Johannesburg, South Africa – 21 June 2010, Telkom SA Limited (JSE: TKG) today announced Group annual results for the year ended 31 March 2010.

The reported results for the period are materially impacted by the accounting for the sale and unbundling of our 50% stake in Vodacom and related transactions and the impairment of the goodwill and assets of Multi-Links.

Unless otherwise indicated, the discussion below is based on normalised results, excluding the items above, and is based on continuing operations as reconciled in the year on year reconciliation of normalised group statement of comprehensive income.

Segment structure

The Group's reporting segments are business units that are separately managed. Our Group consists of three segments. The Telkom South Africa segment provides fixed-line access and voice services, fixed-mobile and data communications services through Telkom South Africa. The Multi-Links segment provides fixed, mobile, data and international communications services in Nigeria through the Multi-Links subsidiary. The other segment is split geographically between international and South Africa. The category, other international, provides internet services outside South Africa, through our Africa Online and MWEB Africa subsidiaries and management services through our Telkom Management Services Company. The Other South African category includes the Trudon Group, Swiftnet and the Group's corporate centre.

Our 50% share of Vodacom's results in the 2009 financial year and Telkom Media's results are disclosed as discontinued operations in terms of IFRS5 in the Telkom Group's consolidated financial statements.

Group salient features for the year ended 31 March 2010

• Vodacom transaction accounts for profit of R40.5 billion.
• Impairment of Multi-Links goodwill of R2,148 million and assets of R3,012 million.
• Normalised operating revenue up 0.7% to R37.0 billion
• Capital expenditure reduced by 44.2% to R5.4 billion.
• Normalised free cash flow of R5.5 billion
• Normalised net financing costs decreased 44.3% to R1.4 billion.
• Net debt reduced by R10.8 billion decreasing normalised net debt to EBITDA from 1.3 times to 0.5 times.
• Normalised headline earnings per share from continuing operations decreased by 11.2% to 473.0 cents.
• Normalised basic earnings per share decreased 12.0% to 425.2 cents per share.
• Normal dividend declared increased 8.7% to 125 cents per share from 115 cents per share.
• Special dividend declared from Vodacom proceeds of 175 cents per share.
• ADSL subscribers increase 18.1% to 647,462.

Normalised Group operating revenue from continuing operations increased 0.7% to R37.0 billion, while EBITDA decreased 15.2% to R9.8 billion. The normalised Group EBITDA margin decreased to 26.5% as at 31 March 2010, compared to 31.5% at 31 March 2009, mainly due to higher operating expenditure of Telkom South Africa and Multi-Links.

Normalised headline earnings from continuing operations decreased by 11.2% to 473.0 cents per share as a result of increased operating expenditure in Telkom South Africa and Multi-Links, partially offset by lower finance charges. Normalised basic earnings per share decreased 12.0% from 483.1 cents per share to 425.2 cents per share at 31 March 2010.

Normalised return on assets before taxation decreased from 16.3% to 13.6% due to the lower operating profit partially set off by a lower asset base and excludes cash balances.

Statement by Reuben September, Chief Executive Officer:

“The year under review has been tough with muted revenue growth as a result of low tariff increases, intensifying competition and high operating expense growth as a result of inventory write-offs in both Telkom SA and Multi-Links and employee expense growth in excess of inflation as a result of salary increases of 11.2% following our agreement with the unions. The inventory write-offs are as a result of technologically obsolete and slow moving inventory and are unlikely to continue into the future. As a result our EBITDA margin declined to 26.5% from 31.5% recorded at 31 March 2009. Lower taxation, lower finance charges and increased investment income resulted in a more modest normalised headline earnings per share decline of 11.2% to 473.0 cents per share.

The impact of competition and the weaker economic environment are evident in the Telkom Group's financial results for the year ended 31 March 2010. The negative effect of growing competition and fixed-to-mobile substitution is highlighted in the 9.3% decrease in Telkom South Africa's traffic revenue. This continuing trend justifies the imperative for the Group to enter the mobile market and particularly the mobile data market. Notably our continued efforts to move traditional traffic revenues into annuity-type subscription products contributed to the decline in traditional traffic revenue but offers customers value based alternatives. In addition, data revenue posted more modest revenue growth of 7.1% as a result of increased competition and pricing pressure.

Our group operating expenditure grew 8.4% to R32.7 billion. The sharply lower level of increase in the second half of the financial year is evidence of our efforts to reduce costs. The cost reduction programme is at an early stage of implementation and we are confident the pace of reduction will increase and we remain committed to reducing costs.

The Group exhibited strong management of the capital expenditure programme spending of R5.4 billion for the year ended 31 March 2010, down 44.2% from the R9.6 billion spent in the 2009 financial year. As a result, normalised free cash flow improved significantly to R5.5 billion. Lower finance charges and acquisitions as well as higher interest received also contributed to the improvement. We have stated very clearly that every effort will be made to continuously improve the cash flow position. We still have an extremely healthy net debt position with annualised net debt to EBITDA of 0.5 times.

Our strategy seeking to re-position the Telkom Group is imperative given the tough operating environment. Similar to the strategies of other leading operators in the world, we are focusing on growing other revenue streams data centre operation, mobile and Africa to compensate for the decline in fixed voice revenues. We are improving our execution in current growth markets, such as broadband and wholesale, and are taking actions to defend our consumer and enterprise markets.

Multi-Links remains a major concern. We have impaired goodwill of R2,148 million and assets of R3,012 million in the current year bringing the total impairment to date to R5,622 million and thereby fully impairing the goodwill and net asset value. The Board of Directors is considering how best to reduce exposure to risk in Nigeria.

Despite the difficulties, the commitment of my team to positioning Telkom to aggressively compete in the South African and African markets is gaining momentum. Our data centre operations, branded Cybernest, was launched on 19 November 2009. This initiative is further evidence of our drive to diversify and grow our revenue streams and take costs out of our current operations.

I am confident that the strength inherent in the fixed-line network and the business leadership and operations skills of our employees will allow us to offer our markets simple, quality, cost effective services that will be competitive in our markets.”

Declaration of ordinary and special dividend

The ordinary dividend has been calculated with reference to Telkom's current and expected future debt and cash flow levels. Our commitment to return to shareholders any proceeds from the Vodacom transaction not utilised within 24 months enables us to pay a further special dividend of 175 cents per share (2009: 260 cents). The level of dividend payments going forward will be based on a number of factors, including the consideration of the financial results, capital and operating expenditure requirements, the Group's debt level, interest coverage, internal cash flows, prospects and available growth opportunities.

Ordinary dividend number 15 of 125 cents per share (2009: 115 cents) and special dividend of 175 cents per share (2009: 260 cents) in respect of the financial year ended 31 March 2010 have been declared payable on Monday, 19 July 2010 to shareholders recorded in the register of the company at close of business on Friday, 16 July 2010.

Holders of ordinary shares

Salient dates with regard to the ordinary and special dividend 2010

Share certificates may not be dematerialised or rematerialised between Monday, 12 July 2010 and Friday, 16 July 2010, both days inclusive.

On Monday 19 July 2010, dividends due to holders of certificated securities on the South African register will either be transferred electronically to shareholders' bank accounts or, in the absence of suitable mandates, dividend cheques will be posted to such shareholders.

Dividends in respect of dematerialised shareholders will be credited to shareholders' accounts with their relevant CSDP or broker.