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38. COMMITMENTS (continued)
Operating lease commitments and receivables (continued)
Telkom Annual Report 2009 221
Notes to the consolidated annual financial statements (continued)
for the three years ended March 31, 2009
Total 5 years
Rm Rm Rm Rm
2008
Land and buildings 2,061 341 913 807
Rental receivable on buildings (266) (94) (169) (3)
Transmission and data lines 709 134 490 85
Vehicles 1,444 233 1,211 –
Equipment 13 10 3 –
Sport and marketing contracts 680 282 395 3
Customer premises equipment receivables (84) (45) (39) –
Total 4,557 861 2,804 892
2007
Land and buildings 1,465 289 771 405
Rental receivable on buildings (269) (91) (174) (4)
Transmission and data lines 262 68 159 35
Vehicles 573 568 5 –
Equipment 23 6 17 –
Sport and marketing contracts 441 164 275 2
Customer premises equipment receivables (57) (30) (27) –
Total 2,438 974 1,026 438
Customer premises equipment receivable
The disclosed information relates to those arrangements which were assessed to be operating leases in terms of IAS17.
Operating leases
The Group leases certain buildings, vehicles and equipment. The majority of the lease terms negotiated for equipment-related premises are
10 years with other leases signed for five and three years. The majority of the leases contain an option clause entitling Telkom to renew
the lease agreements for a period usually equal to the main lease term.
The minimum lease payments under these agreements are subject to annual escalations, which range from 6% to 15%.
Penalties in terms of the lease agreements are only payable should Telkom vacate a premises and negotiate to terminate the lease
agreement prior to the expiry date, in which case the settlement payment will be negotiated in accordance with the market conditions of
the premises. Future minimum lease payments under operating leases are included in the above note. Onerous leases for buildings, of
which Telkom has no further use, no possibility of sub-lease and no option to cancel, are provided for in full and included in other provisions
(refer to note 29).
The master lease agreement for vehicles was for a period of five years and then extended for an additional three years which resulted in
the lease expiring on March 31, 2008. During August 2007 new terms were negotiated and approved and as a result the operating
lease commitments for vehicles are based on the new agreement which expires on March 31, 2013.
In accordance with this agreement Telkom is not allowed to lease any similar vehicle as specified in the contract from any other service
provider during the five year period except for the rentals at airport which are utilised in cases of subsistence and travel as well as vehicles
which are not part of the agreement.
The agreement is structured to have no lease increases on vehicles that are continually leased from the lessor. If a vehicle is, however,
replaced by a new similar vehicle, the lease costs of the newest vehicle will increase by the Consumer Price Index. All leased vehicles are,
however, subject to any variance in the interest rate fluctuations and are adjusted as and when the adjustments are announced by the South
African Reserve Bank. The leases of individual vehicles are renewed annually.
The master lease agreements for office equipment are with two suppliers with initial periods of 36 months effective from November 25,
2005. Upon expiry of the initial lease agreement on November 25, 2008, an extension of the lease was negotiated until November 24,
2009. In terms of these agreements the leases of individual equipment shall be valid for 36 months at a fixed fee for the entire period.