The statement of comprehensive income for the year ended 31 March 2010 has been adjusted to remove the effects of the sale and unbundling of our 50% share in Vodacom, the profit on sale of Telkom Media, the impairment of the goodwill and net asset value of Multi-Links, the impact of the Soccer World Cup contract entered into with the Department of Communications and the amortisation of the FIFA brand intangible asset to enable year on year comparison.

The reported results for March 2010 have been restated for the effect of the CDMA business relating to Multi-Links being classified as a disposal Group held for sale.

The impact of the items discussed above on Group earnings as reported is as follows:

Reconciliation of normalised group statement of comprehensive income

Normalised Group Operating Revenue

We have changed the revenue presentation to align to internal business focus areas. Voice revenue is classified as usage or subscription revenue and customer premises equipment and sales revenue is disclosed separately. Prior year numbers have been restated to reflect the new presentation format.

Group operating revenue decreased by 5.2% to R33,388 million (2010: R35,213 million) in the year ended 31 March 2011. The decrease is mainly due to the 100% pass through to customers of the reduction in mobile termination rates effective from 1 March 2010, lower switched hubbing activities and lower traffic volumes. Data Centre Operations includes R1,165 million of revenue from Telkom South Africa in terms of the transfer pricing policy effective from 1 April 2010. This revenue is eliminated on consolidation.

Normalised Telkom South Africa operating revenue

Operating revenue from the Telkom South Africa segment decreased by 5.9% to R31,467 million (2010: R33,448 million) primarily due to lower fixed-to-mobile traffic revenue and lower international and mobile interconnection revenue, partially offset by growth in data revenue.

Subscription and connections revenue decreased slightly by 0.7% to R6,763 million (2010: R6,814 million) largely as a result of a decrease in the number of postpaid and prepaid access lines.

Traffic revenue decreased by 13.3% mainly due to a reduction in mobile termination rates and lower fixed-to-mobile volumes due to the increasing substitution of calls placed using mobile services rather than fixed-line services. This was partially offset by an increase in revenue from subscription based calling plans by 10.3% to R1,637 million primarily due to increased volumes as a result of a 9.5% increase in the number of subscribers to 783,193 (2010: 715,221).

Interconnection revenue decreased by 35.6% to R1,679 million (2010: R2,608 million) largely as a result of a decrease of 50.1% in international interconnection revenue and a 34.4% decrease in mobile interconnection revenue. International interconnection revenue decreased primarily due to lower volumes on switched hubbing. The decrease in mobile interconnection revenue is mainly as a result of the decrease in mobile termination rates. Fixed interconnection revenue increased mainly due to increased volumes from Neotel, Sentech and VANS.

Data revenue increased 7.7% to R10,699 million (2010: R9,930 million) mainly due to revenue generated by the 2010 Soccer World Cup, a growing demand for services, including ADSL, a 7.5% increase in revenue from leased line facilities to mobile operators, growth in managed data network services and an increase in internet access and related services.

Normalised Group Other Income

Other income includes profit on the disposal of investments, property, plant and equipment and intangible assets as well as interest received from debtors and on loans to subsidiaries. The increase is mainly due to profit on the sale of a portion of our right of use in the SAT-3 undersea cable, partially offset by lower interest received from debtors due to the lowering of the interest rate charged. Interest received from subsidiaries by the corporate centre was significantly lower for the year ended 31 March 2011 due to the impairment of the Multi-Links loans as well as part of the Multi-Links loan being interest free from 30 September 2009 onwards. Interest received from subsidiaries is eliminated on consolidation.

Normalised Group Operating expenses

Group operating expenses decreased by 1.5% to R29,671 million (2010: R30,136 million) in the year ended 31 March 2011, primarily due to a decrease in payments to other operators partially offset by the expenditure incurred by the mobile business and an increase in employee expenses. The decrease in payments to other operators is mainly due to the reduction in mobile termination rates and lower international switched hubbing volumes in Telkom South Africa. The increase in employee expenses is primarily due to voluntary employee severance package expenses incurred of R739 million. Higher selling, general and administrative expenses are mainly attributable to the start-up of the Mobile business, offset by a decrease in maintenance and material expenses and lower licence fees in Telkom South Africa and a decrease in marketing fees in Corporate Centre. Service fees increased as a result of higher consulting fees paid mainly for the start-up of the mobile business and the exit of the CDMA business in Nigeria. Operating leases increased mainly as a result of an increase in vehicle leases.

Normalised operating expenditure contribution per segment

The 1.5% decrease in group operating expenses was primarily driven by a decrease in Telkom South Africa and Telkom International's operating expenses partially offset by the inclusion of mobile operating expenditure in the current year. Telkom South Africa's operating expenses decreased mainly as a result of the reduction in mobile termination rates partially offset by voluntary employee severance package expenses incurred. Also included in Telkom South Africa expenditure in the 2011 financial year is service fees paid to data centre operations in terms of the transfer pricing policy of R1,165 million that is eliminated on consolidation. Telkom international's operating expenditure is lower mainly as a result of lower expat fees incurred for Multi-Links.

>Normalised Telkom South Africa operating expenditure (excluding mobile)

Telkom South Africa's operating expenses, excluding mobile expenditure, decreased by 1.7% in the year ended 31 March 2011, to R24,682 million (2010: R25,103 million), primarily due to lower payments to international operators as a result of lower volumes on switched hubbing and lower payments to mobile operators due to the reduction in mobile termination rates, partially offset by the introduction of a transfer pricing policy from 1 April 2010 for services rendered by Cybernest of R1,165 million and voluntary employee severance package expenses.

Employee expenses increased by 12.2% in the year ended 31 March 2011, primarily due to voluntary employee severance package expenses incurred of R650 million incurred and higher salaries and wages as a result of average annual salary increases of 8.3% partially offset by lower headcount and Telkom Conditional Share expenses included in the prior year.

Payments to international network operators decreased 53.3% due to lower volumes on switched hubbing and mobile international traffic. Payments to mobile operators decreased 23.6%, largely due to the reduction in mobile termination rates with effect from 1 March 2010. The decrease in mobile termination rates contributed to a R1,199 million decrease in fixed-to-mobile revenue and R1,025 million to the decrease in payments to mobile operators.

Selling, general and administrative expenses decreased by 4.6% primarily as a result of lower materials and maintenance resulting from cost saving initiatives and lower provision for licence fees due to lower gross profit generated from Electronic Communications Services and Electronic Communication Network Services, partially offset by higher marketing expenses mainly relating to the 2010 Soccer World Cup.

Service fees increased by 50.5% primarily due to a R1,043 million intercompany charge by Cybernest for services performed as the transfer pricing policy was introduced on 1 April 2010. This cost is eliminated on consolidation.

Vehicle leases increased as a result of inflation increases, partially offset by a 4.1% reduction in the number of vehicles from 7,928 to 7,606.

Mobile operating expenses (part of Telkom South Africa operating expenses but excluded from above)

8•ta employed 228 employees at 31 March 2011. Payments to other operators consist mainly of payments to MTN in terms of the roaming agreement. Selling, general and administrative expenses relate mostly to network maintenance, cost of handsets sold and marketing expenses. Service fees relate to consultants assisting with the implementation of the business plan. Operating leases relate mostly to rental of buildings.

Normalised Ebitda Per Sergment

Investment Income

Investment income consists of interest received on short-term investments and bank accounts. Investment income decreased by 57.7% to R213 million (2010: R503 million), largely as a result of lower cash balances and short term deposits.

Finance charges and Fair Value Movements

Finance charges include interest paid on local and foreign borrowings, amortised discounts on bonds and commercial paper bills, fair value gains and losses on financial instruments and foreign exchange gains and losses on foreign currency denominated transactions and balances.

Finance charges and fair value movements increased by 5.3% to R1,109 million (2010: R1,053 million) in the year ended 31 March 2011. The increase was mainly as a result of foreign exchange and fair value losses of R202 million (2010: R90 million gain) due to lower investment growth in assets held by the cell captive compared to 2010 and the revaluation of the Telcordia provision on settlement of this liability. This was partly offset by a 20.6% decrease in interest expense to R907 million (2010: R1,143 million) as a result of 14.2% decrease in the Group's interest bearing debt to R8,355 million (2010: R9,737 million) and lower prevailing interest rates.

Normalised Taxation

The consolidated taxation expense from continuing operations decreased to R950 million (2010: R1,566 million) due to lower profit levels and taxation concessions. The consolidated effective taxation rate for the year ended 31 March 2011 was 28.3% (2010: 31.8%).

Consolidated statement of financial position

The Group's financial position remains strong. Net debt, after financial assets and liabilities, from continuing operations decreased by 3.9% to R4,907 million from R4,723 million as at 31 March 2010 resulting in a net debt to EBITDA ratio of 0.5 times at 31 March 2011. On 31 March 2011, the Group had cash balances of R1,773 million (2010: R3,793 million). The proceeds retained from the Vodacom transaction contributed to the higher balances as at 31 March 2010.

The decrease in cash is mainly attributable to the mobile expansion capital and operational expenditure, the settlement of the Telcordia dispute (approximately R608 million) and the repayment of private placing debt instruments with a nominal value of R1,780 million on maturity and the dividend payment of R3 per share.

Normalised Free Cash Flow

Excluding the effects of the R608 million payment to Telcordia regarding the supplier dispute, STC on the special dividend and voluntary severance packages the Group's free cash flow decreased 36.8% to R3,481 million from R5,507 million as at 31 March 2010.

Group capital expenditure

The decrease in capital expenditure was mainly driven by a decrease in the capital expenditure of Multi-Links as a result of the decision to exit the CDMA business, partially offset by an increase in mobile capital expenditure.

Telkom South Africa capital expenditure

Telkom South Africa's capital expenditure, which includes spending on intangible assets, decreased by 27.2% to R2,835 million (2010: R3,892 million) and represents 9.0% of Telkom South Africa's revenue (2010: 11.6%).

Baseline capital expenditure of R1,736 million (2010: R2,380 million) was largely for the deployment of technologies to support the growing data services business (including the ADSL footprint), links to the mobile cellular operators and expenditure for access line deployment in selected high growth commercial and business areas. The lower expenditure for the period can be attributed to a more measured approach to the rollout of infrastructure to meet short-term demand and revenue generating services.

Expenditure on network evolution of R550 million (2010: R654 million) was mainly to continue with the submarine cable projects to address international growth expected during the next decade and to provide next generation voice infrastructure on the national switching layer to relieve identified legacy capacity requirements.

The sustainment category expenditure of R101 million (2010: R58 million) was largely for the replacement of obsolete batteries and direct-current power systems.

Telkom continues to focus on its operations support systems with current emphasis on provisioning and fulfilment, assurance and customer care and hardware technology upgrades on the enterprise networks. During the year ended 31 March 2011, R155 million (2010: R402 million) was spent on the implementation of several systems.

The support capital expenditure of R265 million (2010: R381 million) is mainly for provision of new buildings and building extensions in support of network growth and for the development and upgrading of existing equipment buildings, including the associated AC power and air conditioning.

The expenditure on regulatory requirements of R28 million (2010: R17 million) is primarily for a system to store and manage customer identification documentation and for the initial phase of the Number Portability project.