for the six months ended 30 September 2015
| Reviewed Six months ended 30 September 2015 |
Restated Six months ended 30 September 2014 |
Audited Year ended 31 March 2015 |
|
|---|---|---|---|
| Rm | Rm | Rm | |
| Expenses | |||
| 5.1 Payments to other operators | 1 396 | 1 446 | 2 930 |
| The decrease is as a result of lower traffic carried for other operators. | |||
| 5.2 Cost of sales | 1 929 | 1 166 | 3 249 |
| The increase in the cost of sales is largely attributable to the inclusion of BCX and the increase in the cost of mobile device sales. | |||
| 5.3 Employee expenses | 5 833 | 4 986 | 9 462 |
| The increase in employee expenses is mainly due to an expense of R1 523 million (September 2014: R325 million) relating to the voluntary severance (VSP) and voluntary early retirement (VERP) process as well as an average salary increase of 6%. This was offset by lower headcount emanating from the prior year VSP and VERP process. | |||
| Change in 30 September 2014 comparative | |||
| Employee expenses decreased by R90 million due to the reclassification of expenses to selling, general and administrative. This was done to provide more relevant disclosure. Refer to note 5.4. | |||
| 5.4 Selling, general and administrative expenses | 2 530 | 2 431 | 4 755 |
| The increase in selling, general and administrative expenses is mainly due to an increase in maintenance costs. | |||
| Included in selling, general and administrative expenses is a write-down of inventories to the value of R51 million (30 September 2014: R20 million; 31 March 2015: R72 million). | |||
| Change in 30 September 2014 comparative | |||
| In order to achieve a more relevant presentation a decision was made to reclassify items from employee expenses to selling, general and administrative. Refer to note 5.3 | |||
| 5.5 Service fees | 1 523 | 1 596 | 3 219 |
| Effective management of property led to a decrease of service fees, partially offset by an increase in consultants, security and other service fees. | |||
| 5.6 Operating leases | 619 | 504 | 1 035 |
| Operating leases increased as a result of an upwards adjustment in site lease costs on mobile masts, as well as a temporary increase in vehicle lease costs due to the delayed implementation of the new vehicle lease supply contract. | |||
| 5.7 Depreciation, amortisation, impairment, write- offs and losses | 2 615 | 2 489 | 5 505 |
| Depreciation of property, plant and equipment | 2 172 | 2 108 | 4 506 |
| Amortisation of intangible assets | 412 | 339 | 779 |
| Impairment of property, plant and equipment and intangible assets | - | 19 | - |
| Write-offs of property, plant and equipment and intangible assets | 31 | 23 | 220 |
The increase is due to higher accelerated depreciation and amortisation as Telkom aligns its asset base to technology evolution and initiatives driving its strategic intent.
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.