Telkom AR front.qxp

in this annual report has been updated to
reflect the above changes to Telkom’s
reporting segments. Telkom currently
expects its Telkom SA, Telkom International
and Telkom Data Centre businesses will
constitute distinct reporting segments in the
2010 financial year due to the
implementation of its new organisational
structure, which became effective as of
April 1, 2009.
Telkom concluded the disposal and sale of
Vodacom, its mobile segment that provided
mobile services through its 50% joint venture
interest in Vodacom, effective as of April
20, 2009. In addition, Telkom’s Board of
directors has decided to dispose of
Swiftnet, a wholly owned subsidiary that
provides wireless data services, and
determined to abandon its Telkom Media
subsidiary. The Telkom Group’s
consolidated financial statements and
information included herein reflects the
restatement to Telkom’s consolidated
financial statements in prior years as a result
of these events to disclose the effect of
discontinued operations and the disposal of
the subsidiaries held for sale as follows:
• Income statement data for all the
periods have been restated to reflect our
50% share of Vodacom’s results, our
100% share of Swiftnet’s results and our
75% share of Telkom Media’s results as
discontinued operations in accordance
with IFRS5; and
• Balance sheet data for only the year
ended March 31, 2009 reflects our
50% share of Vodacom’s results and our
100% share of Swiftnet’s results as
discontinued operations in accordance
with IFRS5.
The discussion of the business below has
been revised from previous years to reflect
the changes to Telkom’s segments and its
discontinued operations.
Group operating revenue
Group operating revenue increased by
6.9% to R35,940 million (March 31,
2008: R33,611 million) in the year ended
March 31, 2009. Fixed-line operating
revenue, before inter-segmental eliminations,
increased by 3.3% to R33,659 million due
to growth in data revenues, higher revenue
from interconnection and subscriptionbased
calling plans, partially offset by
lower traffic revenue. Multi-Links’s operating
revenue increased 124.9% due to a
209.3% growth in its subscriber base.
Telkom’s defend and growth strategies are
on track. We have achieved good growth
in our bundled calling plan products,
Telkom Closer and Supreme Call, and
strong growth in our broadband products.
Data revenue continues to achieve double
digit growth, delivering a 12.1% revenue
growth to R9,310 million for the year
ended March 31, 2009.
Group operating expenses
Group operating expenses increased by
19.5% to R29,895 million (March 31,
2008: R25,014 million) in the year ended
March 31, 2009, due to a 19.6%
increase in operating expenses in the fixedline
segment to R29,849 million (before
inter-segmental eliminations) and a
157.1% increase in operating expenses in
Multi-Links to R2,422 million (before intersegmental
eliminations). Fixed-line operating
expenses increased due to increased selling,
general and administrative expenses,
payments to other network operators,
depreciation, amortisation, impairment and
write-offs, employee expenses and service
fees. The increase in Multi-Links’s operating
expenses was primarily due to increased
cost of sales and associated subsidies as a
result of increased sales volumes,
increased advertising and promotional
expenditure and an increase in expatriate
fees as a result of an increase in staff
seconded from Telkom during the year.
Investment income
Investment income consists of interest
received on short-term investments and
bank accounts. Investment income
increased by 7.7% to R181 million
(March 31, 2008: R168 million), largely
as a result of increased short-term deposits
and interest rates.
Telkom Annual Report 2009 25
Finance charges and fair value
movements
Finance charges include interest paid on
local and foreign borrowings, amortised
discounts on bonds and commercial paper
bills, fair value gains and losses on
financial instruments and foreign exchange
gains and losses on foreign currency
denominated transactions and balances.
Finance charges and fair value movements
increased by 82.7% to R2,843 million
(March 31, 2008: R1,556 million) in the
year ended March 31, 2009, primarily
due to a 12.2% increase in interest
expense to R1,732 million (March 31,
2008: R1,543 million) mainly as a result
of the 38.7% increase in the Group’s net
debt to R23,047 million (March 31,
2008: R16,617 million). In addition to the
increase in the interest expense, net fair
value and foreign exchange rate
movements resulted in a loss of
R1,111 million for the year ended
March 31, 2009 (March 31, 2008:
R13 million). The increase in the loss was
mainly attributable to foreign exchange
losses incurred by Multi-Links on foreign
denominated loans and creditors’ balances
as a result of the devaluation of the Naira
as well as the mark to market valuation of
the Multi-Links put option.
Taxation
Consolidated taxation expense from
continuing operations decreased by
37.3% to R1,660 million (March 31,
2008: R2,647 million) in the year ended
March 31, 2009. The consolidated
effective taxation rate for the year ended
March 31, 2009 was 44.6% (March 31,
2008: 34.5%). Telkom company’s effective
taxation rate was 8.9% (March 31, 2008:
24.6%). The lower effective taxation rate
for Telkom Company in the year ended
March 31, 2009 was mainly due to the
deferred taxation asset that was raised on
the capital gains tax base cost of the 15%
investment in Vodacom which is held for
sale that will be utilised in the future capital
gains tax liability of the sale transaction,
partially offset by the R1,843 million
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
Information