Wrap Text
Group Provisional Annual Results for the year ended 31 March 2019
Telkom SA SOC Ltd
(Incorporated in the Republic of South Africa)
Registration number 1991/005476/30
JSE share code: TKG
ISIN: ZAE000044897
JSE bond code: BITEL
("Telkom" or "the company")
Group Provisional Annual Results for the year ended 31 March 2019
Telkom SA SOC Ltd is listed on the JSE Ltd. Information may be accessed on Reuters under the symbol TKGJ.J and on
Bloomberg under the symbol TKG.SJ. Information contained on Reuters and Bloomberg is provided by a third-party
and is not incorporated by reference herein. Telkom has not approved or verified such information and does not
accept any liability for the accuracy of such information.
Special note regarding forward-looking statements
Many of the statements in this document, and verbal statements that may be made by Telkom or by officers, directors or
employees acting on Telkom's behalf, constitute or are based on forward-looking statements.
All statements, other than statements of historical facts, including, among others, statements regarding our strategy,
future financial position and plans, objectives, capital expenditures, projected costs and anticipated cost savings and
financing plans, as well as projected levels of growth in the communications market, are forward-looking statements.
Forward-looking statements can generally be identified by the use of terminology such as "may", "will", "should", "expect",
"envisage", "intend", "plan", "project", "estimate", "anticipate", "believe", "hope", "can", "is designed to" or
similar phrases. However, the absence of such words does not necessarily mean that a statement is not forward looking.
Forward-looking statements involve several and unknown risks, uncertainties and other factors that could cause our actual
results and outcomes to be materially different from historical results or from any future results expressed or implied by
such forward-looking statements. Factors that could cause our actual results or outcomes to differ materially from our
expectations, include but are not limited to those risks identified in Telkom's most recent integrated report, which is
available at www.telkom.co.za/ir.
Telkom cautions readers not to place undue reliance on these forward-looking statements. All written and verbal
forward-looking statements attributable to Telkom, or persons acting on our behalf, are qualified in their entirety by
these cautionary statements. Moreover, unless we are required by law to update these statements, we will not necessarily
update any of these statements after the date of this document, so that they conform either to the actual results or to
changes in our expectations.
Any forward looking financial information disclosed in this group provisional annual results for the year ended
31 March 2019 (the "results announcement") has not been reviewed or audited or otherwise reported on by our
external joint auditors.
The FY2018 comparatives of the results announcement are restated for the adoption of IFRS 15 and change in the
presentation of cash flows.
Pro forma information
Certain financial information presented in the results announcement constitute pro forma financial information. This is
presented for illustrative purposes only. Because of its nature, the pro forma financial information may not fairly
present Telkom's financial position, changes in equity, and results of operations or cash flows. The pro forma
financial information is the responsibility of the board of directors of Telkom. The pro forma financial information
contained in this results announcement has been reviewed by the group's joint independent external auditors and their
unmodified limited assurance report prepared in terms of ISAE 3420 is available for inspection at the company's
registered office during office working hours.
The financial information presented in the results announcement has been prepared excluding the impact of the
voluntary severance packages (VSP), voluntary early retirement packages (VERP) and the section 189 costs
('the pro forma adjustments') and constitute pro forma financial information to the extent that it is not extracted
from the segment disclosure included in the summary audited consolidated provisional financial statements for the
year ended 31 March 2019. This pro forma financial information has been presented to eliminate the impact of the
pro forma adjustments from the consolidated financial results for the year ended 31 March 2019 to achieve a comparable
year on year analysis and show the underlying performance of the business. The pro forma adjustments have been
determined in terms of the group accounting policies disclosed in the consolidated financial statements for the
year ended 31 March 2019, except for the changes in accounting policies as a result of the adoption of the
accounting pronouncements effective 1 January 2018 and the JSE Listing Requirements.
Reported March 2019 refers to the March 2019 financial information as included in the summary audited consolidated
provisional financial statements.
The joint independent auditors' audit report by PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Grant Thornton
Inc. does not report on all of the information contained in this announcement/financial results. Shareholders are
therefore advised that in order to obtain a full understanding of the nature of the joint independent auditors'
engagement they should obtain a copy of the joint independent auditors' audit report together with the accompanying
financial information from Telkom's registered office.
The directors of Telkom take full responsibility for the preparation of this results announcement including the pro forma
financial information that has been correctly extracted from the underlying audited financial statements.
The information contained in this document is also available on Telkom's investor relations website
www.telkom.co.za/ir.
Key indicators
All commentary, messaging and indicators in this report for the current year exclude VSP, VERP and section 189
costs of R728 million and the related tax impact of R215 million (the pro forma adjustments).
- Operating revenue1 up 5.3% - Mobile service revenue up 58.3%
FY2019: 41 774 FY2019: 8 155
FY2018: 39 661 FY2018: 5 151
R'million R'million
- Fixed service revenue down 8.8% - Information technology up 6.2%
FY2019: 21 167 FY2019: 6 764
FY2018: 23 216 FY2018: 6 370
R'million R'million
- EBITDA2 up 8.5% - Capital expenditure down 3.0%
FY2019: 11 309 FY2019: 7 674
FY2018: 10 422 FY2018: 7 909
R'million R'million
- BEPS3 up 15.5% - HEPS3 up 22.6%
FY2019: 665.1 FY2019: 722.4
FY2018: 575.7 FY2018: 589.3
Cents per share Cents per share
- Cash at the end of the year down 43.5% - Adjusted free cash flow3 up 12.9%
FY2019: 1 428 FY2019: 534
FY2018: 2 527 FY2018: 473
R'million R'million
1 During the year we restated the prior year revenue by R1 357 million. Of this amount, R656 million related to
Smart Office Connexion (SOX). The implementation of IFRS 15 also highlighted a prior year error of
R641 million relating to the recognition of Mobile CPE revenue to dealer stores and R60 million related
to the adoption of IFRS 15. These revenue adjustments led to a restatement of the prior year number from
R41 018 to R39 661 million.
2 EBITDA as defined in the IFRS 8 segment note in the consolidated financial information and includes the
pro forma adjustments. Refer below for the reconciliation of the reported figures to the adjusted figures.
3 Based on pro forma financial information. Refer below for the reconciliation for the reported figures to
the adjusted figures.
Telkom structure
Telkom SA SOC Ltd represents Telkom group ("Telkom" or "the group"), which comprises Telkom company and its
subsidiaries. The Telkom company's subsidiaries are BCX, Gyro and Yellow Pages (known as Trudon). Its
divisions are Openserve and Telkom Consumer.
In the context of our operating model, business units comprise our divisions and subsidiaries. The "Other"
segment includes Yellow Pages, VS Gaming and Corporate Centre.
Openserve is South Africa's leading wholesale infrastructure connectivity provider with the largest open access
network across South Africa.
Telkom Consumer is South Africa's largest fixed-broadband provider, internet service provider and, together
with its mobile network, a converged communications provider.
BCX is a leading technology company that provides ICT solutions and an integrated portfolio of technology
solutions across South Africa.
Gyro is a turn-key solutions provider responsible for managing the mast and tower portfolio, property development
and property management services on behalf of the group.
Yellow Pages is a local advertising and marketing company that provides services and digital solutions to local
businesses. Yellow Pages' business units operate in South Africa and Namibia.
Adjustments and restatements
Revenue restatements
The 31 March 2018 comparative financial information was restated due to a prior year adjustment relating to the
adoption of IFRS 15 (Revenue from contracts with customers). The adoption of the standard had no material impact
on earnings before interest, taxation, depreciation and amortisation (EBITDA), profit before tax, cashflows, or
basic earnings per share (BEPS) and headline earnings per share (HEPS).
As part of the IFRS 15 implementation process, the group reassessed the revenue recognition principles of IAS 18
and the judgement applied to mobile customer premises equipment (CPE) sales. This resulted in a restatement of
revenue and cost of handsets. There was no impact on the EBITDA, profit before tax, cashflows or BEPS and HEPS.
During the year we identified that due to protective rights historically granted to the minority shareholder, in
respect of SOX, which is a 51 percent previously consolidated entity, BCX concluded that it did not have control of
the entity as defined by IFRS 10 (Consolidated financial statements). There was no material impact from the accounting
standard on the EBITDA, profit before tax, cashflows or BEPS and HEPS.
Both matters (IAS 18 and IFRS 10) were assessed as material prior year errors and were corrected by restating the
comparative figures as required by IAS 8 (Accounting policies, changes in accounting estimates and errors).
Previously
Reported Restated
March March 2018
2018 Restatements
Rm Rm Rm
Revenue 41 018 (1 357) 39 661
IFRS 15 (60)
IAS 18 (641)
IFRS 10 (656)
EBITDA 10 544 (122) 10 422
IFRS 15 (29)
IFRS 10 (93)
Profit after tax 3 158 (160) 2 998
IFRS 15 (29)
IFRS 10 (131)
BEPS (cents) 602.3 (26.6) 575.7
IFRS 15 (5.7)
IFRS 10 (20.9)
Free cash flow 501 (28) 473
IFRS 10 (28)
IFRS 9
IFRS 9 (Financial instruments) was adopted without restating comparative financial information. In accordance with
the transitional provisions of the standard, the adjustment arising from the implementation of the expected credit
loss model is not reflected in the restated statement of financial position as at 1 April 2017 and 31 March 2018,
but is recognised as an adjustment to the retained earnings opening balance as at 1 April 2018.
Pro forma financial information
Certain financial information presented in this results announcement constitutes pro forma financial information in
terms of the JSE Listings Requirements. The pro forma financial information is presented to assist a user to analyse
the underlying performance of the business. The pro forma adjustments include the impact of the VSP, VERP and
section 189 costs of R728 million and the related tax impact of R215 million. The pro forma consolidated income
statement and pro forma consolidated cash flow statement and all related KPIs and messages in this booklet are
based on this adjusted 31 March 2019 base. The applicable criteria on which this pro forma financial information is
reported and prepared, is set out below.
Reported Adjusted1
March Pro forma March
2019 adjustment 2019
Rm Rm Rm
Operating expenses 22 310 (728) 21 582
Employee expenses 10 777 (728) 10 049
EBITDA 10 581 728 11 309
Operating profit 4 767 728 5 495
Taxation 1 176 215 1 391
Profit for the period 2 831 513 3 344
BEPS (cents) 561.9 665.1
HEPS (cents) 619.2 722.4
1 Excluding the impact of VSP, VERP and section 189 of R728 million and the related tax impact
of R215 million.
Results from operations
The group profit after tax increased by 11.5 percent to R3 344 million (FY2018: R2 998 million). This is mainly
attributable to the 8.5 percent increase in EBITDA2 to R11 309 million, offset by a 25.0 percent increase in the
taxation expense and a 4.1 percent increase in depreciation, amortisation, impairments and write-offs, resulting
in a 22.6 percent increase in adjusted HEPS.
2 EBITDA as defined in the IFRS 8 segment note in the consolidated financial information and includes the
pro forma adjustments.
OVERVIEW OF OUR BUSINESS
Telkom announced its group results for the year ended 31 March 2019 on 27 May 2019 in Centurion, South Africa.
Telkom delivered a solid performance with group operating revenue increasing by 5.3 percent, driven by the stellar
performance of our mobile business. Mobile service revenue increased by 58.3 percent, underpinned by our broadband-led
proposition. BCX recorded growth in information technology (IT) revenue from external enterprise customers despite the
weak economic environment and Gyro performed very well. The change in technology continues to put our fixed business under
pressure with fixed voice revenue negatively impacting the overall performance of BCX and Openserve. Overall, I am pleased
that the growth in the new revenue streams drives overall growth for the group attesting to the success of our
investment strategy.
Message from group chief executive officer:
Sipho Maseko
The significant growth in mobile service revenue was supported by an 85.9 percent growth in active subscribers to
9.7 million, as our affordable broadband-led proposition continues to resonate with customers. Despite adding
4.5 million subscribers in the year, our blended average revenue per user (ARPU) was stable at R100. Pre-paid
subscribers more than doubled compared to the prior year, increasing by 109.3 percent to 7.8 million
(FY2018: 3.7 million). Our pre-paid proposition continues to attract good quality subscribers demonstrated
by a significant increase in pre-paid ARPU of 19.8 percent to R71. Post-paid subscribers increased by
26.8 percent, with net additions of approximately 396 000 to reach 1.9 million, with an ARPU of R186.
Our strategy to separate our property and mast and tower portfolio to increase management focus and unlock value
for the group is bearing fruit. Gyro's external revenue grew by 24.2 percent and the mast and tower tenants grew
by 10.5 percent compared to FY2018.
BCX's IT revenue from external customers grew 6.2 percent. This was achieved despite the weak economic environment
where South Africa experienced a technical recession in the first half of the year, and consumers were under
pressure from increases in tax and fuel and a weaker currency. This is an encouraging result given that BCX
touches all sectors of the economy. I am particularly pleased that BCX has now stabilised as an organisation,
mainly attributable to a new leadership team, a change in the operating model and an enhanced strategy focusing
on customer retention.
Notwithstanding the group's solid performance, evolving technology is a key challenge. This is evident by a decline
of 7.9 percent in the fixed business revenue across the group, as customers migrate to new technologies. Fixed voice
and interconnection revenue declined by 14.3 percent, which negatively impacted the overall performance of Openserve
and BCX. Despite this impact, overall revenue decline was contained at 3.3 percent for Openserve and 3.4 percent
for BCX.
The declining traditional revenue has an EBITDA dilution impact and requires sustainable cost management initiatives
to preserve margins. We implemented several cost optimisation initiatives which led to underlying group EBITDA increasing
by 8.5 percent ahead of revenue growth of 5.3 percent. The EBITDA margin expanded by 0.8 percentage points to 27.1 percent.
We remain focused on operational efficiencies to preserve margins while our revenues evolve, and we manage the
impact of inflation on our expenses.
Our capital investment of R7.7 billion continues to underpin our growth, with a capital expenditure (capex) to revenue
ratio of 18.4 percent. Our ongoing investment enabled Telkom to grow new revenue in evolving technology, offsetting the
traditional revenue shrinkage. Over the past six years, the contribution of our new revenue streams has grown significantly,
the mobile revenue contribution increased from 3.2 percent to 25.7 percent, and IT revenue grew from 0.9 percent to
16.2 percent. We continue to invest in the fibre ecosystem which sustains our fixed data revenue. We are prudent in our
homes passed by fibre strategy and focus on homes connected. We increased the home connectivity rate to 38.4 percent
(FY2018: 30.7 percent). We remain a market leader in fibre to the business and backhaul, with the majority of our sites
connected with fibre. We continue to modernise our network through the packet optical transport network (POTN), which
will future-proof the core network and enable data growth across access aggregation and core networks. This is the
foundation for software-defined networks and network functional virtualisation capability.
Sipho Maseko
Group chief executive officer
Overview of our business
FINANCIAL CAPITAL
Key salient features
- Group operating revenue1 up 5.3 percent to R41.8 billion
- EBITDA2 up 8.5 percent to R11.3 billion
- EBITDA margin of 27.1 percent
- Capex of R7.7 billion with capex to revenue ratio of 18.4 percent
- HEPS3 up 22.6 percent to 722.4 cents
- Final ordinary dividend of 249 cents taking the annual dividend to 362 cents, an increase of
2.0 percent year on year
Financial information summary
Adjusted Restated
March March
2019 2018 Variance
Rm Rm %
Gross operating revenue1 41 774 39 661 5.3
EBITDA2 11 309 10 422 8.5
Capital expenditure 7 674 7 909 (3.0)
Free cash flow3 534 473 12.9
Net debt 8 813 6 870 (28.3)
Headline earnings per share (cents)3 722.4 589.3 22.6
EBITDA margin (%)2 27.1 26.3
Effective tax rate (%) 29.4 27.6
Capex to revenue (%) 18.4 19.9
Net debt to EBITDA (times) 0.8 0.7
Return on invested capital (%) 11.3 10.2
1 During the year we restated the prior year revenue by R1 357 million. Of this amount, R656 million related
to Smart Office Connexion (SOX). The implementation of IFRS 15 also highlighted a prior year error of
R641 million relating to the recognition of mobile CPE revenue to dealer stores and R60 million related to
the adoption of IFRS 15. These revenue adjustments led to a restatement of the prior year number from
R41 018 to R39 661 million.
2 EBITDA as defined in the IFRS 8 segment note in the consolidated financial information and includes the
pro forma adjustments. Refer below for the reconciliation of the reported figures to the adjusted figures.
3 Based on pro forma financial information. Refer below for the reconciliation of the reported figures to
the adjusted figures.
Group revenue driven by new revenue streams
Group revenue increased 5.3 percent to R41 774 million, mainly driven by a 58.3 percent increase in mobile
service revenue. BCX's IT and Gyro's external revenue also contributed positively to the group revenue, with a growth
of 6.2 percent and 24.2 percent respectively. Ongoing investment, enhanced management focus and broadband-led
propositions underpinned our revenue growth.
Notwithstanding the growth in new revenue streams, the fixed business continues to be negatively impacted by a change
in technology. Fixed voice and interconnection revenue declined 14.3 percent as customers migrate to newer technologies.
Underlying group EBITDA growth underpinned by sustainable cost management
Group EBITDA increased by 8.5 percent to R11.3 billion, with an EBITDA margin of 27.1 percent (FY2018: 26.3 percent).
EBITDA improvement benefited from the revenue growth and our ongoing sustainable cost management.
Direct costs which are associated with the mobile business increased 20.7 percent largely due to an increase in store
footprint and, extension of distribution channels and an increase in dealers incentives to support the growth in
subscriber base. The direct costs growth was much lower than the mobile service revenue growth of 58.3 percent.
Our relentless focus on cost reduction continues, with operating expenses declining 1.4 percent due to a 12.5 percent
decline in headcount supported by our staff optimisation process. This was offset by the growth in maintenance costs
to support the 28.7 percent increase in mobile sites by 1 142 sites in the year as we grow our mobile coverage and
capacity.
Refer below for each business unit's segment performance. The detailed performance of each business unit is addressed
in the productive capital section below.
- R41.8 bn
Group operating revenue driven mainly by the mobile business
5.3% increase from the previous year
- R8.2 bn
mobile service revenue 58.3% increase from the previous year
- R11.3 bn
Group EBITDA
8.5% increase from the previous year
- EBITDA margin of 27.1%
- 722.4 cents per share
Group HEPS
22.6% increase from the previous year
Group HEPS benefited from higher EBITDA
Reported HEPS increased 5.1 percent to 619.2 cents per share, mainly due to higher EBITDA. HEPS, excluding the impact
of VSP, VERP and section 189 cost, increased 22.6 percent to 722.4 cents. Reported BEPS decreased 2.4 percent.
Excluding the impact of VSP, VERP and section 189 costs, BEPS increased 15.5 percent to 665.1 cents, benefiting
from EBITDA growth.
Group capital investment for future growth
Capital investment of R7.7 billion, with capex to revenue of 18.4 percent underpins growth. Mobile and fibre remain
key capex focus areas with good returns in mobile service revenue growth of 58.3 percent. The investment in FTTH
rationalised as we focus on areas showing a propensity for higher connectivity rates. Our FTTH connectivity rate
improved to 38.4 percent - the highest connectivity rate in the market. We increased our investment in POTN which
will future-proof the core network. This is the foundation for software-defined networks and network function
virtualisation capability.
March March
2019 2018 Variance
Capex Rm Rm %
Fibre 1 216 2 112 (42.4)
Mobile 3 011 2 319 29.8
Operations support system (OSS)/business support system
(BSS) programme 223 294 (24.1)
Network rehabilitation/sustainment 261 303 (13.9)
Service on demand 1 195 1 292 (7.5)
Core network 1 172 902 29.9
Other 207 131 58.0
Telkom 7 286 7 353 (0.9)
BCX 304 504 (39.7)
Gyro 60 29 106.9
Other
Yellow Pages 24 16 50.0
VS Gaming - 7 (100.0)
Total 7 674 7 909 (3.0)
Strong balance sheet to fund future growth
Telkom remains lowly geared with a net debt to EBITDA ratio of 0.8 times, despite net debt increasing
to R8 813 million (FY2018: R6 870 million). Group cash balances declined to R1 428 million
(FY2018: R2 527 million),mainly due to R566 million paid for VSP, VERP and section 189 costs.
The growth in borrowings is in line with our strategy to fund capex through long-term debt as the
group moves to an optimal capital structure.
Balance sheet Restated
March March
2019 2018 Variance
Rm Rm %
Bank and cash balances 1 428 2 527 (43.5)
Current borrowings (5 401) (2 239) (141.2)
Non-current borrowings (4 840) (7 158) 32.4
Net debt (8 813) (6 870) (28.3)
Net debt to EBITDA (times) 0.8 0.7 0.1
Free cash flow impacted by the payment of VSP, VERP and section 189 costs and working capital management
Free cash flow weakened to negative R32 million (FY2018: positive R473 million). This was due to an 8.2 percent
decrease in cash generated from operations before dividend paid, mainly impacted by the R566 million VSP, VERP
and section 189 costs and a decrease in working capital. The deterioration in working capital was primarily due
to the increase in contract assets. Excluding the impact of the VSP, VERP and section 189 payments, our cash
flow would have increased by 12.9 percent to R534 million.
Free cash flow Restated
March March
2019 2018 Variance
Rm Rm %
Cash generated from operations 8 903 10 113 (12.0)
Interest received 441 310 42.3
Finance charges paid (847) (722) (17.3)
Taxation paid (945) (1 472) 35.8
Cash generated from operations before dividend paid 7 552 8 229 (8.2)
Cash paid for capital expenditure (7 584) (7 756) 2.2
Free cash flow (32) 473 (106.8)
Add back: VSP, VERP and section 189 costs paid 566 - 100.0
Adjusted free cash flow 534 473 12.9
Progress against medium-term guidance
FY2019 - FY2021 FY2019 Actual Medium-term guidance
Operating revenue Mid-single digit 5.3% Mid-single digit
EBITDA margin 24% - 27% 27.1% n/a
EBITDA growth n/a 8.5% Mid-single digit
Capex to revenue 16% - 20% 18.4% 16% - 20%
Net debt to EBITDA (times) less than or equal to one 0.8 1 - 1.2
Note: Excludes corporate action.
Based on initial IFRS 16 take on balances.
As business is evolving, the change in revenue mix has a dilutive impact on EBITDA margins. Management will now
focus on growing absolute EBITDA going forward. The accounting changes IFRS 16 will have a dilutive impact on
earnings while positively impacting EBITDA. IFRS 16 will significantly impact our balance sheet negatively
particularly our net debt and net debt to EBITDA ratio and necessitated that we increase our net debt to
EBITDA ratio.
Segment performance
Inter-company revenue and transfer pricing were included to measure and assess performance
and allocate resources.
Openserve Consumer BCX Gyro Other Eliminations Group
Adjusted Rm Rm Rm Rm Rm Rm Rm
March 2019
Revenue from
contracts with
customers 16 940 19 214 19 580 1 169 2 015 (17 144) 41 774
Fixed 16 940 8 265 10 432 - 169 (13 055) 22 751
Mobile - 10 949 - - - (195) 10 754
Information
technology - - 8 919 - - (2 155) 6 764
Other - - 229 1 169 1 846 (1 739) 1 505
Cost of handsets,
equipment and
directories - (2 959) (2 121) - (244) 119 (5 205)
Sales commission,
incentive and
logistical costs (6) (1 250) (213) - - 12 (1 457)
Payments to other
operators (954) (1 958) (729) - - 701 (2 940)
Other income 378 615 117 - 809 (1 200) 719
Operating expenses (10 066) (12 632) (13 394) (484) (2 518) 17 512 (21 582)
Employee expenses (3 628) (735) (4 538) (104) (1 032) (12) (10 049)
Other operating
expenses (1 553) (7 990) (7 071) (79) (274) 13 814 (3 153)
Maintenance (2 413) (2 087) (1 041) (25) (446) 2 938 (3 074)
Marketing (24) (458) (63) - (390) 129 (806)
Impairment of
receivables and
contract assets (19) (416) 50 16 27 (42) (384)
Service fees (1 721) (416) (490) (185) (335) 213 (2 934)
Operating leases (708) (530) (241) (107) (68) 472 (1 182)
EBITDA2 6 292 1 030 3 240 685 62 - 11 309
EBITDA
margin (%)2 37.1 5.4 16.5 58.6 3.1 27.1
Capital expenditure 4 034 3 070 304 60 206 7 674
1 During the year we restated the prior year revenue by R1 357 million. Of this amount R656 million related to
Smart Office Connexion (SOX). The implementation of IFRS 15 also highlighted a prior year error of
R641 million relating to the recognition of Mobile CPE revenue to dealer stores and R60 million related
to the adoption of IFRS 15. These revenue adjustments led to a restatement of the prior year number from
R41 018 to R39 661 million.
2 EBITDA as defined in the IFRS 8 segment note in the consolidated financial information and includes the
pro forma adjustments. Refer below for the reconciliation of the reported figures to the adjusted figures.
FY2018 has been restated to reflect the revised measurement basis used by the chief operating decision
makers to measure the performance of the reportable segments in the current financial year.
Openserve Consumer BCX Gyro Other Eliminations Group
Restated Rm Rm Rm Rm Rm Rm Rm
March 2018
Revenue from
contracts with
customers1 17 525 16 501 20 263 944 4 457 (20 029) 39 661
Fixed 17 525 9 278 11 253 - 95 (13 446) 24 705
Mobile - 7 223 - - - (155) 7 068
Information
technology - - 8 843 - - (2 473) 6 370
Other - - 167 944 4 363 (3 956) 1 518
Cost of handsets,
equipment and
directories (1) (2 163) (2 051) - - (196) (4 411)
Sales commission,
incentive and
logistical costs (48) (779) (184) - - 76 (935)
Payments to other
operators (1 296) (1 247) (922) - (12) 871 (2 606)
Other income 345 807 3 - 769 (1 317) 607
Operating expenses (10 621) (13 265) (13 799) (630) (4 174) 20 595 (21 894)
Employee expenses (4 145) (1 003) (4 777) (59) (693) - (10 677)
Other operating
expenses (1 754) (8 493) (6 940) - (423) 14 619 (2 991)
Maintenance (2 615) (2 162) (1 060) (146) (2 497) 5 784 (2 696)
Marketing (14) (370) (125) - (246) (8) (763)
Impairment of
receivables and
contract assets 3 (438) (53) (15) (139) 7 (635)
Service fees (1 502) (323) (629) (410) (164) - (3 028)
Operating leases (594) (476) (215) - (12) 193 (1 104)
EBITDA 5 904 (146) 3 310 314 1 040 - 10 422
EBITDA 33.7 (0.9) 16.3 33.3 23.3 26.3
margin (%)
Capital expenditure 4 728 2 359 504 29 289 7 909
PRODUCTIVE CAPITAL
Openserve
- FTTH connectivity rate increased to 38.4% up 7.7 ppts from FY2018
- EBITDA margin of 37.1% up 3.4 ppts from FY2018
- We believe the scale and quality of our network is our primary value differentiator. Our strong footprint
and IP-based network create a unique holistic network. We are confident that improved cost-efficiency
initiatives and focused customer interactions will redefine South Africa's data connectivity market.
- Openserve was awarded the title 2018 Fixed Broadband Provider of the Year by MyBroadband
Openserve's revenue was resilient despite customers migrating to next-generation technologies at lower price points.
Despite pressure on revenue and a change in our revenue mix, EBITDA grew at a better rate than the previous years.
This was enabled by, among others, our strategy to modernise the network to improve cost to connect and reduce
cost to serve.
Performance overview
Openserve contained the revenue decline at 3.3 percent to R16 940 million (FY2018: R17 525 million), despite voice
revenue decreasing by 15.8 percent. The decline in voice revenue was caused by migration of customers from legacy
to next-generation technologies, and lower call termination rates. The negative impact was partially offset by fixed
data revenue growth of 7.3 percent, mainly due to next-generation fibre and ethernet products, which grew by
40.3 percent to R1 207 million. Fibre to the base station increased by 3.3 percent to 7 018 base stations as
mobile operators expand their networks. The demand for ethernet services from enterprise customers increased
by 55.6 percent to 37 476 service connections. Our focus on homes connected to improve returns is being realised.
The FTTH connectivity rate increased from 30.7 percent in the prior year to 38.4 percent, slightly below our
target of 40 percent.
Openserve upgraded the fibre broadband portfolio minimum access speed to 10 Mbps to enable faster broadband
access speed and increase data consumption. Openserve also reduced the effective price on IPConnect by
9.1 percent by providing additional capacity to customers. This led to an increase of 11.6 percent on the
average daily data usage for FTTH customers in the fourth quarter. This is in line with our commitment to
bring down the cost to communicate.
EBITDA improved 6.6 percent to R6 292 million, driven by a 5.2 percent decrease in operating costs as we continue to
extract operational efficiencies by modernising our network. The migration from legacy to next-generation technology
contributed to a 27.8 percent reduction in assurance visits, which decreased our subcontractor cost. Our cost optimisation
programme included employee productivity and operational efficiencies, which contributed positively with a 12.5 percent
decrease in employee costs.
The EBITDA margin increased by 3.4 percentage point basis to 37.1 percent, despite the dilution impact of the change in
revenue mix.
Modernising the network
Our capital investment focuses on modernising the network through the POTN, which will future-proof the core network
and enable data growth across access, aggregation and core networks. This is the foundation for software-defined
networks and network function virtualisation capabilities.
Our investment in the national fibre portfolio increased our footprint by 6 400 km of fibre, with a total fibre
network of 163 800 km. This grew ethernet services on the network by 13 400 connections (FY2018: 7 700) to 37 400.
The associated capital investment reduced by 7.4 percent.
We are optimising our capital investment through redeploying next-generation broadband equipment from areas recently
covered with fibre, to areas serviced with legacy broadband equipment.
Transforming service delivery
Customer experience is an integral part of our service delivery strategy. We implemented a fully integrated workforce
dispatching tool, which improved our service delivery. The tool uses real-time scheduling to reduce travel time and
improve productivity efficiency.
The service delivery transformation journey decreased redispatches by 21.4 percent, improving our net promoter score
(NPS) by 2.9 percent to 48.9 percent.
Our data analytics provides accurate and predictive information that facilitates a proactive approach to managing our
network and meeting customer expectations.
Telkom Consumer
- Telkom Consumer operating revenue: R19 214m an increase of 16.4%
due to accelerated mobile data revenue growth
- Active mobile customers increased by 85.9% to 9.7m
- Mobile service revenue up 58.3% to R8.2bn
- EBITDA grew exponentially from (R146m) to R1030m
due to the growth in net operating revenue, ongoing cost management and cost efficiencies
Telkom Consumer's performance was driven by the mobile business acceleration, underpinned by our successful data-led
value propositions. We are migrating customers from selected traditional fixed-line to wireless technologies, such as LTE
and fibre. We continued to invest in the wireless network and started implementing the roaming agreement and facilities
leasing agreement between Telkom and Vodacom. We extended distribution channels and increased our store footprint to
support the increase in demand for mobile services.
Performance overview
Telkom Consumer's operating revenue increased by 16.4 percent to R19 214 million (FY2018: R16 501 million).
This is mainly due to accelerated mobile service revenue of 58.3 percent to R8 155 million (FY2018: R5 151 million).
Mobile
Our data-led proposition and customer value management underpinned growth in subscriber base and ARPUs. Active
subscribers increased by 85.9 percent to 9.7 million, with a blended ARPU stable at R100.
Data
Our broadband-led strategy is yielding positive results. Data revenue increased by 34.7 percent to R8 913 million,
mainly due to mobile data revenue growth of 60.7 percent to R5 917 million. Our broadband customer base, which includes
ADSL, VDSL, LTE and fibre, increased by 8.4 percent to 1.7 million customers. This was supported mainly by new to
franchise subscribers and the migration of customers to new products, as well as the Summer and Chinese marketing
campaigns. We expanded our innovative product offering through the unlimited home product suite. It offers a premium
service with uncapped internet for data-hungry households, and an unlimited Telkom-to-Telkom calling plan. Coupled
with this, we introduced the "in home entertainment" offer. This bundled the LIT box media streamer to unlimited
home bundles to stream media to a television screen, for example ShowMax, Netflix and YouTube.
Telkom successfully ran the "Summer of More" campaign, which enhanced customer value propositions by providing
additional data and streaming value. This led to the highest new subscribers on our flagship FreeMe product suite.
By including smaller FreeMe bundles, the offering is more accessible to the mass market and significantly increased
the monthly sales of FreeMe bundles. Telkom partnered with YouTube to include free promotional streaming data for
customers as part of the FreeMe bundles, which increased accessibility.
Pre-paid Pre-paid subscribers grew by 109.3 percent, adding net additions of 4.1 million subscribers to
segment 7.8 million customers. Despite the significant growth in subscribers, ARPU increased by
19.8 percent to R71.
Post-paid The customer base increased by 26.8 percent to 1.9 million subscribers. ARPU marginally declined
segment to R186 as we drive increased value through our deals.
Content and gaming
Our various LIT content offerings, such as video, music and TV streaming, address the lifestyle and entertainment
needs of our customers. We continuously build on the LIT value proposition. We offer mobile streaming bundles, which
enable customers to source cost-effective streaming data in conjunction with LIT content partners.
We continue to strengthen relationships with our content partners. We entered into a partnership agreement with
Netflix - a first for Netflix with a South African telecommunications company. The agreement makes it easier and more
affordable for customers to consume streaming services across the network.
Our entry into the gaming arena fortified our standing in the content space through heightened gaming possibilities
through our largest African e-sport tournament management capability, VS Gaming. We hosted the first South African
EA FIFA World Cup qualifier event in May 2018. This increased the access and participation of South Africans in
e-sports, locally and globally.
EBITDA improvement
EBITDA swung from a loss of R146 million in the prior year to R1 030 million in FY2019, benefiting from the strong
growth in revenue and ongoing cost management.
The continued growth in mobile is now beginning to achieve scale. The deterioration of our copper base technology
is being more than offset by a strong double-digit growth in the mobile business, resulting in a positive revenue growth
of 16.4 percent at the consumer level. Our net operating revenue percentage continues to improve as we manage our
variable cost effectively. This is driven by an increased network footprint that mitigates the roaming growth, as well as
favourable termination rates coupled with a reduction in internal connectivity costs linked to the old technology copper
business. As we drive volumes of traffic through the network and reduce our unit marginal costs, we grow the mobile network
footprint. This translates into a more efficient operating expenses structure as we strive to offer the lowest cost per
bit on the mobile network. This is evidenced by the strong value proposition deals that we take to market.
Capital investment
Telkom Consumer continued its 4G-driven network expansion programme to support growing customer numbers and data
traffic. We increased capital investment by 30.1 percent to R3 070 million, increasing base stations by 28.7 percent
to 5 116 base stations, 3 438 of those base stations are 4G, an increase of 47.4 percent compared to the prior year.
We started refarming a portion of our 2 100 MHz spectrum to LTE, following the successful refarming of the 1 800 MHz
spectrum for smartphones. The strategic intent of focusing spectrum resources towards 4G contributed to smartphone
subscribers increasing by 91.8 percent to 5.3 million.
We entered into a roaming agreement and facilities leasing agreement with Vodacom, to provide a seamless roaming
experience across all their mobile sites. The roaming agreement was implemented in phases starting in the Limpopo region,
and is 80.0 percent complete. Work commenced in other regions. The facilities leasing agreement allows Telkom to use its
roaming partners' passive equipment (towers, antennas and shelters) to accelerate its network build. This, together with
our own capital deployment, facilitates an efficient capital and operational expenditure profile, while accelerating time
to market.
Customer experience
Service delivery remains our key focus and we are determined to achieve more across our fixed and mobile operations.
Continuously evaluating customer feedback guides our approach and actions and we seek to constantly improve the
customer experience. We realised significant benefits, including improving our composite NPS and halving the number
of repeat callers in certain areas of business.
How Telkom Consumer is improving the customer experience:
- expanding our network capital investment of R3 070m
- improved data traffic through 5 116 base stations
- Smartphone subscribers increased by 91.8% to 5.3m
BCX
- Improved IT external revenue by 6.2% to R6.8bn
- BCX restructured the business operations into two main service offerings - telecommunications and
IT solutions. This will improve focus and ensure we service customers effectively. We appointed a chief revenue
officer to manage BCX's go-to-market model that is based on customer segmentation and dedicated channels to serve.
The initial feedback from customers is positive and the model has led to improved customer experience as
demonstrated by a 4 points improvement in NPS and 11 points improvement in quality of service measurement.
- B-BBEE rating now Level 1 up from level 3
- EBITDA margin of 16.5% due to optimised operating costs
BCX has gone through a restructuring process with an aim to stabilise the business by arresting the declining
financial performance, simplifying the structure to create efficiencies and reducing the organisation's cost to serve.
The restructuring process is gaining traction evidenced by better financial performance in the second half of the
year where the rate of decline in revenue improved to 1.8 percent compared to 4.9 percent decline in the first half
of the year, and EBITDA increased by 46.0 percent compared to a decline of 36.5 percent in the first half of the year.
Performance overview
Revenue declined 3.4 percent to R19 580 million, a decline of R683 million compared to a R1 billion revenue decline
in the prior year. The decline in revenue is primarily due to a 13.3 percent decline in fixed voice revenue, a
deteriorated performance from small and medium-sized enterprises (SMEs) and continued delays in spending from
the public sector.
Our strategy to reduce fixed voice customer churn and migrating customers to next-generation voice solutions has
started to bear fruit. In the second half of the year, next-generation voice revenue increased by 28.3 percent
compared to 56.9 percent in the first half of the year and fixed voice revenue in the second half of the year
declined by 10.5 percent compared to 13.4 percent in the first half of the year.
However, IT revenue delivered solid growth of 6.2 percent from external customers, underpinned by good performance
from retail and financial services sectors despite the poor economic conditions. Overall, IT revenue increased by
0.9 percent impacted by the reduction in Telkom group IT charge as well as hardware and software sales.
Data revenue decreased by 3.3 percent, driven by an increase in next-generation data revenue of 44.0 percent as data
demand continues to surge. However, this was offset by the decline in traditional data revenue of 19.0 percent, due to
convergence from legacy ADSL and diginet to fibre. We will continue to focus on migrating customers from diginet to
metro-ethernet.
EBITDA declined 2.1 percent to R3 240 million with an EBITDA margin expanding from 16.3 percent to 16.5 percent
negatively impacted by the continued decline in traditional business which are high-margin businesses. This was
partially offset by the optimisation of operating costs through renegotiations of supplier contracts, consolidation
of offices, containing discretionary expenditure and using robotics to improve some processes. In line with our
employee optimisation programme, towards the end of the year, we reduced permanent employee numbers by 13.4 percent
to 5 782. We expect the savings from this programme to come through in the next financial year. The employee
optimisation programme was managed to ensure that daily operations were not disrupted, and key skills were retained.
Business portfolio review
In the prior year, BCX initiated a review of its business portfolio identifying some of the African
subsidiaries as assets held for sale and integrating South African subsidiaries into One BCX to drive efficiencies
within the company. To this end, BCX Nigeria, Tanzania and SOX group are held for sale. The remaining international
subsidiaries are retained to have presence across borders.
The integration of the South African subsidiaries into One BCX is progressing according to plan with only two subsidiaries
which will be divisionalised in the next financial year.
How we are improving the customer experience at BCX:
- customer-centric focus drives innovation
- digital transformation
- automated client surveys
- problems resolved within 1 month
Client experience
Our clients are at the core of our business and we are driving innovative ways to redesign client experience.
The goal is to position BCX as the most recommended digital transformation partner, and to repurpose it to be
more customer centric.
We implemented initiatives to improve our NPS. These included a robust, automated solution that feeds client survey
responses to the account manager within 24 hours. This starts a closing-of-the-loop process with clients to resolve their
pain points. A total of 85 percent of client pain points highlighted were resolved within one month, with the remainder
within two months, compared to the previous six-month turnaround. This is testament that BCX values and responds
to client feedback.
A client experience risk platform for each vertical owner, that is financial services, retail and public sector, earmarks
accounts needing high care. These accounts require targeted interventions to re-establish trust and convert clients to
become promoters of BCX. We closely monitor high-risk clients to ensure retention and to identify upsell and cross-sell
opportunities.
GYRO
- Gyro operating revenue of R1 169m
23.8% increase driven by our mast and tower portfolio
- EBITDA margin increased from 33.3% to 58.6% due to revenue growth and active cost management
increase of 25.3 ppts
- Mast and tower revenue increased 35.4% to R930m
- Gyro manages Telkom's property portfolio, which consists of 1 332 properties, comprising exchange and switch,
office, client service centre, centre for learning buildings, radio transmission sites and residential dwellings.
Gyro focused on optimising the mast and tower portfolio, undertaking development planning for selected properties, and
optimising the group's property-related expenses. We established a solid foundation for revenue opportunities and asset
value enhancement going forward. The mast and tower portfolio generates the bulk of our external revenue, as external
rental income will only be realised as properties are redeveloped.
Revenue increased 23.8 percent to R1 169 million, mainly driven by our mast and tower portfolio, underpinned by
revenue enhancement initiatives in the tower portfolio.
EBITDA increased by 118.2 percent to R685 million and the EBITDA margin expanded by 25.3 percentage basis points
to 58.6 percent, driven by revenue growth and active cost management.
Mast and tower portfolio
Our mast and tower revenue increased by 35.4 percent, primarily from 1 380 multi-tenanted towers. We are removing
redundant equipment from 120 of these towers to make rental space available for new tenancy. We assessed the
entire portfolio for suitability of mobile network operator multi-tenancy. As a result, we introduced 2 000
additional towers to potential tenants. We are aggressively marketing these sites to our major tenants and
have received positive interest.
The tower portfolio is anchored by Telkom Mobile as it penetrates new markets and enhances its 4G network coverage.
We have a new tower build programme for 2 000 sites over the next three years, underpinned by Telkom Mobile's demand for
new sites. We established supplier panels for site permitting and acquisitions, tower manufacturing and construction for
expeditious execution of the build programme. In line with the evolving technology landscape and customer requirements,
Gyro has developed a small cell offering for 4G network augmentation and 5G rollout preparation.
Gyro will establish adjacent revenue streams from property developments as part of its core objective of unlocking
value in the tower and property portfolios.
Property portfolio
We are assessing each of the group's 1 332 properties to determine the best use. Development planning is underway for
selected properties with development potential. We conducted market research for most of the selected properties to
identify supportable property segments per site. We continue adding suitable properties to the development pipeline
and commence with the rezoning and development planning process to prepare the properties for redevelopement.
We continued rationalising the Telkom property portfolio and started with Telkom regional centres in major cities.
Telkom business units will be consolidated into regional offices and operational/warehoused building centres. This will
lead to greater productivity and efficiencies among business units and will optimise occupancy expenses at the regional
level.
While regional centres are being prepared for office space, warehouse and operational consolidation, Gyro focused on
reducing third-party rental expenditure where Telkom properties offer suitable alternative accommodation. We identified
leases for BCX, Yellow Pages and Openserve in Cape Town, Durban, Port Elizabeth and Johannesburg that can be replaced
with more cost-effective tenancy in Telkom properties. This initiative is at various phases of completion and the
financial benefits will be realised from the next financial year. This initiative will be extended to other major cities.
We are decommissioning 62 exchange properties that are no longer fit for operational purpose. We will sell
decommissioned properties if they do not meet development criteria or other strategic uses. We continue to aggressively
assess buildings and properties in the portfolio to identify assets that are no longer required for operational purposes
that we can either redevelop or sell, thereby reducing occupancy costs while generating revenue.
Yellow Pages (known as Trudon)
How we have evolved our business:
- optimised underlying cost base
- implemented a new operating model
- We added value for clients with our enhanced online platform which contributed to
- 175% increase in users
- 908 354 customer visits
- 93% increase in organic page views
- reduced operating expenditure and increased EBITDA by 7%
Yellow Pages continued to evolve from a traditional print directory publisher to a technology-enabled organisation
that provides a range of digital-centric marketing and e-commerce services to customers.
We stabilised the business by optimising the underlying cost base, implementing a new operating model and
enhancing the current online Yellow Pages platform. The new operating model implementation, including the employee
reorganisation process, is complete and has unlocked further operating cost-efficiency opportunities.
Print revenue continued to be under pressure due to churn of high-value subscribers away from the traditional printed
directories, combined with churn on the Internet Yellow Pages product due to the lack of value associated with
the low traffic volumes to the site. To address the churn and provide increased value to customers, we relaunched
the online Yellow Pages platform in September 2018. This has contributed to the 175 percent increase in users
since March 2018. We have 908 354 customers that visit the site monthly. Organic page views increased by 93 percent
to 2.1 million impressions per month.
We continue to expand our third-party channels, including the pilot of the tied agency model. This will support the
growth of digital marketing solutions in traditionally underserviced areas and improve the simplicity, quality and
pricing of product offerings. We introduced new bundles to simplify the decision-making process. Customers can now
choose a bundle, which includes a range of products, from those suited to start-up businesses, that require a basic
internet presence, to more mature organisations looking to drive traffic to their website or establish an e-commerce
capability.
EBITDA for the period, excluding the impact of VSP, VERP and section 189 costs, increased by 7 percent. This was achieved
through the 31 percent reduction in operating expenditure which offset the 20 percent decline in net operating revenues
due to loss in high-margin print revenues.
We will continue developing and enhancing the online Yellow Pages platform with new functionality, such as a customer
dashboard that will be launched during the next financial year. This will allow customers to purchase selected digital
marketing products via the self-service portal and allow them to market their services to other businesses on the
Yellow Pages platform.
Yellow Pages will be reported as part of the Telkom Small and Medium Business unit from the next financial year.
It will be leveraged to support customer retention and provide integrated product offerings to SMEs.
INTELLECTUAL CAPITAL
The increasingly inter-connected world influences how technology interacts within businesses, and with their customers
and users. A customers' ability to utilise and consume services across multiple channels is becoming a common requirement
and changes how we implement technology and IT solutions.
- Our central focus is the customer
- We are transforming our operating model for IT put the customer experience first
- We have evolved our OSS/BSS systems to enable a better client experience
IT and technology are pivotal in enabling relationships with our customers. We are transforming our IT operating model
to ensure we put customers and their experience with us at the centre of our IT transformation journey. Digitilisation
across multiple platforms forces higher dependency on IT and requires a relook at our customer journeys and process
flows. We successfully concluded the prior year projects on workforce management, by retiring solutions in this
space, and various security and customer service-related initiatives, such as improved access to the geographic information
system platform. We continue to implement internal projects such as Office 365 and SAP-based modules. Our endeavour to
move towards comprehensive digital platforms continues and we achieved multiple milestones across self-service apps,
online portal upgrades and multiple new functionalities like zero-touch options across customer interaction points.
Our focus remains on transforming the OSS/BSS landscape through effective fulfilment, assurance and billing across
each business unit, and improved enterprise IT solutions, which support the group. This is in line with the impact
of a software-defined network and network field virtualisation, enabling better network management and system
availability, which enables a better customer experience.
This overarching focus to enable better service delivery relies on
5 key transformation drivers:
1. Digitalisation and Overhaul business processes to conform to intuitive interfaces,
process enablement near real-time fulfilment, personalised treatment and service
demands through digitilisation
2. Reliable service Deliver faster and better services by utilising underpinning
delivery technologies and sustainable and reliable IT infrastructure
3. Outcome-based Deliver end-to-end, outcome-based services driven by
delivery harnessing, creating and maintaining customer and business value
4. Flexible fulfilment, OSS/BSS that enable dynamic product catalogue and advanced
assurance and billing service orchestration tools to enable a digital abstraction of data
solutions
5. Improved cost Prioritise profitable and consumption-based services across
structures all IT transformation projects and partnerships to improve cost
efficiencies
Telkom is cognisant of its obligation to manage information and cybersecurity threats. The group is required to comply
with legislation and regulations such as the Protection of Personal Information Act and the Payment Card Industry Data
Security Standard. We continuously mitigate these potential risks. We operate within a mature and compliant ISO 27001
information security management system environment. We continue to implement our Information Security Management programme
and drive upgrades and enhancements to our multi-pronged approach towards information and cybersecurity. This includes
effective detection and protection against various cyberattacks and cybercrime. We continue to review and enhance our
information and cybersecurity assurance capability to monitor the effectiveness of the information security management
initiatives. We create greater awareness among employees and our customers through the various programmes.
HUMAN CAPITAL
Having the right talent, in the right place, at the right time is critical to our success, and delivering on our
vision. The group employs, supports and develops people to ensure we have the right capabilities, commitment and
enthusiasm to achieve our strategic objectives.
Telkom's focus areas remain transformation and talent development. The total permanent group workforce as at
31 March 2019 is 15 296 compared to 17 472 in FY2018. The decrease in permanent workforce was primarily
due to VSP and VERPs offered and the section 189 process. The racial breakdown of permanent employees within
the reporting year comprised of 64 percent black South Africans, 33 percent white South Africans and 3 percent
non-South Africans. In total, 35 percent of our external recruitment was made up of women. It remains a challenge to
realise gender equality and female representation which aligns to the challenges of the broader ICT sector.
Within the group, women represent 31 percent of our employee base. Telkom is committed to increasing female
representation and transformation, confirmed by our female promotion rate of 54 percent, which is higher than
the representation rate.
Our external recruitment points to Telkom's strong resolve to hire in accordance with our transformation objective,
and 84 percent of all external hires were black. Our top management black representation increased from
62 percent to 100 percent.
Our enduring talent management framework enables actionable career development plans aligned to personal aspirations
and business needs. Telkom focuses on developing high-potential talent in line with specific business needs and invested
R11 million in talent and skills development programmes. Programmes include Top Flight, Step Up, Female Leadership
Development and two new programmes, Traction and Digital Leadership Development. The group spent R293 million on
employee training and development and each employee received an average of 14 hours of training (FY2018: 17 hours).
Following on from the Bright Young Minds programme and the succeeding Future Minds programme, 12 young talented
individuals were successfully positioned in various permanent roles across the group. Added to this, other
programmes continue to attract, develop and employ young talent.
Telkom had 848 learnerships and internships (FY2018: 703) active during the year. Candidates comprise 46 percent
female (FY2018: 56 percent), 100 percent black (FY2018: 100 percent) and 27 percent learners with disabilities
(FY2018: 13 percent). Learnerships were aimed at unemployed learners as a talent pipeline in line with future
talent requirements, and internships were aimed at unemployed learners enabling them to gain meaningful work
experience.
For talent mapping and succession planning purposes, all management and employees were reviewed and assessed against
predetermined criteria. To address potential challenges and minimise talent risks for the group, the talent mapping
findings were used to inform the identification of successors and to provide input into the actions required.
The Top Flight and Step Up programmes were launched in June 2018 to develop highly educated, high-potential leaders.
There are 18 and 23 executives on the programmes respectively. Individual key challenges and development needs are
identified by the participants to construct their development journey for the year. Each participant has a personal
coach and will receive coaching sessions as part of their development. Three of the 23 executives were promoted
during the year.
SOCIAL AND RELATIONSHIP CAPITAL
By focusing on social and relationship capital, we contribute to national and global development goals, comply with
legislation, drive our business strategy, create shared value, promote transformation and maintain our social
licence to operate. BCX B-BBEE rating improved from level 3 to level 1.
Transformation is a key strategic pillar in our business strategy. We implemented several strategic initiatives to
drive transformation across the group. Two governance committees, the broad-based black economic empowerment (B-BBEE)
forum and the skills development forum, developed the B-BBEE improvement plan with targets for implementation. These
forums are mandated to advocate transformation as a strategic imperative when making business decisions.
Telkom applied to the Department of Trade and Industry for the government shareholding to be classified as a B-BBEE
facilitator status. The application proved successful and was gazetted on 7 May 2019. Although we believe this
conversion will contribute significantly to our growth strategy, we continue to investigate other avenues to
improve the ownership element.
FutureMakers was launched in May 2015 as Telkom's Enterprise and Supplier Development programme. It demonstrates our
commitment to SME development to drive our beyond-compliance approach to develop black-owned businesses in the
information and communications technology (ICT) sector. This initiative is aimed at enhancing market access opportunities,
driving ICT innovation, and fostering inclusive participation of majority black-owned ICT businesses in Telkom's supply
and value chain. SMEs that are identified for inclusive procurement are supported by FutureMakers through incubation and
business development support. During the year, BCX through FutureMakers invested in the incubation of innovative
start-ups. Openserve and Consumer through FutureMakers invested in business development support for the
Independent Field Technician (IFT), Consumer Dealer and Subcontractor programmes.
The IFT programme increased from three pilot companies that consisted of four qualified technicians in 2015, to
45 companies in FY2019. Total cumulative procurement spend was R192 million in FY2019. The programme offers commodity
services such as ADSL, fibre and jointing services in support of qualifying black small business development.
The programme created 804 jobs to date.
The Consumer Dealers' programme consists of 25 dealers, including 3 flagship dealers and 6 multi-dealers, 23 internet
cafes, 3 events companies and 1 debt collector.
The programme aims to leverage SMEs as a channel to increase the distribution footprint, contributing to inclusive
procurement, access to connectivity in underserviced areas, and promoting job creation.
The Innovation programme has R30 million cumulatively invested through grant funding and connectivity, of which
R10 million was invested in FY2019. There are 76 enterprises incubated in emerging technologies from ideation to
commercialisation in FY2019. The programme aims to incubate, accelerate, and invest in enterprises that develop solutions
in areas such as the Internet of Things, big data analytics, artificial intelligence, smart cities and cybersecurity.
Telkom Foundation invested R78.3 million (FY2018: R57.2 million) including administration costs, of which
R54.5 million was invested in education and R15.8 million in social development programmes. The three-phased Telkom
Foundation strategy supports learners, enabling their economic participation in the ICT sector and assists the
youth to grasp opportunities.
NATURAL CAPITAL
Measuring and managing our environmental impact is important for the planet and the communities in which we work,
and essential for the financial sustainability of our supply chain and our business.
The ICT industry is categorised as a low environmental impact sector. The most significant environmental impact of our
operations is e-waste, energy use and the related carbon emission in our network. Our focus is on minimising Telkom's
energy intensity and carbon footprint by improving the energy efficiency of our activities.
Telkom has participated in the CDP (formerly the Carbon Disclosure Project) for the past seven years. This provides
feedback on how well Telkom manages energy and greenhouse gas inventory to reduce the group's environmental impact within
our operational boundary. We disclose our greenhouse gas (GHG) emissions to demonstrate our commitment as a responsible
global citizen to the legal obligations under the United Nations Framework Convention on Climate Change and its Kyoto
Protocol. Our commitment to reduce GHG emissions safeguards our long-term sustainability and equips us to effectively
respond to regulatory and policy changes.
To minimise the increases in energy use and carbon emissions, we continue to roll out energy-efficient measures and
technologies, and we also have water-saving initiatives. These include:
Smart lighting Installation of smart control technologies (motion sensors and daylight
controls, LED switches), LED lighting and smart meters at our high energy consuming sites
lighting roll so that lights are off when not in use. The benefits of these projects are to
out and smart enhance and improve control of energy costs and consumption, benchmarking
metering of facilities' electricity usage, sustainability reporting and effective utilities
management. The implementation of these projects is planned to be
completed in FY2020.
Telkom Park Implementing an energy management system (EnMS) at Telkom Park to achieve ISO 50001
energy certification: The EnMS will enhance the adoption of best
management practices and sustainable energy savings.
system
Resource Implementing a Resource Efficiency programme at five of our priority sites
efficiency (Rosebank exchange, New Doornfontein exchange, Braamfontein exchange,
assessments Germiston exchange and Telkom Park). The programme focuses on energy
efficiency, sustainable water uses and waste management.
The increase of e-waste is a source of income for waste collectors and handlers. We sell our cabling to a leading
e-waste recycling organisation, which processes the cabling by using environmentally and socially responsible techniques
without chemicals or burning. We sell copper recovered from the recycling process to local and international markets.
This sensitive, labour-intensive process provides employment and empowerment for an Eastern Cape rural community,
where 22 families rely solely on this project as a source of income.
Outlook
- Year end with a solid performance
- Accelerate the migration of customer to next-generation technologies
- It is imperative to continue investing in key growth areas in line with our strategy to
ensure that we win against our peers
- Growth pillars
- Mobile
- Information technology
- Next-generation data
- Mast and tower
- Roaming agreement and facilities leasing agreement to accelerate the network deployment
- Disciplined approach to
- allocating sources of capital
- considering our investment strategy
- return to shareholders
while maintaining a healthy balance sheet
- Telkom will host a Capital Markets Day on 29 May 2019
The group ended the year with a solid performance despite the pressures from the regulatory landscape, a weak economic
environment, a decline in fixed voice revenue and customers migrating to next-generation technologies at lower margins.
Looking forward, we expect to accelerate the migration of customers to next-generation technologies in line with our
strategy focusing on retaining customers. It is imperative to continue investing in key growth areas in line with our
strategy to ensure that we win against our peers.
The capex investment to date is already yielding positive results with the growth in our new generation revenue
streams driving growth for the group. We expect the trends to continue with new revenue streams driving growth
for the group.
We will continue to manage the decline in traditional revenue by proactively migrating customers from traditional
to new generation revenue and partnering with over-the-top players to provide data-led propositions to
our customers.
To support the migration strategy, we intend to accelerate our investment in our network for coverage and capacity and
continue to utilise our LTE coverage (4G) spectrum efficiently, as the bulk of the traffic is on our 4G network. During
the year, we entered into a roaming agreement and facilities leasing agreement that will further strengthen our ability
to accelerate the network deployment. The new roaming agreement will provide us with deep passive sharing, seamless
roaming, access to 4G and enhanced high value location coverage. This will enable us to provide improved customer
experience and allow us to extend our coverage footprint. Our focus is to retain customers as customers become
technology agnostic.
We are mindful of the migration from traditional to new revenue streams at lower margins with increased cost to serve.
As a result, we are embarking on a structured and focused sustainable cost management program to rebase the cost
structure to improve absolute EBITDA growth and ensure that we are sustainable on a long-term basis.
We are renewing our capital framework to ensure that we apply a disciplined approach to how we allocate the various
sources of capital, taking into account our continued investment strategy, return to shareholders, while
maintaining a healthy balance sheet.
Capital Markets Day
Telkom will host a Capital Markets Day on 29 May 2019. A webcast link with live streaming and all presentations of
the day will be made available on the website at www.telkom.co.za/ir at 08h00 (South African standard time).
Dividend policy remains unchanged
Our policy is to pay an annual dividend of 60 percent of headline earnings, with an interim dividend of 40 percent
of interim headline earnings.
Declaration of dividend
In line with our dividend policy, the board declared a final ordinary dividend number 24 of 249.40317 cents per share.
This follows an interim dividend of 112.14144 cents per share declared in the interim results. This takes the annual
dividend for FY2019 to 361.54461 cents per share (FY2018: 355.08846 cents per share).
The declared dividend is payable on Tuesday, 18 June 2019 to shareholders recorded in the register of the company at
close of business on Friday, 14 June 2019. The dividend will be subject to a local dividend withholding tax rate of
20 percent which will result in a net final dividend of 199.52254 cents per ordinary share to those shareholders not
exempt from paying dividend withholding tax. The ordinary dividend will be paid out of available cash balances.
The number of ordinary shares in issue at date of this declaration is 511 140 239. Telkom SA SOC Ltd's tax reference
number is 9/414/001/710.
Salient dates with regard to the ordinary final dividend
Declaration date Monday, 27 May 2019
Last date to trade cum dividend Tuesday, 11 June 2019
Shares trade ex-dividend Wednesday, 12 June 2019
Record date Friday, 14 June 2019
Payment date Tuesday, 18 June 2019
Share certificates may not be dematerialised or re-materialised between Wednesday, 12 June 2019 and
Friday, 14 June 2019, both days inclusive.
On Tuesday, 18 June 2019, dividends due to holders of certificated securities on the South African register
will be transferred electronically to shareholders' bank accounts.
Dividends in respect of dematerialised shareholders will be credited to shareholders' accounts with
their relevant central securities depository participant or broker.
OPERATIONAL DATA
March March Variance
Subscribers 2019 2018 %
Broadband subscribers
Fixed broadband subscribers1 847 650 981 176 (13.6)
Mobile broadband subscribers 6 377 056 3 626 527 75.8
Fixed subscribers
Closer subscribers 718 968 790 207 (9.0)
Internet all access subscribers2 507 172 572 402 (11.4)
Fixed access lines ('000)3 2 267 2 678 (15.3)
Revenue per fixed access line (Rand) 4 545 4 703 (3.4)
Fixed voice ARPU 351.8 360.8 (2.5)
Fixed broadband ARPU 204.6 190.3 7.5
Managed data network sites 43 996 47 059 (6.5)
Mobile subscribers
Active mobile subscribers4 9 680 725 5 207 876 85.9
Pre-paid 7 807 255 3 729 943 109.3
Post-paid 1 873 470 1 477 933 26.8
ARPU (Rand) 99.90 98.19 1.7
Pre-paid 71.44 59.62 19.8
Post-paid 186.08 191.90 (3.0)
Pre-paid churn (%) 57.2 51.6 5.6
Post-paid churn (%) 13.1 12.0 1.1
Blended churn (%) 48.7 40.4 8.3
1 Includes xDSL and FTTH lines of which 6 134 (FY2018: 6 927) are internal lines
2 Includes Telkom Internet ADSL, ISDN and WiMAX subscribers
3 Includes copper voice and broadband, ISDN and FLLA. Excludes Telkom internal lines
4 Based on a subscriber who has participated in a revenue-generating activity within the last 90 days
March March Variance
Volumes 2019 2018 %
Fixed broadband data volumes (terabytes) 1 023 252 848 314 20.6
Mobile broadband data volumes (terabytes) 379 641 191 813 97.9
Total fixed-line traffic (millions of minutes) 10 707 12 028 (11.0)
Network
Ports activated via MSAN access 1 467 984 1 536 133 (4.4)
Fibre to the home 430 659 356 684 20.7
Fibre to the cabinet 2 390 235 2 237 057 6.8
Mobile sites integrated 5 116 3 974 28.7
LTE sites integrated 3 438 2 333 47.4
Active fibre connectivity rate (%) 38.4 30.7 7.7
Group employees5 15 296 17 472 (12.5)
Telkom company employees 9 202 10 143 (9.3)
Consumer 1 105 1 370 (19.3)
Openserve 8 097 8 493 (4.7)
Corporate Centre 339 280 21.1
BCX group employees6 5 782 6 675 (13.4)
Yellow Pages group employees 216 444 (51.4)
Gyro employees6 96 210 (54.3)
5 Based on number of group permanent employees
6 132 Gyro employees were transferred to BCX
FINANCIAL PERFORMANCE
Pro forma condensed consolidated provisional annual statement of profit and loss*
Adjusted Restated
March March
2019 2018
Rm Rm %
Revenue from contracts with customers1 41 774 39 661 5.3
Payments to other operators2 2 940 2 606 (12.8)
Cost of handsets, equipment and directories3 5 205 4 411 (18.0)
Sales commission, incentive and logistical costs3 1 457 935 (55.8)
Other income 719 607 18.5
Operating expenses 21 582 21 894 1.4
Employee expenses4 10 049 10 677 5.9
Other operating expenses 3 153 2 991 (5.4)
Maintenance4 3 074 2 696 (14.0)
Marketing4 806 763 (5.6)
Impairment of receivables and contract assets 384 635 39.5
Service fees 2 934 3 028 3.1
Operating leases4 1 182 1 104 (7.1)
EBITDA5 11 309 10 422 8.5
Depreciation, amortisation, impairment6
and write-offs 5 814 5 585 (4.1)
Operating profit 5 495 4 837 13.6
Investment income 185 186 (0.5)
Income/(Loss) from associates 2 (70) 102.9
Finance charges and fair value movements7 947 842 (12.5)
Net finance charges 885 884 (0.1)
Cost of hedging 88 167 47.3
Foreign exchange and fair value movements (26) (209) 87.6
Profit before taxation 4 735 4 111 15.2
Taxation 1 391 1 113 (25.0)
Profit for the year 3 344 2 998 11.5
* Based on pro forma financial information. Refer below for the reconciliation of the reported
figures to the adjusted figures.
Notes
1 Revenue from contracts with customers grew 5.3 percent, supported by significant growth
in mobile revenues. Traditional fixed voice and data continued to decline.
2 Payments to other operators increased 12.8 percent mainly because of higher payments
to mobile operators in line with the 51.1 percent increase in our mobile voice and
subscription revenue.
3 Costs of handsets, equipment and directories and sales commission, incentive and logistical
costs increased 18.0 percent and 55.8 percent respectively following an increase in mobile
acquisition cost driven by the 85.9 percent increase in active mobile subscribers.
4 Operating expenses increased due to:
a. Employee expenses decreased due to the group headcount decreased 12.5 percent to 15 296 full-time
employees.
Partially offset by:
b. Maintenance expenditure driven by the 28.7 percent increase in mobile sites.
c. Marketing expenditure increased in Telkom Consumer.
d. Operating leases cost increased as a result of the 7.1 percent increase in mobile sites and
costs relating to the new BCX building.
5 Group EBITDA positively impacted by the 5.3 percent increase in operating revenue while operating expenses
decreased 1.4 percent. The lower-than-inflation growth in operating expenses is attributable to our continued
focus on cost-efficiency initiatives as part of ongoing business transformation.
6 Depreciation, amortisation, impairments and write-offs increased 4.1 percent, mainly due to the increase
in capex, partially offset by the extension of useful lives.
7 Finance charges and fair value measurements increased largely driven by the lower fair value gain of
R65 million (FY2018: R171 million) on the revaluation of the cell captive as a result of the partial
disinvestment from the fund in the prior year. The decrease in the cost of hedging is offset by the
corresponding loss in foreign exchange movements.
Operating revenue
Restated1
March March
2019 2018
Rm Rm %
Fixed 22 751 24 705 (7.9)
Voice and subscriptions 10 450 12 249 (14.7)
Usage 3 898 4 586 (15.0)
Subscriptions 6 552 7 663 (14.5)
Interconnection 792 868 (8.8)
Fixed-line domestic 347 380 (8.7)
Fixed-line international 445 488 (8.8)
Data 9 925 10 099 (1.7)
Data connectivity 6 795 7 056 (3.7)
Internet access and related services 2 040 1 907 7.0
Managed data network services 1 050 1 096 (4.2)
Multi-media services 40 40 (0.3)
Customer premises equipment sales and rentals 1 542 1 345 14.6
Sales 483 252 91.5
Rentals 1 059 1 093 (3.1)
Other revenue 43 144 (70.1)
Mobile 10 754 7 068 52.2
Mobile voice and subscriptions 1 968 1 302 51.1
Mobile interconnection 270 166 62.8
Mobile data 5 917 3 683 60.7
Mobile handset and equipment sales 2 407 1 775 35.6
Significant financing component revenue 191 142 34.7
Information technology 6 764 6 370 6.2
Information technology service solutions 4 169 3 918 6.4
Application solutions 1 528 1 592 (4.0)
IT hardware and software 923 692 33.3
Industrial technologies 145 168 (13.8)
Other 1 505 1 518 (0.9)
Trudon 651 850 (23.4)
Gyro1 609 491 24.2
VS Gaming 15 11 33.0
BCX - Fastnet 230 167 37.9
Total 41 774 39 661 5.3
1 During the year we restated the prior year revenue by R1 357 million. Of this amount R656 million
related to Smart Office Connexion (SOX). The implementation of IFRS 15 also highlighted a prior year
error of R641 million relating to the recognition of mobile CPE revenue to dealer stores and R60 million
related to the adoption of IFRS 15. These revenue adjustments led to a restatement of the prior year
number from R41 018 to R39 661 million.
Notes
1 Gyro revenue disclosure was restated to exclude the R166 million impact of Fastnet revenue in the prior
year and included as BCX-Fastnet revenue.
Revenue variance explanations
Fixed-line voice usage and subscription revenue decreased by 14.7 percent toR10 450 million
(FY2018: R12 249 million) as the declining trend accelerated, driven by migration to new technologies
and a 15.3 percent decline in the number of fixed access lines.
Fixed interconnection revenue decreased 8.8 percent to R792 million (FY2018: R868 million), mainly due
to lower traffic volumes.
Fixed data connectivity services decreased 3.7 percent to R6 795 million (FY2018: R7 056 million). This
is due to the decline in traditional revenue streams, offset by the increase in fibre and new data products
including FTTH and metro-ethernet.
Mobile voice and subscription revenue
increased 51.1 percent to R1 968 million (FY2018: R1 302 million). This is attributed to an 85.9 percent
increase in the number of active mobile subscribers.
Mobile data revenue increased 60.7 percent to R5 917 million (FY2018: R3 683 million), driven by our strategy
to focus on data which led to an increase in mobile data traffic.
Information technology increased 6.2 percent to R6 764 million (FY2018: R6 370 million), mainly due to an
increase in application solutions revenue.
Condensed consolidated provisional statement of financial position*
Reported Restated
March March
2019 2018
Rm Rm %
Assets
Non-current assets 37 961 36 359 4.4
Property, plant and equipment1 32 035 30 324 5.6
Intangible assets2 4 521 4 492 0.6
Other investments 78 100 (22.0)
Employee benefits3 729 627 16.3
Other financial assets 133 60 121.7
Finance lease receivables 210 262 (19.8)
Deferred taxation4 255 494 (48.4)
Current assets 14 783 13 778 7.3
Inventories 1 267 1 341 (5.5)
Income tax receivable 76 54 40.7
Current portion of finance lease receivables 108 112 (3.6)
Contract asset5 2 518 1 672 50.6
Trade and other receivables6 7 425 6 370 13.9
Current portion of other financial assets7 388 163 138.0
Current portion of other investments 1 573 1 509 4.2
Cash and cash equivalents 1 428 2 557 (44.2)
Asset of disposal group classified as held for sale 200 204 (2.0)
Total assets 52 944 50 341 5.2
Equity and liabilities
Equity attributable to owners of the parent 29 573 26 957 9.7
Share capital 5 050 5 050 -
Share-based compensation reserve 512 377 35.8
Non-distributable reserves 1 621 1 579 2.7
Retained earnings 22 390 19 951 12.2
Non-controlling interest 195 194 0.5
Total equity 29 768 27 151 9.6
Non-current liabilities 6 740 10 268 (34.4)
Interest-bearing debt8 4 840 7 158 (32.4)
Provisions9 1 193 2 427 (50.8)
Other financial liabilities 79 - 100.0
Deferred revenue 466 502 (7.2)
Deferred taxation 162 181 (10.5)
Current liabilities 16 436 12 922 27.2
Trade and other payables10 7 406 6 898 7.4
Shareholders for dividend 29 58 (50.0)
Current portion of interest-bearing debt8 5 401 2 239 141.2
Current portion of provisions9 1 316 1 489 (11.6)
Current portion of deferred revenue 1 396 1 597 (12.6)
Income tax payable 572 361 58.4
Current portion of other financial liabilities7 316 250 26.4
Credit facilities utilised - 30 (100.0)
Total liabilities 23 176 23 190 (0.1)
Total equity and liabilities 52 944 50 341 5.2
* Does not represent pro forma information reported.
Notes
1 Property, plant and equipment constitutes largely of fixed and mobile network equipment. The increase is
driven by additions of R7 034 million, partially offset by depreciation of R4 842 million
2 Intangible assets constitute largely of software and goodwill. The increase in intangibles is due to
additions of R640 million, mainly attribute to software acquisitions, partially offset by amortisation.
3 Employee benefits increased due to a higher discount rate applied to the calculation of the post-employment
employment liabilities.
4 Deferred tax asset reduction of 48.4 percent is attributable to a R67 million additional liability raised
in Telkom SA SOC Ltd relating to the actuarial gains recognised on the post-employment benefit plans.
This movement was accounted for in other comprehensive income. The remaining movement in the asset is
attributable to the IFRS implication noted below, the full recognition of the deferred tax asset
in respect of prior year losses and the utilisation of temporary differences. At 31 March 2018, the group
did not recognise a deferred tax asset of R341 million in respect of temporary differences and tax losses
amounting to R1 220 million that could be carried forward against future taxable income. These differences
originated in Telkom company in the prior year. There was no unrecognised deferred tax asset at 31 March 2019.
5 Contract assets recognised in accordance with the adoption of IFRS 15. The 50.6 percent increase is supported
by the 35.6 percent increase in mobile handset and equipment sales.
6 Trade receivables increased 13.9 percent from R6 370 million to R7 425 million, mainly driven by the increase
in Mobile revenue. Telkom Mobile debtors increased by R775 million as a result of increased subscribers in
the current year.
7 Current portion of other financial assets and liabilities increased to R388 million and R316 million respectively
due to the movement in Telkom company derivatives.
8 Interest bearing debt increased largely due to increased borrowings to fund capital expenditure and optimise
the group's capital structure. R2.3 billion of TL20 bond is maturing in February 2020 and was moved from
long term to short term. Also, R500 million of the Nedbank term loan is maturing in April 2019.
9 The reduction in provisions is largely due to the the decrease in provision for bonuses and a decrease in
BCX's provisions for UCS which were paid off in the current year.
10 Trade payables increased largely due to an increase in accruals supported by the 4.5 percent increase in
direct and operating expenses, excluding the VERP, VSP and section 189 costs of R728 million.
Condensed consolidated provisional statement of cash flows*
Reported Restated
March March
2019 2018
Rm Rm %
Cash flows from operating activities 5 706 6 039
Cash receipts from customers 40 341 40 091 0.6
Cash paid to suppliers and employees (31 438) (29 978) 4.9
Cash generated from operations1 8 903 10 113 (12.0)
Interest received 441 310 42.3
Finance charges paid2 (847) (722) (17.3)
Taxation paid3 (945) (1 472) 35.8
Cash generated from operations before
dividend paid 7 552 8 229 (8.2)
Dividend paid (1 846) (2 190) (15.7)
Cash flows from investing activities (7 522) (6 617) (13.7)
Proceeds on disposal of property, plant and
equipment and intangible assets 35 82 (57.3)
Additions to assets for capital expansion4 (7 584) (7 756) 2.2
Realisation of investment in other
financial assets 45 31 45.2
Investments made by FutureMakers (18) (24) 25.0
Proceeds on realisation of Cell Captive assets 1 050 (100.0)
Cash flows from financing activities 717 1 731 (58.6)
Loans raised5 3 246 7 680 (57.7)
Loans repaid (2 544) (4 685) 45.7
Purchase of shares for the Telkom and
subsidiaries long term incentive share scheme (47) (68) (30.9)
Shares repurchased and cancelled - (759) (100.0)
Finance lease repaid (42) (16) (162.5)
Repayment of derivatives (222) (546) 59.3
Proceeds from settlements of derivatives 326 125 160.8
Net decrease in cash and cash equivalents (1 099) 1 153 195.3
Net cash and cash equivalents at the beginning
of the year 2 527 1 374 83.9
Net cash and cash equivalents at the end of the year 1 428 2 527 (43.5)
* Does not represent pro forma information reported.
Notes
1 Cash flow from operating activities decreased mainly due to our 4.9 percent increase in cash
paid to suppliers and employees.
2 Increased finance charges paid is largely due to increased borrowings.
3 Taxation paid decreased primarily due to lower current taxation in the current period.
4 Reduction in payments relating to additions to assets for capital expansion are largely due to reduction in capex rollout.
5 The reduction in loans raised is largely due to disciplined working capital management and lower capital expenditure.
Summary audited consolidated provisional financial statements
Board approval
These summary consolidated provisional financial statements were authorised for issue on 24 May 2019 by the
Telkom SA SOC Limited board of directors and published on 27 May 2019.
Directors responsibility and audit report
The directors of the company take full responsibility for the preparation of the summary consolidated provisional
financial statements. The summary consolidated provisional financial statements have been audited by our
independent joint auditors PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Grant Thornton Inc.
Preparer and supervisor of the summary consolidated provisional financial statements
These summary consolidated provisional financial statements were prepared by the Telkom finance staff under
the supervision of the group chief financial officer, Tsholofelo Molefe CA (SA).
Independent auditor's report on the summary consolidated provisional financial statements
To the Shareholders of Telkom SA SOC Limited
Opinion
The summary consolidated provisional financial statements of Telkom SA SOC Limited contained in the
accompanying provisional report, which comprise the summary consolidated provisional statement of financial
position as at 31 March 2019, the summary consolidated provisional statements of profit or loss and other
comprehensive income, changes in equity and cash flows for the year then ended, and related notes, are derived
from the audited consolidated financial statements of Telkom SA SOC Limited for the year ended 31 March 2019.
In our opinion, the accompanying summary consolidated provisional financial statements are consistent, in all
material respects, with the audited consolidated financial statements, in accordance with the requirements
of the JSE Limited Listings Requirements for provisional reports, as set out in note 3.1 to the summary
consolidated provisional financial statements, and the requirements of the Companies Act of South Africa
as applicable to summary financial statements.
Summary Consolidated Financial Statements
The summary consolidated provisional financial statements do not contain all the disclosures required by
International Financial Reporting Standards and the requirements of the Companies Act of South Africa as
applicable to annual financial statements. Reading the summary consolidated provisional financial statements
and the auditor's report thereon, therefore, is not a substitute for reading the audited consolidated
financial statements and the auditor's report thereon.
The Audited Consolidated Financial Statements and Our Report Thereon
We expressed an unmodified audit opinion on the audited consolidated financial statements in our report dated
24 May 2019. That report also includes communication of key audit matters. Key audit matters are those matters
that, in our professional judgement, were of most significance in our audit of the consolidated financial
statements of the current period.
Director's Responsibility for the Summary Consolidated Financial Statements
The directors are responsible for the preparation of the summary consolidated provisional financial statements
in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports, set out
in note 3.1 to the summary consolidated provisional financial statements, and the requirements of the Companies
Act of South Africa as applicable to summary financial statements.
Auditor's Responsibility
Our responsibility is to express an opinion on whether the summary consolidated provisional financial statements
are consistent, in all material respects, with the audited consolidated financial statements based on our
procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810 (Revised),
Engagements to Report on Summary Financial Statements.
Other matter
We have not audited future financial performance and expectations expressed by the directors included in the
commentary in the accompanying financial statements and accordingly do not express an opinion thereon.
PricewaterhouseCoopers Inc. SizweNtsalubaGobodo Grant Thornton Inc.
Director: KJ Dikana Director: SY Lockhat
Registered Auditor Registered Auditor
Johannesburg Johannesburg
24 May 2019 24 May 2019
Summary consolidated provisional statement of profit or loss and other comprehensive income
for the year ended 31 March 2019
Restated
31 March 31 March*
2019 2018
Notes Rm Rm
Revenue 4 41 774 39 661
Other income 719 607
Payments to other operators 2 940 2 606
Cost of handsets, equipment and directories 5 205 4 411
Sales commission, incentives and logistical costs 1 457 935
Employee expenses 5 10 777 10 677
Other operating expenses 3 153 2 991
Maintenance 3 074 2 696
Marketing 806 763
Impairment of receivables and contract assets 15 384 635
Service fees 2 934 3 028
Operating leases 1 182 1 104
EBITDA 10 581 10 422
Depreciation of property, plant and equipment 5 4 842 4 760
Amortisation of intangible assets 5 702 778
Write-offs, impairments and losses of property,
plant and equipment and intangible assets 5 270 47
Operating profit 4 767 4 837
Investment income 185 186
Income/(loss) from associates 2 (70)
Net finance charges, hedging costs and fair value movements 947 842
Net finance charges 885 884
Cost of hedging 88 167
Foreign exchange and fair value movements (26) (209)
Profit before taxation 4 007 4 111
Taxation 1 176 1 113
Profit for the year 2 831 2 998
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Exchange gains/(losses) on translating foreign operations** 23 (22)
Items that will not be reclassified to profit or loss
Defined benefit plan actuarial gains/(losses) 1 352 (652)
Income tax relating to actuarial gains/(losses) (67) -
Other comprehensive income/(loss) for the year, net of taxation 1 308 (674)
Total comprehensive income for the year 4 139 2 324
Profit attributable to:
Owners of Telkom 2 795 2 917
Non-controlling interests 36 81
Profit for the year 2 831 2 998
Total comprehensive income attributable to:
Owners of Telkom 4 101 2 243
Non-controlling interests 38 81
Total comprehensive income for the year 4 139 2 324
Basic earnings per share (cents) 6 561.9 575.7
Diluted earnings per share (cents) 6 551.8 563.6
* Restated. Refer to note 3.3, 3.4, 3.5 and 3.6.
** This component of OCI does not attract any tax.
Summary consolidated provisional statement of financial position
at 31 March 2019
Restated Restated
31 March 31 March** 1 April**
2019 2018 2017
Notes Rm Rm Rm
Assets
Non-current assets 37 961 36 359 34 339
Property, plant and equipment 32 035 30 324 27 863
Intangible assets 4 521 4 492 4 719
Other investments 78 100 314
Employee benefits 729 627 635
Other financial assets 133 60 60
Finance lease receivables 210 262 310
Deferred taxation 9 255 494 438
Current assets 14 783 13 778 13 539
Inventories 1 267 1 341 1 268
Income tax receivable 76 54 9
Finance lease receivables 108 112 237
Trade and other receivables 15 7 425 6 370 7 012
Contract assets 15 2 518 1 672 1 031
Other financial assets 388 163 126
Other investments 1 573 1 509 2 388
Cash and cash equivalents 8 1 428 2 557 1 468
Assets classified as held for sale 11 200 204 12
Total assets 52 944 50 341 47 890
Equity and liabilities
Equity attributable to owners of the parent 29 573 26 957 27 635
Share capital 5 050 5 050 5 208
Share-based compensation reserve 512 377 452
Non-distributable reserves 1 621 1 579 1 376
Retained earnings 22 390 19 951 20 599
Non-controlling interests 195 194 197
Total equity 29 768 27 151 27 832
Non-current liabilities 6 740 10 268 6 991
Interest-bearing debt 12 4 840 7 158 4 733
Employee related provisions 13 1 186 2 388 1 536
Non-employee related provisions 13 7 39 51
Other financial liabilities 79 - -
Deferred revenue 466 502 529
Deferred taxation 9 162 181 142
Current liabilities 16 436 12 922 13 067
Trade and other payables 7 406 6 898 7 465
Shareholders for dividend* 29 58 25
Interest-bearing debt 12 5 401 2 239 1 535
Employee related provisions 13 1 175 1 325 1 383
Non-employee related provisions 13 141 164 124
Deferred revenue 1 396 1 597 1 571
Income tax payable 572 361 431
Other financial liabilities 316 250 440
Credit facilities utilised 8 - 30 93
Total liabilities 23 176 23 190 20 058
Total equity and liabilities 52 944 50 341 47 890
* Includes dividend payable to non-controlling interests of Yellow Pages.
** Restated. Refer to note 3.3, 3.4 and 3.7.
Summary consolidated provisional statement of changes in equity
for the year ended 31 March 2019
Restated
31 March 31 March**
2019 2018
Rm Rm
Balance at 1 April (as previously reported) 27 385 27 906
Attributable to owners of Telkom 27 026 27 569
Non-controlling interests 359 337
Adjustments on initial adoption of IFRS 15 -
Revenue from Contracts with Customers** (90) (61)
Adjustments on initial adoption of IFRS 9 -
Financial Instruments 207 -
SOX deconsolidation** (48) (13)
SOX remeasurement** (96) -
Restated balance at 1 April 27 358 27 832
Total comprehensive income for the year 4 139 2 324
Profit for the year 2 831 2 998
Other comprehensive income/(loss) 1 308 (674)
Exchange gains/(losses) on translating foreign operations 23 (22)
Net defined benefit plan remeasurements 1 285 (652)
Dividend declared* (1 817) (2 223)
Disposal of non-controlling interest - (3)
Increase in share-compensation reserve 135 48
Shares repurchased and cancelled during the year - (759)
Increase in treasury shares (47) (68)
Balance at the end of the year 29 768 27 151
Attributable to owners of Telkom 29 573 26 957
Non-controlling interests 195 194
* Dividend declared includes dividend to the non-controlling interests of Yellow Pages and the BCX group.
** Restated. Refer to note 3.3, 3.4, 3.6 and 3.7.
Summary consolidated provisional statement of cash flows
for the year ended 31 March 2019
Restated
31 March 31 March
2019 2018*
Notes Rm Rm
Cash flows from operating activities 5 706 6 039
Cash receipts from customers 40 341 40 091
Cash paid to suppliers and employees (31 438) (29 978)
Cash generated from operations 18 8 903 10 113
Interest received 441 310
Finance charges paid (847) (722)
Taxation paid (945) (1 472)
Cash generated from operations before dividend paid 7 552 8 229
Dividend paid (1 846) (2 190)
Cash flows utilised for investing activities (7 522) (6 617)
Proceeds on disposal of property, plant and
equipment and intangible assets 35 82
Additions to assets for capital expansion (7 584) (7 756)
Realisation of investment in other financial assets 45 31
Investments made by FutureMakers (18) (24)
Proceeds on realisation of sinking fund - 1 050
Cash flows from financing activities 717 1 731
Loans raised 19 3 246 7 680
Loans repaid 19 (2 544) (4 685)
Purchase of shares for the Telkom and subsidiaries
long-term incentive share scheme (47) (68)
Shares repurchased and cancelled - (759)
Finance lease repaid 19 (42) (16)
Repayment of derivatives (222) (546)
Proceeds from derivatives 326 125
Net (decrease)/increase in cash and cash equivalents (1 099) 1 153
Net cash and cash equivalents at 1 April 2 527 1 374
Net cash and cash equivalents at the end of the year 8 1 428 2 527
* Restated. Refer to note 3.8.
Notes to the summary consolidated provisional financial statements
for the year ended 31 March 2019
1. Independent audit
The summary consolidated provisional financial statements have been derived from the audited group financial
statements. The directors of the company take full responsibility for the preparation of the summary consolidated
provisional financial statements and that the financial information has been correctly derived and are consistent
in all material respects with the underlying audited group financial statements. The summary consolidated
provisional financial statements for the year ended 31 March 2019 have been audited by our joint auditors
PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Grant Thornton Inc., who have expressed an unmodified opinion
thereon. The auditors also expressed an unmodified opinion on the group financial statements from which the
summary consolidated provisional financial statements were derived. A copy of the auditors' report on the group
financial statements is available for inspection at the company's registered office, together with the financial
statements identified in the auditors' report.
2. Corporate information
Telkom SA SOC Limited (Telkom), the ultimate parent of the group, is a company incorporated and domiciled in
the Republic of South Africa (South Africa) whose shares are publicly traded on the Johannesburg Stock Exchange
(JSE). The main objective of Telkom, its subsidiaries, joint ventures and associates (the group) is to supply
telecommunication, multimedia, technology, information, mobile communication services and other related
information technology services to the group's customers in Africa. Turnkey property and tower management
solutions are also provided through the Gyro group, which is a wholly owned subsidiary of the group.
3. Basis of preparation, significant accounting judgements, estimates and assumptions and significant
accounting policies
3.1 Basis of preparation
The summary consolidated provisional financial statements have been prepared in accordance with International
Financial Reporting Standard, IAS 34 Interim Financial Reporting and in compliance with the Listings Requirements of
the JSE Limited, the South African Companies Act, 2008, the SAICA Financial Reporting Guide as issued by the Accounting
Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council.
The summary consolidated provisional financial statements are disclosed in South African Rand, which is also the
parent company's presentation and functional currency. Unless stated otherwise, all financial information presented
in Rand has been rounded off to the nearest million.
The summary consolidated provisional financial statements are prepared on the historical cost basis, with the
exception of certain financial instruments subsequently measured at fair value. Details of the group's significant
accounting policies are consistent with those applied in the previous financial year except for those listed below.
3.2 Significant accounting judgements, estimates and assumptions
In preparing these summary consolidated provisional financial statements, the significant judgements made by
management in applying the group's accounting policies and the key sources of estimation uncertainty were consistent
with those applied to the consolidated annual financial statements for the year ended 31 March 2018, with the exception
of the judgements and estimates related to the adoption of IFRS 15 Revenue from Contracts with Customers (refer to
note 3.3.1), IFRS 9 Financial Instruments (refer to note 3.3.2) and the useful lives of property, plant and equipment
(refer to note 5).
3.3 Significant accounting policies
The summary consolidated provisional financial statements have been prepared in accordance with the accounting
policies adopted in the previous financial year, except for the adoption of the new and amended standards as well as
a change made to the presentation basis for cost of sales as set out below. Disclosure has only been provided for new
standards and interpretations which became effective for the current period where the adoption had a material impact
on the group.
The group adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments in the current year.
The group has restated the prior period financial statements as a result of the adoption of the changes in the new
revenue standard.
3.3.1 Adoption of IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers. The standard replaces revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction
Contracts and the related Interpretations.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or
services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The standard requires the entities in the Telkom group to apportion revenue earned from
contracts to the identified performance obligations in the contracts on a relative stand-alone selling price basis,
based on a five-step model.
The standard also requires the capitalisation of costs incremental to obtaining the contract and recognition of these
costs as an expense over the contract term. Telkom has applied the practical expedient to only defer costs related to
contracts with terms over 12 months.
The group is in the business of supplying fixed voice and data services to post and pre-paid customers and the sale of
subscription based value-added voice services and calling plans. The group also sells fixed line customer premises
equipment and services both for voice and data needs. Mobile communication services include voice and data services and
customer premises equipment. Sundry revenue includes directory services and wireless data services. The equipment and
services are sold both on their own in separate identified contracts with customers and together as a bundled package
of goods and/or services. Separate performance obligations are identified to the extent that the goods and services are
distinct and the customer can benefit from it, either on its own or together with other goods and services.
In accordance with the transition provisions in IFRS 15, the group has adopted the new standard using the fully
retrospective approach and has restated comparative numbers for the 31 March 2018 financial period respectively.
The group applied the following practical expedients when applying IFRS 15 retrospectively:
- The group did not restate comparative numbers for contracts that were completed at 1 April 2017; and
- The group did not restate comparative numbers for contracts that began and ended in the same annual reporting
period.
The nature and changes in the financial statements were as follows:
Nature and
Type of characteristics Nature of change required
item of the item on implementation of
affected affected the new standard Impact
3.3.1.1 Contract The group incurs Where the costs incurred The adoption of the standard has led to a
costs commission costs relate to the acquisition of higher level of costs qualifying for deferral
in relation to a contract, the standard over the contract term. This has led to a
contracts entered requires the costs to be reduction in costs recognised on the date that
into with customers. capitalised and recognised a contract is signed with a customer at the
Commission costs are as an expense over the date of initial application as the costs are now
paid based on new contract terms engaged initially accounted for as a contract asset and
contracts entered with the customer. recognised as an expense over the contract
into. term as opposed to being expensed on
contract inception.
3.3.1.2 Installation The group earns Where the payment of an The group had previously recognised
fee revenue installation fees for installation fee provides installation fees on fixed-term contracts
various installation the customer with a over an estimated customer relationship
services attached to material substantive period. Where installation fees were received
the provision of fixed right, the installation fee in relation to month-to-month service
and mobile services. should be recognised over contracts, the installation fees were previously
Installation fees are an estimated customer recognised on the date of completion of
recognised for both relationship period as the installation service. The adoption of
fixed-term and opposed to recognition on the standard has resulted in the deferral of
month-to-month the date that delivery is installation fees over the estimated customer
contracts. completed. relationship period. This led to a reduction in
revenue in the comparative statement of profit
or loss and will lead to an increase in revenue
in future periods as the revenue is recognised
over the customer relationship period.
3.3.1.3 Fixed-line The group bundles Revenue relating to each Fixed-line:
and Mobile voice, data and item bundled together The group previously did not recognise
customer customer premises in a contract will be revenue allocated to equipment where the
premises equipment together recognised based on the equipment was provided to the customer as
equipment in its post-paid allocated transaction price. a "free" element of a bundle. The adoption of
contracts. Revenue The transaction price will IFRS 15 has resulted in a portion of the service
related to the be allocated based on revenue attributable to the "free" elements in
customer premises the relative stand-alone fixed-line contracts being recognised upfront,
equipment is selling price of each item when control is transferred, as opposed to
recognised once in the bundle. The group being recognised over the contract term as
control of the has elected to apply the part of the subscription revenue. This has
equipment has been practical expedient to not resulted in an increase in customer premises
transferred to the recognise a significant equipment revenue and a reduction in service
customer. Customers financing component for revenue.
settle the obligation any contract which is less
relating to the than 12 months. Where Mobile:
equipment over the the contract term exceeds The group has historically been allocating
contract term. The 12 months, a portion revenue primarily to the main data, voice
term is usually in of the transaction price and equipment elements in a contract.
excess of 12 months. allocated to customer Revenue was not previously allocated to a
premises equipment will be financing component. The adoption of IFRS
recognised as significant 15 has resulted in a reduction in customer
financing component premises equipment revenue as a larger
revenue over the contract portion of the total transaction price is now
term. allocated to service related revenue as well
as the recognition of a significant financing
component.
The following accounting policies are applicable to revenue recognition and the related disclosures following the
adoption of the new standard:
Contract costs
Contract assets are capitalised and amortised over the contract term. The amortised costs are included as part of cost
of contracts with customers or other operating expenses as determined by the costs of contracts with customers policy.
Significant financing component
The group assesses post-paid contracts at inception to determine whether a significant financing component exists.
If the financing component is less than 5% of the total transaction price allocated to the customer premises equipment,
it is deemed not to be significant and the finance component will not be recognised separately. The financing element
is assessed on a contract-by-contract basis.
3.3.2 Adoption of IFRS 9 Financial Instruments
The new standard includes the final classification and measurement model for financial assets and liabilities as well
as the new expected credit loss (ECL) model for the impairment of financial assets that replaces the incurred loss model
prescribed in IAS 39. The IAS 39 classification model for financial liabilities has been retained, however changes in
own credit risk will be presented in other comprehensive income for liabilities designated at fair value through profit
or loss. IFRS 9 also includes new requirements for general hedge accounting.
Initial classification and measurement
IFRS 9 introduces new measurement categories for financial assets. The impact of the measurement categories of IFRS 9
on the group's financial instruments is illustrated in the table below.
Measurement category Carrying amount
Original New Original New
(IAS 39) (IFRS 9) (IAS 39) (IFRS 9) Difference
Assets
(As at 1 April 2017)
Fair value through Fair value through
Other investments profit or loss profit or loss 2 399 2 399 -
Trade and other Loans and
receivables receivables Amortised cost 7 557 7 557 -
Other financial assets
Forward exchange Fair value through Fair value through
contracts profit or loss profit or loss 54 54 -
Firm Fair value through Fair value through
commitments profit or loss profit or loss 24 24 -
Asset finance Loans and
receivables receivables Amortised cost 73 73 -
Loans and
Loans receivables Amortised cost 35 35 -
Finance lease Loans and
receivables receivables Amortised cost 547 547 -
Cash and cash Loans and
equivalents receivables Amortised cost 1 612 1 612 -
Liabilities
(As at 1 April 2017)
Interest-bearing
debt Amortised cost Amortised cost (6 285) (6 285) -
Trade and other
payables Amortised cost Amortised cost (7 516) (7 516) -
Shareholders
for dividend Amortised cost Amortised cost (25) (25) -
Other financial
liabilities
Forward exchange Fair value through Fair value through
contracts profit or loss profit or loss (189) (189) -
Firm Fair value through Fair value through
commitments profit or loss profit or loss (229) (229) -
Interest rate Fair value through Fair value through
swaps profit or loss profit or loss (22) (22) -
Impairment
IFRS 9 requires the group to record expected credit losses on all of its debt securities, loans, trade receivables,
other receivables, cash and cash equivalents and finance lease receivables, either on a 12-month or lifetime basis.
The group has elected the simplified approach to recognise lifetime expected losses for its trade and other
receivables and contract assets as permitted by IFRS 9. The group has assessed and concluded that due to the short-term
nature of its trade and other receivable balances, the trade receivable balances are not significantly exposed to the
impact of changes in the macro-economic environment. The provision model will therefore not include economic environmental
changes as assumptions applied in deriving the expected loss on its trade and other receivables and contract assets.
The group has historically been raising provisions for bad debt based on incurred losses.
Impairment losses calculated using the simplified approach are calculated using a provision matrix. The provision
matrix is a probability-weighted model which applies an expected loss percentage, based on the net write-off history
experienced on receivables, to each ageing category of receivables at the end of each month in order to calculate the
total provision to be raised on the receivable balances.
Receivables have been grouped together based on similar credit characteristics and a separate expected loss provision
matrix has been calculated for each of the categories based on the net loss history associated to the specific category
of receivable.
IFRS 9 has revised the criteria for the write-off of a financial instrument. The group has historically been writing
off trade receivables at the point where a trade receivable balance is handed over for debt collection. Trade receivables
are handed over for collection when the group has been unable to collect outstanding amounts through its internal
collection processes. The subsequent collection was then accounted for as a reduction in the provision for bad debt expense.
Following the adoption of IFRS 9, the group has implemented a process whereby trade receivable balances are only written
off at the point where there is no longer any probable recovery on a trade receivable balance. This has resulted in an
increase in the trade receivable balance of R746 million and R559 million in the allowance account for credit losses.
The net adjustment has been accounted for as an adjustment to the opening balance of retained earnings on transition
to IFRS 9.
Telkom recognises lifetime expected credit losses on finance lease receivables in terms of the simplified approach to
recognise lifetime expected credit losses. Whenever a finance lease receivable is billed, the amount is moved from
finance lease receivables to trade receivables and forms part of the trade receivables balance. To determine an expected
credit loss for the outstanding lease receivables, the total outstanding amounts are proportioned into the various ageing
buckets based on the proportions experienced in the trade receivables. The same loss rates that are used for the fixed
line trade receivables segment are then applied to the outstanding lease receivables balance to derive the expected loss
on finance lease receivables over the lifetime of the instrument. The underlying assumption attached to this is that the
exposure to the finance lease balance will realise as the balance is billed to the customer over the lifetime of the
instrument and will thus follow the same pattern of expected loss as the trade receivable balance.
Twelve month expected credit losses are calculated for cash and cash equivalents using the general approach. Due to
the fact that Telkom's cash and cash equivalents are noted as being current assets, the twelve month and lifetime expected
credit losses are expected to be equivalent. In addition, given that these amounts are invested with South Africa's
largest four banks, management's expectation is that the impact on the total provision is negligible.
Impairments of all other financial assets that are not measured using the simplified approach will be calculated as
the difference between the carrying value of the asset and the present value of the expected cash flows, discounted at
the original effective interest rate of the instrument.
Hedge accounting
Subsequent to making the decision which informed the transition disclosures in the 31 March 2018 financial statements,
the group has elected to continue applying the hedge accounting requirements of IAS 39.
Transition
The group is applying IFRS 9 retrospectively, applying the practical expedients relating to the accounting for
expected credit losses, in terms of which the opening balance of retained earnings has been adjusted in the current
financial period.
The impairment loss on trade receivables was previously recognised where it was assessed that the receivable was
impaired. The impairment was based on an assessment of the extent to which customers had defaulted on payments due and
an assessment of their ability to make payments based on their creditworthiness and historical write-offs experience.
The adoption of IFRS 9 has resulted in a reduction of the allowance for credit losses of R61 million due to a lower
estimated loss based on the revised model.
3.4 Prior period error
3.4.1 Prior period error - mobile CPE revenue recognition
As part of the IFRS 15 implementation process, the group reassessed the revenue recognition principles and the
judgement applied to mobile CPE sales to independently owned dealer stores. It was identified that upon transfer of
a device to a dealer, revenue was recognised relating to the sales of devices. At this point, the group would also
recognise the cost of sale relating to the inventory transferred to the dealer.
Subsequent to this transaction, in the event where a device would be bundled with a post-paid mobile contract, Telkom
would recognise revenue again as a second transaction relating to the device sold with the post-paid contract.
At this point, the group would reimburse the dealer for the device and recognise the cost of reimbursement as a cost
of sale transaction. The accounting treatment adopted resulted in the overstatement of operating revenue and
corresponding cost of sales.
There was however no impact on the net operating revenue, EBITDA, profit before tax or basic earnings per share and
headline earnings per share. The previous accounting treatment had no impact on the statement of financial position
as it only resulted in an overstatement of the revenue and cost of sales line items respectively.
Taking into account the agent versus principal rules defined in IFRS 15, the accounting treatment for the current
period has been corrected to only reflect a device sale once the device has been sold outright to an end customer
or been bundled in a post-paid contract.
3.4.2 Prior period error - Smart Office Connexion group consolidation
Telkom group, through its wholly owned subsidiary BCX, is invested in the Smart Office Connexion (SOX) group.
The SOX group consists of 9 individual entities. These entities were consolidated during the prior financial year.
During the current financial year, it was identified that owing to substantive protective rights granted to the
minority shareholder, BCX did not have control of the subsidiaries as defined by IFRS 10 Consolidated Financial
Statements.
The matter has been assessed as a material prior period error and has been corrected by restating the comparative
financial statements as required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
The effect of the restatement is the deconsolidation of the SOX group on a line-by-line basis in the financial
statements and the recognition of the investments in the underlying entities of the SOX group on an equity accounted
basis in terms of IAS 28 Investments in Associates and Joint Ventures.
During the comparative financial period, the investment in the SOX group was classified as held for sale.
The consolidated net asset value of the SOX group was assessed in terms of IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, it was concluded that there was no remeasurement required at a Telkom group level. Following
the change to account for the investments as equity accounted investments, a remeasurement was identified. The income
from joint ventures and associates line item in the financial statements has been restated to reflect the remeasurement
as an adjustment in the 2018 financial year. This resulted in an additional R96 million impairment accounted for in
the 2018 financial year.
Refer to note 3.6, 3.7 and 3.8 for each materially affected line item as part of the adoption of the new standards and
the correction of the prior period error.
3.5 Change in presentation of the statement of profit or loss and other comprehensive income from a hybrid to a
by-nature of expense basis due to classification error
In the current financial reporting period, the JSE queried the hybrid presentation basis applied in Telkom's statement
of profit or loss and other comprehensive income. The JSE is of the opinion that this basis is contrary to the
requirements of IFRS.
The JSE however concurred with management's view that this presentation basis did not result in a material
misstatement of the previously reported financial results.
As part of the resolution of the matter, Telkom proposed to address the error by changing its presentation basis from
a hybrid to a by-nature presentation basis in the spirit of supporting 'the effective functioning of the capital markets
and the JSE's regulatory objectives'. The proposal was accepted by the JSE and subsequently implemented across the
Telkom group.
The change in presentation basis has resulted in the removal of the cost of sales line item from the statement of
profit or loss and other comprehensive income. The cost of sales line has been replaced by the following two items which
previously made up total cost of sales:
- Costs of handsets, equipment and directories
- Sales commission, incentives and logistical costs
These line items are now being presented separately.
In addition, as requested by the JSE, we have included an accounting policy note which clarifies the nature of the
costs on the by-nature presentation basis as follows:
Costs of handsets, equipment, directories, sales commission, incentives and logistical costs
The costs of handsets, equipment and directories represents the acquisition cost of the items sold net of any supplier
rebates and discounts. This line item does not include any allocated overhead costs.
Sales commission and incentives are costs paid to Telkom's independent sales channels. Logistical costs represent
costs incurred with third parties outside the group for the delivery of handsets to customers and stores. This line
item does not include the allocation of any other expense classified by nature in the financial statements.
Following the change referred to above, the subtotal "net operating revenue" was removed from the statement of profit
or loss and other comprehensive income.
As the group continues to implement its current business plan, a greater focus has been placed on the key reporting
metrics on which the group provides financial guidance:
- Gross Operating Revenue
- EBITDA Margin
- CAPEX to Revenue
- Net Debt to EBITDA
The chief operating decision maker no longer measures its business units on a "net operating revenue" basis
and it has therefore been considered appropriate to remove this line item from the financial statements to
accurately reflect the manner in which management reviews the financial performance of the group.
The changes made above have had no impact on any of the reported key metrics as noted
above and do not impact any of the financial guidance issued by the group. The group has
re-presented the 31 March 2018 statement of profit or loss and other comprehensive income.
3.6 Adjustment to the summary consolidated statement of profit or loss and other comprehensive income
Year ended 31 March 2018
Change in
SOX SOX presentation Mobile CPE
As Decon- Remeasure- basis and restate-
previously solidation ment reclassifications IFRS ment
reported **** **** *** 15 **** Restated
Rm Rm Rm Rm Rm Rm Rm
Operating revenue 41 018 (656) - - (60) (641) 39 661
Voice** 13 679 - - - (128) - 13 551
Interconnection 1 034 - - - - - 1 034
Data* 13 629 - - - 153 - 13 782
Customer premises equipment** 3 988 - - - (227) (641) 3 120
Significant financing component** - - - - 142 - 142
Sundry revenue 1 662 - - - - - 1 662
Information technology 7 026 (656) - - - - 6 370
Other income 607 - - - - - 607
Payments to other operators 2 606 - - - - - 2 606
Cost of sales 6 256 (238) - (6 018) - - -
Cost of handsets, equipment
and directories - - - 5 052 - (641) 4 411
Sales commission, incentives and
logistical costs - - - 966 (31) - 935
Employee expenses 10 917 (240) - - - - 10 677
Selling, general and administrative
expenses 7 132 (47) - (7 085) - - -
Other operating expenses - - - 2 991 - - 2 991
Maintenance - - - 2 696 - - 2 696
Marketing - - - 763 - - 763
Impairment of receivables and
contract assets - - - 635 - - 635
Service fees 3 054 (26) - - - - 3 028
Operating leases 1 116 (12) - - - - 1 104
EBITDA 10 544 (93) - - (29) - 10 422
Depreciation of property, plant
and equipment 4 780 (20) - - - - 4 760
Amortisation of intangible assets 778 - - - - - 778
Write-offs, impairments/(reversals)
and losses of property, plant and
equipment and intangible assets 47 - - - - - 47
Operating profit 4 939 (73) - - (29) - 4 837
Investment income 203 (17) - - - - 186
Income/(loss) from associates - 26 (96) - - - (70)
Net finance charges, hedging
costs and
fair value movements 851 (9) - - - - 842
Net finance charges 893 (9) - - - - 884
Cost of hedging - - - 167 - - 167
Foreign exchange and fair
value movements (42) - - (167) - - (209)
Profit before taxation 4 291 (55) (96) - (29) - 4 111
Taxation 1 133 (20) - - - - 1 113
Profit for the year 3 158 (35) (96) - (29) - 2 998
Other comprehensive income
Items that will be reclassified
subsequently to profit or loss
Exchange gains on translating
foreign operations (22) - - - - - (22)
Items that will not be reclassified
to profit or loss
Defined benefit plan actuarial loss (652) - - - - - (652)
Income tax relating to actuarial loss - - - - - - -
Other comprehensive income for the
year, net of taxation (674) - - - - - (674)
Total comprehensive
income for the year 2 484 (35) (96) - (29) - 2 324
Profit attributable to:
Owners of Telkom 3 052 (10) (96) - (29) - 2 917
Non-controlling interests 106 (25) - - - - 81
Profit for the year 3 158 (35) (96) - (29) - 2 998
Total comprehensive income
attributable to:
Owners of Telkom 2 378 (10) (96) - (29) - 2 243
Non-controlling interests 106 (25) - - - - 81
Total comprehensive income
for the year 2 484 (35) (96) - (29) - 2 324
Basic earnings per share (cents) 602.3 (2.0) (18.9) - (5.7) - 575.7
Diluted earnings per share (cents) 589.7 (1.9) (18.6) - (5.6) - 563.6
* Includes a R45 million restatement relating to installation fees. Refer to note 3.3.1.2 and 3.3.1.3.
** Refer to note 3.3.1.3.
*** Refer to note 3.5.
**** Refer to note 3.4.1 and 3.4.2.
3.7 Adjustments to the summary consolidated statement of financial position
As at 31 March 2018 As at 1 April 2017
As As
previously SOX previously SOX
reported Restatement IFRS 15 Restated reported Restatement IFRS 15 Restated
Rm Rm Rm Rm Rm Rm Rm Rm
Assets
Non-current assets 36 417 (58) - 36 359 34 125 214 - 34 339
Property, plant and equipment 30 377 (53) - 30 324 27 918 (55) - 27 863
Intangible assets 4 492 - - 4 492 4 720 (1) - 4 719
Other investments 100 - - 100 40 274 - 314
Employee benefits 627 - - 627 635 - - 635
Other financial assets 60 - - 60 60 - - 60
Finance lease receivables 262 - - 262 310 - - 310
Deferred taxation 499 (5) - 494 442 (4) - 438
Current assets 14 127 (403) 54 13 778 13 912 (384) 11 13 539
Inventories 1 435 (94) - 1 341 1 384 (116) - 1 268
Income tax receivable 54 - - 54 9 - - 9
Finance lease receivables 112 - - 112 237 - - 237
Trade and other receivables 8 126 (138) (1 618) 6 370 8 156 (124) (1 020) 7 012
Contract assets - - 1 672 1 672 - - 1 031 1 031
Other financial assets 163 - - 163 126 - - 126
Other investments 1 509 - - 1 509 2 388 - - 2 388
Cash and cash equivalents 2 728 (171) - 2 557 1 612 (144) - 1 468
Assets classified as
held for sale - 204 - 204 12 - - 12
Total assets 50 544 (257) 54 50 341 48 049 (170) 11 47 890
Equity and liabilities
Equity attributable to
owners of the parent 27 026 21 (90) 26 957 27 569 127 (61) 27 635
Share capital 5 050 - - 5 050 5 208 - - 5 208
Share-based compensation
reserve 377 - - 377 452 - - 452
Non-distributable reserves 1 579 - - 1 579 1 376 - - 1 376
Retained earnings 20 020 21 (90) 19 951 20 533 127 (61) 20 599
Deferral of incremental
contract costs - - 149 - - - 118 -
Deferral of installation
fee revenue - - (46) - - - (1) -
Earlier recognition
of fixed-line
customer premises
equipment revenue
and recognition of significant
financing component - - 32 - - - 27 -
Lower recognition of mobile
customer premises equipment
revenue and recognition of
significant financing component - - (225) - - - (205) -
Non-controlling interests 359 (165) - 194 337 (140) - 197
Total equity 27 385 (144) (90) 27 151 27 906 (13) (61) 27 832
Non-current liabilities 10 240 (10) 38 10 268 7 004 (13) - 6 991
Interest-bearing debt 7 165 (7) - 7 158 4 744 (11) - 4 733
Employee related provisions 2 388 - - 2 388 1 536 - - 1 536
Non-employee related provisions 44 (5) - 39 56 (5) - 51
Deferred revenue 464 - 38 502 529 - - 529
Deferred taxation 179 2 - 181 139 3 - 142
Current liabilities 12 919 (103) 106 12 922 13 139 (144) 72 13 067
Trade and other payables 6 878 (78) 98 6 898 7 516 (122) 71 7 465
Shareholders for dividend 58 - - 58 25 - - 25
Interest-bearing debt 2 247 (8) - 2 239 1 541 (6) - 1 535
Employee related provisions 1 340 (15) - 1 325 1 397 (14) - 1 383
Non-employee related provisions 164 - - 164 124 - - 124
Deferred revenue 1 589 - 8 1 597 1 570 - 1 1 571
Income tax payable 363 (2) - 361 433 (2) - 431
Other financial liabilities 250 - - 250 440 - - 440
Credit facilities utilised 30 - - 30 93 - - 93
Total liabilities 23 159 (113) 144 23 190 20 143 (157) 72 20 058
Total equity and liabilities 50 544 (257) 54 50 341 48 049 (170) 11 47 890
3.8 Adjustments to the summary consolidated statement of cashflows
Year ended 31 March 2018
As SOX
previously reported Restatement* Restated
Rm Rm Rm
Cash flows from operating activities 6 084 (45) 6 039
Cash receipts from customers 41 049 (958) 40 091
Cash paid to suppliers and employees (30 878) 900 (29 978)
Cash generated from operations 10 171 (58) 10 113
Interest received 327 (17) 310
Finance charges paid (731) 9 (722)
Taxation paid (1 493) 21 (1 472)
Cash generated from operations before dividend paid 8 274 (45) 8 229
Dividend paid (2 190) - (2 190)
Cash flows utilised for investing activities (6 634) 17 (6 617)
Proceeds on disposal of property, plant and
equipment and intangible assets 82 - 82
Additions to assets for capital expansion (7 773) 17 (7 756)
Realisation of investment in other financial assets 31 - 31
Investments made by FutureMakers (24) - (24)
Proceeds on realisation of sinking fund 1 050 - 1 050
Cash flows from financing activities 1 729 2 1 731
Loans raised 7 680 - 7 680
Loans repaid (4 685) - (4 685)
Purchase of shares for the Telkom and (68) - (68)
subsidiaries long term incentive share scheme
Shares repurchased and cancelled (759) - (759)
Finance lease repaid (18) 2 (16)
Repayment of derivatives (546) - (546)
Proceeds from derivatives 125 - 125
Net increase/(decrease) in cash and 1 179 (26) 1 153
cash equivalents
Net cash and cash equivalents at 1 April 1 519 (145) 1 374
Net cash and cash equivalents at the end of the year 2 698 (171) 2 527
* Refer to note 3.4.2.
3.9 Standards and interpretations in issue not yet adopted and not yet effective
Information on standards issued by the IASB, but not effective for the current financial year, has been provided below
where it is expected that the new standards will have a material impact on the group.
Management anticipates that all relevant pronouncements will be adopted in the group's accounting policies for the
first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments
neither adopted nor listed below are not expected to have a material impact on the group's financial statements.
The following new standard in issue has not yet been adopted and is not yet effective.
The standard is effective for the 31 March 2020 financial period.
3.9.1 IFRS 16 Leases
IFRS 16 Leases, issued by the IASB in January 2016, is effective for reporting periods beginning on, or after,
1 January 2019 and will be adopted by the group on 1 April 2019.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard
introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases
with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise
a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing
its obligation to make lease payments.
Leases where the group acts as lessor
IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17 Leases. Accordingly, a lessor
continues to classify its leases as operating leases or finance leases, and to account for those two types of leases
differently. The group is not materially affected by the changes made to operating and finance leases and the treatment
of residual guaranteed values. However, additional disclosures will be required in the 2020 financial year.
Leases in which the group is a lessee
The adoption of the standard will result in a significant increase in the asset and liability position from the
recognition of right-of-use assets and lease liabilities representing the present value of future minimum lease payments
discounted at a rate appropriate after taking the lease term into account, attributable to the following major lease
categories:
- Mast and Tower infrastructure lease agreements
- Property leases (including warehousing)
- Vehicle fleet leases
The right-of-use assets will be subsequently measured using the cost model as set out in
IAS 16 Property, Plant and Equipment. The right-of-use liabilities will subsequently be measured at amortised cost.
As at the reporting date, the group has non-cancellable operating lease commitments of R1 906 million.
The adoption of the new standard will not affect the profit after tax over the duration of a contract as the total
lease payments which would have been expensed over the lease term are unaffected. However, due to the impact of higher
finance charges in the early years of the lease, the impact on earnings will initially be dilutive, before being accretive
in later periods.
The new standard moves the majority of lease payments below EBITDA , as well as a depreciation charge on the
right-of-use asset and interest expense on the lease liability as opposed to operating lease expenses. This will result
in an increase in EBITDA over the lease term. Application of the standard will also impact key ratios linked to EBITDA
e.g. Net debt to EBITDA.
Under IAS 17 Leases, the operating lease payments were included in cash flows from operating activities. Following the
adoption of IFRS 16 Leases, the lease payments will be included in cash flows from financing activities. This will result
in an increase in the inflows from operating activities and an increase in the outflows from financing activities owing
to a significant reclassification between the line items on the statement of cash flows.
The following key judgements will be applied in the adoption of the new standard:
Lease discount Except where a discount rate implicit in the lease has been stipulated
rate in the lease agreement, the discount rate for a lease will be determined
with reference to the incremental borrowing rate for a loan with a similar
period as the lease term. The rate will be determined by Telkom treasury,
which acts as a centralised treasury function.
Separation of Where a lease includes various components, which are not service
lease components related, management has applied the practical expedient to treat the
components as one lease.
Low value assets The group has elected to apply the practical expedient to account for all
and short-term short term leases (less than 12 months) as operating expenses. All leases where
leases the underlying asset being used is of low value (less than $5 000) are assessed
on a lease-by-lease basis and accounted for as expenses as incurred.
Lease term It will be assumed that in the event where a lease termination clause
exists which is exercisable at the lessee's discretion that the termination
option will not be exercised.
It has been assumed that where a lease contract is currently ongoing
on a monthly basis, that the lease term be limited to the one month
enforceable period and therefore that the lease be excluded from the
lease population for the calculation of the right-of-use asset and liability
on adoption of the standard.
Where a contract contains a renewal clause, management has assumed
that the lease will be renewed for a period calculated based on past
historical renewal behaviour, taking into consideration the strategic
nature of the asset.
Transition
The group is adopting the new standard on 1 April 2019, using the modified retrospective approach. The cumulative
effect of adopting IFRS 16 will therefore be recognised as an adjustment to the opening balance of retained earnings
at 1 April 2019, with no restatement of comparative information.
The group will also adopt the practical expedient in IFRS 16 to apply the new standard to all contracts being
accounted for under IAS 17 and IFRIC 4 at 1 April 2019 and to apply the principles outlined in IFRS 16 for identifying
a lease to all new contracts entered into after that date.
4. Segment information
The executive committee (Exco) is the group's chief operating decision maker (CODM). Management has determined the
operating segments based on the reports reviewed by Exco that are used to make strategic decisions, allocate
resources and assess performance of each reportable segment.
The CODM reviews the performance of the operating segments on an EBITDA basis. During the period, management removed
the net operating revenue line item from its assessment of the performance for segment reporting purposes. For this
purpose, the reportable segments have been determined as Openserve, Consumer, BCX, Gyro and "Other". Gyro also met the
quantitative thresholds to be disclosed as a separate segment in the current reporting period.
EBITDA is defined as earnings before finance income and finance cost (which includes gains and losses on foreign
exchange transactions), tax, depreciation and amortisation and is also presented inclusive of the following items:
- Significant financing component; and
- Interest on overdue accounts
The significant financing component is included in operating revenue as a separate component of revenue.
"Other" includes Yellow Pages and other business units.
The 31 March 2018 segment information has been restated for the adoption of IFRS 15 Revenue from Contracts with
Customers, the change in presentation basis and the SOX and Mobile CPE error.
During the current reporting period, the structure of the segment below has been updated to reflect operating expenses
on an operating segment level. The comparative segment has been restated to reflect intersegmental transactions in all
operating expenses and costs included in net operating revenue per segment. During the current year, the Fastnet
business was transferred from the Gyro group into BCX. The comparative segment information has been restated to
include Fastnet as part of the BCX segment.
The current period EBITDA for segmental purposes has been normalised for voluntary severance, retirement and
retrenchment package expenses of R728 million.
Openserve Consumer BCX Gyro Other Eliminations Consolidated
March 2019 Rm Rm Rm Rm Rm Rm Rm
Revenue from external customers* 4 207 18 866 17 426 609 666 - 41 774
Revenue recognised over time
Voice - 6 845 5 633 - - - 12 478
Interconnection 792 270 - - - - 1 062
Data 3 415 8 913 3 446 - - - 15 774
Information technology services - - 5 841 - - - 5 841
Significant financing component revenue - 191 - - - - 191
Sundry revenue - - 269 - - - 269
Revenue recognised at a point in time
Customer premises equipment - 2 635 1 314 - - - 3 949
Information technology hardware - - 923 - - - 923
Sundry revenue - 12 - - 666 - 678
Operating lease revenue - - - 609 - - 609
Intersegmental operating revenue 12 733 348 2 154 560 1 349 (17 144) -
Other income 378 615 117 - 809 (1 200) 719
Payments to other operators (954) (1 958) (729) - - 701 (2 940)
Cost of handsets, equipment and
directories - (2 959) (2 121) - (244) 119 (5 205)
Sales commission, incentives and
logistical costs (6) (1 250) (213) - - 12 (1 457)
Employee expenses (3 628) (735) (4 538) (104) (1 032) (12) (10 049)
Selling, general and administrative expenses (4 009) (10 951) (8 125) (88) (1 083) 16 839 (7 417)
Service fees (1 721) (416) (490) (185) (335) 213 (2 934)
Operating leases (708) (530) (241) (107) (68) 472 (1 182)
Earnings before interest, tax,
depreciation and amortisation (EBITDA) for
reportable segments including
intersegmental transactions 6 292 1 030 3 240 685 62 - 11 309
Reconciliation of operating profit to
profit before tax
Normalisations
Voluntary severance, retirement and
retrenchment package expenses (728)
Adjusted earnings before interest, tax,
depreciation and amortisation (EBITDA)
for reportable segments 10 581
Depreciation, amortisation, impairments,
write-offs and losses (5 814)
Operating profit 4 767
Investment income 185
Income/(loss) from associates 2
Net finance charges, hedging costs and
fair value movements (947)
Profit before taxation 4 007
Other segment information
Capital expenditure of property, plant
and equipment and intangible assets 4 034 3 070 304 60 206 - 7 674
* Revenue includes balances generated by subsidiaries of BCX in countries outside of South Africa.
These are however not considered material to the group and are thus not disclosed separately.
Openserve Consumer BCX Gyro Other Eliminations Consolidated
** ** ** ** ** **
Restated March 2018*** Rm Rm Rm Rm Rm Rm Rm
Revenue from contracts with external
customers* 4 296 16 129 17 790 709 737 - 39 661
Revenue recognised over time
Voice - 7 052 6 499 - - - 13 551
Interconnection 868 166 - - - - 1 034
Data 3 351 6 773 3 563 - 95 - 13 782
Information technology services - - 5 678 - - - 5 678
Significant financing component revenue - 142 - - - - 142
Sundry revenue - - 218 - - - 218
Revenue recognised at a point in time
Customer premises equipment - 1 980 1 140 - - - 3 120
Information technology hardware - - 692 - - - 692
Sundry revenue 77 16 - - 642 - 735
Operating lease revenue - - - 709 - - 709
Intersegmental operating revenue*** 13 229 372 2 473 235 3 720 (20 029) -
Other income 345 807 3 - 769 (1 317) 607
Payments to other operators (1 296) (1 247) (922) - (12) 871 (2 606)
Cost of handsets, equipment and directories (1) (2 163) (2 051) - - (196) (4 411)
Sales commission, incentives and
logistical costs (48) (779) (184) - - 76 (935)
Employee expenses (4 145) (1 003) (4 777) (59) (693) - (10 677)
Selling, general and administrative
expenses*** (4 380) (11 463) (8 178) (161) (3 305) 20 402 (7 085)
Service fees (1 502) (323) (629) (410) (164) - (3 028)
Operating leases (594) (476) (215) - (12) 193 (1 104)
Earnings before interest, tax,
depreciation and
amortisation (EBITDA) for reportable
segments including intersegmental
transactions 5 904 (146) 3 310 314 1 040 - 10 422
Reconciliation of operating profit
to profit before tax
Earnings before interest, tax,
depreciation and amortisation
(EBITDA) for reportable segments 10 422
Depreciation, amortisation,
impairments/(reversals),
write-offs and losses (5 585)
Operating profit 4 837
Investment income 186
Income/(loss) from associates (70)
Net finance charges, hedging costs
and fair value movements (842)
Profit before taxation 4 111
Other segment information
Capital expenditure of property, plant
and equipment and intangible assets 4 728 2 359 504 29 289 - 7 909
Entity wide disclosures
All material non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets,
and rights arising under insurance contracts related to the segments above are located in South Africa. Assets
belonging to the subsidiaries of BCX outside of South Africa are not considered material to the group as a whole.
No single customer contributes more than 10% of the revenue from external customers and thus no specific information
related to major customers is included in the segment information above.
For the purpose of assessing revenue contribution per customer, management does not treat Government as a single
customer.
* Revenue includes balances generated by subsidiaries of BCX in countries outside of South Africa. These are
however not considered material to the group and are thus not disclosed separately.
** Restated. Refer to note 3.3, 3.4, 3.5 and 3.6.
*** Restated to reflect the revised measurement basis used by the CODM to measure the performance of the reportable
segments in the current financial year.
5. Operating expenses
Restated
31 March 31 March
2019 2018
Rm Rm
Employee expenses 10 777 10 677
Included in employee expenses is a R728 million
(31 March 2018: Rnil) provision for voluntary severance,
retirement and retrenchment packages.
Depreciation, amortisation, impairments,
write-offs and losses 5 814 5 585
Depreciation of property, plant and equipment 4 842 4 760
Amortisation of intangible assets 702 778
Write-offs, impairments and losses of property,
plant and equipment and intangible assets 270 47
During the year, the group reassessed the useful lives on various technologies. The reassessment takes into account
the group's current CAPEX strategy and changes in the technological environment. The reassessment of useful lives
decreased the depreciation and amortisation expense at a group level by R537 million (31 March 2018: R280 million).
The depreciation for the remaining useful life of the group's assets will be increased by this amount.
Provision for credit losses
The group accounts for specific provisions for credit losses where there are indicators of impairment identified
relating to a trade receivable balance. For the period under review, the group reassessed provisions raised at
31 March 2018. The expected losses, based on management's best estimate in the previous reporting period have
not materialised as expected and management has subsequently reversed the provision for credit losses raised
on these specific debtors. This has resulted in a reduction in the provision for credit loss expense
of R157 million in the current year.
6. Earnings and dividend per share
Restated
31 March 31 March
2019 2018
Total operations
Basic earnings per share (cents)* 561.9 575.7
Diluted earnings per share (cents)* 551.8 563.6
Headline earnings per share (cents)* 619.2 589.3
Diluted headline earnings per share (cents)* 608.1 577.0
Reconciliation of weighted average number of ordinary shares: Number of Number of
shares shares
Weighted ordinary shares in issue 511 140 239 522 421 876
Weighted average number of treasury shares (13 759 299) (15 728 674)
Weighted average number of shares outstanding 497 380 940 506 693 202
Reconciliation of diluted weighted average number of ordinary shares:
Weighted average number of shares outstanding 497 380 940 506 693 202
Expected future vesting of shares related to group share
scheme incentive plans 9 146 285 10 840 186
Diluted weighted average number of shares outstanding 506 527 225 517 533 388
* The disclosure of headline earnings is a requirement of the JSE Limited and is not a recognised
measure under IFRS. It has been calculated in accordance with the South African Institute of
Chartered Accountants' circular 4/2018 issued in this regard.
Restated
31 March 31 March
2019 2018
Rm Rm
Total operations
Reconciliation between earnings and headline earnings:
Profit for the year 2 831 2 998
Non-controlling interests (36) (81)
Profit attributable to owners of Telkom 2 795 2 917
Profit on disposal of property, plant and equipment and
intangible assets (2) (59)
Write-offs, impairments and losses of property, plant and 270 47
equipment and intangible assets
Remeasurement of associates 30 96
Taxation effects** (13) (15)
Headline earnings 3 080 2 986
Dividend per share (cents) 349.11 408.89
The dividend per share is based on a dividend of 236.97 cents per share declared on 28 May 2018 and
112.14 cents per share declared on 13 November 2018 (31 March 2018: 290.75 cents per share declared
on 1 June 2017 and 118.11 cents per share declared on 10 November 2017). 511,140,239 number of
ordinary shares were outstanding on the dates of the dividend declaration (31 March 2018:
526,948,700).
** The taxation impact consists of a R13 million increase (31 March 2018: R15 million) in tax expense
related to recoupment of tax on write-offs of property, plant and equipment and intangible assets.
7. Capital additions and disposals
31 March 31 March
2019 2018
Rm Rm
Property, plant and equipment
Additions 7 034 7 416
Disposals (40) (19)
6 994 7 397
Intangible assets
Additions 640 493
Disposals (30) (4)
610 489
Finance charges of R59 million (31 March 2018: R135 million) were capitalised to property, plant and
equipment in the current financial period.
8. Net cash and cash equivalents
Restated
31 March 31 March
2019 2018
Rm Rm
Cash disclosed as current assets 1 428 2 557
Cash and bank balances 1 308 1 498
Short-term deposits 120 1 059
Credit facilities utilised - (30)
Net cash and cash equivalents 1 428 2 527
Undrawn borrowing facilities 6 402 5 250
The undrawn borrowing facilities are unsecured and bear interest at a rate that will be mutually agreed between the
borrower and lender at the time of drawdown. These facilities are subject to annual review and are in place to ensure
liquidity. At 31 March 2019, R5.3 billion (31 March 2018: R4.5 billion) of these undrawn facilities were committed.
9. Deferred taxation
Restated
31 March 31 March
2019 2018
Rm Rm
Deferred taxation balance is made up as follows: 93 313
Deferred taxation assets 255 494
Deferred taxation liabilities (162) (181)
The decrease in the deferred tax balance in the current year is attributable to a R67 million (31 March 2018: Rnil)
additional liability raised in Telkom SA SOC Limited relating to the actuarial gains recognised on the post-employment
benefit plans. This movement was accounted for in other comprehensive income. The remaining movement in the asset is
attributable to the IFRS implication noted below, as well as the full recognition of the deferred tax asset in
respect of prior year losses and the utilisation of temporary differences.
At 31 March 2018, the group did not recognise a deferred tax asset of R341 million in respect of temporary
differences and tax losses amounting to R1 220 million that could be carried forward against future taxable
income. These differences originated in Telkom company in the prior year. There was no unrecognised deferred
tax asset at 31 March 2019.
The adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments has had no impact on
the deferred tax asset position as a result of the limitation of the deferred tax asset applied in the Telkom company
results in the prior year. The 1 April 2018 adjustment to the allowance account for credit losses attributable to the
change in the write-off criteria following the adoption of IFRS 9 has resulted in a reduction of the deferred tax asset
of R41 million.
10. Fair value measurement
Exposure to continuously changing market conditions has made management of financial risk critical for the group.
Treasury policies, risk limits and control procedures are continuously monitored by the Board of Directors through
its Audit and Risk Committees.
10.1 Fair value of financial instruments
Valuation techniques and assumptions applied for the purposes of measuring fair value:
Fair value at
Type of financial 31 March 2019 Valuation Significant
instrument Rm technique inputs
Derivative 231 Discounted cash Yield
assets flows curves
Derivative (280) Market
liabilities interest rates
Investment in ABSA 1 573 Quoted market Market prices
sinking fund prices adjusted for
counterparty credit
risk
Investment in 69 Discounted cash Cash flow forecasts
FutureMakers flows and market related
discount rates
Interest- (10 327) Discounted cash Market
bearing debt flows and quoted interest rate
bond prices
Derivative instruments are measured at fair value through profit or loss.
Fair value hedge
The foreign forward exchange contracts designated as fair value hedges, are being used to hedge the exposure
to changes attributable to movement in the spot exchange rate of its firm commitments.
A decrease in fair value of the forward exchange contracts, designated as fair value hedges, of R311 million
(31 March 2018: decrease of R319 million) has been recognised in finance charges and fair value movements and
offset with a similar gain (31 March 2018: gain) on the hedged items (property, plant and equipment and inventory).
The estimated net fair values as at the reporting date have been determined using available market information and
appropriate valuation methodologies as outlined on the previous page. The fair values of the financial assets and
financial liabilities are sensitive to exchange rate and interest rate movements.
Derivatives are recognised at fair value. The fair values of derivatives are determined using quoted prices or,
where such prices are not available, a discounted cash flow analysis is used. These amounts reflect the approximate
values of the net derivative position at the reporting date.
The fair values of the borrowings disclosed above are based on quoted prices or, where such prices are not available,
the expected future payments discounted at market interest rates. As a result, they differ from their carrying values.
The fair value of cash and short-term deposits, trade and other receivables, finance leases, shareholders for dividend
and trade and other payables approximate their carrying amounts largely due to the short-term maturities of these
instruments and market related interest rates included in finance lease receivables. Long-term receivables and borrowings
are evaluated by the group based on parameters such as interest rates, specific country factors and the individual
creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected losses
of these receivables. As at the reporting date, the carrying amount of such receivables, net of allowances, are not
materially different from their calculated fair values. Fair values of quoted bonds are based on price quotations at
the reporting date.
10.2 Fair value hierarchy
The table below analyses financial instruments carried at fair value and amortised cost, by valuation method.
The different levels have been defined as follows:
a) Quoted prices in active markets for identical assets or liabilities (level 1).
b) Inputs other than quoted prices, that are observable for the asset or liability (level 2).
c) Inputs for the asset or liability that are not based on observable market data (level 3).
31 March 31 March
Hierarchy 2019 2018
levels* Rm Rm
Assets measured at fair value
Investment in Absa sinking fund Level 2 1 573 1 509
Investment made by FutureMakers Level 3 69 50
Forward exchange contracts Level 2 161 14
Firm commitments Level 2 70 149
Liabilities measured at fair value
Forward exchange contracts Level 2 (13) (222)
Interest rate swaps Level 2 (30) (23)
Firm commitments Level 2 (237) (5)
Liabilities measured at amortised cost
Interest-bearing debt consisting of:
Listed debt Level 2 (10 327) (9 694)
* There have been no transfers between the fair value levels in the year under review.
11. Business combinations and disposals
Subsidiaries classified as held for sale in the year
In the prior period, BCX initiated a review of its investment portfolio. At 31 March 2018, management had identified
its full African portfolio and the Smart Office Connexion group as held for sale.
During the current period, management reversed the decision to dispose of its African subsidiaries in the Southern
African Development Community (SADC). The investment in BCX Nigeria and BCX Tanzania remains classified as held for
sale.
The mandate provided to management by the board to dispose of the Smart Office Connexion group expired in June 2018
and the asset was no longer held for sale at this date. During the second half of the year, management re-initiated
the sale negotiations regarding the sale. As at 31 March 2019, the sale of the SOX group is considered highly probable.
The asset held for sale is accounted for at its fair value less costs of disposal of R200 million (31 March 2018:
R204 million).
The remaining investments classified as held for sale are immaterial to the financial statements as a whole and have
not been disclosed separately in the statement of financial position and statement of profit or loss and other
comprehensive income.
African subsidiaries - BCX Tanzania and BCX Nigeria Rm
Revenue 366
Expenses (358)
Net finance costs and fair value movements (11)
Loss before tax (3)
Taxation (2)
Loss for the period (5)
Total non-current assets 28
Total current assets 149
Total non-current liabilities 1
Total current liabilities 94
The assets above have been revalued to the lower of the carrying value at the date of classification as held
for sale and the fair value less costs to sell in the prior period.
There was no additional impairment loss recognised on these assets in the current financial period.
An impairment of R30 million (31 March 2018: R96 million) was recognised on the investment in SOX following the
increase in carrying value of the investment owing to the equity accounted income of R26 million (31 March 2018:
R20 million) of the SOX group of entities.
12. Interest-bearing debt
Restated
31 March 31 March
2019 2018
Rm Rm
Non-current interest-bearing debt 4 840 7 158
Local debt 4 700 6 998
Foreign debt 123 118
Finance leases 17 42
Current portion of interest-bearing debt 5 401 2 239
Local debt 5 370 2 200
Foreign debt 5 4
Finance leases 26 35
The current portion of interest-bearing debt of R5 401 million (31 March 2018: R2 239 million) for group as
at 31 March 2019 is expected to be repaid from operational cash flow and other borrowings.
During the period under review, additional loans to the value of R3 246 million (31 March 2018: R7 680 million)
in the form of commercial paper were raised. No material transaction fees were raised upon the issue of these
debt instruments. The instruments have an average interest rate of 7.9% and are repayable over an average
term of 6 months.
13. Provisions
Restated
31 March 31 March
2019 2018
Rm Rm
Non-current employee related provisions 1 186 2 388
Subsidiary defined benefit plans 22 21
Telephone rebates 412 402
Telkom Retirement Fund 752 1 965
Current portion of employee related provisions 1 175 1 325
Annual leave 466 573
Post-retirement medical aid - 6
Telephone rebates 39 39
Bonus, termination packages and other benefits 670 707
Non-current non-employee related provisions
Other 7 39
Current portion of non-employee related provisions
Other 141 164
Annual leave
In terms of the group's policy, employees are entitled to accumulate vested leave benefits not taken within
a leave cycle, to a cap of 15-30 days (31 March 2018: 22-30 days), which must be taken within a 6-19 month
(31 March 2018: 12-18 month) leave cycle. The leave cycle is reviewed annually and is in accordance with
legislation.
Bonus
The bonus scheme consists of performance bonuses which are dependent on the achievement of certain financial and
non-financial targets. The bonus is payable annually to all qualifying employees after the group's results have
been made public, with a 14th cheque for a certain group of employees.
Voluntary Early Retirement Packages (VERP)/Voluntary Severance Packages (VSP) and retrenchment provision
During the year under review, the group initiated a voluntary severance and retrenchment process. An expense
relating to the process of R728 million (31 March 2018: Rnil) was recognised.
Non-employee related provisions
Other provisions relate to the ICASA licence fee provision, a restoration provision, provisions for legal
matters and contingent consideration relating to prior year business combinations.
Telkom Retirement Fund
The decrease in the Telkom Retirement Fund obligation is primarily driven by the increase in the discount
rate from 8.80% to 9.70%. This resulted in an actuarial gain of R1 334 million.
14. Commitments
31 March 31 March
2019 2018
Rm Rm
Capital commitments authorised 9 744 9 270
Commitments against authorised capital expenditure 5 671 4 350
Authorised capital expenditure not yet contracted 4 073 4 920
Capital commitments comprise of commitments for property, plant and equipment and software included in
intangible assets.
Management expects these commitments to be financed from internally generated cash and borrowings.
15. Trade and other receivables and contract assets
Restated
31 March 31 March
2019 2018
Rm Rm
Trade and other receivables 7 425 6 370
Trade receivables 5 884 4 811
Gross trade receivables 7 091 5 638
Impairment of receivables (1 207) (827)
Prepayments and other receivables 1 541 1 559
Contract assets 2 518 1 672
Gross contract assets - Handset receivables 2 331 1 520
Contract cost assets 226 149
Ongoing commission capitalised assets 131 98
Impairment of contract assets - Handset receivables (170) (95)
Contract cost assets 226 149
Assets recognised from costs incurred to obtain a contract 149 118
Contract costs capitalised during the year 255 154
Amortisation recognised as cost of providing services
during the year (178) (123)
Allowance account for credit losses - trade receivables 1 207 827
Opening balance as previously reported 827 528
Adoption of IFRS 9 Financial Instruments - Adjustment (61) -
to allowance account measurement
Adoption of IFRS 9 Financial Instruments - Change to 559 -
write-off criteria
Charged to statement of profit or loss and other 184 537
comprehensive income
Receivables written-off (302) (238)
Allowance account for credit losses - contract assets 170 95
Opening balance as previously reported 95 65
Charged to statement of profit or loss and other 200 98
comprehensive income
Contract assets written-off (125) (68)
The repayment terms of trade receivables vary between 21 days and 45 days from date of invoice. Interest
charged on overdue accounts varies between a rate of prime and a rate of 18%, depending on the contract terms.
16. Contingencies
Contingent liabilities
Other than the disclosures below, there have been no significant movement or new matters noted on the contingent
positions as reported in the 31 March 2018 financial statements.
High court
Radio Surveillance Security Services (Pty) Ltd (RSSS)
In December 2011, RSSS served a summons on Telkom for the sum of R216 million. Telkom defended the matter. The trial
was finalised in March 2018. Judgement was granted in April 2018. The claim of RSSS was dismissed with costs. RSSS made
an application for leave to appeal to the Supreme Court of Appeal, which was dismissed. The matter is considered settled.
Phutuma Networks (Pty) Ltd (Phutuma)
In August 2009, Phutuma served a summons on Telkom, claiming for damages, in the amount of R5.5 billion, arising from
a tender published by Telkom in November 2007. The High Court granted absolution from the instance, in Telkom's favour.
The Supreme Court of Appeal (SCA) had initially dismissed Phutuma's application for leave to appeal in October 2014.
On 4 November 2014, the SCA rescinded its order granted in October 2014. In early 2015, the SCA referred the application
for leave to appeal back to the full bench of the North Gauteng High Court. The leave to appeal was heard in September
2016 and was upheld. The matter now needs to be re-enrolled for trial.
Tax matters
As noted in the prior year consolidated annual financial statements, the tax treatment of the loss that arose in the
2012 and 2014 financial years on the sale of foreign subsidiaries is based on a specific set of circumstances and a
complex legislative environment. The 2012 matter was heard in the Tax Court in August 2018 and an appeal has been filed
against the Tax Court judgement received, and as such, the dispute with SARS remains unresolved. The tax refund received,
relating to the 2012 sale, therefore remains contingent and will only be recognised once the matter has been resolved.
17. Related parties
Restated
31 March 31 March
2019 2018
Rm Rm
Details of material transactions and balances with related
parties not disclosed separately in the summary consolidated
provisional financial statements were as follows:
With shareholders:
Government of South Africa
Related party balances
Finance lease receivable 207 229
Trade receivables 1 370 1 010
Provision for doubtful debt (212) (207)
Related party transactions
Revenue (4 128) (4 557)
At 31 March 2019, the Government of South Africa held 40.5% (31 March 2018: 40.5%) of Telkom's shares,
and had the ability to exercise significant influence. The Public Investment Corporation held 11.9%
(31 March 2018: 12.9%) of Telkom's shares.
Restated
31 March 31 March
2019 2018
Rm Rm
With entities under common control:
Major public entities
Related party balances
Trade receivables 42 54
Provision for doubtful debt (2) (10)
Trade payables (35) (12)
Related party transactions
Revenue (excluding operating lease income) (456) (573)
Operating expenses (excluding operating lease expenses) 399 427
Operating lease income (27) (23)
Operating lease expense 30 19
Key management personnel compensation:
(Including directors and prescribed officers' emoluments)
Related party transactions
Short-term employee benefits 272 247
Post-employment benefits 17 15
Termination benefits 13 25
Equity compensation benefits 22 (3)
Terms and conditions of transactions with related parties
Except as indicated above, outstanding balances at 31 March 2019 are unsecured and settlement occurs in cash.
There have been no guarantees provided or received for any related party receivables or payables. Except as
indicated above, for the year ended 31 March 2019, the group has not impaired any of the amounts owed by the
related parties. This assessment is undertaken each financial period through examining the financial position
of the related party and the market in which the related party operates.
18. Reconciliation of profit for the year to cash generated from operations
Restated
31 March 31 March
2019 2018
Rm Rm
Cash generated from operations 8 903 10 113
Profit for the year 2 831 2 998
Finance charges and fair value movements 947 842
Taxation 1 176 1 113
Investment income and income from associates (187) (116)
Interest received from trade receivables (250) (130)
Non-cash items 5 519 5 779
Depreciation, amortisation, impairment and write-offs 5 814 5 585
(Decrease)/increase in provisions (162) 181
Sale of property, plant and equipment (2) (59)
Foreign exchange movements (29) 25
Share based payment expenses 135 48
Deferred revenue (237) (1)
Movement in working capital (1 133) (373)
Inventories (94) (56)
Accounts receivable (1 280) (11)
Accounts payable 241 (306)
19. Net debt reconciliation
Restated
31 March 31 March
2019 2018
Rm Rm
Total interest-bearing debt at reporting date 10 241 9 397
Total interest-bearing debt at the beginning of the year 9 397 6 268
Loans raised 3 246 7 680
Loans repaid (2 544) (4 685)
Finance leases repaid (42) (16)
Foreign exchange revaluation on loans 12 -
Finance charges capitalised to interest-bearing debt 172 150
Interest accruals include the effect of interest amortised and accrued for in the closing balance of
interest-bearing debt.
The group classifies interest paid as cash flow from operating activities.
20. Significant events and transactions
Results of the Telkom Annual General Meeting regarding directors re-appointments
On 23 August 2018, all board members were elected as per the Annual General Meeting ordinary resolutions.
Dividends
The Telkom Board declared an ordinary dividend of 237 cents per share on 28 May 2018 which was paid on
25 June 2018 to shareholders registered on 22 June 2018.
The Telkom Board also declared an ordinary dividend of 112 cents per share on 13 November 2018 which was paid
on 3 December 2018 to shareholders registered on 30 November 2018.
Employee Share Plan
In May and June 2018, Telkom purchased 901,068 shares from the market through Rossal, a wholly owned subsidiary,
for the purposes of the employee share plan.
Allocation of shares in terms of the Telkom Employee Share Plan
On 25 May 2018, the board approved the sixth allocation of shares to employees in terms of its Employee Share Plan.
The number of shares to vest will depend on the extent to which the performance conditions are met at the end of the
applicable vesting period.
Vesting of shares
In terms of the Telkom Share Plan 101 191 and 31 500 shares vested to Mr Sipho Maseko and Mr Deon Fredericks
respectively in June 2018.
Appointment of new group chief financial officer and executive director
Telkom announced on 27 June 2018 that Mr Deon Fredericks would step down as group chief financial officer and
executive director with effect 30 June 2018. Ms Tsholofelo Molefe has been appointed as the new group chief
financial officer and as an executive director of the Telkom Board with effect from 1 July 2018.
BCX Section 189 Process
On 7 November 2018, BCX issued a company-wide communication advising its employees that it had served unions with a
notice in terms of section 189 of the Labour Relations Act. The matter was finalised in February 2019.
Conclusion of Telkom and Vodacom roaming and facilities leasing agreement
On 7 November 2018, Telkom and Vodacom concluded a new roaming and facilities agreement. The roaming agreement covers
2G, 3G and LTE roaming with seamless handovers between Telkom and Vodacom networks. The facilities leasing agreement
will allow Telkom to use Vodacom towers, antennas and shelters to build out its own network. Telkom currently has a
roaming agreement with MTN which expires in June 2019. The company is conducting a phased transition from the current
roaming agreement, which will be concluded by the end of the contract period.
Change in JSE sponsor
Telkom announced on 22 March 2019 that it had made a decision that Telkom will be rotating the role of The Standard
Bank of South Africa Limited as JSE Sponsor, with effect from 30 June 2019.
The company has appointed Nedbank Corporate and Investment Banking, a division of Nedbank Limited, as JSE Sponsor,
with effect from 1 July 2019.
Retirement of non-executive director
Telkom announced on 24 July 2018 that Mr Itumeleng Kgaboesele, an independent non-executive director, would be
retiring from the Telkom Board with effect from 23 August 2018.
Telkom announced on 24 August 2018 that Dr Hamadaun Toure has resigned from the board of directors of Telkom as an
independent non-executive director with effect from 23 August 2018.
On 21 February 2019, Telkom advised the market that Mr Jabu Mabuza will be stepping down as an independent
non-executive director and the chairman of the board of directors of Telkom, with effect from 31 May 2019.
Mr Sello Moloko, currently an independent non-executive director of the board, will act as the new chairman
of the Telkom Board with effect from 1 June 2019.
Appointment of non-executive director
Telkom announced on 21 February 2019 that Dr Sibusiso Sibisi has been appointed to the board of directors of the
company as an independent non-executive director with effect from 1 April 2019.
Appointment of new external auditors
On 23 August 2018, the AGM ratified the appointment of PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Grant
Thornton Inc. for appointment as the joint external auditors for the group for the financial year ending
31 March 2019.
21. Events after the reporting date
Dividends
The Telkom Board declared an ordinary dividend of 249.40 cents per share on 27 May 2019, payable on
18 June 2019 to shareholders registered at the close of business on 14 June 2019.
Acquisition of Trudon (Pty) Ltd minority interest
On 20 March 2019, the Telkom Board approved the acquisition of the minority shareholding in Trudon (Pty) Ltd.
During May 2019 the parties to the transaction signed the sale of shares agreement. The parties are awaiting
approval from the Competition Commission to finalise the transaction.
Disposal of SOX interests
On 20 March 2019, the Telkom Board approved BCX's disposal of its stake in SOX Holdings (Smart Office
Connexion Group Holdings Ltd.)
On 22 May 2019, the parties have agreed to the disposal of BCX's shares in the form of a repurchase of
shares agreement, in terms of which SOX Holdings will buy back BCX's shares. The agreement is subject to
the fulfilment (or waiver where appropriate) of certain condition precedents, including:
- Competition Commission approval; and
- The conclusion of service, support and maintenance agreements between BCX and SOX.
Other matters
The directors are not aware of any other matter or circumstance since the financial year ended
31 March 2019 and the date of this report, or otherwise dealt with in the financial statements, which
significantly affects the financial position of the group and the results of its operations.
Centurion
27 May 2019
Group company secretary
Ayanda Ceba
Tel: +27 12 311 0345
secretariat@telkom.co.za
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
PO Box 61051
Marshalltown, 2107
Sponsor
The Standard Bank of South Africa Ltd
Standard Bank Centre
30 Baker Street
Rosebank, 2196
Directors
JA Mabuza (chairman),
SN Maseko (group chief executive Officer),
TBL Molefe (group chief financial Officer),
SL Botha, GW Dempster, N Kapila*,
K Kweyama, KW Mzondeki,
F Petersen-Cook, RG Tomlinson,
L von Zeuner, D Mokgatle,
S Moloko, S Luthuli
*In India
www.telkom.co.za
Date: 27/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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