| |
Significant accounting judgements, estimates and assumptions
Estimation of useful lives and residual values for property, plant and equipment
The useful lives of assets are based on management's estimation. Management considers the impact of changes in technology, customer service requirements and availability of capital funding to determine the optimum useful life expectation for each of the individual categories of property, plant and equipment. Due to the rapid technological advancement in the telecommunications industry, the estimation of useful lives could differ significantly on an annual basis due to unexpected changes in the rollout strategy. The impact of the change in the expected useful lives of property, plant and equipment is described fully in note 3.4.8. The measurement of residual values of assets is also based on management's judgement whether the assets will be sold or used to the end of their economic lives and the estimation of what their condition will be like at that time. Changes in the useful lives and/or residual values are accounted for as a change in accounting estimate.
Impairments of property, plant and equipment
Management is required to make judgements concerning the cause as well as the amount of impairment. In the identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services, market changes, legal changes, operating environments and other circumstances that could indicate that an impairment exists. The Group applies the impairment assessment to its CGUs. This requires management to make significant judgements concerning the existence of impairment indicators, identifying CGUs, and estimating the remaining useful lives of assets as well as projected cash flows to determine fair value less costs of disposal or value in use. Management's analysis of CGUs involves an assessment of the ability of a group of assets to independently generate cash inflows, and involves analysing the extent to which different products make use of the same assets. Management's judgement is also required when assessing whether there are indicators that a previously recognised impairment loss should be reversed.
Where impairment indicators exist, determining the recoverable amount of a CGU requires management to make assumptions to determine the value in use. The value in use is calculated using the discounted cash flow valuation method. The determination of value in use is based on a number of factors including the discount rate, revenue growth, terminal growth rates, EBITDA margins and capital expenditure. The judgements, assumptions and methodologies used can have a material impact on the recoverable amount and, ultimately, the amount of impairment loss recognised.
In calculating value in use, consideration is also given to the completion of a network that is partially completed at the date the impairment test is performed. Significant judgement is applied in determining if network expansion should be treated as a partially completed asset or an enhancement of an asset (which cash flows are not allowed to be considered in calculation of value in use).
Summary of material accounting policies
Recognition of property, plant and equipment
The cost of an item of property, plant and equipment is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. Subsequent costs are included in the carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
The carrying amount of any component accounted for as a separate asset is derecognised when replaced.
Assets under construction represent freehold buildings, operating software, network and support equipment and include all direct expenditure as well as related borrowing costs capitalised, but exclude the costs of abnormal amounts of waste material, labour or other resources incurred in the production of self-constructed assets.
Subsequent measurement
Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Repairs and maintenance expenses are charged to profit or loss during the reporting period in which they are incurred.
Depreciation, residual values and useful lives
The residual value of property, plant and equipment is the estimated amount that the Group would currently obtain from the disposal of the asset, after deducting the estimated cost of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Due to the technical nature of the Group's assets, the residual value is assumed to be zero based on the active market that is likely to exist at the end of the asset's useful life, which can be used to estimate the residual values.
The estimated useful lives applied are provided in note 3.4.8.
Depreciation is charged from the date the asset is available for use on a straight-line basis over the estimated useful life and ceases at the earlier of the date that the asset is classified as held for sale and the date the asset is derecognised. Idle assets continue to attract depreciation.
Impairment of property, plant and equipment
The Group regularly reviews its non-financial assets and CGUs for any indication of impairment. An impairment test is performed when indicators, including changes in technology, market, economic, legal and operating environments, availability of funding or the discontinuation of services, exist and could result in changes to the asset's or CGU's estimated recoverable amount.
An impairment loss is recognised in profit or loss if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount.
Previously recognised impairment losses are reviewed annually for any indication that they may no longer exist or may have decreased. If any such indication exists, the recoverable amount of the asset is estimated. Such impairment losses are reversed in profit or loss if the recoverable amount has increased as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years.
The carrying amounts of property, plant and equipment can be reconciled as follows:
| Group |
Freehold
land and
buildings
Rm |
Network
equipment
Rm |
Support
equipment
Rm |
Furniture
and office
equipment
Rm |
Data
processing
equipment
and software
Rm |
Under
construction
Rm |
Other1
Rm |
Total
Rm |
| Carrying amount - 31 March 2024 |
2 081 |
20 771 |
969 |
222 |
352 |
1 538 |
69 |
26 002 |
| Cost |
7 056 |
100 810 |
6 642 |
823 |
3 227 |
1 538 |
508 |
120 604 |
| Accumulated depreciation, impairment and write-offs |
(4 975) |
(80 039) |
(5 673) |
(601) |
(2 875) |
— |
(439) |
(94 602) |
| Additions2 |
95 |
3 794 |
137 |
32 |
241 |
1 062 |
9 |
5 370 |
| Transfers2 |
254 |
868 |
122 |
174 |
2 |
(1 476) |
18 |
(38) |
| Foreign currency translation |
(1) |
— |
1 |
(1) |
— |
(6) |
— |
(7) |
| Disposals |
(107) |
(1) |
— |
— |
— |
(5) |
— |
(113) |
| Disposal of subsidiary3 |
(883) |
(407) |
(1) |
— |
— |
(294) |
(12) |
(1 597) |
| Depreciation |
(197) |
(2 678) |
(293) |
(89) |
(112) |
— |
(16) |
(3 385) |
| Write-offs and impairment |
(1) |
(212) |
(15) |
(2) |
— |
(27) |
(1) |
(258) |
| Reclassified to held for sale reversal2 |
761 |
78 |
1 |
— |
— |
520 |
— |
1 360 |
| Carrying amount - 31 March 2025 |
2 002 |
22 213 |
921 |
336 |
483 |
1 312 |
67 |
27 334 |
| Cost |
7 076 |
104 047 |
6 852 |
1 004 |
3 271 |
1 312 |
504 |
124 066 |
| Accumulated depreciation, impairment and write-offs |
(5 074) |
(81 834) |
(5 931) |
(668) |
(2 788) |
— |
(437) |
(96 732) |
| Additions |
120 |
3 944 |
190 |
14 |
433 |
914 |
11 |
5 626 |
| Transfers |
44 |
422 |
209 |
26 |
93 |
(786) |
9 |
17 |
| Foreign currency translation |
— |
10 |
(10) |
— |
— |
5 |
— |
5 |
| Disposals |
(92) |
(2) |
— |
— |
(2) |
— |
(5) |
(101) |
| Depreciation |
(205) |
(2 885) |
(282) |
(85) |
(136) |
— |
(16) |
(3 609) |
| Write-offs and impairment |
(32) |
(184) |
(28) |
(3) |
(5) |
(9) |
(2) |
(263) |
| Carrying amount - 31 March 2026 |
1 837 |
23 518 |
1 000 |
288 |
866 |
1 436 |
64 |
29 009 |
| Cost |
7 012 |
107 149 |
7 191 |
1 001 |
3 483 |
1 436 |
507 |
127 779 |
| Accumulated depreciation, impairment and write-offs |
(5 175) |
(83 631) |
(6 191) |
(713) |
(2 617) |
— |
(443) |
(98 770) |
|
|
|
|
|
|
|
|
|
| 1 |
Other includes, for example, intruder detection systems, surveillance equipment, access control systems, mechanical aids and tools, etc. |
| 2 |
In the current year, it was identified that transfers with a carrying amount of R341 million between network equipment and under construction, were incorrectly disclosed as additions in the prior year. This resulted in transfers for network equipment increasing by R341 million and additions for network equipment decreasing by R341 million with the opposite movement impacting under construction. The prior year disclosure has been restated to correct this error. The error had no impact on the statement of financial position, statement of profit or loss and other comprehensive income, statement of cash flows, or any other notes. |
| 3 |
Swiftnet was classified as held for sale and remained so until its disposal in the prior year. The related balances are included in the property, plant and equipment reconciliation note to align the reconciliation with the disclosure notes. These balances relate to assets held for sale as at 31 March 2024 and reflect the subsequent disposal, as disclosed in notes 12.2 and 12.3. |
| Company |
Freehold
land and
buildings
Rm |
Network
equipment
Rm |
Support
equipment
Rm |
Furniture
and office
equipment
Rm |
Data
processing
equipment
and software
Rm |
Under
construction
Rm |
Other1
Rm |
Total
Rm |
| Carrying amount - 31 March 2024 |
582 |
7 313 |
129 |
59 |
248 |
930 |
24 |
9 285 |
| Cost |
1 457 |
22 088 |
355 |
165 |
2 123 |
930 |
121 |
27 239 |
| Accumulated depreciation, impairment and write-offs |
(875) |
(14 775) |
(226) |
(106) |
(1 875) |
— |
(97) |
(17 954) |
| Additions2 |
20 |
1 652 |
1 |
28 |
214 |
424 |
— |
2 339 |
| Transfers2 |
30 |
341 |
1 |
— |
(1) |
(395) |
(1) |
(25) |
| Disposals |
(3) |
— |
— |
— |
— |
— |
— |
(3) |
| Depreciation |
(39) |
(1 061) |
(19) |
(8) |
(81) |
— |
(6) |
(1 214) |
| Write-offs |
(4) |
(140) |
— |
(1) |
— |
(12) |
— |
(157) |
| Carrying amount - 31 March 2025 |
586 |
8 105 |
112 |
78 |
380 |
947 |
17 |
10 225 |
| Cost |
1 471 |
23 237 |
353 |
188 |
2 143 |
947 |
109 |
28 448 |
| Accumulated depreciation, impairment and write-offs |
(885) |
(15 132) |
(241) |
(110) |
(1 763) |
— |
(92) |
(18 223) |
| Additions |
23 |
1 751 |
53 |
9 |
425 |
408 |
— |
2 669 |
| Transfers |
62 |
249 |
1 |
— |
93 |
(351) |
6 |
60 |
| Disposals |
(4) |
— |
— |
— |
— |
— |
— |
(4) |
| Depreciation |
(52) |
(1 175) |
(21) |
(9) |
(105) |
— |
(4) |
(1 366) |
| Write-offs |
(7) |
(89) |
— |
(1) |
(4) |
(3) |
(2) |
(106) |
| Carrying amount - 31 March 2026 |
608 |
8 841 |
145 |
77 |
789 |
1 001 |
17 |
11 478 |
| Cost |
1 552 |
24 301 |
401 |
191 |
2 357 |
1 001 |
107 |
29 910 |
| Accumulated depreciation, impairment and write-offs |
(944) |
(15 460) |
(256) |
(114) |
(1 568) |
— |
(90) |
(18 432) |
|
|
|
|
|
|
|
|
|
| 1 |
Other includes, for example, intruder detection systems, surveillance equipment, access control systems, mechanical aids and tools, etc. |
| 2 |
In the current year, it was identified that transfers with a carrying amount of R341 million between network equipment and under construction were incorrectly disclosed as additions in the prior year.This resulted in transfers for network equipment increasing by R341 million and additions for network equipment decreasing by R341 million with the opposite movement impacting under construction. The prior year disclosure has been restated to correct this error. The error had no impact on the statement of financial position, statement of profit or loss and other comprehensive income, statement of cash flows, or any other notes. |
Finance charges of R57 million (31 March 2025: R48 million) for Group and R37 million (31 March 2025: R32 million) for Company were capitalised to property, plant and equipment and intangible assets in the current financial year.
No property, plant and equipment has been pledged as security.
Expansion of the mobile network contributed 38% of the additions to assets. In total, 28% of capital expenditure was on the deployment of fibre, 14% was on the next-generation Packet Optical Transport Network (POTN) core network, and 13% relates to information technology solutions. The remaining 7% of capital expenditure is attributable to Telkom properties, regulatory and compliance, strategic initiatives, shared services and other. The focus on expanding the mobile network and fibre rollout is expected to continue over the next few years.
Assets with a carrying value to the net amount of Rnil (31 March 2025: R24 million) for the Group and Company were transferred from intangible assets to property, plant and equipment in the current year. Assets with a carrying value to the net amount of R36 million (31 March 2025: R17 million) for Group were transferred from property, plant and equipment to intangible assets in the current year. At the Group level, transfers were effected between property, plant and equipment, intangible assets and inventory (these transfers only take place from CWIP).
Transfers in the Company mostly related to property, plant and equipment, investment property and intangible assets. Assets with a carrying value of R16 million (31 March 2025: R30 million) for Group relate to inventory that was transferred to property, plant and equipment in the current year.
Assets with a carrying amount of R24 million (31 March 2025: Rnil) were transferred from investment properties to property, plant and equipment. There were no transfers from property, plant and equipment to investment property in the current and prior year.
Changes to the estimated useful lives of property, plant and equipment resulted in a decrease in depreciation of R1 million (31 March 2025: R23 million) for Company and R76 million (31 March 2025: R124 million) for Group. Refer to note 3.4.8 for the useful lives.
The capital expenditure under property, plant and equipment relates to expansions of R4 837 million (31 March 2025: R4 339 million) for Group and R2 461 million (31 March 2025: R2 104 million) for Company. Expenditure due to maintenance is R789 million (31 March 2025: R768 million) for Group and R208 million (31 March 2025: R245 million) for Company.
In addition to the goodwill in the consolidated annual financial statements, the IAS 36 impairment considerations also apply to the investment in Openserve and BCX (refer to note 5.3) and the property, plant and equipment in the separate annual financial statements. No cash generating unit impairment was recognised on property, plant and equipment in the current and prior financial years.
Property, plant and equipment consists mainly of network equipment. The network equipment within the Company does not generate cash inflows that are largely independent of those from other assets or groups of assets. Property, plant and equipment is included in the impairment testing for the Telkom CGU (refer to note 5.3). The recoverability of property, plant and equipment is largely dependent on macro-economic factors, which include cash flows to be generated through the network assets, as well as internal assumptions and estimates related to realisation levels and operating costs. The impairment test included assessing the recoverable amount of property, plant and equipment, with reference to all cash flows (including the fair value contributory asset income), and comparing this to the carrying amount of the property, plant and equipment (refer to note 5.3).
Included in the carrying amount of property, plant and equipment above are furniture and office equipment subject to operating leases:
| Group |
Furniture
and office
equipment
Rm |
| Carrying amount - 31 March 2024 |
25 |
| Cost |
116 |
| Accumulated depreciation, impairment and write-offs |
(91) |
| Depreciation |
(40) |
| Transfers |
167 |
| Disposals |
(1) |
| Carrying amount - 31 March 2025 |
151 |
| Cost |
267 |
| Accumulated depreciation, impairment and write-offs |
(116) |
| Depreciation |
(42) |
| Transfers |
14 |
| Carrying amount - 31 March 2026 |
123 |
| Cost |
254 |
| Accumulated depreciation, impairment and write-offs |
(131) |
|
|
In the prior year, the Group disclosed freehold land and buildings with a carrying amount of R832 million as property, plant and equipment subject to operating leases to fulfil the disclosure requirement of IFRS 16 paragraph 95. These freehold land and buildings are leased to Openserve and disclosed as investment property for the Company and property, plant and equipment for the Group. Therefore, since these freehold land and buildings are leased to Openserve, the Group considers them as held for its own use. There is no disclosure required for the Company in this regard since IFRS 16 only refers to property, plant and equipment, subject to operating leases and not investment properties. The disclosure has therefore been removed. |
