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114
Telkom Annual Report 2009
Financial review (continued)
Traffic revenue declined in the 2009
financial year primarily due to lower traffic
volumes partially offset by increased
subscription based calling plans and
revenue and higher average traffic tariffs.
Traffic revenue declined in the 2008
financial year primarily due to lower
average traffic tariffs and lower local traffic
volumes partially offset by increased
subscription based calling plans and
revenue, international outgoing and fixedto-mobile
traffic.
ICASA approved a 2.1% reduction in the
overall tariffs for services in the basket
effective August 1, 2006, 1.2% reduction
in the overall tariffs for services in the
basket effective August 1, 2007 and a
2.4% increase in the overall tariffs for
services in the basket effective August 1,
2008. Traffic was adversely affected in
both the 2009 and 2008 financial years
by the increasing substitution of calls
placed using mobile services rather than
our fixed-line service and dial-up traffic
being substituted by our ADSL service, as
well as the decrease in the number of
prepaid and residential post-paid PSTN
lines and increased competition in our
payphone business.
Local traffic revenue decreased in the
2009 and 2008 financial years primarily
due to significantly lower traffic resulting
primarily from internet call usage being
substituted by our ADSL service, the
substitution of calls placed using mobile
services and discounts to business
customers, partially offset by increased
local off-peak tariffs and traffic volumes
related to Telkom Closer packages. We
increased penetration of subscription
based calling plans to stimulate usage in
the 2009 and 2008 financial years and to
counteract mobile substitution, which
effectively lowers the cost to the customer.
On September 1, 2005, we decreased
the price of local peak calls after the first
unit by 5.0% to 38 SA cents per minute
(VAT inclusive). This price was unchanged
on August 1, 2006 and August 1, 2007.
On August 1, 2008, we increased the
price of local peak calls after the first unit
by 3.2% to 39.2 SA cents per minute (VAT
inclusive). On August 1, 2007, the price of
local off-peak calls increased 4.1% on
average. On August 1, 2008, the price of
local off-peak calls increased 9.2% on
average.
Long distance traffic revenue decreased in
the 2009 and 2008 financial years mainly
due to a decrease in average long
distance tariffs and, to a lesser extent,
decreased long distance traffic, partially
offset by increased traffic related to Telkom
Closer packages and Worldcall. We
decreased our fixed-line long distance
traffic tariffs by 10% on September 1,
2005, a further 10% on August 1, 2006
and a further 10% on August 1, 2007. The
tariff remained unchanged on August 1,
2008.
Revenue from fixed-to-mobile traffic consists
of revenue from calls made by our fixed-line
customers to the three mobile networks in
South Africa and is primarily a function of
fixed-to-mobile tariffs and the number, the
duration and the time of calls. Fixed-tomobile
traffic revenue decreased in the
2009 and 2008 financial years due to
higher discount offered to customers in
order to retain traffic, partially offset by
higher traffic related to the Telkom Closer
packages. The decrease in fixed-to-mobile
traffic in the 2009 financial year was
primarily due to an increase in the number
of Telkom Closer customers, thereby
decreasing the out of bundle volumes. The
increase in fixed-to-mobile traffic in the
2008 financial year was primarily due to
discounts offered to larger customers on
fixed-to-mobile calls.
Revenue from international outgoing traffic
consists of revenue from calls made by our
fixed-line customers to international
destinations and from international voice
over internet protocol services and is a
function of tariffs and the number, duration
and mix of calls to destinations outside
South Africa. In the 2009 financial year,
international outgoing traffic revenue
declined primarily as a result of a decrease
in volumes mainly as a result of the
increase in the number of Telkom Closer
subscribers, thereby decreasing the out of
bundle volumes. In the 2008 financial
year, international outgoing traffic revenue
declined primarily as a result of a decrease
in the average international outgoing
tariffs, partially offset by an increase in
international outgoing traffic primarily as a
result of the reduced tariffs. The average
tariffs to all international destinations
decreased by 11.1% on August 1, 2006
and by 9.0% on August 1, 2007. On
August 1, 2008 the overall international
tariffs remained unchanged, but tariffs to
certain destinations were increased whilst
others were decreased.
Revenue from subscription based calling
plans includes revenue from Telkom’s
subscription based plans, Telkom Closer
and Supreme Call, which are bundled
products on post-paid PSTN lines that
include discounted rates and free minutes
for a fixed monthly subscription fee. In the
2009 financial year, revenue from
subscription based calling plans increased
by 20.5% primarily due to a 27.6%
increase in customers subscribing to these
packages. In the 2008 financial year,
revenue from subscription based calling
plans increased by 98.7% primarily due to
a 69.4% increase in customers subscribing
to these packages.
Interconnection. We generate revenue from
interconnection services for traffic from calls
made by other operators’ customers that
terminate on or transit through our network.
Revenue from interconnection services
includes payments from domestic mobile,
domestic fixed and international operators
regardless of where the traffic originates or
terminates. The following table sets forth
information related to interconnection
revenue for the years indicated.