Telkom AR front.qxp

12
Telkom Annual Report 2009
The telecommunications industry (continued)
Telkom has made significant progress in
rebalancing
its fixed-line tariffs...
by December 31, 2003. Telkom has met
with Neotel to discuss its request for
implementing carrier pre-selection.
Until Neotel’s interconnection systems and
its inter-operator process and systems to
support carrier pre-selection become
available, Telkom cannot fully implement
carrier pre-selection. However, Telkom
does not believe it can meet the 10 months
deadline for automatic carrier preselection.
Number portability
The Telecommunications Act mandated that
number portability, to enable customers to
retain their fixed-line and mobile telephone
numbers if they switch between fixed-line
operators or between mobile operators, be
introduced. These provisions were retained
in the Electronic Communications Act.
A framework number portability regulation
was published at the end of 2004 that
generically provides for the introduction of
fixed-to-fixed and mobile-to-mobile number
portability. Telkom is required to implement
number portability in blocks of 10,000
numbers within two months after Neotel
launches such retail services and individual
number portability within 12 months of
receiving a request from Neotel. Telkom
has received a request from Neotel to
implement both block and individual
number portability and Telkom and Neotel
implemented number portability in blocks
of 10,000 and 1,000 numbers in May
2009. After several delays mobile number
portability phase one was launched on
November 11, 2006. Phase 2, which
was implemented during April 2007,
includes multi-line porting, secure file
transfer protocol access to third parties and
operational software upgrades on the
central reference data base.
The set-up and per-operator costs are
typically the largest cost components of
implementing number portability. Similar to
carrier pre-selection, there is a risk of not fully
recovering system set-up costs. The
implementation of these requirements in a
timely manner, could result in Telkom’s
business being disrupted and cause its net
profit to decline and the implementation of
these requirements will likely further increase
competition and cause churn rates to
increase.
Fees and tariffs
Telkom has made significant progress in
rebalancing its fixed-line tariffs with a view
to focusing more on the relationship
between the actual costs and tariffs of
subscriptions and connections and traffic in
order to more accurately reflect underlying
costs and to be more competitive.
Regulations made under the repealed
Telecommunications Act, but which are still
in effect, imposed a price cap (3.5%
below inflation, effectively implying a
continuous real decrease in prices) on a
basket of Telkom’s specified services. These
include installations; pre-paid and postpaid
line rentals; local, long distance and
international calls; fixed-to-mobile calls;
public payphone calls; ISDN services; its
Diginet product and its Megaline product.
A similar cap applies to a sub-basket of
those services provided to residential
customers, including leased lines up to and
including lines of 2 Mbps of capacity and
the rental and installation of business
exchange lines.
Approximately 57% of Telkom’s operating
revenue in the year ended March 31,
2008 was included in this basket,
compared to approximately 54% in the
year ended March 31, 2009.