Telkom Trading Statement

In terms of paragraph 3.4(b) of the Listings Requirements of the JSE Limited, companies are required to publish a trading statement as soon as they become reasonably certain that the financial results for the period to be reported on next will differ by at least 20% from those of the previous corresponding period.

Telkom is currently finalising its results for the six months ended 30 September 2009, which are expected to be released on 23 November 2009.

The South African business continued to experience margin pressure absorbing higher than inflation increases in operating costs mainly as a result of higher payments to local and international operators, salary increases as a result of the agreement reached with the unions, higher depreciation and increased provisioning for inventory write-offs.

The Nigerian operations reported EBITDA losses at similar levels to those of the corresponding period in the previous year. Trading conditions in Nigeria remained tough as a result of local economic factors, pricing pressures and the short term strategy to reduce inventories and acquire subscribers by subsidising certain handsets. The newly appointed distribution agents are still at an early stage of establishing new distribution channels and average revenues per subscriber remained low in an intensely competitive market. The weaker Nigerian economy has also placed increased pressure on consumer spending.

Telkom successfully concluded the sale and unbundling of its 50% stake in Vodacom during the period under review.

The following unusual items impacted earnings for the six months period:

1. Profit on the sale of our 15% share in Vodacom, of approximately R18,535 million;
2. profit on the unbundling of our 35% share in Vodacom, of approximately R25, 688 million;
3. capital gains tax on the sale and unbundling of our Vodacom shares, of approximately R1,353 million;
4. secondary taxation on companies ('STC') on the special dividend relating to the sale of Vodacom, of approximately R977 million;
5. reversal of the deferred tax asset relating to capital gains tax on the Vodacom sale, of approximately R421 million;
6. compensation expense recognised in terms of IFRS2 relating to the amendment of the Telkom Conditional Share Plan, of approximately R946 million;
7. fair value loss on the mark to market valuation of Vodacom shares held at 30 September 2009, of approximately R166 million;
8. impairment of goodwill in Multi-Links Nigeria, of approximately R2,148 million; and
9. profit on disposal of Telkom Media, of approximately R68 million.

Basic earnings per share ('BEPS') from continuing operations for the period are distorted by the accounting for the sale and unbundling of our 50% stake in Vodacom. Normalised BEPS from continuing operations, which excludes the profit on sale and gain on unbundling of Vodacom and all expenses related to the transaction, are expected to decrease by between 130% and 140%. BEPS including the profit on sale and gain on unbundling of Vodacom and all expenses related to the transaction are expected to increase by 1,565% to 1,575%.

Normalised headline earnings per share from continuing operations for the period, which excludes all the unusual items listed above, are expected to decrease by approximately 45% to 55%. Headline earnings per share, which includes the STC on the special dividend, the compensation expense and the fair value loss on Vodacom shares, are expected to decrease by between 130% and 140% from the corresponding period in the prior year.

The main differences between basic earnings and headline earnings are the profit on the sale and gain on unbundling of our 50% share in Vodacom and the related capital gains tax and impairments and write-offs relating to property, plant and equipment and intangible assets.

This trading statement has neither been reviewed nor reported on by the Company's external auditors.

Johannesburg
13 November 2009
Sponsor: UBS