service provider active in Cote d'Ivoire,
Ghana, Kenya, Namibia, Swaziland, Tanzania, Uganda,
Zambia and Zimbabwe. Africa Online's strategy will focus
on brand development, creation and development of
customer channels, improvement of network systems, human
resources development and an expansion drive targeting
other African countries. |
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| Multi-Links: Acquisition of 75% stake |
| On April 19, 2007, Telkom acquired 75% of Multi-Links
Telecommunications Limited, or Multi-Links in Nigeria, for
US$280 million, or R1,985 million. Multi-Links is a private
telecommunications operator with a Unified Access Licence
allowing fixed, mobile, data, long distance and
international telecommunications services focused primarily
on corporate clients in Nigeria. Multi-Links strategy will
focus on brand awareness and promotional campaigns to
increase the revenue of fixed-wireless and mobile customers
and will seek to offer easy to understand high value
bundles, differentiated on voice quality and service.
Broadband Internet with internet service provider services
will target high value bundles. High quality internet protocol
next generation network services are planned to be
deployed in Lagos to attract high end corporate users and
carrier class wholesale products and services are planned
to be introduced by establishing an earth station to provide
international connectivity. The remaining 25% of Multi-Links
is owned by Kenston Investment Limited, an investment
company based in the Isle of Man in the United Kingdom. |
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| Telkom Media |
Telkom recently launched Telkom Media (Proprietary)
Limited, which on August 31, 2006 applied to ICASA for a
commercial satellite and cable subscription broadcast
licence. From May 28 to June 12, 2007 ICASA held public
hearings into the applications by 18 applicants for a
satellite and cable subscription broadcast licence. At the
hearings ICASA stated that they would make an
announcement on the issuing of licences by the end of
November 2007. Telkom cannot assure you that it will
obtain a licence from ICASA or be able to launch
commercial operations.
Telkom Media intends to have a 30% black economic
empowerment shareholding. Partners in the black economic
empowerment entity are expected to be Videovision
Entertainment, MSG Afrika Media and WDB Investment
Holdings (Proprietary) Limited. This shareholding combines
a wealth of electronic media expertise. Telkom Media aims
to offer two media-and entertainment services: satellite pay-TV and cable TV, or internet protocol TV.
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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| EASSy consortium |
On March 9, 2007 the Eastern Africa Submarine System,
or EASSy, supply contract was signed by the 23-member
EASSy consortium with Alcatel-Lucent who will lay the first
ever optical submarine cable network landing in
East Africa. Telkom agreed to invest approximately
US$18.9 million and will have an ownership interest in the
EASSy cable system of approximately 8%. In addition,
Telkom agreed, to invest US$1.5 million for an approximate
10% equity stake in a special purpose vehicle that was
established to coordinate the participation of smaller
operators in the region. The EASSy cable will connect to
South Africa at the same landing point as the SAFE cable in
Mtunzini, north of Durban. Telkom will seek to provide a
network operations centre and administrator services to the
EASSy consortium. Telkom also expects to be in a position
to sell onward connectivity to Europe, America and Asia to
East African operators using the EASSy cable. Telkom's
primary use for the EASSy will be to establish and improve
its East African fibre connectivity and also to use EASSy as
an alternative global diverse route out of South Africa.
The 9,900 km high performance fibre optic cable is being
deployed to link eight countries from Sudan to South Africa,
via Somalia, Kenya, Tanzania, Madagascar and
Mozambique. Landings are planned for Port Sudan,
Sudan; Djibouti; Mogadishu, Somalia; Mombasa, Kenya;
Dar Es Salaam, Tanzania; Tollary, Madagascar; Maputo,
Mozambique; and Mtunzini, South Africa.
Based on Alcatel-Lucent's submarine and terrestrial optical
solutions, EASSy will connect the eastern African seaboard
as well as landlocked countries, to the rest of the world.
It will also provide connectivity across the continent to
support the increase in local traffic from existing and new
broadband services. EASSy is expected to provide Telkom
the opportunity to expand its footprint further into Africa,
creating further opportunities for access to future potential
markets. In delivering a regional capacity of up to 320
Gbps per fibre pair, EASSy complements and increases
Telkom's capacity, especially with regard to taking the 2010
World Cup to the rest of the world. By complementing
existing undersea networks, EASSy is being designed to
provide continuity of service in times of natural disasters and
to alleviate congestion during periods of peak traffic.
By interconnecting with Sea-Me-WE 3, Sea-Me-We 4 and
SAT-3/SAFE, the EASSy undersea cable will also serve as a
supporting infrastructure for these networks. Landlocked
states such as Ethiopia, Botswana, Burundi, Uganda,
Zambia and Zimbabwe will also be able to access the
EASSy cable. The EASSy project is scheduled for
completion early in the 2009 calendar year. |
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| Business Connexion offer |
| On April 4, 2006, Telkom announced that it had made an
offer to acquire the entire issued share capital of Business
Connexion Group Limited, or BCX, other than the BCX
shares held as treasury shares and, if the trustees of the BCX
share incentive trust so agree, the BCX shares held by the
BCX share incentive trust. Telkom had offered to acquire the
outstanding options in BCX on the same terms and
conditions as the offer for the shares. On June 28, 2007,
the South African Competition Tribunal prohibited the
proposed merger. |
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