Telkom SA SOC Limited
Integrated Report 2017
For the year ended 31 March 2017

An overview of our business

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Who is Telkom

Telkom is a leading information and communications technology (ICT) services provider in South Africa, offering fixed-line, mobile, data and information technology (IT) services.

Through BCX, our IT company, the group has operations across the globe. Effective from 1 April 2017, Telkom formed a wholly owned subsidiary, Gyro, which is responsible for managing our masts and towers, property development and property management services on behalf of the group.

Our purpose

This is tied to the national vision of seamlessly connecting our customers to a better life.

Our vision

To lead in the converged ICT market through deep and credible relationships and a distinctive customer experience by:

  • leading the provision of converged solutions
  • providing a quality network with unmatched reach
  • offering end-to-end digital solutions in the business community
  • creating innovative and pervasive broadband consumer services
  • being the wholesale provider of choice
  • being the best place to work for committed and accountable people

Our values

Telkom’s values form the foundation of our Business Code of Ethics (BCOE). Telkom has five core values:

Continuous improvement     Listen, act, learn and innovate. We seek continuous improvement and do things quickly, effectively and innovatively. We learn from our mistakes to enhance our performance and become more responsive to customer needs.  
Honesty     Be real, open and truthful. We keep our promises and commitments. We always tell the truth and are open and transparent in all our dealings with each other, our customers, our stakeholders and the broader community.  
Accountability     “If it is to be, it is up to me”. We take full ownership of our actions and deliverables. We do not blame others and always give our best. We are passionate and walk the extra mile for customers.  
Respect     Ensure dignity to all. Protect the environment. We treat people with courtesy, politeness and kindness, and actively listen to others. We value diversity and always seek to understand others.  
Teamwork     Together we win. We are team players with a common goal and shared vision. We deliver business results through cooperation and share our knowledge and resources to the benefit of the business and stakeholders.  

One of Telkom’s keys to future success is to build a high-performance, values-driven culture. The culture of an organisation is one of the principal sources of its competitive advantage and brand differentiation. Telkom is committed to conduct its business in an ethical manner based on its core values and acceptable principles.

Shareholding as at 31 March 2017

Telkom is a Johannesburg Stock Exchange (JSE) listed company with the share code TKG.

Equity shareholding

  • 51.8%
    Institutional
    shareholders
  • 39.3%
    Government of
    South Africa
  • 3.4%
    Non-
    institutional
    shareholders
  • 3.3%
    Treasury
    shares
  • 2.2%
    Miscellan-
    eous*

* Small shareholders-mostly retail clients.

Debt holding information

Telkom credit ratings

          Moody’s       Standard & Poor’s  
  Issuer rating
Long-term global scale
      Baa3       BBB-  
  Long-term national scale       Aa1.za       -  
  Outlook       Negative*       Negative*  
  Date       13/6/2017       10/4/2017  
* Following the downgrade of the South African sovereign rating, Standard & Poor’s and Moody’s affirmed our credit rating at BBB- and Baa3, respectively, and changed our outlook to negative from stable.

 

South African listed debt

  Bonds          
  Listed bonds       TL20  
  Commercial paper       TLC01  
          TLC02  

 

Group operating structure

The table below sets out our operating structure. Further information on each business unit and subsidiary is provided on the pages that follow, refer to page 62 for further information on our operating model.

Group
Divisions 100% owned subsidiaries 64.9 owned subsidiary

Openserve is South Africa’s leading wholesale infrastructure connectivity provider with the largest network footprint across South Africa.


We are contracted to provide network infrastructure services which include fulfilment, provisioning, maintenance and assurance services to wholesale clients and their customers.

Differentiating factors

Network

The unmatched scale and quality of Openserve’s next-generation network creates a unique wholesale market differentiator.

  • the largest high-speed fixed-broadband connectivity across South Africa
  • largest fibre footprint across national, metro and access with more than 149 000 km of fibre installed
  • optimised national transmission network capacity to enable infrastructure connectivity growth across enterprise carrier, consumer segments and global markets
  • deepest network, connectivity services and communication skills capacity
  • extensive experience in design and deployment of network

Openserve represents an openaccess network and strives to deliver high-quality connectivity solutions and services. As a connectivity provider Openserve plans, engineers, operates and maintains Telkom’s core and access network. The Openserve brand, which, was functionally separated from Telkom, was launched in October 2015.

Open-access network

A network allowing for wholesale access to electronic communications network and electronic communications network services to licence holders on terms that are reasonable, effective, transparent and non-discriminatory.

Products and services

Openserve offers a diverse range of products and services across the connectivity value chain. It is the only large scale provider that delivers large-scale integrated copper and fibre-based offerings over a high-speed backhaul network.

Broadband solutions
Provision of reliable fixed-line internet access

Optical and carrier solutions
Long-distance data distribution network (backhaul)

Enterprise solutions
Business-specific connectivity products and services

Infrastructure sharing
Passive telecommunications infrastructure sharing, such as towers

The national transmission network is a transport network used to enable national and international narrow and broadband connectivity between major regional centres.

National and regional

Automatic switched transport network deployed at all national layer sites

National dense wavelength division multiplexing (DWDM) route
Regional DWDM route
Submarine cable
Wavelength access
Automatic switched
transport network
deployed at all
national layer sites

Our fibre network spans across national and local transport (core), and aggregation and access footprints, enabling us to provide high speed connectivity across South Africa.

Openserve has passed over 2.2 million premises as at 31 March 2017, providing high-speed broadband connectivity using fibre.

Core fibre-optic network
Fibre-optic cable
Base stations
Enterprises
Homes
 


Telkom’s Consumer unit is South Africa’s largest fixed-broadband provider, internet service provider and, together with its mobile network, a converged communications provider.


Telkom Consumer consists of mobile, fixed-line home and office, and small and medium-sized enterprises (SMEs) offerings.

We service 4 million mobile subscribers, 1.1 million fixed-line residences and 243 000 fixed-line SMEs.

Differentiating factors

  • ability to provide services over an array of technologies – fixed and mobile
  • mobile broadband at high speeds
  • uncapped plans
  • innovative products
  • value proposition beyond pricing
  • simple pricing, data-led products in mobile

Products and services

  • voice, data and content
  • broadband
  • SMME solutions such as voice failover, integrated data services and converged services
  • mobile solutions and devices
  • application and content management solutions
  • fibre
  • voice over internet protocol
  • cloud-based private branch exchange
  • fixed-line look-alike

BCX is a premier end-to-end digital partner, providing advanced ICT solutions to companies.

Together with Telkom, BCX has extensive experience working with JSE-listed enterprises, public sector organisations, state-owned entities and SMEs globally.

BCX provides innovative ICT business solutions, operates ICT systems, and manages products, services and solutions in many locations, as shown in the map.

Differentiating factors

  • biggest data centre footprint in Africa
  • largest network infrastructure
  • unparalleled geographical reach
  • custom application development
  • unrivalled ICT solutions
  • industry-specific expertise
  • leader in service excellence
  • strategic vendor relationships
  • real-time, personalised service delivery

Products and services

BCX has a diversified ICT product portfolio that includes access to national fixed and mobile networks, data centres (and related services) and IT services. It has a portfolio housed under a single brand that is used to provide a wide range of services to the enterprise market.

Solutions IT products Telecommunication products and services
  • cloud computing
  • unified communications and collaboration
  • security
  • Internet of Things (IoT)
  • big data analytics
  • mobility
  • enterprise solutions
  • applications solutions
  • IT managed services
  • infrastructure solutions
  • cloud solutions
  • unified communications and collaboration
  • business mobility
  • global services
  • broadband, internet service and value-added services

Telkom acquired 100 percent of the issued capital of BCX group in September 2015.

Following the acquisition of BCX, Telkom’s data centre operations were sold to BCX and the Enterprise business was sold and integrated with BCX.

BCX is the only converged business in the market to offer end-to-end solutions to corporate customers.

BCX points of presence of operations

(Operational and service integration management)

Operational and service integration management capabilities
Great lakes region
No capabilities
BCX offices

Gyro is responsible for managing the group’s properties and tower needs, optimising the portfolio’s and providing a turnkey property and tower management solution.



Services

Masts and towers

  • optimise and improve current usage, manage and maintain current portfolio, and build new towers according to market demand

Property development

  • maximise the value of the property portfolio through an end-to-end property solutions

Property management services

  • continuously improve existing Telkom corporate real estate services
  • provide integrated turnkey property and tower services to Telkom and third party clientele
  • improved cost efficiency and reduced carbon footprint of energy supply in Telkom-owned properties

The formation of Gyro will:

  • extract value from the property and tower portfolio by utilising the existing portfolio in a more efficient manner for current business operations
  • excess capacity will be commercialised for best use in order to create a sustainable investment
  • built a valuable internal corporate real estate services and will be commercialising this offering

Trudon is a local advertising and marketing organisation that provides services and digital solutions to local businesses.

Trudon, the publishers of the Yellow Pages, delivers the best commercial search in South Africa and affordable, effective advertising and marketing options to the SME and corporate market.

Differentiating factors

  • long-established relationships with SMEs
  • largest SME customer base
  • partnerships with global over the top players to provide exclusive solutions to the South African market
  • wide range of both digital and print offerings at a variety of price points

Products and services

Traditional media

  • print media
  • telephone number enquiries

Digital marketing

  • online search
  • WiFi advertising
  • social media
  • e-commerce
  • digital market places
  • presence management

Trudon operates in Johannesburg, and has six other branches in South Africa. It has over 65 years of communication experience. Trudon has four subsidiaries, Leads Machine (100 percent), Kompare (55 percent), Connecto (100 percent) and TDS Namibia (75 percent).

Leads Machine

Leads Machine is a social media company primarily focused on providing SME customers with a full digital offering. Leads Machine’s mission is to help businesses grow online by enabling better digital experiences.

Connecto

Connecto is responsible for the development of an online social media directory and acts as the innovation hub for Trudon’s digital products, including Yapp – the online chat-based marketplace for SMEs.

TDS Namibia

TDS Namibia is a joint venture with Namibian Telecoms to produce the Yellow and White Pages directory listings for Namibia. These have been supplemented with some of the new digital offerings such as online Yellow Pages.

Kompare

Kompare is an online comparison marketplace (website, mobile site and application) where consumers can search, compare and buy a wide range of business and consumer products from hundreds of online South African retailers.