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Telkom preliminary audited Annual Results

  Year ended March 31
  2002 2003 % Change
International outgoing

1,175

1,284

9.3

Interconnection

1,798

1,773

1.4

Data

3,913

4,507

15.2

Directories and other

687

759

10.5

Total fixed-line operating revenues

27,976

29,635

5.9

Operating revenue from our fixed-line segment, before inter-segmental eliminations, increased 5.9% (2002: 5.8%) primarily due to increased traffic revenue, as a result of average tariff increases and growth in data services revenue. Traffic was adversely affected in both the 2003 and 2002 financial years by the increasing substitution of calls placed using mobile services rather than fixed-line services. Traffic declined 0.7% (2002: 0.3% decrease), however, revenue per fixed access line continued to improve, increasing 5.5% (2002: 10.1%) to R4,989 (2002: R4,729). This was due to increased average tariffs, higher penetration of value-added voice services and increased penetration of higher revenue generating access services. Data revenue increased 15.2% (2002: 17.6%) mainly due to higher demand for data services.

  Year ended March 31
  2002 2003 % Change
Fixed-line operating expenses In ZAR millions  
 

2002

2003

% Change

Employee expenses

6,611

6,698

1.3

Payments to other network operators

6,759

6,726

0.5

SG&A

4,650

3,312

28.8

Services rendered

2,138

2,489

16.4

Operating leases

1,148

1,155

0.6

Depreciation and amortisation

4,363

5,105

17.0

Other income

118

198

67.8

Total fixed-line operating expenses

25,551

25,287

1.0

Fixed-line operating expenses, before inter-segmental eliminations, were relatively flat in the 2003 financial year, decreasing 1.0% (2002: 13.0% increase) to R25,287 million (2002: R25,551 million) primarily due to reduced selling, general and administrative expenses. Selling, general and administrative expenses were impacted in the 2002 financial year by the inclusion of a R346 million write-off of Telcordia-related assets and the inclusion of a R325 million provision, before interest and legal costs, related to the Telcordia dispute. Excluding these items, selling, general and administrative expenses decreased primarily due to a R276 million reduction in the bad debt provision on our balance sheet, as well as lower materials and maintenance expenses due to reduced losses in respect of cable theft and lower fault rates. Bad debts written-off against the provision decreased by 39.5% (2002: 1.8% increase) to R491 million (2002: R812 million). The decrease in fixed-line operating expenses was partially offset by increased depreciation and amortisation and services rendered, while operating leases, payments to other network operators and employee expenses remained relatively constant. Fixed-line operating profits increased 79.3% (2002: 36.5% decrease) to R4,348 million (2002: R2,425 million) with operating margins increasing to 14.7% (2002: 8.7%). Fixed-line EBITDA increased 39.3% (2002: 15.7% decrease) to R9,453 million with EBITDA margins increasing to 31.9% (2002: 24.3%).

Mobile
The mobile segment accounted for 22.3% of group operating revenues (2002: 19.3%) (after inter-segmental eliminations) and 33.3% of group operating profits (2002: 43.3%). Vodacom is the largest mobile communications network operator in South Africa with an estimated 57% share of mobile customers as of March 31, 2003 based on total estimated customers. Vodacom also has investments in mobile operators in Lesotho, Tanzania and the Democratic Republic of the Congo. Vodacoms operational statistics are presented below at 100%, but all financial figures are the 50% proportionately consolidated into the group.

  Year ended March 31
  2002 2003 % Change
Mobile operating revenue In ZAR millions  
 

2002

2003

% Change

Airtime

4,743

5,650

19.1

Interconnection

2,150

2,655

23.5

Equipment sales

814

1,132

39.1

International services

151

270

78.8

Other sales and services

217

183

15.7

Other sales and services

217

183

15.7

Total mobile operating revenue

8,075

9,890

22.5

During the year, the mobile segment delivered strong revenue growth of 22,5%, before inter-segmental eliminations, to R9,890 million (2002: R8,075 million), primarily driven by customer growth and an increase in equipment sales. Revenue from Vodacoms operations outside of South Africa as a percentage of Vodacoms total mobile operating revenue increased to 6.2% (2002: 4.6%). The growth in revenue can largely be attributed to a 26.0% increase in Vodacoms total customers to 8.6 million as of March 31, 2003 (2002: 6.9 million) resulting from strong growth in prepaid customers in South Africa and significant growth in customers outside of South Africa. In South Africa, total average monthly revenue per user (ARPUs) increased marginally to R183 (2002: R182). Contract ARPUs increased by 12.3% to R629 (2002: R560). During the year, South African contract churn decreased to 11.9% in 2003 (2002: 14.5%). Prepaid churn, however, remained relatively high at 34.0% (2002: 30.1%) due to greater competition, lower barriers to entry for prepaid customers and the volatile nature of the prepaid customer base.

  Year ended March 31
  2002 2003 % Change
Mobile operating expenses In ZAR millions  
 

2002

2003

% Change

Employee expenses

568

509

10.4

Payments to other network operators

689

1,109

61.0

SG&A

3,688

4,614

25.1

Services rendered

57

65

14.0

Operating leases

237

273

15.2

Depreciation and amortisation

1,035

1,188

14.8

Other operating income

15

34

126.7

Total mobile operating expenses

6,259

7,724

23.4


Mobile operating expenses, before inter-segmental eliminations, increased by 23.4%, largely in line with the growth in revenue of 22.5%. Mobile selling, general and administrative expenses increased 25.1% in the year ended March 31, 2003 primarily due to an increase in selling and distribution expenses to support the growth in South African and other African operations and the increased competitiveness in the South African market.

Mobile payments to other network operators increased 61.0% in the year ended March 31, 2003 as a result of increased outgoing traffic and a higher volume growth of outgoing traffic terminating on the other mobile networks relative to traffic terminating on the fixed-line network. The cost of terminating calls on other mobile networks is higher than calls terminating on Telkoms fixed-line network.

Profit from operations increased 19.3% (2002: 42.2%) to R2,166 million (2002: R1,816 million) and operating profit margin decreased marginally to 21.9% (2002: 22.5%). Mobile EBITDA increased 17.6% (2002: 36.1%) to R3,354 million with EBITDA margins decreasing to 33.9% (2002: 35.3%).

Dividends
The board of directors has decided not to declare a dividend at this time, as it believes it would be prudent to continue to focus on debt reduction in line with the group strategy.

Audit report
The comprehensive financial statements, from which the preliminary results have been derived, have been audited by the joint auditors Ernst & Young and KPMG. Their unqualified opinion is available for inspection at the companys registered office.

Outlook
Increased competition and emerging technologies place greater importance on the need to further develop our group strategy to maintain our leadership position and deliver value for shareholders.

We will continue to improve the competitiveness of our fixed line business by improved customer service, innovative products and competitive pricing. We have also started to work more closely with Vodacom on potential synergies in areas such as marketing, procurement and products, that will build value for both operators. Our performance will be further enhanced by our commitment and ability to drive operational efficiencies, increase cash flows and reduce debt.

NE Mtshotshisa SE Nxasana
Non-executive chairman Chief executive officer
June 23, 2003 Johannesburg Telkom SA Limited  
Registration number: 1991/005476/06  
Registered office: Telkom Towers North,
152 Proes Street,
Pretoria, 0002, South Africa
 
Postal address: Private Bag X881, Pretoria, 0001  
Board of directors: NE Mtshotshisa (Chairman), SE Nxasana (CEO),
SM McKenzie (COO)*, CK Tan (CSO)#, JP Klug*,
Tan Sri Dato ir. Md. Radzi Mansor#, RP Menell,
MP Moyo, TA Sekano, CL Valkin, TG Vilakazi,
VV Mashale (Company Secretary)
* American # Malaysian
 
Sponsor: UBS Securities South Africa (Proprietary) Limited
Transfer secretaries: Computershare Investor Services Limited
 

Operational data

  Year ended March 31
  2002 2003 % Change
Summary group financial statements and operational data
Fixed-line

 

 

 

Fixed access lines (thousands)

4,924

4,844

(1.6)

Fixed access lines (thousands)

4,924

4,844

(1.6)

Post paid

 

 

 

PSTN

3,554

3,285

7.6

ISDN channels

467

563

20.6

Prepaid

708

817

15.4

Payphones

195

179

8.2

Fixed-line penetration rate (%)

11.1

10.7

3.6

Revenue per fixed access line (ZAR)

4,729

4,989

5.5

Total fixed-line traffic (millions of minutes)

32,973

32,868

0.3

Local

20,252

20,396

0.7

Long distance

4,895

4,728

3.4

Fixed-to-mobile

4,390

4,135

5.8

International outgoing

375

439

17.1

Interconnection

3,06

3,170

3.6

Internet customers

48,995

98,690

101.4

Managed data network sites

5,684

7,729

36.0

Number of full-time, fixed-line employees(excluding TDS and Swiftnet)

39,444

35,361

10.4

Fixed lines per fixed-line employee

125

137

9.6

Mobile

 

 

 

Total customers (thousands)

6,863

8,647

26.0

South Africa

 

 

 

Customers (thousands)

6,557

7,874

20.1

Contract

1,090

1,181

8.3

Prepaid

5,439

6,664

22.5

Community services telephones

28

29

3.6

Churn (%)

27.2

30.4

11.8

Contract (%)

14.5

11.9

17.9

Prepaid (%)

30.1

34.0

13.0

Average monthly revenue per customer (ZAR)

182

183

0.5

Contract

560

629

12.3

Prepaid

93

90

3.2

Community services

93

90

3.2

Number of employees

3,859

3,904

1.2

Number of customers per employee

1,699

2,017

18.7

Other African countries

 

 

 

Customers (thousands)

306

773

152.6

Average monthly revenue per customer

 

 

 

Lesotho (ZAR)

144

104

27.8

Tanzania (USD)

27

22

18.5

Democratic Republic of the Congo (USD)

n/a

20

n/a

Number of employees

494

502

1.6

Number of customers per mobile employee

619

1,540

148.8

  Year ended March 31
  2002 2003 % Change
Audited consolidated income statements in ZAR millions      

2002

2003

% Change

Operating revenue

34,197

37,600

10.0

Other income

144

234

62.5

Employees expenses

7,166

7,208

0.6

Payments to other operators

5,762

6,185

7.3

SG&A

8,402

7,888

6.1

Services rendered

2,195

2,541

15.8

Operating leases

1,217

1,205

1.0

Depreciation and amortisation

5,408

6,293

16.4

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