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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 internet traffic being
substituted by our ADSL service, as well as
the decrease in the number of residential
post-paid PSTN lines and increased
competition in our payphone business. In
addition, the 2009 financial year traffic
was adversely affected by customer
migration to broadband services offered
by mobile operators.
The table above sets forth information
regarding interconnection traffic terminating
on or transiting through our network for
the periods indicated. We calculate
interconnection traffic, other than
international outgoing mobile traffic and
international interconnection traffic, by
dividing interconnection revenue for the
particular category by the weighted
average tariff for such category during the
relevant period. Fixed-line international
outgoing mobile traffic and international
interconnection traffic are based on the
traffic registered through the respective
exchanges and reflected in international
interconnection invoices.
The increase in domestic mobile
interconnection traffic in the years ended
March 31, 2009 and 2008 was primarily
due to an overall increase in mobile calls
as a result of growth in the mobile market,
partially offset by increased mobile-tomobile
calls bypassing our network. The
decrease in domestic mobile interconnection
traffic in the 2009 financial
year was primarily due to increased
mobile-to-mobile calls bypassing our
network.
Domestic fixed interconnection traffic
includes traffic from Neotel, USALs and
VANS. The increase in domestic fixed
interconnection traffic in the year under
review was mainly due to increased
competition.
International interconnection traffic
decreased in the 2009 and 2008
financial years due to a decrease in
volumes as a result of loss of volumes to
Neotel, Sentech, the USALs and illegal
operators terminating traffic in the country.
The decrease was partially offset by
increased international hubbing traffic in
the year under review.
Tariff rebalancing
We made significant progress in
rebalancing our fixed-line tariffs. Our tariff
rebalancing programme was historically
aimed at better aligning our fixed-line traffic
charges with underlying costs and
international norms. We expect that our
tariff rebalancing in future will focus more
on the relationship between the actual
costs and tariffs of subscriptions,
connections and traffic in order to more
accurately reflect underlying costs, and in
response to increased competition.
Regulations under the Telecommunications
Act, which remain in effect, impose a price
cap on a basket of Telkom’s specified
services including installations, prepaid
and post-paid line rental, local, long
distance and international calls, fixed-tomobile
calls, public payphone calls, ISDN
services, our Diginet product and our
Megaline product. A similar cap applies to
a sub-basket of those services provided to
residential customers, including leased
Telkom Annual Report 2009 91
Year ended March 31,
2008/2007 2009/2008
(in millions of minutes, except percentages) 2007 2008 2009 % change % change
Domestic mobile interconnection traffic 2,419 2,502 2,484 3.4 (0.7)
Domestic fixed interconnection traffic – 113 415 n/a 267.3
International interconnection traffic 1,321 1,280 1,189 (3.1) (7.1)
Total 3,740 3,895 4,088 4.1 5.0
lines up to and including lines of 2 Mbps
of capacity and the rental and installation
of business exchange lines. Approximately
57% of our operating revenue for the year
ended March 31,2008 was included in
this basket, compared to approximately
54% in the year ended March 31, 2009.
Our tariffs for these services are filed with
ICASA for approval. The price cap
operates by restricting the annual
percentage increase in revenues from all
services included in the basket that are
attributable solely to changes in annual
inflation, measured by changes in the
consumer price index, less a specified
percentage.
Historically, the annual permitted
percentage increase in revenues from both
the whole basket and the residential subbasket
was 1.5% below inflation. Effective
from August 1, 2005 through July 31,
2008, the annual permitted increase in
revenues from both the whole basket and
the residential sub-basket was lowered to
3.5% below inflation, and ADSL products
and services have been added to the
basket. In addition, the price of no
individual service within the residential subbasket
can be increased by more than 5%
above inflation except where specific
approval has been received from ICASA,
and pursuant to the Electronic Communications
Act, revenue generated from
services where we have significant market
power may not be used to subsidise
competitive services. Early in 2008,
ICASA commissioned a review of the
existing price control regulations
applicable to Telkom; however, ICASA has
not initiated the statutory public process of
reviewing the existing regulations. Telkom is
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