Telkom says its first report after using the newly adopted Chart of Accounts and Cost Allocation Manual (COA/CAM) model of presenting its financial reports to the Independent Communications Authority of SA (ICASA) will only be ready by the end of September.
The manual was approved and produced by ICASA on 28 June, and according to the regulations, the statutory date by which Telkom is supposed to comply and submit the chart of accounts report is 30 September.
Telkom CEO Sizwe Nxasana states the report would only be ready by that time even after ICASA had previously asked the national fixed-line operator to release un-audited results by last Friday.
"ICASA had requested that we give them un-audited numbers based on our performance to date, but we refused to do so because as a listed entity we have to comply with certain regulations both locally and in the US. Should we do otherwise, we would be putting the company under great risk of major law suits," he says.
Telkom says hundreds of cost drivers and thousands of cost pools have to be loaded into the costing model, adding that a lot of time is needed to analyse the results, identify inconsistencies and take appropriate interventions. "Even auditors say more time is needed for this complex process," the company says.
According to Telkom, COA/CAM demonstrates the profitability of the business per service and gives ICASA the opportunity to re-assess its productivity factor.
[VIDEO]The Chart of Accounts is a list of accounts prepared for regulatory purposes: revenues, expenditure, assets and liabilities. The Cost Allocation Manual encompasses the principles for allocating costs to services and detailed allocation rules are set out in a procedures manual, developed by Telkom and approved by ICASA.
Using this method, financial results are restated in accordance with regulatory principles and rules enabling ICASA to meet its objectives, while at the same time Telkom also meets disclosure requirements of the US Securities Exchange Commission and the JSE Securities Exchange.
The figures are independently audited.
Separation
Telkom is required to practise accounting separation between regulated and unregulated business (regulated is all those transactions completed in terms of its PSTN licence).
<B>Using the COA/CAM model:</B>
* Telkom is required to present its retail and wholesale activities to ICASA using specific cost allocation methodology.
* The COA/CAM sets out a structured accounting and regulatory reporting framework for operators to provide regular information, and allows the regulator to meet its objectives, such as the prevention of exploitation of market power, predatory pricing, anti-competitive cross-subsidisation, price discrimination and cost-oriented charges to other operators.
* Telkom is also required to submit regulatory financial statements once a year showing the balance sheet and profit and loss account per service.
Telkom`s regulated business is split into three areas: core network (exchanges, facilities in the backbone), access networks (local loop connecting customers to the exchange), and retail business (product and services).
The unregulated services are competitive telecommunications products or services from customer premises equipment such as the telephone instruments, to value-added network services and the Internet service.
"The source of Telkom`s profits lies in efficiencies that have been deliberately managed, like a substantial reduction of underlying costs and astute financial management, human resources, lower capex, less debt and interest payments," says Nxasana.
He adds that the company`s strategy is to improve efficiencies and innovation, but admits that historical comparisons show that Telkom`s revenues have not increased dramatically.
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