for the six months ended 30 September 2014
| Reviewed Six months ended 30 September 2014 |
Restated Six months ended 30 September 2013 |
Audited Year ended 31 March 2014 |
|
|---|---|---|---|
| Rm | Rm | Rm | |
| 5.1 Payments to other operators | 1 446 | 1 928 | 3 944 |
| The decrease in payments to other network operators (interconnection fees) is due to the reduction in the mobile termination rates. | |||
| 5.2 Cost of sales | 1 166 | 974 | 2 498 |
| The increase in the cost of sales is largely attribued to the increased cost of mobile device sales. | |||
| 5.3 Employee expenses | 5 052 | 2 814 | 7 137 |
| The change in employee expenses is mainly due to a net curtailment and settlement gain of R2.2 billion that occurred in the comparative period. Included in the current financial period is an additional expense of R325 million due to the voluntary severance (VSP), voluntary early retirement (VERP) and retrenchment process as well as an average salary increase of 6%. The reduction in headcount is predominantly driven by natural attrition as well as the VSP and VERP process. | |||
| Change in comparatives | |||
| Employee expenses increased by R37 million due to the reclassification of employee vehicle insurance expense from service fees. These are short-term employee benefits derived from employment with Telkom and have therefore been reclassified accordingly to provide more relevant disclosure. | |||
| 5.4 Selling, general and administrative expenses | 2 341 | 2 391 | 4 682 |
| The decrease in selling and administrative expenses is as a result of lower marketing expenditure offset by an increase in the provision of impairment of trade receivables. Included in selling, general and administrative expenses is write-down of inventories to the value of R20 million (30 September 2013: R11 million; 31 March 2014: R53 million). | |||
| Change in comparatives | |||
| Sundry income of R49 million was reclassified to other income to provide more relevant disclosure. Refer to note 4. | |||
| 5.5 Service fees | 1 596 | 1 513 | 3 110 |
| Space optimisation projects and higher electricity tariffs led to an increase in property management expences. Consultants, security and other services fees decreased, driven by lower consulting costs incurred relating to the Company’s transformation programme and lower security cost as a result of cost saving initiatives. | |||
| Change in comparatives | |||
| Service fees decreased by R37 million due to the reclassification of employee vehicle insurance expenses to employee expenses. These are short-term employee benefits derived from employment with Telkom and have therefore been appropriately reclassified. Refer to note 5.3. | |||
| 5.6 Operating leases | 504 | 498 | 1 052 |
| Operating leases increased as a result of an increase in the number of mobile sites acquired offset by a decrease in vehicle rentals. | |||
| 5.7 Depreciation, amortisation, impairment, write- offs and losses | 2 489 | 3 091 | 5 937 |
| Depreciation of property, plant and equipment | 2 108 | 2 309 | 4 616 |
| Amortisation of intangible assets | 339 | 333 | 689 |
| Impairment of property, plant and equipment and intangible assets | 19 | 392 | 392 |
| Write-offs of property, plant and equipment and intangible assets | 23 | 57 | 240 |
The decrease in depreciation is due to accelerated depreciation on new connections installed to customer premises coupled with the impairment of certain legacy and technologically aged items in the prior period that was not incurred to the same extent in the current financial period.