Year ended March 31 | ||
2002 | 2003 | |
---|---|---|
Total long-term portion of interest bearing debt | 21,505 | 16,346 |
Contingencies
Year ended March 31 | ||
2002 | 2003 | |
---|---|---|
Third parties | 65 | 161 |
Guarantee of employee housing loans | 208 | 192 |
Third parties
These amounts represent sundry disputes against third parties that are not
individually significant and that the company does not envisage settling.
Guarantee of employee housing loans
Telkom guarantees to settle a certain portion of employees housing loans. The
amount guaranteed differs depending on factors such as employment period and
salary rates. When an employee leaves the employment of Telkom, any housing debt
guaranteed by the company is settled before any payment can be made over to the
employee.
The maximum amount of the guarantee in the event of default is disclosed above.
Supplier dispute
Expenditure of R594 million was incurred up to March 31, 2002 for the
development and the installation of an integrated end-to-end customer assurance
and activation system to be supplied by Telcordia.In the 2001 financial year,
the agreement with Telcordia was terminated and the company wrote-off R119
million of this investment in the fixed-line business. Following an assessment
of the viability of the assets relating to the Telcordia initiative, the balance
of the assets was written-off in the 2002 financial year. During March 2001, the
dispute was taken to arbitration, where Telcordia was seeking approximately
US$130 million plus interest at a rate of 15,5% per year for money outstanding
and damages. In September 2002, a partial ruling was issued by the arbitrator in
favour of Telcordia. Telkom has since brought an application to the High Court
in August 2003. Telcordia also petitioned the United States District Court to
confirm the parital finding, which petition Telkom has resisted. A hearing date
for this petition has been scheduled for June 25, 2003. The arbitration
proceedings and the amounts of Telkoms liability are not expected to be
finalised until late 2003 or early 2004. Telkoms provision of US$44 million for
its estimate of probable liabilities, including interest, was recognized as at
March 31, 2003.
Site restoration costs
The group has a constructive, but not legal, obligation to incur site
restoration costs. No sites have been identified that would require material
restoration to be performed in the foreseeable future.
Vodacom Congo (R.D.C.) S.P.R.L.
The group has a 51% equity interest through Vodacom in Vodacom Congo (R.D.C.)
S.P.R.L. (Vodacom Congo), which commenced business on December 11, 2001.
Vodacom, in terms of the shareholders agreement, is ultimately responsible for
the funding of the operations of Vodacom Congo for the first three years. The
49% portion attributable to the joint venture partner of the liabilities and
losses were as follows:
Year ended March 31 | ||
2002 | 2003 | |
---|---|---|
in ZAR millions | ||
Net Loss | (19) | (186) |
Total Liabilities | (30) | (522) |
Total Assets | (440) | (658) |
Preference shares | (368) | (368) |
Accordingly, the group exposure is 50% of the above amounts.
Capital commitments
Year ended March 31 | ||
2002 | 2003 | |
---|---|---|
in ZAR millions | ||
Capital commitments authorised not committed | (5,272) | (5,494) |
Fixed-line | (4,847) | (4,873) |
Mobile | (425) | (621) |
Capital commitments authorised and committed | (810) | (435) |
Fixed-line | (85) | (104) |
Mobile | (725) | (331) |
These commitments are expected to be financed mainly from internally generated cash and other borrowings.
Related party transactions With joint venture (Vodacom - 50% share)
Year ended March 31 | ||
2002 | 2003 | |
---|---|---|
in ZAR millions | ||
Income | (370) | (436) |
Expenses | (1,484) | (1,489) |
Audit fees - IPO-related fees | (-) | (14) |
IPO costs | (-) | (25) |
Interest received With shareholders | (36) | (42) |
Thintana Communications LLC - Management fees | (396) | (273) |
Government - Revenue Related party balances With joint venture (Vodacom) | (1,382) | (1,873) |
Trade receivables | (41) |
(35) |
Trade payables With shareholders | (272) | (253) |
Government - Trade receivables | (134) | (193) |
Employees - Other receivables With affiliate directors | (170) | (126) |
March 31, 2003
Mr Eric Molobi resigned as a director of Telkom on July 31, 2002 and was no
longer the Chairman of the board of Directors at March 31, 2003.
Ms Nomazizi Mtshotshisa, Chairman of the board of directors at March 31, 2003, is a director of Beslyn Investments, a company that has a contract to supply Telkom with protective clothing.
Mr Eric Molobi, the Chairman of the board of directors on March 30, 2002, had the following interests as Chief Executive Officer of Kagiso Trust Investments (Proprietary) Limited:
Subsequent events
On September 1, 2002, Telkom issued an information memorandum inviting
potential investors to provide preliminary submissions to purchase a substantial
portion of the fixed-line property portfolio and lease that property back to us.
On May 23, 2003, Telkom announced that it had terminated its information
memorandum relating to the proposed sale and lease-back transaction. The
directors are not aware of any other matter or circumstance since the financial
year-end, not otherwise dealt with in the financial statements, which
significantly affects the financial position of the group and the results of
operation.
Negative working capital
For the year ended March 31, 2003, and 2002, the groups current liabilities
are greater than the current assets. Current liabilities will be financed from
operating cash flows, new borrowings and existing credit facilities.
Comparative
Certain comparatives have been reclassified in accordance with current period
classification and presentation.
Special note regarding forward-looking statements
All statements contained herein, as well as oral statements that may be made
by Telkom or by officers, directors or employees acting on behalf of the Telkom
group, that are not statements of historical fact constitute forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995, specifically Section 21E of the U.S. Securities Exchange Act of
1934, as amended. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that could cause our actual results to be
materially different from historical results or from any future results
expressed or implied by such forward-looking statements. Among the factors that
could cause our actual results or outcomes to differ materially from our
expectations are those risks identified under the caption Risk Factors
contained in the prospectus relating to Telkoms initial public offering filed
with the U.S. Securities Exchange Commission and available on Telkoms website
at www.telkom.co.za, including, but not limited to, increased competition in the
South African fixed-line and mobile communications markets; developments in the
regulatory environment; Telkoms ability to reduce expenditure; the outcome of
arbitration or litigation proceedings with Telcordia Technologies Incorporated;
general economic, political, social and legal conditions in South Africa and in
other countries where Vodacom invests; fluctuations in the value of the Rand;
and other matters not yet known to us or not currently considered material by
us. You should not place undue reliance on these forward-looking statements. All
written and oral forward-looking statements attributable to us or persons acting
on our behalf are qualified in their entirety by these cautionary statements.
Moreover, unless we are required by law to update these statements, we will not
necessarily update any of these statements after the date of this press release,
either to conform them to actual results or to changes in our expectations.
Johanesburg
23 June 2003
Date: 23/06/2003 08:00:34 AM Produced by the JSE SENS Department
23/06/2003 Source: JSE NEWS SERVICE