3. Performance
3.4 Expenses
 

Summary of material accounting policies

Cost of handsets, equipment, software and directories

The costs of handsets, equipment, software and directories represent the acquisition cost of the items sold, net of any supplier rebates and discounts. This line item does not include any allocated overhead costs.

Sales commission, incentives and logistical costs

Sales commission and incentives are costs paid to Telkom’s independent sales channels. Logistical costs represent costs incurred with third parties outside the Group for the delivery of handsets to customers and stores. This line item does not include the allocation of any other expense classified by nature in the financial statements.

Payments to other operators

Costs charged based on usage by other service providers in the same line of business. These services are directly related to offering of the products or services to customers, and exclude amounts paid in relation to internal consumption.

3.4.1 Payments to other operators
 
  Group Company
  31 March 
2024 
Rm 
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Payments to other operators (3 328) (3 399) (2 664) (2 964)

Payments to other operators decreased due to lower roaming traffic costs paid to other operators for Telkom Company.

3.4.2 Cost of handsets, equipment, software and directories
 
  Group Company
  31 March 
2024 
Rm 
Restated1
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Cost of handsets, equipment, software and directories (6 125) (6 341) (3 867) (4 280)
1 Refer to note 2.7.

Cost of handsets, equipment, software and directories decreased mainly due to lower mobile post-paid sales and higher rebates received.

3.4.3 Sales commission, incentives and logical costs
 
  Group Company
  31 March 
2024 
Rm 
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Sales commission, incentives and logistical costs (2 748) (2 522) (2 748) (2 521)

Sales commission, incentives and logistical costs increased due to higher commissions from growth in the commissionable base and increased connections via commissionable channels.

3.4.4 Employee expenses
 
  Group Company
  31 March 
2024 
Rm 
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Employee expenses (7 895) (9 292) (1 519) (3 397)
Salaries and wages1 (6 932) (7 665) (1 166) (2 608)
Post-retirement pension and retirement fund (refer to notes 10.2 and 10.3)2 (481) (582) (48) (200)
Post-retirement medical aid (refer to note 10.4)3 176  176 
Post-retirement telephone rebates (refer to note 10.5) (39) (36) (39) (36)
Share-based compensation expense (refer to note 9.2) (121) (176) (36) (80)
Other benefits4 (509) (1 255) (238) (764)
Employee expenses capitalised to capital projects2 180  246  115 
1 Salaries and wages for Company decreased mainly due to the Openserve carve-out in the prior financial year. Openserve was a division of Telkom Company for the first five months of the 2023 financial year.
2 The decrease in Company post-retirement pension and retirement fund and employee expenses capitalised to capital projects is mainly due to Openserve carve-out. In the prior year, five months of Openserve expense was included in Company.
3 The decrease in post-retirement medical aid is due to curtailment paid by the Company for 31 May 2023 restructuring that was not taken into account in the 31 March 2023 valuation report.
4 Other benefits include, among others, skills development, annual leave, performance incentive, service bonuses, voluntary employee severance/voluntary early retirement and retrenchment package costs and termination benefits. Included in other benefits for 31 March 2023 were restructuring costs amounting to R1 065 million for Group and R420 million for Company. The decrease is also due to lower leave pay and training costs compared to the prior year.
3.4.5 Other expenses
 
  Group Company
  31 March 
2024 
Rm 
Restated1
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Other expenses (2 195) (2 324) (697) (857)
Sundry expenses2 (402) (400) (36) (66)
Licence fees (287) (393) (207) (331)
Subsistence and travel (55) (60) (15) (19)
Third party service costs (927) (968) (134) (118)
Image building and market research costs (73) (74) (60) (71)
Telephone rebate – Openserve employees –  –  (17) – 
Donations (66) (55) (35) (34)
Losses3 (305) (314) (149) (171)
Other (80) (60) (44) (47)
1 Refer to note 2.7.
2 Sundry expenses include, among others, consumables, membership fees, project fees, stock write-offs, printing and stationery costs.
3 Losses include losses as a result of damages to private property of third-parties, costs of extinguishing fire and excess payments to insurers.
3.4.6 Wholesale voice and non-voice services
 
  Group Company
  31 March
2024
Rm
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Wholesale voice and non-voice services (196) (5 638) (3 574)
Data connectivity (71) (3 222) (1 922)
Broadband access (8) (1 475) (878)
Managed services (107) (137) (100)
Line rental cost (10) (804) (674)

Wholesale voice and non-voice services increased for Company mainly due to Openserve carve-out, in the prior year five months costs were included as Openserve carve-out happened in September 2022.

3.4.7 Maintenance
 
  Group Company
  31 March 
2024 
Rm 
Restated1
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Maintenance (4 842) (4 152) (2 608) (3 241)
1 Refer to note 2.7.

Maintenance costs have increased for the Group due to higher maintenance costs and support contract costs. The decrease for Company is due to the Openserve carve-out. In the prior year, five months of Openserve costs were included in Company.

3.4.8 Service fees
 
  Group Company
  31 March 
2024 
Rm 
Restated1
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Service fees (3 849) (3 870) (1 397) (2 171)
Facilities and property management (2 443) (2 524) (715) (1 357)
Consultancy, security and other services (1 406) (1 346) (682) (814)
Audit fees2 (82) (113) (44) (76)
Consultancy services2,3 (403) (497) (97) (168)
Security and other services2 (921) (736) (541) (570)
1 Refer to note 2.7.
2 In the current year, we have disclosed a breakdown of consultancy, security and other services. The change is made to better reflect the nature of the expense.
3 Consultancy services include non-audit fees of R680 000 (31 March 2023: R1.5 million).

Facilities and property management decreased mainly due to lower diesel refuelling costs for standby generators and lower utility costs. The decrease in Company is mainly due to the Openserve carve-out. Openserve was part of Telkom Company for the first five months of the 2023 financial year.

3.4.9 Depreciation, amortisation, impairments and write-offs of non-financial assets
 
  Group Company
  31 March 
2024 
Rm 
Restated1
31 March 
2023 
Rm
31 March 
2024 
Rm
31 March 
2023 
Rm
Depreciation, amortisation, impairments and write-offs of non-financial assets (5 525) (20 589) (3 125) (11 463)
Depreciation of property, plant and equipment1 (3 350) (5 092) (1 155) (3 038)
Depreciation of right-of-use assets (1 463) (1 255) (1 404) (1 439)
Depreciation of investment property –  –  (112) (55)
Amortisation of intangible assets (632) (746) (426) (577)
Write-offs of property, plant and equipment and intangible assets2 (80) (260) (28) (225)
Impairment of property, plant and equipment and intangible assets2 –  (13 236) –  (6 129)
1 Refer to note 2.7.
2 The decrease is mainly due to the impairment recognised in the prior year.
  Group Company
The estimated useful lives assigned to groups of property, plant and equipment are: Years
2024
Years
2023
Years
2024
Years
2023
Freehold buildings 5 to 43 5 to 50 5 to 40 5 to 40
Network equipment        
Cables 4 to 30 4 to 30 4 to 30 4 to 30
Switching equipment 5 to 18 5 to 18 5 to 18 5 to 18
Transmission equipment 5 to 20 5 to 20 5 to 20 5 to 20
Other 2 to 20 2 to 20 2 to 20 2 to 20
Support equipment 5 to 12 5 to 12 5 to 10 5 to 10
Furniture and office equipment 10 to 15 5 to 15 11 to 15 11 to 15
Data processing equipment and software 2 to 10 5 to 10 5 to 10 5 to 10
Telkom support services equipment 2 to 20 2 to 20 2 to 20 2 to 20
  Company
The expected useful lives assigned to investment property are: Years
2024
Years
2023
Investment property 5 to 40 5 to 40
  Group Company
The expected useful lives assigned to intangible assets are: Years
2024
Years
2023
Years
2024
Years
2023
Software and licences 5 to 10 3 to 10 5 to 10 5 to 10
Trademarks, copyrights and other 5 to 20 5 to 20 5 to 20 5 to 13

During the year, the Group reassessed the useful lives on various property, plant and equipment and intangible assets. The reassessment takes into account the Group's current capex strategy and changes in the technological environment. The reassessment of useful lives decreased the depreciation expense by R37 million (31 March 2023: decrease of R98 million) and decreased the amortisation expense by R2 million (31 March 2023: increase of R133 million) at Company level and decreased the depreciation expense by R143 million (31 March 2023: decrease of R80 million) and decreased the amortisation expense by R8 million (31 March 2023: decrease of R128 million ) at Group level. With all other factors remaining constant, depreciation for future periods is expected to increase by R37 million for Company and by R143 million for Group, and amortisation for future periods is expected to increase by R2 million for Company and R8 million for the Group. Refer to notes 5.1 and 5.2 for the related accounting policies.