Notes to the financial statements | Note 3.4

Summary of material accounting policies

Payments to other operators

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

Cost of handsets, equipment, software and directories

The cost 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 annual financial statements.

Payments to other operators decreased mainly due to the optimisation of the mobile roaming costs. This was driven by lower costs incurred resulting from a reduction in loadshedding hours, the rollout of Telkom mobile sites and the focus on cost efficiency as the Group maintains stringent roaming traffic thresholds and migrate traffic to the Telkom network.

The cost of handsets, equipment, software and directories decreased largely due to lower IT hardware and software sales in BCX and lower mobile device costs underpinned by post-paid sales. This was primarily driven by Telkom Consumer implementing stringent credit vetting to de-risk its post-paid portfolio in response to a deteriorating credit consumer position.

Sales commission, incentives and logistical costs increased due to higher commissions from growth in the mobile commissionable base and the increase in costs associated with the post-paid market such, as distribution channel costs and higher recharges and airtime sales.

The increase of R417 million in Telkom Company is mainly due to support contract costs relating to the maintenance of IT services between Telkom Company and BCX.

The increase in Telkom Company facilities and property management costs is mainly due to maintenance of the generators.

During the year, the Group reassessed the useful lives of 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 for property, plant and equipment by R23 million (31 March 2024: R37 million) and decreased the amortisation expense for intangible assets by R19 million (31 March 2024: R2 million) at Company level.

The reassessment of useful lives decreased the depreciation expense for property, plant and equipment by R124 million (31 March 2024: R143 million) and decreased the amortisation expense for intangible assets by R25 million (31 March 2024: R8 million) at Group level.

With all other factors remaining constant, depreciation for future periods is expected to increase by R23 million for Company and by R124 million for Group, and amortisation for future periods is expected to increase by R19 million for Company and R25 million for the Group. Refer to notes 5.1 and 5.2 for the related accounting policies.

The assessment of useful lives decreased the depreciation expense on investment property for Telkom Company by R9 million. With all other factors remaining constant, depreciation for future periods is expected to increase by R9 million. Refer to note 5.4 for related accounting policies.