Telkom AR front.qxp

120
Telkom Annual Report 2009
Financial review (continued)
Selling, general and administrative
expenses increased primarily due to the
impairment of the Multi-Links investment in
the 2009 financial year, increased
materials and maintenance expenses and
higher bad debts. Selling, general and
administrative expenses decreased
primarily due to the provision for probable
liabilities in the Telcordia dispute in the
2007 financial year, which were not
increased significantly in the 2008
financial year, and lower marketing
expense, partially offset by the R217 million
impairment of the Telkom Media loan in the
2008 financial year – increased materials
and maintenance expenses and higher
bad debts.
Materials and maintenance expenses
include stock write-offs, subcontractor
payments and consumables required to
maintain our network. Materials and
maintenance expenses increased in the
years ended March 31, 2009 and 2008
primarily due to increased operating
maintenance projects as result of an
increase in the number of technologies
employed in the network and higher fuel
costs as a result of the increased price of
fuel. In the 2009 financial year increased
maintenance on the submarine cables as a
result of higher exchange rates also
contributed.
Marketing expenses were relatively flat in
the 2009 financial year. Marketing
expenses decreased in the year ended
March 31, 2008 primarily due to lower
sponsorships and decreased calling plan
advertising during the year.
Bad debt increased in the year ended
March 31, 2009 as more debtors
defaulted on payments as a result of poor
economic conditions in South Africa driven
by higher inflation. Bad debt increased in
the year ended March 31, 2008 due to
provisions for higher international bad
debts in certain countries, including
Nigeria, Gabon and the United Kingdom.
Bad debt as a percentage of revenue was
1.0%, 0.7% and 0.4% in the 2009, 2008
and 2007 financial years, respectively.
Other expenses include obsolete stock,
cost of sales, subsistence and travel and an
offset for bad debts recovered. Other
expenses increased in the year ended
March 31, 2009 primarily due to the
R1,843 million impairment of the Multi-
Links investment, R254 million impairment
of the Telkom Media loan and R85 million
impairment of the Africa Online investment
in the 2009 financial year. Other expenses
decreased in the year ended March 31,
2008 primarily due to the provision for
probable liabilities in the Telcordia dispute
in the 2007 financial year, which were not
increased significantly in the 2008 financial
year, partially offset by the R217 million
impairment of the Telkom Media loan in the
2008 financial year.
Service fees. Service fees include payments
in respect of the management of our
properties, to TFMC, a facilities and
property management company, consultants
and security. Consultants comprise fees
paid to collection agents and to providers
of other professional services and external
auditors. Security refers to services to
safeguard the network and contracts to
ensure a safe work environment, such as
guard services.
The following table sets forth information
relating to service fee expenses for the
periods indicated.
2007
Fixed-line service fees
Year ended March 31,
2008 2009 2008/2007 2009/2008
(in millions, except percentages) ZAR ZAR ZAR % change % change
Property management 1,141 1,222 1,262 7.1 3.2
Consultants, security and other 1,065 1,191 1,499 11.8 25.9
Service fees 2,206 2,413 2,761 9.4 14.4