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222 Telkom Annual Report 2009 Notes to the consolidated annual financial statements (continued) for the three years ended March 31, 2009 38. COMMITMENTS (continued) Total 5 years Rm Rm Rm Rm Finance lease commitments 2009 Building Minimum lease payments 1,654 113 546 995 Finance charges (822) (112) (426) (284) Finance lease obligation 832 1 120 711 Equipment Minimum lease payments 7 5 2 – Finance charges (2) (1) (1) – Finance lease obligation 5 4 1 – Vehicles Minimum lease payments 187 47 140 – Finance charges (38) (15) (23) – Finance lease obligation 149 32 117 – 2008 Building Minimum lease payments 2,198 257 791 1,150 Finance charges (1,031) (152) (496) (383) Finance lease obligation 1,167 105 295 767 Equipment Minimum lease payments 16 4 12 – Finance charges (2) – (2) – Finance lease obligation 14 4 10 – Vehicles Minimum lease payments 242 48 194 – Finance charges (59) (20) (39) – Finance lease obligation 183 28 155 – 2007 Building Minimum lease payments 2,412 227 853 1,332 Finance charges (1,198) (166) (540) (492) Finance lease obligation 1,214 61 313 840 Equipment Minimum lease payments 6 – 6 – Finance charges – – – – Finance lease obligation 6 – 6 – Finance leases Finance leases on vehicles relates to the lease of Swap bodies. The lease term for the Swap bodies is April 2008 to April 2013. A major portion of the finance leases relates to the sale and lease-back of the Group’s office buildings. The lease term negotiated for the buildings is for a period of 25 years ending 2019. The minimum lease payments are subject to an annual escalation of 10% p.a. Telkom has the right to sublet part of the buildings. In case of breach of contract, the lessor is entitled to cancel the lease agreement and claim damages. Finance leases on equipment mainly relates to office equipment. The lease term negotiated for the finance leases is for a period of three years ending in 2011.
39. CONTINGENCIES Telkom Annual Report 2009 223 Notes to the consolidated annual financial statements (continued) for the three years ended March 31, 2009 2007 2008 2009 Rm Rm Rm Third parties 28 27 18 Fixed-line 19 18 18 Mobile 4 4 – Multi-Links – – – Other 5 5 – Third parties These amounts represent sundry disputes with suppliers that are not individually significant and that the Group does not intend to settle. Supplier dispute Telcordia instituted arbitration proceedings against Telkom in March 2001 before a single arbitrator of the International Court of Arbitration, operating under the auspices of the International Chamber of Commerce. Telcordia is seeking to recover approximately US$130 million for monies outstanding and damages, plus costs and interest at a rate of 15.5% per year which was increased by Telcordia to US$172 million in the 2007 financial year and subsequently decreased to US$128 million in the 2008 financial year. The arbitration proceeding relates to the cancellation of an agreement entered into between Telkom and Telcordia during June 1999 for the development and supply of an integrated end-to-end customer assurance and activation system by Telcordia. In September 2002, the arbitrator found that Telkom had wrongfully repudiated the contract and a partial award was issued by the arbitrator in favour of Telcordia. Telkom subsequently filed an application in the South African High Court to review and set aside the partial award. On November 27, 2003, the South African High Court set aside the partial award and issued a cost order in favour of Telkom. On May 3, 2004, the South African High Court dismissed an application by Telcordia for leave to appeal and ordered Telcordia to pay the legal costs of Telkom. On November 29, 2004 the Supreme Court of Appeals granted Telcordia leave to appeal. Telcordia filed a notice of appeal and also petitioned the United States District Court for the District of Columbia to confirm the partial award, which petition was dismissed, along with a subsequent appeal. Following the dismissal of the appeal, Telcordia filed a similar petition in the United States District Court of New Jersey. The United States District Court of New Jersey also dismissed Telcordia’s petition, reaffirming the decision of the United States District Court of Columbia. Telcordia appealed this dismissal, which was later dismissed by the Appeals Court of New Jersey. The appeal by Telcordia in the Supreme Court of Appeals was set down for and heard on October 30 and October 31, 2006. Following the successful upholding of the appeal, Telkom filed an application for leave to appeal to the Constitutional Court on only the issue revolving around the Supreme Court of Appeals’ failure to recognise Telkom’s rights of access to the courts under the South African Arbitration Act. The Constitutional Court has since dismissed Telkom’s appeal with costs. The Constitutional Court judgment brought finality to the dispute over the merits of Telcordia’s claim against Telkom and the parties reconvened the arbitration in May 2007 to deal with the amount of damages to which Telcordia is entitled. Two hearings were held at the International Dispute Resolutions Centre (IDRC). The first hearing was held in London on May 21, 2007 and was a ’directions hearing’, in terms of which the parties consented to a ruling by the arbitrator setting out a consolidated list of proposals and issues to form part of the damages hearing. The second hearing was held in London at the IDRC on June 25 and 26, 2007 and dealt with the application by Telcordia for the striking out of part of Telkom’s defence on the basis that Telkom had raised issues in its defence that had already been heard by the arbitrator prior to his partial award. This application was dismissed by the arbitrator. The arbitrator also made a ruling compelling Telcordia to provide certain particulars requested by Telkom with regard to the claims by Telcordia. In his ruling, the arbitrator also set out a list of issues for determination of the damages.
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We are... one of Africa’s largest
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Telkom shareholding as at March 31,
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Grow profitable revenue through wir
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600 500 400 300 200 100 0 07 08 09
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The telecommunications industry Con
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egulation that stipulated standard
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a - Euros a - Euros a - Euros 0.25
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ated management team with experienc
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The regulatory environment The regu
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On target for 2010 Telkom Annual Re
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Online impairments, the fixed-line
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• Remodelling - reaching for new
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in this annual report has been upda
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Capital expenditure for the Group i
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More than100 years of combined tele
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Management team Telkom Annual Repor
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Telkom Annual Report 2009 33 Age at
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uild a partnership with communities
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Customers: Through our Customer Cen
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• Interfacing with the media Whil
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Partnering with Human Resources Gro
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The members’ resignations and app
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Share dealings In line with JSE Lis
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NYSE rules Telkom practice Telkom A
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the codes of conduct and ethics tha
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Telkom Annual Report 2009 51 Enterp
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provider, we practice a risk manage
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egulate the business of dealers in
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addressing a number of significant
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There was a major Over the past dec
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payment policy that facilitates the
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Headcount movement Compensation and
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• Accelerated development of wome
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14,500 union members participated i
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were admitted to the university in
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ole in exposing students to the rea
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Sick leave indices • We saved R2
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These will be augmented by another
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Some of the key deliverables are:
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Fittingly, the initiative was launc
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Sponsorships Sponsorships continue
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Item Comment and reference Governan
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espond to competitive challenges Pe
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Operational review History and deve
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service. All costs including instal
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Traffic was adversely affected in b
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Telkom’s focus on bringing new in
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esponse of the CDMA operators to ou
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MWEB Africa On April 21, 2009, we a
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VPN model that allows other service
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services and also to support Telkom
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Telkom’s fixed-line voice busines
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Results of operations The Telkom Gr
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EBITDA can be reconciled to operati
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Telkom Annual Report 2009 109 Finan
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Fixed-line operating revenue increa
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The following table sets forth info
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Interconnection revenue Year ended
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Telkom Annual Report 2009 117 Fixed
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Fixed-line payments to other networ
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Service fees increased in the year
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Vodacom’s operating revenue from
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our fixed-line business, which were
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Vodacom’s selling, general and ad
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The increase in other operating rev
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commercial paper bills, as well as
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The following table sets forth our
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challeng Consolidated financial sta
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138 Telkom Annual Report 2009
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140 Telkom Annual Report 2009 Direc
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146 Telkom Annual Report 2009 Notes
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346 VOTING AND PROXIES Ordinary sha
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Notes Telkom Annual Report 2009 1.
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