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DELIVERED TO ALL STAKEHOLDERS |
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The Group is delivering on its strategic intent to
create long-term value for stakeholders in the six months ended September
30, 2006 by striving to fulfill customer needs through introducing
innovative products and delivering solid financial returns to shareholders.
The fixed-line revenue held up well, improving 0.7% despite tariff
reductions on certain products and the loss of dial-up minutes due
to our ADSL rollout. The decrease in call traffic volumes of 7% were
offset by 65% volume growth in data services, increased revenue from
subscriptions and connections and rental and service fees. EBITDA
margins decreased mainly due to an increase in employee expenses as
a result of an increased headcount necessary to deliver on improving
service levels and the deployment of the NGN as well as salary increases,
increased medical aid expenses and increased bonus provisioning. Selling,
general and administrative expenses increased as expected largely
due to material and maintenance and marketing. Depreciation was 18.8%
lower due to the extension of useful lives of certain assets.
South African Mobile customers increased 28.1% during the six months
to September 30, 2006, reinforcing Vodacom’s market leadership position
in South Africa. Exceptional customer growth and continued efficiencies
in the mobile business resulted in a marginal EBITDA margin decrease
of 33.8% against a 15.6% decline in South African ARPUs. |
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| INCREASING IMPORTANCE OF DATA
REVENUE |
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The fixed-line business achieved a 13.5% increase in
data revenue for the six months ended September 30, 2006, with strong
growth in all data revenue categories.
ADSL adoption in the consumer and small and medium size business segment
increased in the 2006 interim period to 190,172 subscribers. Telkom
has accelerated the fibre roll-out to shorten copper loop lengths
and accelerated the roll-out of IMAX – an integrated multi access
platform – for wireline services and WIMAX for wireless services.
The ADSL customisation of SA’s self install option is close to completion.
Telkom is well on its way to achieve ADSL penetration of 15% – 20%
of fixed access lines by 2010.
The continuing demand for broadband during the six months ended September
30, 2006, has resulted in strong growth in fixed-line’s leased line
and other data services revenue of 8.8%. Revenue from cellular operator
fixed links has increased from R600 million in the six months ended
September 30, 2005 to R803 million in the six months ended September
30, 2006, mainly as a result of the roll-out of cellular operators’
3G networks.
Telkom’s vision is to become an ICT solutions partner for corporate
and business customers, moving up the value chain, providing higher
value products and services to our traditional voice and data products.
This strategy has been validated by our success in winning large corporate
customer accounts and delivering to their ICT requirements from voice
products and services to network management. Our VPN Supreme and Customer
Network Care products aimed mainly at the medium to large sized business,
have enjoyed success through alignment with customers’ requirements.
Vodacom’s data revenue increased by 61.5% to R722 million (50% share)
for the six months ended September 30, 2006 from R447 million (50%
share) for the six months ended September 30, 2005, contributing 7.4%
(September 30, 2005: 5.5%) to mobile operating revenue.
Growth in mobile data revenue is mainly due to the launch of new data
initiatives such as 3G, HSDPA, Mobile TV, Vodafone live!, BlackBerry®
and the continued popularity of SMS.
Telkom made an offer to Business Connexion’s (“BCX”) shareholders
to acquire 100% of BCX for R2.5 billion. The offer price constitutes
R9 per share, plus BCX to pay a special dividend of 25 cents per share.
Telkom believes that the BCX acquisition provides a good opportunity
to create shareholder value as it enables Telkom to enter the data
hosting and desktop management market. These services are complementary
to the value adding products and services being developed within Telkom.
The Competition Commission has agreed to refer the matter to the Competition
Tribunal by November 17, 2006 and a pre-hearing is scheduled at the
Competition Commission for November 24, 2006.
On August 31, 2006 Telkom announced the creation of Telkom Media (Pty)
Ltd, a private company with a 41.5% Black Economic Empowerment shareholding,
which on August 31,2006 applied to ICASA for a commercial satellite
and cable subscription broadcast licence. Telkom Media will offer
two media- and entertainment services: satellite pay-TV and cable
TV (IPTV). Initial offerings in the satellite subscription service
will provide subscribers with access to seven locally compiled television
channels which will contain a significant amount of local content.
Entry into the bouquet will be priced at a level that is favourable
to the majority of South Africans.
Telkom’s entrance into the pay-TV market opens new opportunities for
it in the Information, Communications and Entertainment space and
is in line with its strategy to provide converged solutions and satisfy
the diverse needs of an increasingly sophisticated customer base. |
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