Telkom SOC : Interim Results for the six months ended 30 September 2016

Group Interim Results

for the six months ended 30 September 2016

2 Overview

Telkom SA SOC Limited

(Registration number 1991/005476/30) JSE share code: TKG

ISIN: ZAE000044897

Group interim results 2016 3

All commentary, messaging and indicators in this report exclude voluntary early retirement and severance package costs of R1 523 million and the related tax impact of R446 million in the prior corresponding period.

Key indicators

R million 20 000

20.6%

4.6%

Cents/share

400

8.6%

19.7%

Special note regarding forward-looking statements

Many of the statements included in this document, as well as verbal statements that may be made by us or by officers, directors or employees acting on our behalf, constitute or are based on forward-looking statements.

All statements, other than statements of historical facts, including, among others, statements regarding our convergence and other strategies, future financial position and plans, objectives, capital expenditures, projected costs and anticipated cost savings and financing plans, as well as projected levels of growth in the communications market, are forward-looking statements. Forward-looking statements can generally be identified by the use of terminology such as "may", "will", "should", "expect", "envisage", "intend", "plan", "project", "estimate", "anticipate", "believe", "hope", "can", "is designed to" or similar phrases, although the absence of such words does not necessarily mean that a statement is not forward looking. These forward-looking statements involve a number of known and unknown risks, uncertainties and other factors that could cause our actual results and outcomes to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Factors that could cause our actual results or outcomes to differ materially from our expectations, include but are not limited to those risks identified in Telkom's most recent annual report, which is available on Telkom's website at www.telkom.co.za/ir.

336.0

280.6

348.7

321.1

5 272

5 040

20 237

16 782

15 000

10 000

5 000

0

Operating revenue

EBITDA

300

200

100

0

BEPS

HEPS

R million 20 000

15 000

10 000

5 000

0

6.4%

We caution you not to place undue reliance on these forward-looking statements. All written and verbal forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Moreover, unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this document, so that they conform either to the actual results or to changes in our expectations.

The information contained in this document is also available on Telkom's investor relations website www.telkom.co.za/ir.

Telkom SA SOC Limited is listed on the JSE Limited. Information may be accessed on Reuters under the symbol TKGJ.J and on Bloomberg under the symbol TKG.SJ. Information contained on Reuters and Bloomberg is provided by a third party and is not incorporated by reference herein. Telkom has not approved or verified such information and does not accept any liability for the accuracy of such information.

R million 2 000

1 500

1 000

500

0

Percentage	0.2%
20 15 10 5 0	13.4 13.6
Return on invested capital

R million	83.3%
2 000 1 500 1 000 500 0	241 1 445
Free cash flow

R million	678.4%
300 200 100 0	214 -37
-100
Mobile EBITD profit/loss

36.7%

Mobile service and A

subscriptions revenue

September 2015 September 2016

Thousands	42.3%
4 000 3 000 2 000 1 000 0	3 212 2 257
Revenue generating mobile subscribers

Telkom operating expenditure

Index

01

Overview 6

The information contained in this document is also available on Telkom's investor relations website www.telkom.co.za/ir

Telkom SA SOC Ltd

(Registration number 1991/005476/30) JSE share code: TKG

ISIN: ZAE000044897

Group secretary

Ephy Motlhamme

Transfer secretaries Computershare Investor Services Proprietary Limited

PO Box 61051 Marshalltown, 2107

Sponsor

The Standard Bank of South Africa Limited Standard Bank Centre

30 Baker Street, Rosebank, 2196

Directors

JA Mabuza (Chairman),

SN Maseko (Group chief executive officer), DJ Fredericks (Chief financial officer),

S Botha, G Dempster, T Dingaan,

N Kapila1, I Kgaboesele, K Kweyama,

K Mzondeki, H Touré2, F Petersen-Lurie, R Tomlinson, LL Von Zeuner

1India 2Mali

Available online in PDF format

02

Operational data 26

03

Financial performance 28

04

Condensed consolidated 41

interim financial statements

05

Today's presentation 77

Auditors' review report

Our auditors, Ernst & Young Inc. and Nkonki Inc., have reviewed the condensed consolidated interim financial statements.

The unmodified review report is available for inspection at the Group's registered office.

Board approval

The condensed consolidated interim financial statements were authorised for issue by the Board of Directors of Telkom (Board) on

11 November 2016.

Preparation and supervisor of condensed consolidated interim financial statements These condensed consolidated interim financial statements were prepared by Mrs Gladys Machinjike (Executive financial

accounting and reporting) and supervised by Mr Robin Coode (Group executive accounting).

6 Group interim results2016

7

Johannesburg, South Africa - 15 November 2016, Telkom SA SOC Limited (JSE: TKG) today announced Group interim results for the period ended 30 September 2016.

01

Message from Group CEO: Sipho Maseko

The group delivered a solid performance in a tough economy where businesses continue to operate under pressure. The consolidation of Business Connexion (BCX), as well as

the satisfactory performance of our mobile business, drove revenue performance during the six months. The mobile business has contributed positively to the group's EBITDA in the reporting period. Our multi-year business transformation also contributed positively. I am pleased that we remain on track with our market guidance, despite the macro-economic challenges.

Customer experience remains a priority. We have undertaken a process redesign that will simplify and improve the quality of

interactions with our customers. As part of our systems redesign programme, we have also progressed well with the fixed and mobile

convergence platform for our consumer and enterprise business. This convergence will allow our customers to have a single view of their account by the end of the financial year.

As from November, we have integrated our Enterprise business with BCX. Isaac Mophatlane has been appointed as the CEO of the merged entity, BCX.

The combined entity will be our Enterprise go-to-market entity and is the only truly converged business in the market which offers end-to-end solutions to Enterprise customers. BCX remains a key growth platform for the group through which, among others, cloud computing and the Internet of Things (IoT) is delivered.

Group chief executive officer Sipho Maseko

Key highlights - Tough climate but solid results

• Operating revenue up 20.6 percent to R20.2 billion

• Net operating revenue up 3.3 percent to R13.8 billion

• EBITDA increased 4.6 percent to R5.3 billion with an EBITDA margin of 26.1 percent

• Headline earnings per share (HEPS) increased 19.7 percent to 336.0 cents

• Capex increased 55.8 percent to R3.6 billion with capex to revenue of 18.0 percent

• Group's net cash and cash equivalents increased to R1.8 billion supporting the interim dividend of 131 cents per share