Voice revenues declined 5.5% to R6,562 million as a result of lower minutes of use due to mobile substitution and, to a lesser extent, lower tariffs. Most categories of voice revenue declined and we expect traditional voice revenue to continue declining. Revenue from subscription based calling plans grew 1.5% to R819 million. The slowdown in calling plan revenue growth reflects the increased penetration of these products and difficult macro economic conditions as customers switch to the lower priced Telkom Closer 1 and 2 products. Voice annuity revenue, which includes line rental, calling plans, customer premises equipment rental and value added services grew 2.9% to R3,983 million.
Interconnection revenue decreased 8.6% to R834 million reflecting a decrease in international interconnection tariffs and lower volumes on switched hubbing. There is a plethora of capacity in the international connectivity market and prices are expected to continue declining.
Total data revenue decreased 7.9% to R5,114 million as a result of income generated from the Soccer World Cup in the previous year. Excluding Soccer World Cup related revenue, data revenue decreased 2.1% as a result of increased self provisioning and lower internet access revenue.
ADSL subscribers increased 13.7% to 795,419 when compared to the 30 September 2010 reporting period. Telkom's share of net additions within the entire broadband market is declining as a result of the rapid growth in mobile broadband. With Telkom's DSL penetration (excluding wholesale DSL) standing at only 19.5% of the fixed-line base there is opportunity for Telkom to offset declines in voice revenues by growing broadband penetration. We are enabling our target offering through high speeds and caps which include consistently greater value for the same price and an uncapped offering.
We acknowledge that the broadband market is dominated by mobile players largely as a result of Telkom's slow time to install and undifferentiated product offerings. This is as a result of network and technology constraints. These issues are being dealt with and we are focusing our efforts on delivering consistent, best in class customer experience and improving current customer satisfaction. We will also simplify and streamline our product offerings and communication. Our new product catalogue will be launched in November 2011. We are using new approaches in how we distribute these products, specifically developing our push (e.g., external sales agents) and new pull channels (e.g., third party retailers and online), while ensuring our staff are knowledgeable and customer oriented in our current channels.
Data traffic is growing exponentially but is difficult to monetise and requires considerable capital investment. For this reason our network transformation is prefaced on customer requirements and commercial returns and is prioritised towards "no-regret" moves. We are also required to explore new business models, including select partnerships, in order to tap into innovation and aggregate the most relevant services and applications.
Operating expenditure increased 8.2% to R15,382 million. This was largely as a result of mobile start-up operating expenditure after intercompany eliminations of R1,408 million and the impairment of iWayAfrica goodwill of R445 million. The fixed-line business reduced operating expenditure 3.9% to R11,693 million. Telkom is firmly committed to reducing its cost base. This must be done in a manner that ensures sustainable, long-term benefits. We have continued optimising staff vacancies through natural attrition and have been actively managing overtime and contractors spend in order to manage costs as far as possible. Other initiatives focus on increasing revenue per customer, product and channel rationalisation, contact centre consolidation, better management of capitalised cost and capital work in progress and process optimisation throughout the business. Management are aware that cost reduction, no matter how difficult, is essential.
Since 8•ta's launch a year ago on 14 October 2010, several key milestones have been accomplished:
8•ta has been recognised for having the best data products offering great value for money. MyBroadband awarded 8•ta "Mobile Data Provider of the Year (2011)" and "Mobile Maverick of the Year (2011)". We have achieved a strong performance in post-paid and data exceeding internal targets. While the distribution network is still in the early stages of development in terms of scale, training and merchandising, we have secured a fairly wide distribution with 113 Telkom Direct Stores, 6 Flagships stores, approximately 70,000 airtime points of sale, approximately 68,000 SIM card points of sale, and approximately 400 post-paid points of sale. We launched with 100% network coverage from day one as a result of the roaming agreement with MTN. Our network build out currently allows us to provide 8•ta coverage to approximately 45% of the population in South Africa. Currently around 43% of all voice traffic and 84% of data traffic is carried on the 8•ta network. We have completed construction of 1,399 base stations of which 1,052 are on the air. In addition, we recently launched a full suite of mobile products for Business that have been well received by the market.
8•ta achieved revenue of R301 million and an EBITDA loss of R1,083 million for the six months ending 30 September 2011. Total revenue generating subscribers equalled 1,140,289 with pre-paid contributing 882,888 and post-paid 257,401. Pre-paid ARPU was R20.47 and post-paid ARPU R286.09. Blended ARPU was R63.32.
At 30 September 2011 our market share was 1.9% with on-net traffic totalling 3% and off-net traffic 97%.
Our main challenge is slower than budgeted pre-paid growth. Issues with getting distribution fully up-and-running have slowed us down. We are working jointly with our distribution partners to complete systems integration and are designing innovative commission structures to grow our footprint. We will also drive greater demand for the 8•ta pre-paid product through increased focus on marketing and clear messaging on the value proposition of our products.
8•ta offers the best value data product in the market. The Go Big data promotion was well received by the public and subscriber up take has been strong. We intend to offer new propositions early in the 2012 calendar year to strengthen our data offering and cater for new customer segments. We will also further leverage convergence as a differentiator, seamlessly switching between fixed and mobile infrastructure.
We are expanding our network coverage in high demand areas to cater for pent up demand. Fifty trial LTE sites are also being rolled out to prepare for future customer requirements of higher speeds and improved quality of service.
We expect to achieve an EBITDA loss for our mobile segment for the year ending 31 March 2012 of approximately R2.2 billion after eliminations and R2.5 billion before eliminations.
Cybernest has continued to gain traction in the market. While the majority of the R695 million revenue achieved in the six months to 30 September 2011 is generated from Telkom, non-Telkom revenue has increased 5.4% to R39 million. We are focusing our efforts on large customers with customised solutions and addressing smaller customers with packaged offers. Cybernest continues to optimise its network design to provide flexible solutions to high bandwidth client requirements. We continue with capacity increases, improving the network management and connectivity and increasing automation to improve productivity. We also continue to build our sales team and build credibility with customers through our strategic partnerships with industry leaders. Our product portfolio is growing as we moved up the IT value chain and we are working closely with Telkom SA's enterprise team to offer customers expanded products and services. We remain optimistic about the prospects for this business.
Trudon's revenue decreased by 1.2% to R639 million while EBITDA and operating profit remained flat.
The core printed directories business has reached maturity in South Africa. To keep pace with the changes in the marketplace, Trudon is evolving from being a publisher of traditional print products to being a local search solutions provider. Print usage by subscribers has reduced and younger users access information primarily through internet and mobile channels, rather than printed white or yellow pages. Trudon has no choice but to follow this migration and build up its capabilities and capacity to offer these products. This move will require capital investment of R145 million over the following two financial years.
During the six month under review iWayAfrica saw a decline in revenues of 21.2% to R175 million. Operating loss excluding the impairment improved 26.7% to a loss of R33 million.
Telkom management is considering options to restructure this business. It is acknowledged that a footprint in Africa is desirable but not at any cost to the core Telkom business and only if management time can be justified on profitable operations.
The sale of Multi-Links was concluded on 3 October 2011 and therefore did not impact the results for the six months ended 30 September 2011. Multi-Links had an operating loss of R269 million for the six months that is included in discontinued operations.
The sale of Multi-Links will result in the recognition of a net loss of approximately R1 billion mainly due to the cumulative amount of exchange differences previously recognised in equity, that will be recognised in profit and loss on disposal of the Multi-Links foreign operation in the second half of the 2011 financial year.
Telkom incurred costs of R80 million for the six months ended 30 September 2011 to exit this business that is included in continuing operations.
The two most pressing regulatory pressures currently are spectrum fees and local loop unbundling. Telkom is committed to continually engage with ICASA for the benefit of both the industry and Telkom.
Spectrum licence fees and access - ICASA introduced Administrative Incentive Pricing (AIP) of spectrum through Regulations on 27 August 2010. These Regulations set the various pricing formulae that will be used in future to determine spectrum fees payable by licensees. The main aim of the regulations is to create incentives for spectrum users to optimise the effective and efficient use of the radio frequency spectrum, by incentivising the use of higher frequencies and in non-urban areas. The objective is to ensure that spectrum fees calculated through AIP reflect the market value of the radio frequency spectrum.
Currently there is uncertainty regarding the implementation of the various formulae and data tables. Telkom and other industry players have formally requested further engagements with the Authority on the regulations. The indication from the Authority is that the implementation date of these regulations will be postponed. The implementation of these regulations has been postponed by ICASA to 1 April 2012 to allow ICASA to get the necessary systems in place to implement the new pricing formulae. Telkom is awaiting a formal communication by ICASA in this regard.
The new proposed fee structure is expected to substantially increase the total spectrum fees payable by Telkom. Telkom is working on various options to reduce this amount using the incentive mechanisms built into the pricing formulae; however even after such optimisations, Telkom's spectrum fees are still expected to increase by a significant amount.
Local Loop Unbundling - Local Loop Unbundling (LLU) in its original form is a regulatory mandated process that allows multiple telecommunications operators to access and provide services over the last-mile copper infrastructure (i.e. from the local exchange to the customer premises) that is traditionally owned by the incumbent operator. The risk that LLU poses to Telkom's profitability is dependent upon the form and details of implementation that will be imposed by ICASA, neither of which are known at this point in time. In addition, Telkom is not the same company it was when LLU was first considered and the market has changed significantly, particularly access technology. Telkom is of the view that any process which ICASA may follow to introduce LLU is likely to be undertaken on a legal basis which is not clearly defined in the Electronic Communications Act. The process will thus be open to interpretation and possibly result in disputes. Telkom has analysed various LLU options, and will continue to engage with key stakeholders.
Public hearings on LLU have been held and we await ICASA's publication to the Minister and Department of Communications on their findings and conclusion.
Shareholders are referred to the SENS announcement released on 14 October 2011 regarding Telkom entering into discussions with KT Corporation (KT) regarding KT potentially acquiring a strategic equity shareholding of 20% in the postissue ordinary share capital of Telkom.
Discussions are continuing regarding areas of mutual strategic and business cooperation and long-term agreements required to formalise the relationship. Management view the transaction in a positive light given KT's experience and wealth of skills in all areas of Telkom's strategic aspirations.
Shareholders are advised to continue to exercise caution when dealing in the Company's securities until a further announcement is made.
Capital expenditure for the Group is expected to range between 15% and 20% of revenue over the current financial year including the impact of our mobile investment.
The targeted net debt to EBITDA is aimed at 1.4 times. In the short term we will operate at lower levels pending the cash outflows associated with the mobile related capital expenditure.