In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Voice and subscriptions | 7 686 | 7 847 | (2.1) |
Fixed-line usage | 3 079 | 3 584 | (14.1) |
Fixed-line subscriptions | 4 207 | 3 915 | 7.5 |
Mobile voice and subscriptions | 400 | 348 | 14.9 |
Interconnection | 598 | 728 | (17.9) |
Fixed-line domestic | 226 | 225 | 0.4 |
Fixed-line international | 317 | 443 | (28.4) |
Mobile interconnection | 55 | 60 | (8.3) |
Data | 5 723 | 5 448 | 5.0 |
Data connectivity | 3 309 | 3 485 | (5.1) |
Internet access and related services | 980 | 884 | 10.9 |
Managed data network services | 538 | 507 | 6.1 |
Multi-media services | 24 | 23 | 4.4 |
Mobile data | 711 | 422 | 68.5 |
IT Business services | 161 | 127 | 26.8 |
Customer premises equipment sales and rentals | 1 480 | 1 140 | 29.8 |
Sales | 150 | 112 | 33.9 |
Rentals | 433 | 423 | 2.4 |
Mobile handset and equipment sales | 897 | 605 | 48.3 |
Other | 260 | 174 | 49.4 |
Business Connexion | 489 | - | - |
Trudon | 498 | 528 | (5.7) |
Swiftnet | 48 | 46 | 4.4 |
Total | 16 782 | 15 911 | 5.5 |
Group operating revenue increased 5.5 percent to R16 782 million (September 2014: R15 911 million), driven by higher mobile data revenue, higher fixed-line subscription revenue and higher equipment sales. This was partly offset by the continuous decline in fixed-line voice revenue and lower data connectivity revenue. Data connectivity revenue remains impacted by lower leased line revenue partly offset by growth in next generation products and services. This growth is not yet sufficient to offset the declines in the traditional revenue streams due to lower pricing and margins.
Fixed-line voice usage revenue decreased by 14.1 percent to R3 079 million (September 2014: R3 584 million) driven by competition, our migration of voice customers to bundled and annuity products and a 5.9 percent decline in the number of lines.
Fixed-line subscriptions revenue grew 7.5 percent to R4 207 million (September 2014: R3 915 million) as a result of customers migrating to bundled offerings and average line rental tariff increases of around 13 percent for business and residential customers.
Mobile voice and subscriber revenue increased 14.9 percent to R400 million (September 2014: R348 million). This can be attributed to a 58.6 percent increase in the number of post-paid subscribers and a 23.7 percent increase in blended ARPU.
Interconnection revenue decreased 17.9 percent to R598 million (September 2014: R728 million) as a result of interconnect traffic lost due to better pricing by competitors. We have regained lost traffic in the latter part of the period under review.
Revenue from data connectivity services decreased 5.1 percent to R3 309 million (September 2014: R3 485 million), caused by a decline in revenue from leased lines. The decrease is partly offset by growth in Metro Ethernet and Megaline services as a result of migration and an increase in ADSL revenue driven by a 4.2 percent increase in ADSL subscribers to 1 012 416 (September 2014: 971 316).
Higher growth of 10.9 percent in Internet access and related services revenue to R980 million (September 2014: R884 million) was supported by a 1.7 percent increase in Internet subscribers and customers migrating to enhanced packages.
Managed data network services revenue increased 6.1 percent to R538 million (September 2014: R507 million) due to the sale of increased bandwidth capacity to key customers.
Mobile data revenue increased 68.5 percent to R711 million (September 2014: R422 million) driven by our strategy to focus on data which led to a 49.4 percent increase in data users to 1.6 million.
IT Business Services data revenue increased 26.8 percent to R161 million (September 2014: R127 million) attributable to new products introduced and the ongoing drive to improve revenue streams such as Basic hosting, Hosted exchanges, LAN Element Management and Office in a box.
Customer premises equipment sales increased 29.8 percent to R1 480 million (September 2014: R1 140 million) mainly due to increased mobile handset and equipment sales.
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Telkom | 544 | 254 | 114.2 |
Business Connexion | 5 | - | - |
Trudon | 15 | 17 | (11.8) |
Swiftnet | 1 | 1 | - |
Total | 565 | 272 | 107.6 |
Other income includes profit on the disposal of investments, property, plant and equipment, interest received from debtors and sundry income
Other income increased 107.6 percent to R565 million (September 2014: R272 million) mainly as a result of higher profit on sale of properties.
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Payments to other operators | 1 396 | 1 446 | 3.5 |
Direct cost | 396 | 261 | (51.7) |
Cost of sales | 1 533 | 905 | (69.4) |
Total | 3 325 | 2 612 | (27.3) |
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Payments to other operators | 1 383 | 1 435 | 3.6 |
Mobile network operators | 764 | 675 | (13.2) |
International network operators | 319 | 429 | 25.6 |
Fixed-line network operators | 138 | 179 | 22.9 |
Data commitments | 162 | 152 | (6.6) |
Direct cost | 396 | 261 | (51.7) |
Cost of sales | 944 | 728 | (29.7) |
Total | 2 723 | 2 424 | (12.3) |
Payments to mobile operators increased 13.2 percent mainly attributable to higher roaming expenses
Payments to international operators decreased 25.6 percent as a result of interconnect traffic lost due to better pricing by competitors. We regained lost traffic in the latter part of the period under review.
Higher direct cost is driven by more subscribers connected which resulted in higher discounts paid for incentives to dealers
The 29.7 percent increase in cost of sales is largely attributable to the increase in the cost of mobile device sales.
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Employee expenses1 | 4 310 | 4 661 | 7.5 |
Selling, general and administrative expenses | 2 530 | 2 431 | (4.1) |
Service fees | 1 523 | 1 596 | 4.6 |
Operating leases | 619 | 504 | (22.8) |
Operating expenses excluding depreciation, amortisation, impairments and write-offs | 8 982 | 9 192 | 2.3 |
Depreciation, amortisation, impairments and write-offs | 2 615 | 2 489 | (5.1) |
Total | 11 597 | 11 681 | 0.7 |
Reclassification of comparative information | |||
(1) In order to achieve a more relevant presentation a decision was made to reclassify items to the amount of R90 million from employee expenses to selling, general and administrative expenses |
Group operating expenses including depreciation, amortisation, impairments and write-offs decreased by 0.7 percent to R11 597 million (September 2014: R11 681 million) for the six month period ended 30 September 2015. The decrease is primarily due to lower employee expenses and effective property management cost offset by higher accelerated depreciation, maintenance, transformation cost and operating lease cost.
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Employee expenses | 4 162 | 4 599 | 9.5 |
Salaries and wages | 3 308 | 3 674 | 10.0 |
Benefits | 1 059 | 1 141 | 7.2 |
Employee related expenses capitalised | (205) | (216) | 5.1 |
Selling, general and administrative expenses | 2 497 | 2 337 | (6.9) |
Materials and maintenance1 | 1 599 | 1 485 | (7.7) |
Marketing | 323 | 322 | (0.3) |
Bad debts | 144 | 103 | (39.8) |
Other1 | 431 | 427 | (0.9) |
Service fees | 1 494 | 1 591 | 6.1 |
Property management | 849 | 942 | 9.9 |
Consultants, security and other | 645 | 649 | 0.6 |
Operating leases | 578 | 479 | (20.7) |
Buildings | 264 | 229 | (15.3) |
Equipment | 27 | 19 | (42.1) |
Vehicles | 287 | 231 | (24.2) |
Depreciation, amortisation, impairments and write-offs | 2 559 | 2 458 | (4.1) |
Depreciation | 2 148 | 2 092 | (2.7) |
Amortisation | 381 | 323 | (18.0) |
Impairment and write-offs | 30 | 43 | 30.2 |
Total | 11 290 | 11 464 | 1.5 |
Reclassification of comparative information | |||
(1) Copper theft losses of R70 million has been re classifid from materials and maintenance to the other category for more relevant disclosure |
Employee expenses were 9.5 percent lower due a lower headcount resulting from voluntary severance and retirement packages in the previous period. The headcount decreased 24.4 percent to 14 212 full-time employees. This was offset by a 6.6 percent average salary increase for bargaining unit employees and a 6.1 percent average salary increase for management employees.
Selling, general and administrative expenses increased 6.9 percent to R2 497 million (September 2014: R2 337 million) mainly due to cost relating to the outsourcing of our call centres and increased bad debts as we made provision based on the adverse economic conditions affecting payment patterns.
Service fees decreased 6.1 percent to R1 494 million (September 2014: R1 591 million) largely due to effective property management partly offset by an increase in costs incurred relating to the company's transformation programme.
The 24.2 percent increase in vehicle leases was mainly attributed to contractual disputes arising during the transition of our vehicle lease supply contract.
Building leases increased 15.3 percent to R264 million (September 2014: R229 million) as a result of an increase in the site lease cost on mobile masts
Depreciation increased 4.1 percent to R2 559 million (September 2014: R2 458 million) due to higher accelerated depreciation as we intensify our rollout of fire and LTE as new technologies
Telkom Mobile, details of operating expenditure are provided below.
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Payments to other operators | 344 | 224 | (53.6) |
Direct cost | 289 | 211 | (37.0) |
Cost of sales | 729 | 542 | (34.5) |
Employee expenses | 150 | 192 | 21.9 |
Selling, general and administrative expenses | 398 | 471 | 15.5 |
Service fees | 46 | 55 | 16.4 |
Operating leases | 148 | 128 | (15.6) |
Depreciation, amortisation, impairments and write-offs | 376 | 308 | (22.1) |
Total | 2 480 | 2 131 | (16.4) |
Investment income consists of interest received on short-term investments and bank accounts. Investment income decreased by 8.7 percent to R116 million (September 2014: R127 million) as a result of lower cash balances held by the group.
Finance charges include interest paid on local and foreign borrowings, amortised discounts on bonds and commercial paper bills, fair value gains and losses on financial instruments and the cell captive as well as foreign exchange gains and losses on foreign currency denominated transactions and balances.
Foreign exchange and fair value movements decreased 257.6 percent to a loss of R93 million (September 2014: gain of R59 million). This decrease was attributable to a fair value loss (prior year was again) on revaluation of the underlying assets held by the cell captive. The interest expense decreased 15.7 percent to R241 million (September 2014: R286 million) as a result of lower debt levels.
The normalised consolidated tax expense increased by 9,8 percent to R525 million (September 2014: R478 million) and excludes the R446 million (September 2014: R91 million) tax benefit on the voluntary severance and retrenchment expenses.
The reported consolidated tax expense decreased by 79,8 percent to R78 million (September 2014: R387 million) mainly as a result of a lower income tax charge which was primarily as a result of a decrease in profit before tax. The tax charge was based on an estimated average annual effective income tax rate, which is in compliance with accounting standards.
The group's capital structure remains strong. Net debt, including financial assets and liabilities, increased to R4 011 million from R545 million as at 30 September 2014, resulting in a net debt to EBITDA ratio of 0.4 times. On 30 September 2015, the group had cash balances, including other financial assets and liabilities, of R623 million (30 September 2014: R4 409 million). The lower cash balances emanate from significant cash outflows experienced in the first six months of the financial year including the cash payment for BCX, dividend payment and voluntary and retirement severance package costs. Despite the significant cash outflows our gearing remains low with a comfortable maturity profile
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Cash generated from operations before dividends paid as reported | 2 029 | 3 469 | (41.5) |
Add back: Package cost paid | 1 464 | 86 | (1 602.3) |
Adjusted cash generated from operations | 3 493 | 3 555 | 1.7 |
Cash paid for capital expenditure | (2 048) | (1 770) | (14.9) |
Free cash flow | 1 445 | 1 785 | (19.0) |
Free cash flow decreased 19.0 percent to R1 445 million (September 2014: R1 785 million).
Our capital expenditure programme is aligned to our strategy to build our next generation network and grow mobile and converged service offerings.
Group capital expenditure, which includes spend on intangible assets, increased 20.4 percent to R2 335 million (September 2014: R1 939 million) and represents 13.9 percent of group operating revenue (September 2014: 12.2 percent).
In ZAR millions |
September 2015 |
September 2014 |
% |
---|---|---|---|
Baseline | 994 | 864 | 15.0 |
Network evolution | 507 | 576 | (12.0) |
Mobile | 200 | 164 | 22.0 |
Sustenance | 119 | 76 | 56.6 |
Effectiveness and efficiency | 229 | 48 | 377.1 |
Support | 31 | 39 | (20.5) |
Other | 2 | 3 | (33.3) |
BCX | 36 | - | - |
Trudon | 42 | 39 | 7.7 |
Swiftnet | 8 | 6 | 33.3 |
Capital expenditure included in PPE | 2 168 | 1 815 | 19.4 |
Capital inventory | 167 | 124 | 34.7 |
Total | 2 335 | 1 939 | 20.4 |
Baseline capital expenditure of R994 million (September 2014: R864 million) consists largely of the deployment of technologies to support the growing data services business, Internet capacity growth, connectivity to the mobile cellular operators and access line deployment in selected high-growth commercial and business areas.
Network evolution expenditure of R507 million (September 2014: R576 million) is related to the continued rollout of the next generation network programme which aims to modernise the legacy voice network, provide high-speed broadband in selected areas and to address the associated operational and business support systems. The lower expenditure is largely due to a more rigorous focus on project selection, in accordance with the group's focus on effiient execution of its strategy. Our rollout was also impacted by civil work required to install fire to the home and business.
Mobile capital expenditure increased 22.0 percent to R200 million (September 2014: R164 million), due to the shift to a more concentrated rollout in major metropolitan areas. The current focus on the radio access network (RAN) is to complete existing projects, deploy LTE in selected areas and to provide capacity to relieve congestion in identified growth areas.
The sustenance category expenditure of R119 million (September 2014: R76 million) was largely linked to the replacement of obsolete power systems as well as the replacement and modernisation of the access and core network. The increase is due to a focus on access network rehabilitation, mainly to improve the customer experience for voice and ADSL services.
The increase in the effectiveness and efficiency category to R229 million (September 2014: R48 million) resulted from a number of projects, including the relocation of the Telkom office to Centurion, a contact centre consolidation initiative and the replacement of electric lighting with lower energy LED lights.
The support capital expenditure of R31 million (September 2014: R39 million) is primarily related to the provision of new buildings and building extensions in support of network growth, building compliance upgrades and the purchase of test equipment for technical staff.