1

Human capital planning

Oupa MagashulaGroup Executive: Human Resources

2

Employee efficiencies must improve

478

351

308329

142

PortugalTelecom

Matav TPSA Cesky Telkom

Lines per employee

1314 14

1718

22

Cesky PortugalTelecom

Matav TPSA TelkomGroup

TelkomFixed-line

only

Employees expenses as % of revenue

3

Fixed-line employee targets

Lines per employee

Number of employees

Employee costs to revenue

Outsourcing

Voluntary retrenchments

Natural attrition

2001 2004 2007

Human capital planning

Operational support systems

7–10% annual

reduction

< 20% of revenue

> 175113 142

43,758 33,828

23% 22%

4

Human capital strategiesQ

uan

tita

tive

fore

cast

ing

(His

tori

c tr

end

an

alys

is) Q

ualitative F

orecastin

g(S

cenario

Plan

nin

g)

Change management

Gap analysis per organizational capability

SHCP interventions

BuildBuild

BuyBuy

BorrowBorrow

BoundBound

BounceBounce

Status quoStatus quo

Shareowner Expectations

Customer needs + wants

Change drivers

Current human capital

supply

“As is”

Future human capital

demand

“To be”

5

Capabilities framework

Challenge: oss-skills

HCmanagement

capability

HCdevelopment

capability

Procurementcapability

Crime/fraudpreventioncapability

Businesssupport

capability

Businesssystem

capability

Financecapability

Telkom’sbrand

capability

Labour markets

Communication markets

Strategic planning capability (PESTIE)

SHCP capability

Ser

vice

m

anag

emen

t ca

pab

ility

Net

wo

rk

op

erat

ion

sca

pab

ility

Net

wo

rk

infr

astr

uct

ure

cap

abili

ty

Marketin

g /

sales infrastru

cture

capab

ility

Acco

un

t m

anag

emen

t cap

ability

Marketin

g

man

agem

ent

capab

ilityStr

ateg

ic

tech

no

log

yp

lan

nin

g c

apab

ility

Strateg

icM

arketing

/sales p

lann

ing

capab

ility

Co

mp

etitorsC

om

pet

itors

Lea

der

ship

& m

anag

emen

t cap

abili

ty

Telkomcustomers/ investors

Lead

ership

& m

anag

emen

t capab

ility

6

Planning example

Telkom’s brand capability

Strategic planning capability

Sales capability

Technical operations capability

Service management capability

Network operations capability

Marketing/sales infrastructure capability

Network infrastructure capability

Procurement capability

Direct customer interface capability

Account management capability

Marketing management capability

Finance capability

Business system capability

Human capital management capability

Human capital development capability

Crime/fraud prevention capability

Business support capability

Core organizational capabilitiesCore organizational capabilitiesLeadership & management capability

HC audit

Peoplecapability

Tophuman capital

prioritiesStaff cost

Key strategicorganizational

capabilities

Operationalefficiency

dashboard

QuantitativeHC forecasting

model

QualitativeHC forecasting

model

7

Costs against capabilities

Marketing management capability, 0.01%

Account management capability, 0.06%

HC management capability, 0.10%

HC development capability, 0.21%

Finance capability, 0.45%

Network operations capability, 0.50%

Procurement capability, 0.59%

Network infrastructure capability, 0.66%

Business system capability, 1.15%

Service managementcapability

Business supportcapability

Technicaloperationscapability

Employees mapped: 1269

22.85%

35.69%

Direct customerinterfacecapability

13.84%

Leadership andmanagement

capability

9.29%

14.60%

3.73%

Results of pilot project implemented at Data and special services

8

Guaranteed remuneration

Telkom Executive Guaranteed Package Versus Market at October 2004

250000

500000

750000

1000000

1250000

1500000

1750000

2000000

2250000

2500000

2750000

3000000

3250000

3500000

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Reward Level

An

nu

al R

and

Val

ue

PolicyMarket Q3Market MedianMarket Q1Your Trend Line

9

Performance remuneration

Telkom vs Market

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

M5 M4 M3

Grade

Ran

d

Market 25%tile Telkom Avg Market Avg Market 75%tile

10

Improved performance incentivisation

Team awardFixed percentage per grade allocated based on achieving 100% of all targetsNo bonuses are payable if individual performance targets are not meet

Performance targets

Financial 70%

Non-financial 30%

EBIT

ROA

BEE

Customer satisfaction

Service targets

Conditional share plan22 million shares available to be granted over next 5 years to management and employees Number of shares will depend on level and performanceGrants to management vest 100% in 3rd year of grant Grants to employees vest over 3 years from 2nd year after grant date

11

The challenge of Aids

9.6% prevalence in TelkomSouth Africa has estimated 22% prevalence rate Death ratio at Telkom of 3.8 per 1 000 employees in 2002 of which only 4% directly related to AidsProjections indicate prevalence ratio will increase to 11.4% in 2006

The reality Telkom’s strategy

Four pillars of strategy:education, awareness, prevention, support and care

Previous focus awareness and prevention (̃ 1.2 million condoms distributed annually)

Future focusenhanced education, voluntary counselling, testing and treatment

R7.7 million allocated for voluntary counsellingand treatment programme for 2004/05