Telkom AR front.qxp

Operational review
History and development of the
Company
Telkom was incorporated on September
30, 1991 as a public limited liability
company registered under the South
African Companies Act No. 61 of 1973,
as amended.
Registration number: 1991/005476/06
The Company’s principal executive offices
are located at:
Telkom Towers North
152 Proes Street
Pretoria
0002
Gauteng Province
South Africa
Telephone number: +27 (0)12 311 3566
Website address: http://www.telkom.co.za
Historical background
Prior to 1991, the former Department of
Posts and Telecommunications of South
Africa exclusively provided telecommunications
and postal services in South Africa.
In 1991, the government of South Africa
transferred the entire telecommunications
enterprise of the Department of Posts and
Telecommunications of South Africa to a
new entity, Telkom, as part of a
commercialisation process intended to
liberalise certain sectors of South Africa’s
economy. Telkom remained a wholly stateowned
enterprise until May 14, 1997,
when the government of South Africa sold
a 30% equity interest in Telkom to Thintana
Communications LLC, a strategic equity
investor beneficially owned by SBC
Communications Inc. and Telekom Malaysia
S.D.N. Berhard. On March 7, 2003, we
completed our initial public offering and
listing on the JSE and NYSE, pursuant to
which the government of South Africa sold
a total of 154,199,467 ordinary shares,
including 14,941,513 ordinary shares
through the exercise of an over-allotment
option.
Sale and unbundling of Vodacom
shareholding
Effective as of April 20, 2009, Telkom
concluded the sale and unbundling of its
interest in Vodacom, pursuant to which the
following inter-conditional transactions
occurred:
• Telkom sold a 15% stake in Vodacom
for R22.5 billion of cash less the
attributable net debt of Vodacom as at
September 30, 2008 and 15% of any
dividends, and any secondary taxation
on companies (STC) levied thereon,
which amounted to R20,583 million.
• Telkom distributed to its shareholders a
sum equal to 50% of the after-tax
proceeds from the sale to Vodacom, net
of any STC levied thereon (R19 per
share) by way of a special dividend.
• Vodacom converted to a public
company and was listed on the main
board of the JSE Limited on May 18,
2009; and
• Telkom distributed its remaining 35%
stake in Vodacom to eligible Telkom
shareholders in proportion to their
shareholdings in Telkom, by way of an
unbundling in terms of Section 90 of the
Companies Act 61 of 1973, as
amended, and Section 46 of the
Income Tax Act 58 of 1962, as
amended.
On June 2, 2009, Telkom completed a
placement of 28,993,233 shares of
Vodacom, on behalf of ineligible foreign
shareholders, with institutional investors
through an accelerated bookbuild offering,
pursuant to Regulation S under the US
Securities Act of 1933. The Vodacom
shares were placed at a price of R53.00
per share, raising gross proceeds of
R1.54 billion for such ineligible foreign
shareholders. The proceeds from the
offering, net of applicable fees, expenses,
taxes and charges, were distributed to the
Telkom Annual Report 2009 87
ineligible foreign shareholders in
proportion to their entitlement to Vodacom
shares. JP Morgan Securities Limited acted
as the Sole Bookrunner for the placement.
For further information on this transaction
please refer to the detailed announcements
posted on the Investor Relations website at
www.telkom.co.za.
Delisting on the New York Stock
Exchange
Given the current global economic climate
and the business imperative for Telkom to
reduce its cost base, the Board has
decided to delist from the New York Stock
Exchange. Maintaining a listing in the
United States is expensive and takes
considerable management time. The
methodology employed and discipline
gained from compliance with the
Sarbanes-Oxley reporting requirements
will be retained, where appropriate, to
ensure strict corporate governance
compliance and transparent financial
reporting.
Telkom is comfortable that the JSE provides
sufficient access to capital from both South
African and global investors. Telkom
intends to maintain a level 1 American
Depositary Receipt programme to facilitate
over-the-counter trading in the United States
of America.
Senior management
On November 14, 2008, the Board
announced that our business would be split
into three operational units – Telkom SA,
Telkom International and Telkom Data
Centre Operations, effective from April 1,
2009. On April 15, 2009 Thami
Msimango was appointed Managing
Director of the Telkom International business
unit. On May 1, 2009 Nombulelo Moholi
was appointed Managing Director of
Telkom SA and on July 30, 2009
Pierre Marais was appointed as acting
Managing Director of Telkom Data Centre
Operations.
Group
overview
Management
review
Sustainability
review
Performance
review
Financial
statements
Company
Financial
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