3. Performance
3.2 Revenue
 

Significant accounting judgements, estimates and assumptions

Recognition and measurement of revenue

Stand-alone selling prices and transaction price

The stand-alone selling prices for mobile devices are based on the standard list prices at which the Group sells them separately (without a service contract). Stand-alone selling prices for communication services are set based on prices for non‑bundled offers with the same range of services. The transaction price is calculated as the total consideration receivable from the customer over the contract term.

Significant financing component

In order to determine whether a significant financing component exists, a model was designed, which calculates the financing component on a contract-by-contract basis. If the financing component is less than 5% of the total transaction price allocated to the customer premises equipment (CPE), it is deemed not to be significant and the finance component will not be recognised separately.

Google Equiano

As part of the Google Equiano arrangement, Openserve will receive an upfront payment for granting the use of terrestrial network to Google for 15 years. Aligned with the Group policy and IFRS 15 principles, management concluded that this has a significant financing element. Management applied judgement and determined an approximate USD rate at which Openserve could be granted USD finance for a similar amount and period to determine the significant financing component. A USD rate was used as revenue will be earned in USD currency and equipment used to build the network was paid for in USD currency.

The significant financing element is recognised as a finance cost and the transaction price (deferred revenue and revenue) is increased with the financing component over the 15-year period. Refer to note 2.6 for more details.

Customer relationship periods

The average customer relationship periods for wholesale, voice and non-voice services are utilised to expense the capitalised installation revenue and cost. Management applies judgements about the data used to determine the customer relationship period estimate. The estimate is based on the historical churn information (refer to note 3.2.3). The churn is determined by considering the service installation and disconnection dates, the weighted customer base ageing and the service connection status of the customers. Changes in average customer relationship periods are accounted for as a change in accounting estimate.

Agent vs principal considerations

When deciding on the most appropriate basis for presenting revenue or related costs, both the legal form and the substance of the agreement between the Group and the counterparty are reviewed to determine each party's respective role in the transaction.

Consideration is given to which party controls the goods or services. If that is not clear, the Group evaluates the following control indicators, among others, when determining whether it is acting as a principal or agent in transactions with customers and the recording of revenue on a gross, or net, basis:

  • The Group is primarily responsible for fulfilling the promise to provide the specified goods or service;
  • The Group has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer; and
  • The Group has discretion in establishing the price for the specified good or service.

Software, cloud services and related services

The Group has applied judgement to determine whether it acts as an agent or principal in these arrangements in accordance with the principles of IFRS 15. One of the judgements made is whether control passes to the Group prior to the passing thereof to the customer. Where the vendor has the primary obligation to fulfil the services to the customers, the Group concluded that control does not pass to the Group and, as a result, it acts as an agent in these arrangements.

Included in the Group service offerings, software and related licences are sold with the ability to access the vendor's latest technology via product updates. The assessment of whether the Group acts as a principal or an agent is judgemental. The Group deems the defining characteristic of each arrangement to be whether its material performance obligation is to deliver software, cloud services and related services or to arrange access to such goods or services.

A key consideration in assessing whether the Group or the vendor is responsible for the software, cloud services and related services relates to the management of the updates to the software. Where the Group has concluded that the upgrades are critical to the functionality of the software and the effective functionality of the solution, and such updates can only be delivered by the vendor, the Group acts as agent for such software sales as the vendor has the primary obligation to fulfil the services to the customers.

Unless the Group obtains the right to direct the use of a piece of software between customers, e.g. gain access to a pool of software licences, the Group has concluded that it does not carry inventory risk for software.

The Group generally has pricing discretion in a contract for the resale of software, vendor cloud services and other related services, but has concluded that this factor in isolation does not result in the Group concluding that it can act as a principal in these transactions.

Vendor resold services

For vendor resold service warranty and maintenance products, a customer purchases a product from the Group that is delivered over time directly by the vendor. These service contracts are sold alongside, but separately from the associated products, and the Group serves as the agent for the contract on behalf of the vendor. The Group's responsibility is to arrange for the provision of the specified service by the vendor, and the Group does not control the specified service before it is transferred to the customer. The Group therefore acts as agent with respect to vendor resold services in which the Group is not primarily responsible for fulfilling the performance obligation.

Revenue from sale arrangements where the Group acts as agent is recognised on a net basis, and the commission or gross profit earned on these contracts is recognised as revenue.

Franchisee

The Group utilises franchise stores to sell its contracts (including those bundled with mobile devices), pre-paid services and mobile devices (without bundling them with a Telkom services contract). The franchisee sells both post-paid and pre-paid contracts. The entity is the principal in a transaction if it obtains control of the specified goods or services before they are transferred to the customer. An entity is an agent if it does not control the specified goods or services before they are transferred to the customer. Telkom accounts for device sales through the franchise stores as a principal as Telkom can unilaterally redirect the handsets between franchisees without the approval of the franchisee to best realise the handset. It has been assessed whether Telkom is a principal or agent for the device obligation on a contract-by-contract basis using the relevant indicators, considering the right of return policy with third-party franchisee. In terms of IFRS 15, Telkom has identified the specified goods or services being provided to the customer, the handset in this instance. A specified good or service is a distinct good or service (or a distinct bundle of goods or services) that will be transferred to the customer.

In terms of IFRS 15, Telkom has identified the specified goods or services being provided to the customer, the handset in this instance. A specified good or service is a distinct good or service (or a distinct bundle of goods or services) that will be transferred to the customer.

Enterprise revenue

Management has assessed that the primary obligation for service delivery to the Enterprise customers remains with Telkom SA SOC Ltd, therefore Telkom recognises gross revenue for the Enterprise customer contracts which were sold to BCX, but not contractually ceded. Similarly, price risk owing to the contracts not ceded is deemed to reside with Telkom. Cognisance is given to the fact that mechanisms exist for a transfer of credit risk between Telkom and BCX. It is on this basis that management has concluded that revenue from such contracts should be recognised in the accounting records of Telkom as a principal with the customers.

Bill-and-hold arrangements

The Group enters into bill-and-hold arrangements on hardware sales. Judgement is applied to determine if the criteria below are met to, to support revenue recognition in terms of the principles of IFRS 15:

  • The reason for the bill-and-hold arrangement must be substantive;
  • The product must be identified separately as belonging to the customer;
  • The product currently must be ready for physical transfer to the customer; and
  • The Group cannot have the ability to use the product or to direct it to another customer.

Hardware and software as part of an integrated solution

The Group enters into contracts with customers to provide integrated solutions. Contracts are assessed individually to determine whether the products and services are distinct, i.e. the product or service is separately identifiable from the other promises in the contract with the customer and whether the customer can benefit from the goods or services either on its own or together with other resources that are readily available.

The nature of the promised goods or services are inputs into a working solution and the customer does not derive value from the stand-alone goods and services. The Group has applied its judgement and views these arrangements, in some instances, as a single performance obligation that needs to be met as the goods and services are not separately identifiable and the customer cannot benefit from either the goods or the services separately. The resulting conclusion impacts the agent versus principal assessment of the revenue recognition for these arrangements. The Group acts as principal in these integrated solution arrangements.

The revenue on these contracts is therefore recognised on a principal basis over time using the output method (i.e. value to the customer of the goods or services transferred to date relative to the remaining goods or services promised).

Reassessment of leases relating to customer premises equipment (CPE)

The Group enters into contracts with customers which involve both the delivery of services and CPE. Prior to the adoption of IFRS 16, these contracts were accounted for as operating leases under IAS 17 (Leases). On adoption of IFRS 16, the Group elected the practical expedient not to reassess whether an existing contract is, or contains, a lease, and management accordingly retained the assessment made under IAS 17 for these existing lease contracts. Subsequent to the adoption of IFRS 16, it was identified that these existing lease contracts, which have reached the end of the initial lease term, continue on a month-to-month basis allowing the customer to exit the contract with no penalty. This is different to the terms which applied during the initial lease term, wherein the customer could not exit without a penalty.

According to IFRS 16, if an entity chooses the practical expedient described above, then an entity shall identify a lease by applying the requirements of IFRS 16 only to contracts entered into or changed after the adoption date. However, IFRS 16 is silent on what constitutes a change to an existing contract.

Management exercised significant judgement and determined that the lease contracts continuing on a month-to-month basis without an exit penalty, subsequent to the initial lease term, constitutes a change in the contract, and therefore reassessed whether these contracts contain a lease in terms of IFRS 16. Upon such reassessment, it has been determined that while the CPE represents an identified asset, the customer does not have the right to direct how and for what purpose the CPE is used throughout the period of use. The Group, being the supplier, has such a right and therefore such arrangements do not contain a lease. It is on this basis that management has concluded that revenue from such contracts should be recognised under IFRS 15 (Revenue from Contracts with Customers).

Nature of goods and services

Revenue from contracts with customers

The Group has elected to apply the IFRS 15 practical expedient on the significant financing component that allows the Group not to adjust the transaction price for the significant financing component for contracts where the time difference between customer payment and transfer of goods or services is expected to be within 12 months or less. The Group sells products and services both separately as well as part of bundled packages. The Group recognises revenue when it transfers control over a product or services to a customer. Products and services that form part of bundled packages are recognised separately if they are distinct. Further detail is provided below:

Products and services Segment Timing of revenue recognition Nature of goods and services and significant payment terms
CPE revenue Telkom Consumer and BCX The Group recognises revenue at a point in time when a customer takes control of the communication equipment or products. The total transaction price is allocated to the mobile device or CPE such as Private Automated Branch Exchanges (PABXs) on a relative stand-alone selling price basis. The relevant stand-alone selling prices are based on the market prices (as indicated in the Group's device catalogues and trade lists) of the individual performance obligations identified in the contract.

The total consideration noted above is determined based on the assessed contract term. Some contracts include an early renewal clause. Based on the assessment of historical data, the Group has determined that there is not a significant number of contracts that are renewed on an earlier basis and has therefore applied the total contractual term in the calculation of the total consideration receivable under a contract. Contract assets are recognised when customers have obtained control of the device for post-paid contracts.

The amount of revenue recognised for devices is adjusted for expected returns, which are estimated based on the historical data. For devices sold separately (i.e. without the telecommunications contract), customers pay full price at the point of sale. For devices sold in bundled packages, customers usually pay monthly in equal instalments over the contract term.

The Group does not provide separate warranties on equipment delivered to customers and therefore no performance obligations are identified associated to this.
Interest revenue Telkom Consumer and BCX The Group recognises revenue over time. The Group assesses whether a significant financing component exists for all contracts in excess of 12 months. A financing element of greater than 5% of the portion of the transaction price allocated to the mobile device or customer equipment has been deemed to represent a significant financing component. The significant financing component is determined using an average discount rate representative of the risk associated to the customers. The assessment of the existence of a financing component is performed on a contract-by-contract basis. The transaction price is reduced with the financing component and the financing component is recognised over the contract period.
Mobile and fixed-line telecommunication services (voice, interconnection and data) Openserve, Telkom Consumer and BCX

Openserve
Openserve provides the following services:

Broadband solutions
This includes next-generation access across fibre and copper networks enabling high-speed internet connectivity.

Optical and carrier solutions
Services constitute the provision of client-specific backhaul and managed connectivity, assuring world-class quality and reliability.

Enterprise solutions
Products include business-to-business connectivity, underpinned primarily by Ethernet-based products.

Global solutions
Interconnect-based services connecting South Africa and the rest of the global market.

Telkom Consumer
The Telkom Consumer business unit provides the following services to customers:

Broadband data
Broadband data refers to high-speed internet access that is always on and faster than the traditional dial-up access.
Broadband includes several high-speed transmission technologies, such as digital subscriber line (DSL), fibre, wireless and satellite.

Voice
Voice telecommunications refer to the communication of sound over a distance using wire or wireless telephones and related technology.

Content
Content services are provided through the association with a variety of content providers, which allows subscription for a fee to games, competitions, videos, social sites and entertainment.

Gaming
Gaming services are provided through the VS Gaming brand; this is the provision of a virtual sports platform which provides regular tournaments and ladders across all major game titles and skills levels and spectator access.

Small and Medium Entity Information, Communication and Technology solutions
Small and Medium Entity Information, Communication and Technology solutions services are data centre infrastructure components as well as an increasing number of content, software, hardware and support services delivered over the internet.

CPE-related revenue
This relates to routers and switches. Although the CPEs represent an identified asset, the customer does not have the right to direct how and for what purpose they are used throughout the period of use. Therefore, such contracts do not contain a lease in terms of IFRS 16.

Global solutions
Interconnect-based services connecting South Africa and the rest of the global market.

BCX
BCX provides fixed telecommunication voice and data services to customers including:

Business mobility
Managed wireless broadband and dedicated access over microwave, 4G/5G and satellite, and secure machine‑to‑machine connectivity.

Managed application-centric data networking
Multiprotocol Label Switching, software-defined wide area network (software-defined WAN) and secure access service edge-based data networking for private and public enterprise branch aggregation with service-level agreements (SLAs) and hyperscaler onramps.

Managed local area networking
Fixed or wireless local area networking for enterprises certified by multiple technology manufacturers; includes centralised or dedicated controllers and switches.

Global telecommunication services
Global telecommunication services relate to Global Connectivity mainly through virtual private network (VPN) services that usually cater for connectivity of local enterprise customers that have branches outside of South Africa.

Unified collaboration
Fixed-voice solutions evolving to unified collaboration as a service, including on-premises or hosted PABXs, cloud telephone and managed hosted contact centres.

Broadband or dedicated access
Fibre or wireless access for point-to-point or point-to-cloud connectivity from enterprise branches, typically to the internet for software-defined WAN and cloud-hosted applications.

Internet and value-added services
Dedicated or broadband express internet for private or public sector branches or from data centres, including features addressing security and peering.

Converged communication services
BCX provides converged communication voice and data services to customers.

CPE- related services
CPE is installed to provide converged communication services and an asset of BCX.
The Group recognises revenue over time as these telecommunication services are provided. Mobile and fixed-line telecommunication services may be sold in bundled or separate packages. The revenue for the telecommunication services is recognised over time as the services are provided. Services purchased by a customer beyond the contract are treated as a separate contract and recognition of revenue from such services is based on the actual voice or data usage, or is made upon the expiration of the Group's obligation to provide the services.

For pre-paid services, the customer pays the full price at the point of sale.

For post-paid contracts, customers usually pay monthly in equal instalments over the contract term together with the additional billing for out-of-bundle usage.

Where the payment of an installation fee attributable to a fixed telecommunication service on a month-to-month contract provides the customer with a material substantive right, the installation is a separate performance obligation and is recognised over an estimated customer relationship period. The customer usually pays the fee upfront when the installation has been completed. Refer to note 3.2.3 for the customer relationship periods per customer type.

Interconnection revenue is derived from calls and other traffic that originate in other operators' networks but use the Telkom network. The Group receives interconnection fees based on agreements entered into with other telecommunication operators. These revenues are recognised in the period in which these services are rendered.
Information technology revenue BCX
Stand-alone hardware
Revenue is recognised at a point in time once control of the goods is transferred to the customer, being when the customer accepts delivery of the goods. The Group acts as principal in these arrangements and revenue is recognised on a gross basis.
  BCX
Standard stand-alone software
Where the Group is acting as an agent, the Group will recognise revenue at a point in time once the Group has fulfilled its performance obligation, being when the right to access the licensing product has transferred to the customer.

In the instance where the Group is acting as principal, the Group will recognise revenue at a point in time once control of the goods have transferred to the customer, being when the right to access the licensing product or software has been transferred to the customer.
The Group acts as a principal in certain contracts and as an agent in other contracts, depending on the nature and scope of the contract. Management applies judgement in establishing whether the Group has control of the software licences prior to the licences being transferred to the customer and therefore whether the Group acts as agent or principal in these contracts.

Where it has been determined that the Group did not control the software licences prior to the licences being transferred to the customer, the Group will recognise revenue as an agent on a net basis.

Where the Group controls the software licences prior to the licences being transferred to the customer, the Group will recognise revenue as a principal on a gross basis.
  BCX
Renewal of software licences
Revenue is recognised at a point in time once control of the goods is transferred to the customer with regards to the software licence after it has been renewed. As the Group does not control the software licences at any point before the licences are transferred to the customer, the Group acts as an agent in the transaction and will account for the revenue as an agent as the Group has no further responsibility with regards to the software licences after control is passed to the customer.
  BCX
Vendor resold services
Revenue is recognised at a point in time once the contract start date is initiated. The Group sells service warranty and maintenance contracts on behalf of its vendors, which are accounted for on a net basis as the Group is acting as an agent in the agreement. The commission or gross profit earned on these sales is recognised as revenue.

A service warranty or maintenance package is sold alongside hardware or software products. The Group's responsibility is to arrange for the provision of the specified service by the original equipment manufacturer/vendor, and the Group does not control the specified service before it is transferred to the customer. The Group therefore has no obligation to the customer in terms of the service or maintenance once the sale has been made and the contract with the vendor has been concluded.
  BCX
Hardware and software as part of an integrated solution
Revenue is recognised over time, making use of the output method. Where the Group is contracted to deliver integrated Converged Communication and/or IT solutions, the solutions are considered as a single performance obligation that is satisfied over time. The nature of the promised goods or services are inputs into a working solution and the customer does not derive value from the stand-alone good and services. The measurement of the value to the customer of the goods or services transferred to date, relative to the remaining goods or services promised, is the most faithful basis of measuring progress.

The Group acts as principal in these arrangements. Revenue is recognised on a gross basis.
  BCX
IT services
Where the Group acts as principal, revenue is recognised over time as the services are being consumed.

Where the Group acts as an agent, revenue is recognised at a point in time when control is transferred to the customer, being when the customer is provided access to the service.
Where the Group is primarily responsible for the delivery of a service and the service is considered to be distinct from other performance obligations stipulated within the contract with customers, the Group acts as principal. Revenue is recognised on a gross basis.

Where the Group does not have the primary responsibility for the acceptability of the service and therefore does not control the service prior to the transfer thereof to the customer, the Group acts as agent. Revenue is recognised on a net basis.
Sundry revenue: electronic directory services and advertising revenue Telkom Consumer

This includes the following products and services:
Advertising
Digital and social media advertising, across a number of platforms
E‑commerce
Omni‑channel offerings
Electronic directory and advertising revenue is recognised over the contract term as the performance obligations are met based on the total transaction price agreed for the contract. The relevant stand-alone selling prices are based on market prices.

The contract term for the services in this revenue stream is usually 12 months or less and therefore no significant financing element has been included in the revenue recognition for this revenue stream.
Sundry revenue Telkom Consumer

This includes the following products and services:
Printed directory services
Revenue from printed directories is recognised at a point in time when the directories are released for distribution. The relevant stand-alone selling prices are based on market prices.
  Openserve

This includes the following products and services:
International other, included in international other is maritime services.
Revenue from maritime services is recognised at a point in time as the performance obligations are met based on the contract. The maritime services are for three-year fixed contracts. The services offered are billed on a monthly basis as they are utilised by the customer, regardless of the contract term. There is no significant financing component as services are billed on a monthly basis, based on services offered to customers at a point in time.

The maritime services billings (stand-alone prices) are based on agreed contract prices that are signed by both the market participants on the contract.

Revenue from other contracts

Leases

Rental income from property and masts and towers is generated by the Group through its subsidiaries. The revenue is recognised as part of the Gyro and Openserve segments. The revenue is accounted for as operating lease revenue and recorded on a straight-line basis in accordance with IFRS 16.

Insurance revenue

Our insurance customers are covered for the month that they have paid insurance premiums. To have continuous cover and a valid claim, premium payments must be up to date and where a payment is not received on time, the contract lapses subject to insurance business regulatory requirements. Insurance revenue reflects the number of premium receipts to which the insurer is entitled in exchange for services provided on device and funeral cover products. The Group allocates the premium receipts to each period of insurance contract services based on the passage of time.

All revenues are presented net of Value-Added Tax (VAT), rebates and discounts. Invoice and payment terms are set out in note 4.3 of the financial statements.

Significant financing component

The Group applies the practical expedient in IFRS 15 paragraph 63 to not recognise a significant financing component for any contract when the goods and services provided are 12 months or less, compared to when the payment is received.

Material right considerations

The Group considers installation fees on month-to-month contracts to provide a material substantive right to the customer as the customer can extend/renew the contract each month without paying an additional installation fee. This installation fee is a separate performance obligation and is capitalised and expensed over an estimated customer relationship period where it is concluded that the installation fee gives rise to a material substantive right.

Contract costs

Contract costs that are eligible for capitalisation as incremental costs of obtaining a contract include commission and connection incentives paid on new contracts that have been entered into. Contract costs are capitalised unless the practical expedient per IFRS 15 paragraph 94 is applied, which states that incremental costs to obtain a contract can be recognised as an expense when incurred if the amortisation period of the asset, that the entity otherwise would have recognised, is one year or less. Contract costs are capitalised in the month of service activation if the Group expects to recover these costs, and is amortised over the contract term.

The Group's normal operating cycle for contract costs capitalised are 24 to 36 months and, as such, contract costs capitalised are disclosed as current assets.

The amortisation of the contract asset is included in sales commission, incentives and logistical costs based on the nature of the costs being deferred.

In all other cases, contract costs are expensed as incurred.

Contract assets

Contract assets represent the Group's right to consideration in exchange for mobile devices and CPE. The contract asset is recognised at the point where the Group transfers control of the device or CPE to the end customer.

The Group's normal operating cycle for contract assets are 24 to 36 months and, as such, contract assets are disclosed as current assets.

IFRS 15 is silent regarding the derecognition of contract assets. Therefore, in terms of IAS 8, the Group has adopted a policy of using IFRS 9 derecognition principles and IFRS 7 derecognition disclosure principles when accounting for the derecognition of contract assets.

The Group recognises the gain on derecognition within the other income line item and/or loss on derecognition within the other expenses line item on the statement of profit or loss and other comprehensive income. The proceeds received are classified as cash generated from operating activities in the statement of cash flows.

Deferred revenue (contract liabilities)

Deferred revenue (contract liabilities) is accounted for or recognised at the earlier of the due date of the invoice and the date that the payment is received from the customer before the performance obligation is satisfied.

A contract liability is an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or an amount of consideration is due) from the customer.

Deferred installation fees and revenue billed in advance represent customer payments received in advance of performance (contract liabilities). This is included in deferred revenue on the statement of financial position.

3.2.1 Disaggregation of revenue
 
  Company
  31 March
2024
Rm
Restated1
 31 March 
2023 
Rm 
Revenue 30 865 33 890
Revenue from contracts with customers recognised over time 26 368 28 797
Voice 6 354 7 992
Interconnection 581 660
Data 18 853 18 975
Information technology 490
Customer premises equipment related services 96 163
Interest revenue 314 319
Sundry revenue 170 198
Revenue from contracts with customers recognised at a point in time 4 216 4 850
Customer premises equipment 4 183 4 789
Sundry revenue 33 61
Lease revenue2 40
Insurance revenue 281 203
1 Restated due to IFRS 17 adoption. Refer to note 2.7 for details.
2 Lease revenue is Rnil in the current year due to Openserve carve-out.

Refer to note 3.1 for the disaggregated revenue per segment for the Group.

Included in Telkom Company revenue is revenue to the value of R4 623 million (31 March 2023: R5 592 million ), which relates to Enterprise customer contracts which were sold to BCX in previous financial years, which have been retained in the name of Telkom SA SOC Ltd.

3.2.2 Transaction price allocated to the remaining performance obligations
 

The tables below include revenue expected to be recognised in the future, related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date.

  Group
31 March 2024
  2025
Rm
2026
Rm
Beyond
2027
Rm
Voice 260 118 26
Data 2 587 1 153 855
Information technology 228 22 12
  Group
31 March 2023
  2024
Rm
2025
Rm
Beyond
2026
Rm
Voice 398 154 34
Data 2 557 1 073 153
Information technology 171 24 13

 

  Company
31 March 2024
  2025
Rm
2026
Rm
Beyond 2027
Rm
Data 260 118 26
Voice 2 485 1 052 149
  Company
31 March 2023
  2024
Rm
2025
Rm
Beyond 2026
Rm
Voice 398 154 34
Data 2 549 1 071 152

All revenue from contracts with customers is included in the amounts presented above.

The Group and Company apply the practical expedient in paragraph 121 of IFRS 15 and do not disclose information about remaining performance obligations that have original expected durations of one year or less.

3.2.3 Customer relationship periods
 

The customer relationship periods (CRPs) in the current financial year are determined as follows:

  • Voice revenue: 5.5 years (31 March 2023: 5.5 years)
  • Wholesale revenue: 4 years (31 March 2023: 4 years)
  • Non-voice revenue: 3.5 years (31 March 2023: 3.5 years)

There has been no change in the average CRPs in respect of non-voice revenue, voice revenue and wholesale revenue during the 2024 financial year.

3.2.4 Assets and liabilities related to contracts with customers
  The Group has recognised the following assets and liabilities related to contracts with customers:
3.2.4.1 Contract assets
 
   Group  Company 
   31 March 
2024 
Rm 
31 March 
2023 
Rm 
31 March 
2024 
Rm 
31 March 
2023 
Rm 
Contract assets  2 204  2 440  2 204  2 440 
Gross contract assets  2 808  2 948  2 808  2 948 
Impairment of contract assets  (604) (508) (604) (508)
Allowance account for expected credit losses – contract assets  604  508  604  508 
Opening balance as previously reported  508  496  508  496 
Charged to statement of profit or loss and other comprehensive income  397  116  397  116 
Contract assets written off  (301) (104) (301) (104)

Contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include sending reminders, pinging the accounts for additional debit order collections, suspending the services, handing over the debt to external debt collectors and not receiving the debtors' positive feedback that confirms the amounts as collectable, failure of a debtor to engage in a repayment plan with the Group, blacklisting the customer, and failure to make contractual payments.

The decrease in the gross contract asset balance is due to lower CPE sales as a result of stringent credit vetting of customers due to higher default in the current year. The increase in the allowance for expected credit losses is driven by an increase in default rates as a result of the current macro-economic conditions. This also resulted in higher write-offs in the current year.

Refer to note 7.1.4 for a detailed credit risk analysis.

Sale of contract assets

Telkom entered into agreements with financial institutions to factor a ring-fenced group of contract assets. The gross carrying amount of the contract assets factored is R1 083 million (31 March 2023: R1 371 million).

Per the arrangements, Telkom retains the contractual right to receive cash flows, and has assumed a contractual obligation to pay the cash flows received to the financial institution.

Based on the structure of the agreements, the IFRS 9 (Financial Instruments) "pass through" criteria were met for the derecognition of the contract assets and the contract asset portfolio was derecognised in its entirety as significant risks and rewards were transferred. The total cash inflow related to the derecognition is included in cash flows from operating activities in the statement of cash flows.

As part of the agreement, Telkom is obligated to pay the financial institution only from the cash collected from the customers and, as such, Telkom assumes no further obligation in relation to the agreement. In the case that there is a credit note, Telkom will not be required to refund the financial institution for the credit note. Telkom has no continuing involvement with the transferred contract asset.

3.2.4.2 Other current assets
 
   Group Company
    31 March 
2024 
Rm 
31 March 
2023 
Rm 
31 March 
2024 
Rm 
31 March 
2023 
Rm 
Other current assets   545  462  545  462 
Contract costs capitalised  272  240  272  240 
Ongoing commission capitalised assets  273  222  273  222 
Contract costs capitalised  272  240  272  240 
Opening balance  240  255  240  255 
Contract costs capitalised during the year  303  254  303  254 
Contracts cancelled during the year  (28) (27) (28) (27)
Amortisation recognised as cost of providing services during the year  (243) (242) (243) (242)

Contract costs capitalised relate to commission and incentive costs paid to dealers and sales staff, which are considered incremental to the acquisition and fulfilment of the contract. The contract costs capitalised are amortised as an expense over the term of the contract to which the commission relates. Management expects that the full cost will be recovered through the revenue recognised on these contracts and has consequently not recognised any impairment on the contract costs capitalised.

   Group  Company 
Ongoing commission capitalised assets  31 March 
2024 
Rm 
31 March 
2023 
Rm 
31 March 
2024 
Rm 
31 March 
2023 
Rm 
Contract asset – ongoing commission  273  222  273  222 
Ongoing commission (included in trade and other payables) (273) (222) (273) (222)
Opening balance  222  211  222  211 
Expense amortised in the current year  (153) (126) (153) (126)
New contracts entered into  306  242  306  242 
Contracts cancelled during the year  (102) (105) (102) (105)
Closing balance  273  222  273  222 

 

3.2.4.3 Deferred revenue
 
  Group Company
  31 March
2024
Rm
31 March
2023
Rm
31 March
2024
Rm
31 March
2023
Rm
Deferred revenue 2 550 1 603 992 1 156
Non-current deferred revenue 899 128 24 33
Current portion of deferred revenue 1 651 1 475 968 1 123

The deferred revenue balance consists primarily of deferred installation fees, deferred revenue from the Google cable landing station, deferred revenue from the grant of use of terrestrial network on system 1 and revenue billed in advance due to Telkom's various billing cycles. Deferred revenue increased mainly due to the Google Equiano transaction. Refer to note 2.6 for more details.

At the end of the prior year, R1 475 million (31 March 2022: R1 633 million) for Group and R1 123 million (31 March 2022: R1 483 million) for Company was recognised as a current liability.

The total revenue recognised in the current year, which related to carried forward deferred revenue associated with installation fee revenue, deferred revenue from the Google cable landing station, deferred revenue from the grant of use of terrestrial network on system 1 and revenue payable in advance, is disclosed in the table below. The amounts recognised as a contract liability will generally be utilised within the next reporting period.

  Group Company
 Revenue recognised in relation to deferred revenue (contract liabilities): 31 March
2024
Rm
31 March
2023
Rm
31 March
2024
Rm
31 March
2023
Rm
Deferred revenue 1 224 1 213 992 1 035

The table above illustrates the portion of the revenue recognised in the current period which related to carried forward deferred revenue associated with installation fee revenue, deferred revenue from the Google cable landing station, deferred revenue from the grant of use of terrestrial network on system 1 and revenue billed in advance.