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Fixed-line payments to other network operators
Year ended March 31,
Telkom Annual Report 2009 119
2007 2008 2009 2008/2007 2009/2008
(in millions, except percentages) ZAR ZAR ZAR % change % change
Payments to mobile communications network operators 5,425 5,460 5,432 0.6 (0.5)
Payments to international and other network operators 1,036 1,208 1,853 16.6 53.4
Payments to fixed-line operators – 234 251 n/a 7.3
Payments to other network operators 6,461 6,902 7,536 6.8 9.2
Payments to fixed-line operators increased in the 2009 financial year due to higher call volumes from interconnection with Neotel and
VANS. Payments to fixed-line operators in the 2008 financial year were derived from interconnection commencing with Neotel, USALS
and VANS during the 2008 financial year. Payments to mobile network operators decreased in the 2009 financial year primarily due to
lower call volumes from our fixed-line network to the mobile networks due to an increase in mobile-to-mobile calls. Payments to international
operators increased during the 2009 financial year due to increased switch hubbing volumes and higher exchange rates. Payments to
mobile and international network operators increased in the 2008 financial year primarily due to higher call volumes from our fixed-line
network to the mobile networks, resulting from discounts offered on our CellSaver and Telkom Closer products, increased fixed-to-mobile
calls by business customers due to growth in the mobile market, increased international outgoing traffic arising from our reduced average
international tariffs, a weaker exchange rate in the 2008 financial year and payments to fixed-line operators commencing in the 2008
financial year. Payments to other network operators include payments made by our fixed-line business to Vodacom, which were
R3,020 million, R3,017 million and R2,954 million in the years ended March 31, 2009, 2008 and 2007, respectively. Fifty percent
of these amounts were attributable to our interest in Vodacom and were eliminated from the Telkom Group’s expenses on consolidation.
Selling, general and administrative expenses. Selling, general and administrative expenses include materials and maintenance costs,
marketing expenditures, bad debts, theft, losses and other expenses, including obsolete stock and cost of sales.
The following table sets forth information related to our fixed-line selling, general and administrative expenses for the periods indicated.
Fixed-line selling, general and administrative expenses
Year ended March 31,
2007 2008 2009 2008/2007 2009/2008
(in millions, except percentages) ZAR ZAR ZAR % change % change
Materials and maintenance 1,900 1,996 2,295 5.1 15.0
Marketing 604 583 574 (3.5) (1.5)
Bad debts 137 217 285 58.4 31.3
Other (1)(2) 1,335 1,103 3,428 (17.4) 210.8
Selling, general and administrative expenses (1)(2) 3,976 3,899 6,582 (1.9) 68.8
Notes:
(1) In the year ended March 31, 2007 we recorded a provision of R527 million for probable liabilities related to Telkom’s arbitration with Telcordia,
excluding legal fees, of which R510 million is included in selling, general and administrative expenses and R11 million for interest and R6 million for
foreign exchange rate effect is included in finance charges. In the year ended March 31, 2008 we increased the provision to R569 million for probable
liabilities related to Telkom’s arbitration with Telcordia, including legal fees. The movement in the provision is due to increased interest of R53 million and
foreign exchange rate effect of R52 million, which are included in finance charges, partially offset by a provisional payment made in respect of specific
sub-claims within the Telcordia claim. In the year ended March 31, 2009 we increased the provision to R664 million for probable liabilities related to
Telkom’s arbitration with Telcordia, including legal fees. The movement in the provision is due to increased interest of R11 million and foreign exchange
rate effect of R94 million, which are included in finance charges, partially offset by a R10 million reversal of the provision which is included in selling,
general and administrative expenses.
(2) Includes a R254 million and R217 million impairment relating to Telkom Media in the 2009 and 2008 financial years, respectively and a R1,843 million
impairment of the Multi-Links investment and an R85 million impairment of the Africa Online investment in the 2009 financial year.
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