FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: For the period ending 14 August 2006
TELSTRA CORPORATION LIMITED
ACN 051 775 556
242 Exhibition Street
Melbourne Victoria 3000
Australia
Indicate by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Form 20-F þ Form 40-F o
Indicate by check mark whether the registrant by furnishing the information contained
in this Form is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes o No þ
If Yes is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
INDEX
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3 July 2006
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Appendix 3Z Final Directors Interest Notice |
6 July 2006
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Telstra presentation to the China 3G Mobile International
Summit, Beijing, China |
10 July 2006
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Telstra marks past year with new products, improved service |
7 August 2006
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Fibre-to-the-node talks discontinued |
7 August 2006
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Transcript from Telstra Fibre to the Node Briefing
Teleconference |
7 August 2006
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Transcript from Telstra Fibre to the Node Briefing Q&As |
10 August 2006
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Telstra Corporation Limited Financial Results for the Year ended
30 June 2006 |
10 August 2006
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Full Year 2006 Results Analyst briefing |
10 August 2006
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Full Year 2006 Results CFO Analyst briefing presentation |
10 August 2006
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CEO Letter to Shareholder |
10 August 2006
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Transcript from Full Year 2006 Results Media Briefing |
11 August 2006
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Transcript from Full Year 2006 Results Analysts Briefing |
14 August 2006
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Telstra responds to media article regarding ULL access pricing |
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3 July 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street |
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Appendix 3Z Final Directors Interest Notice
In accordance with the listing rules I enclose an Appendix 3Z Final Directors Interest Notice
for Mr John Fletcher.
Yours sincerely
Douglas Gration
Company Secretary
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Telstra Corporation Limited |
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ACN 051 775 556 |
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ABN 33 051 775 556 |
TABLE OF CONTENTS
Rule 3.19A.3
Appendix 3Z
Final Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
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Name of entity
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Telstra Corporation Limited |
ABN
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33 051 775 556 |
We (the entity) give ASX the following information under listing rule 3.19A.3 and as agent for
the director for the purposes of section 205G of the Corporations Act.
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Name of director
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Mr John Fletcher |
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Date of last notice
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22 February 2006 |
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Date that director ceased to be director
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30 June 2006 |
TABLE OF CONTENTS
Part 1 Directors relevant interests in securities of which the director is the registered
holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
Note: In the case of a company, interests which come within paragraph (i) of the
definition of notifiable interest of a director should be disclosed in this part.
Number & class of securities
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1,237
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TLS Ordinary Shares |
Part 2 Directors relevant interests in securities of which the director is not the
registered holder
Note: In the case of a company, interests which come within paragraph (ii) of the
definition of notifiable interest of a director should be disclosed in this part.
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
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Name of holder & nature of interest
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Number & class of securities |
Note: Provide details of the circumstances giving
rise to the relevant interest |
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Kannatex Pty Ltd |
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32,000 TLS Ordinary Shares |
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Growthshare Pty Ltd ATF Telstra
DirectShare Plan
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29,567 TLS Ordinary Shares |
Part 3 Directors interests in contracts
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Detail of contract
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N/A |
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Nature of interest
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N/A |
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Name of registered holder
(if issued securities)
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N/A |
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No. and class of securities to which
interest relates
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N/A |
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6 July 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street |
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra presentation to the China 3G Mobile International Summit, Beijing, China
In accordance with the listing rules, I attach a copy of a presentation by Sol Trujillo,
Telstra Chief Executive Officer, at the China 3G Mobile International Summit, for release to
the market.
Yours sincerely
Douglas Gration
Company Secretary
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Telstra Corporation Limited |
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ACN 051 775 556 |
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ABN 33 051 775 556 |
3G: Opportunities and customer benefits |
7th Annual China 3G Mobile International Summit 6 July 2006, Beijing, China |
Sol Trujillo, Chief Executive Officer, Telstra Corporation Limited |
Leading Australian player with scale |
Telstra has the ability to offer truly integrated communications |
· Telstra is Australias leading full service communications provider:
Wireline: unparalleled customer reach across Australia
Wireless: rolling out one of the worlds most advanced networks |
Sensis: information services with search, transaction and navigational
capacity |
BigPond: Australias largest broadband provider |
· Strongest brand name in the industry in Australia |
· Highest Australian market share while managing offshore opportunities |
· Strong balance sheet & cash flows allow us to fund growth opportunities |
· Ability to drive economies of scale |
Our vision: a world of 1 click solutions that are simple to use and valued by customers |
Driving a new customer experience with Market Based Management: |
1 click * 1 touch * 1 screen for customers |
· Driving new revenue sources: |
Mobile data traffic more than doubled (Six months to 30/6/06) |
· Driving reduced complexity in the business:
Cutting 1252 IT systems by 80% over 5 years |
· Driving costs down -a One Factory approach: |
Building a wireline IP core network to improve capacity by
up to 77 times |
Moving to a single wireless network |
Multiple platform investment
2G 2.5G 3G Super 3G 4G
Sharing
3GSM
HSDP
3GSM 10 Mbps 1 Gbp peak
A1 & 2
(WCDMA) 100 Mbps peak (target goal)
500-1100 Kbps
220-320Kbps (target goal)
GSM EDGE
GSM GPRS Telstra Today
100-130 Kbps
9Kbps 30-40 Kbps
Deployed
Active rollout
1x EVDO Not
1xRTT
CDMA 50-70 Kbps RevA currently
1x EVDO pursuing
CDMA 14Kbps 400-700
Kbps
National Partial
rollout rollout
Trialled
Broadband IP Wireless Flarion
WiMa
WiFi x
Speeds quoted are average to high end average |
Integrating and simplifying platforms |
2G 2.5G 3G Super 3G 4G
Sharing
HSDPA
3GSM 10 Mbps
1 & 2 1 Gbp peak
(WCDMA) 100 Mbps peak
500-1100 Kbps (target goal)
220-320Kbps (target goal)
GSM EDGE
GPRS
9Kbps 100-130 Kbps
30-40 Kbps
Telstra Today
Deployed
Wide Area Wireless Active rollout
Not currently
Short Range IP Wireless pursuing
WiFi |
3G -HSDPA using 850Mhz: greater breadth, much faster services, lower capital costs |
· Greater breadth of coverage from 850 is necessary for Australias landscape |
More than 98% population coverage or 1.6 million square kilometres |
Better in-building coverage |
By augmenting with HSDPA, customers will enjoy much faster services |
Average data rates 500kbps -1.1Mbps (launch), peaking at 3.6Mbps (launch) and
migrating to a peak of 14Mbps (2007) |
With 850, fewer base stations required, lowering capital costs and reducing replication
costs |
The much faster customer experience with 3G HSDPA |
For HSDPA mobile users, it delivers content to your mobile virtually instantaneously and with
higher data rates |
Download in seconds real-time video and internet content |
For wireless laptop users, it delivers speeds equivalent to mainstream ADSL |
Nearly instantaneous remote email synchronisation |
For enterprises, it can deliver more than just productivity improvements. |
Ambulances are trialling wireless video to get medical advice at the scene of an accident
Fire services are trialling wireless real-time maps showing where fires are breaking |
National 3G service on track: more than half built |
Network deployment: more than half built with >3000 850 base stations installed
since November one of the fastest global roll-outs |
· Video call trial proved the technology, its 3G 2100 network compatibility, and showed,
at 850Mhz, wireless broadband provides superior coverage |
· Innovative and unique services for Telstra customers are in development |
· Handset & device procurement for 3GSM 850 well advanced |
3GSM on 850 is gaining momentum |
3GSM family of technologies |
82% of the global digital mobile market |
2 billion GSM mobile users globally: 72 million using 3G |
China is the single largest GSM market today with >370 million users |
A core set of common 3G handsets requirements are being developed |
3GSM on 850 is gaining momentum: |
Cingular, a leading US operator with 51m subscribers, launched its high speed
mobile broadband network including 3G 850 last December |
Rogers Wireless, Canadas largest voice and data operator, is also deploying
3GSM on 850 |
Many Latin American telcos are expected to follow suit |
Our services and applications |
Wireless broadband: substantive take-up and usage growth |
· Subscribers almost doubled along with data |
traffic increases (Jan to 30 June 06) |
· Corporate & enterprise IT group |
Teleworking: a key usage driver |
· Delivers productivity gains: |
Easy collaboration with remote teams |
Our services and applications |
Business mobility: usage led by emerging key applications |
Enterprises and governments initially used wireless e-mail and remote access |
· Now most also use wireless applications targeting core business processes for mobilisation as
the applications community is maturing |
· General workforce productivity improvement applications include: |
Wireless remote working |
Real-time wireless operational support |
· Industry-specific applications: |
Transport & logistics uses include vehicle tracking |
Utilities use telemetry for remote monitoring and control of assets in the
field (eg. water pumps, meters) |
Business Office Mobility Workforce
Management Contact Solutions Remote and Mobile
Communications Office Mobility Workforce
Management Contact Solutions Asset Management |
Do what you would Increase productivity Low cost
interaction Increase productivity |
Ability to be in contact, Do what you would Increase
productivity Low cost interaction Increase productivity |
Ability to be in contact, normally do when at and
customer and messaging to and customer |
productivity and work normally do when at and
customer and messaging to and customer |
productivity and work your desk when you are responsiveness,
customer base and responsiveness, |
life balance tool your desk when you are responsiveness,
customer base and responsiveness, |
life balance tool mobile or remote decrease costs
and constituents decrease costs and |
mobile or remote decrease costs
and constituents decrease costs and |
Traditional Voice Email Alerts & Notifications |
Traditional Voice Email Sales Force Automation / Alerts
& Notifications Telemetry |
Sales Force Automation / Authentication Telemetry |
Integration Authentication System Alerts |
PTT Advanced Laptop
Connectivity Integration Interaction
System Alerts |
PTT Advanced Laptop Connectivity Interaction |
Video Calling, Messaging Fleet Management |
Video Calling, Messaging Remote Working Field Service
Automation Fleet Management |
& Remote Working Field Service Automation |
Conferencing Employee Comms Asset Tracking |
Conferencing Job Dispatch / POD Staff
Rostering Asset Tracking |
International Roaming Job Dispatch / POD Staff
Rostering |
International Roaming Government Comms |
International Roaming Government Comms Security
Monitoring |
International Roaming Security Monitoring |
Business Portal Permission Marketing |
Mobile VPN Permission Marketing |
Our services and applications |
Consumer 3G: content and email is currently driving usage |
Email and internet over your phone is driving usage |
· Video streaming use and revenue is taking off |
· Video calls now used by one in five |
· Our content is superior: |
AFL, NRL, Commonwealth Games, World Cup soccer, V8
supercars |
More news:ABC, CNN, The Age
Music, games and movies
Sensis content: Whereis.com |
Our services and applications |
1 click integration and differentiated content will be our competitive advantages as the 3G
market grows |
Differentiated content across
multiple devices |
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10 July 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street |
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra marks past year with new products, improved service
In accordance with the listing rules, I attach an announcement for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
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Telstra Corporation Limited |
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ACN 051 775 556 |
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ABN 33 051 775 556 |
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Media Release
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10 July 2006
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132/2006 |
Telstra marks one year on the move with new products, improved service
Telstras customers and shareholders are already seeing new products and improved service as
the companys landmark transformation strategy starts to deliver results.
Telstra today published a comprehensive report for shareholders, customers and staff detailing its
record of achievement over the past year.
The 28-page document reviews the progress of Telstras transformation during CEO Sol Trujillos
first 12 months, focusing on progress against the companys transformation strategy outlined by Mr
Trujillo on 15 November 2005.
The report reveals that less than eight months since the companys three-to-five year
transformation strategy was unveiled, Telstras national 3G wireless network is already more than
half-finished; $14 million has been saved by consolidating office space and vacating 25 leases;
with an additional $70 million saved by sourcing mobile devices through global supply-chain
specialist, Brightstar.
The report reveals ten top achievements in the 2005/06 financial year
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Construction of Telstras new 3G wireless network was well underway, with more than 3,500 of
5,112 planned base stations already complete. |
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Telstra enhanced its reputation for superior mobile and data coverage, activating an
additional 525 GSM and 272 EVDO sites. |
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Telstras property portfolio was consolidated, exiting 45,000 square metres of idle office
space in 25 buildings, saving $14 million. |
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More than $70 million was saved sourcing mobile devices using supply-chain
specialist, Brightstar. |
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Unsatisfied demand for ADSL broadband was reduced by nearly two-thirds. |
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26% fewer customers exited traditional PSTN services in the year to May, the number of new
PSTN customers increased by 10%, and the number of customers using three or more
Telstra products grew by nearly 30%. |
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Customers began using innovative subscription-based pricing plans that provide untimed STD
calls and local calls at no additional cost. |
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Small and medium-sized business customers are now being served by a brand new business unit
which is already implementing specialist call centres and shops. |
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Telstra staff to begin taking classes as part of a $210 million employee training package. |
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Telstras consumer website, www.nowwearetalking.com.au raised awareness of the impact of
regulation on shareholder value, the telecommunications industry, and national productivity. |
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
For news, views and discussion on telecommunications in Australia see
www.nowwearetalking.com.au
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Telstra Corporation Limited |
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ABN 33 051 775 556 |
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Media Release
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The report says Telstra welcomes competition and, under its transformation strategy, will be a
high-performance competitor that wins the confidence and loyalty of consumers, serves the
communications needs of the nation and its regions, and rewards shareholders for their confidence
in the ability of the company to grow and prosper.
It says Telstras first priority is competing for customers in the marketplace. However, the
report warns that growing regulation much of which applies to Telstra and not others
increasingly restrains the company from cutting costs and earning new revenues.
The report finds that these regulatory burdens allow opportunistic competitors to take a free-ride
on Telstra shareholders investments, jeopardising future innovation in an increasingly competitive
global market.
Shareholders can receive the report in several ways -
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Download a copy from www.nowwearetalking.com.au or www.telstra.com.au/abouttelstra |
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Register at Telstra@linkmarketservices.com.au (1300 88 66 77) to receive a copy by email |
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Write to Telstra Share Registry, Level 4, 333 Collins Street, Melbourne VIC 3000 or fax 02 9287
0303 |
Telstra Media Contact:
Andrew Maiden
Tel:
02 9298 5259
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
For news, views and discussion on telecommunications in Australia see
www.nowwearetalking.com.au
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Telstra Corporation Limited |
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ABN 33 051 775 556 |
The New Telstra, On the Move
A PROGRESS REPORT ON
TELSTRAS TRANSFORMATION |
The New Telstra, On the Move
A PROGRESS REPORT ON TELSTRAS TRANSFORMATION
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Page No |
TELSTRAS TRANSFORMATION |
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1 |
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CHRONOLOGY |
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3 |
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WIRELESS TRANSFORMATION |
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5 |
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WIRELINE TRANSFORMATION |
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7 |
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IT TRANSFORMATION |
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8 |
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BENEFITS NOW |
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9 |
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ACCELERATED REVENUE GENERATION |
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10 |
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PRODUCT AND NETWORK PLATFORM RATIONALISATION |
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13 |
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NETWORK ENHANCEMENTS |
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13 |
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OPERATIONAL IMPROVEMENTS |
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14 |
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MARKET BASED MANAGEMENT |
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15 |
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SENSIS EXPANDING INFORMATION SERVICES |
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19 |
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EXPANDING
BROADBAND THROUGH BIGPOND |
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21 |
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EMPOWERING OUR PEOPLE |
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22 |
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ACHIEVING REGULATORY REFORM |
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23 |
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GLOSSARY |
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27 |
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The New Telstra, On the Move
A PROGRESS REPORT ON TELSTRAS TRANSFORMATION
Maintaining our promise to keep shareholders, customers
and staff informed, this document provides a first anniversary
progress report on the transformation to the New Telstra as
outlined on 15 November 2005 at the CEOs strategic review.
On 1 July 2005, Sol Trujillo took the reins as Telstras new
Chief Executive Officer. Together with the Telstra Board,
he launched a comprehensive review of every corner of
Telstras operations everything from its customer-facing
and back-office operations to the status of its infrastructure
all in the light of changing technologies and changing
consumer needs.
Since 15 November, Telstra has been
executing to that strategy theres an
under construction sign on the company.
The results of the review were announced on 15 November,
2005 when the CEO and Telstra management confirmed the
need for a new approach to the business. The CEO outlined
a vision for a New Telstra and a three to five year strategy
to transform the companys operations in order to provide
a new customer experience, enhance shareholder value,
and better serve the economic and social development of
Australia and its cities and regions.
This
strategy for the New Telstra includes building next
generation networks, supporting a growing demand for
IP-based services and simplifying IT systems. It requires
Telstra to grow revenues from new products, cut costs and
change the game on pricing, services and service delivery.
The plan for the New Telstra recognised that, unless the
company embarked upon a comprehensive, three to five
year transformation, Telstras growth prospects were limited
and the uncomfortable ride for shareholders would continue.
The review highlighted the need for urgency to address key
issues: the accelerating decline in our traditional PSTN business,
changing consumer preferences, slowing growth in the wireless
market and the growing cost and intrusiveness of regulation.
The strategy came with a vision to give our customers a
seamless user experience across all devices and platforms
fixed, wireless and internet in a 1-click, 1-touch, 1-button,
1-screen, 1-step way whether that customer is an individual,
small business, large business, government agency or
non-profit organisation.
Just as customers live in an integrated
world that includes family, friends, work
and play, Telstras transformation is
guided by the principles of integration.
Since
15 November, Telstra has been executing to that strategy
theres an under construction sign on the company.
We
are modernising networks including the construction
of a next generation, national high-speed wireless network.
We are taking out costs, in part by reducing complexity,
making business systems more efficient and simplifying
operations. This includes the creation of a one factory
approach to operations, which is guided by four principles:
do it once, do it right for the customer, do it in an integrated
way and do it at the lowest possible unit cost.
1
TELSTRAS TRANSFORMATION:
Executing the strategy |
We have implemented market based management, which
means basing everything we do on the needs and wants of
our customers. By knowing them and understanding their
needs better than ever before, and better than anybody else,
we are able to offer them the products and services that allow
them to live their life their way. Our extensive customer research
allows Telstra to differentiate itself from all competitors by
creating offers that are relevant to the lifestyles of every
individual segment. In addition, the insight weve gained
into each segment, resulting from our research, allows us
to reach them in the media most effective for each segment.
In simple terms, we aim to give our customers exactly the
experiences they want at home, at work, and at play.
Only Telstra is able to offer Australians more ways to do
more things in more places.
Telstra welcomes competition
and, under our transformation
strategy, we intend the New Telstra to
be a high-performance competitor
that can win the confidence and
loyalty of consumers who are and
become our customers.
Just as customers live in an integrated world that
includes family, friends, work and play, Telstras
transformation is guided by the principles of integration.
This includes integrating services across mobiles, BigPond
and Sensis to facilitate product differentiation tailored to
customer needs, increasing the value of Telstra products,
and services for the customer.
Sensis, a high-performance directory business by global
standards, is building on its search and transaction business
and over time integrating its applications and services business
with Telstra as it plays its own role in the transformation.
BigPond, once simply a supplier of connections to the
internet, now is a market leader in state of the art, awardwinning
content across the online and Telstra 3G platforms.
The Commonwealth Games in Melbourne this year displayed
how Telstra is leading the market through customer experience
and innovation. Using BigPond, the Games were 1-click away
on 3G mobile phones, with eight different channels for interactive
viewing. BigPond is gaining strength as the market leader in
innovation by providing increasingly attractive content for
our customers.
Telstra is also undergoing a cultural transformation,
with big investments in training our people and reforming
the way we do business.
Telstra is investing considerable time and resources in a
constructive dialogue with policy-making and regulatory
authorities to achieve a regulatory treatment that
safeguards shareholder investments in next generation
networks and services. Thats because our priority is to
create and advance shareholder value, not to give it
away to competitors.
Telstra is no longer a branch of government, a community
property or a magic pudding that can be sliced and diced
by increasing regulation without negative effects for
shareholders, customers and the telecommunications
industry at large. Telstra welcomes competition and,
under our transformation strategy, we intend the New
Telstra to be a high-performance competitor that can
win the confidence and loyalty of consumers who are
and become our customers.
One Factory Approach to Operations
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Do it once. |
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Do it right for the customer. |
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Do it at the lowest possible unit cost.
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Do it in an integrated way. |
Will Telstras transformation deliver what shareholders and consumers want? |
Is the company heading in the right direction? Are you encouraged by the
progress we are making? We want to hear your views and suggestions.
Please visit our advocacy website www.nowwearetalking.com.au and
join in the discussion forum on Telstras transformation. |
2
CHRONOLOGY:
The story so far |
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July 2005 |
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1 July
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Sol Trujillo commences at Telstra as CEO. |
29 July
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Telstra launches Australias first combined mobile and home capped plan. |
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August 2005 |
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11 August
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Telstra Annual Results; announces $4.45 billion profit for 2004/05 but warns of slowing revenue growth
and accelerating fixed line revenue decline. |
11 August
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Presentation to Federal Government on National Broadband Plan. |
11 August
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CEO establishes Telstra Operations division and one factory approach; COO position announced. |
25 August
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BigPond launches Wireless Broadband (EVDO) service to consumers. |
25 August
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Sensis launches Whereis® Navigator Australias first satellite navigation system for mobile phones. |
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September 2005 |
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5 September
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Customer launch of 3G 2100 mobile service. |
5 September
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Telstra revises Earnings Before Interest and Taxes (EBIT) guidance for 2005/06. |
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October 2005 |
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6 October
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BigPond connects its one-millionth broadband (Cable+ ADSL) customer. |
10 October
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Telstra launches 1c text messages for Telstra Pre-Paid Plus customers. |
17 October
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|
Brightstar (Phase 1) exclusive wireless device sourcing deal announced. |
26 October
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|
BigPond named ISP of the Year and Telstra named Mobile Operator of the Year at 2005
Australian Telecom Magazine Awards. |
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|
November 2005 |
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3 November
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BigPond announces 12-month half-price broadband offer. |
5 November
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|
Sensis launches re-designed Tradingpost.com.au website, which includes the ability to make
offers and buy online and a new advertiser centre. |
15 November
|
|
CEO unveils Telstra Transformation
Strategy and other announcements including the next
generation network and strategic partners key vendors who will assist Telstra in delivering its network transformation. |
15 November
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|
$210 million employee training package announced. |
16 November
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|
Chief Operations Officer, Greg Winn leads Technology Briefing with analysts and media. |
|
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December 2005 |
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1 December
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|
Group Managing Director Public Policy & Communications, Phil Burgess leads Regulatory Briefing
with analysts and media. |
7 December
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|
Telstra launches www.nowwearetalking.com.au website. |
9 December
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|
Hong Kong CSL and New World PCS announce merger. |
15 December
|
|
First 3G 850 video call made between 3G 2100 phone in Sydney and a 3G 850 phone in country
Victoria using Ericsson equipment. |
21 December
|
|
Telstra puts planned Fibre to the Node network (FTTN) on hold pending regulatory reforms
to ensure a commercial rate of return for Telstra shareholders. |
21 December
|
|
CEO Sol Trujillo establishes Telstra Business, a new division that is focused on serving small to mid-sized businesses. |
28 December
|
|
Telstra lodges undertaking with ACCC Unconditioned Local Loop (ULL) service for $30 uniform national
price for both cities and the bush. This undertaking was rejected by the ACCC on 15 June 2006. |
|
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January 2006 |
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|
24 January
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|
Telstra sponsored Queens Baton Relay commences in Sydney for Australian leg of journey
to Melbourne 2006 Commonwealth Games. |
31 January
|
|
Sensis acquires majority share in Adstream/Quickcut, which provides content management and
delivery services to advertisers around Australia. |
3
CHRONOLOGY:
The story so far |
|
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|
February 2006 |
|
|
8 February
|
|
New look Yellow
Pages® OnLine site launches with Choice buying guides, improved mapping
content and simpler search capabilities. |
9 February
|
|
Telstra announces $2.14 billion profit for first half of 2005/06. |
21 February
|
|
Alcatel ISAM (IP-DSLAM) technology tested and integrated into Telstras network with the first customer connected to
a new ADSL service using next generation access technology at our Frankston exchange in Melbourne, Victoria. |
22 February
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BigPond announces Australias first legal movie download service. |
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March 2006 |
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1 March
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BigPond Cable Extreme launches with new high speed plans (up to 17 Mbps). |
3 March
|
|
Telstra and the ACCC begin discussions around regulation reforms to safeguard shareholder investments
in building our Fibre to the Node network. These discussions are ongoing. |
3 March
|
|
Telstra announces 5 year $67 million training initiative for Telstras field technicians via a Telstra Learning
Academy. Part of a $210 million, three year employee training program. |
11 March
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National roll-out of Alcatel ISAM (IP-DSLAM) technology commences. |
12 March
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Telstra launches new brand campaign underscoring our ability to bring together services and content. |
14 March
|
|
BigPond launches BigBlog a service capitalising on the web phenomenon where people create web log
diaries to share their thoughts, comments, stories, interests and adventures, hosted online on BigPond. |
15-26 March
|
|
Melbourne 2006 Commonwealth Games, supported by Telstra network and sponsorship, and showcases
integrated services. |
22 March
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|
Telstra announces reduction in wholesale local call prices. |
31 March
|
|
Merger completed between Telstras Hong Kong mobile carrier CSL and New World. |
31 March
|
|
First Cisco CRS-1 installed and commissioned as part of the deployment of new IP Core. |
31 March
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Business Support Systems (BSS) supplier contracts now in place with Accenture, Comverse and Siebel. |
|
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April 2006 |
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3 April
|
|
BigPond announces new pricing plans, lower prices and wider coverage for the BigPond Wireless
Broadband mobile card service. |
6 April
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|
Telstra announces six year contract with IBM to manage Telstras internal IT systems. |
13 April
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Sensis launches the print, online and voice travel and accommodation guide, GoStay. |
18 April
|
|
Largest Expression of Interest (EOI) in the Brisbane property market; national property consolidation
program continues. |
21 April
|
|
Last ADSL customers operating on problematic Shasta technology migrated onto the new Juniper ERX boxes. |
26 April
|
|
BigPond reaches one-millionth ADSL broadband customer, doubling its ADSL customer numbers
in less than 12 months. |
27 April
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|
Telstra seeks urgent Government clarification on regulation of its new 3G 850 network. |
30 April
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EVDO network expansion completed and marketing commenced. |
|
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May 2006 |
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1 May
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Telstra launches Viva Call Centre in Perth, employing an expected 135 staff to provide outbound sales
support for broadband, mobiles and fixed line (PSTN). |
18 May
|
|
Telstra marketing and sponsorship activities for the World Cup commence. |
22 May
|
|
22 ISAM sites deployed nationally and 17,000 ports achieved to meet broadband ADSL growth. |
23 May
|
|
Telstra Services announces WorkPlace Excellence program to staff new tools, productivity improvements
and review of work practices. |
25 May
|
|
Telstra revises Cash Capital Expenditure guidance down by $700 million to $4.1-$4.4 billion for 2005/06,
to reflect savings from better procurement outcomes; stopping of projects not aligned with the new
transformation strategy and minor delays with some components of this strategy. |
31 May
|
|
The percentage of faults restored on time for our business customers reaches a four year high
(at 91 per cent) through various initiatives. |
|
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June 2006 |
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21 June
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BigPond launches Games Shop a new online service for PC games downloads. |
21 June
|
|
Telstra announces details of 2,600 job reductions across the business in the next two years
part of the commitment to reduce staff by 10,000 12,000 over five years. |
22 June
|
|
Telstra launches new pricing initiatives: subscription plans for home phones. |
28 June
|
|
One millionth customer migrates to the new BigPond technology platform. |
4
National 3G service on track
Since
Novembers announcement to build a new, national 3G service, Telstra with its strategic
partner, Ericsson, has maintained an aggressive building schedule. By 30 June, more than 3,500 of
the anticipated total of 5,112 3G 850 base stations have been
installed on-site and more than 3,000
sites across Australia equipped and upgraded with additional transmission capacity.
Only one month after the initial announcement, the first
video phone call on the 3G 850 network was placed between
country Victoria and Sydney proving the technology and its
compatibility with the existing 3G 2100 network. This trial
also showed, at 850Mhz, wireless broadband on 3G provides
superior coverage, extending the availability of high-speed
data services.
When Telstra launches its national 3G network, it will operate services over both the GSM and CDMA
networks until the national 3G 850 network provides the same or better coverage and at least until
January 2008. From that time, once the software upgrades are complete and the new service matches
or betters the current range and performance of CDMA and any necessary Government approvals have
been gained, Telstra will close its CDMA network. In the meantime, Telstra has also extended its
2GSM network coverage in key markets to maintain coverage superiority. By July, this will include
an extra 522 2GSM mobile base station sites including 113 sites to improve coverage in the Sydney
area.
By 30 June, 2006 more than
3,500 3G 850 base stations installed
5
Wireless broadband performance continues to deliver: traffic up 270 per cent, subscribers double
Australians appetite for all things broadband continues with the substantial take-up of
wireless broadband services on Telstras EVDO network. Since January 2006, total data traffic
almost tripled, growing by 270 per cent in the five months to
May 2006. From January to June 2006,
subscribers almost doubled. New plans, lower prices and wider coverage for the consumer and
business services have helped contribute to this result. To continue to meet this growing demand,
Telstra extended its network coverage by 272 EVDO sites, bringing coverage to nearly half of the
countrys population.
Wireless broadband usage increases
6
New IP core network: one third deployed since 1 July 2005
Telstras next-generation network is delivering new, better and faster services to tens of
thousands of customers. The new wireline IP core network will offer 77 times the platform capacity
of the old network. It will provide users with more reliable and stable media and telephony
services and expand dramatically the number and range of services any individual customer can use.
In February Alcatel IP-DSLAM technology was tested and integrated into the Telstra network with the
first customer connected to a new ADSL service using next generation access technology at our
Frankston exchange in Melbourne, Victoria. In upgraded areas, residential customers are
network-ready for new multimedia applications when higher speed services become available.
Telstra is beginning to deploy advanced services to upgraded business customers including IP
telephony and conferencing,
IP-based call centers, reliable higher-speed broadband, web-hosting and
security services.
The new network is permitting Telstra to move more swiftly to satisfy customer demand and the
fast-growing market for Virtual Private Networks (VPNs)* to connect organisations and enterprises
to the internet is experiencing immediate benefits. In the past year the time taken to order new
VPNs has come down by 75 per cent 1, while delivery times are down at least 20 per
cent 2. The new network is reducing overall unit costs for Telstra, allowing proactive
management of actual and predicted network demand and permitting network upgrades to be implemented
simultaneously across the nation rather than sequentially over many months.
|
|
|
1. From 55 minutes to 15 minutes, on average.
|
|
2. From five weeks to four weeks, on average. |
|
3. Video on Demand not currently available. |
Expanding services through IP gateway
Improvement in VPN turnaround times since 1 July 2005
|
|
|
* |
|
Virtual Private Network (VPN) is a private communications network used
by businesses to communicate securely over a public network. |
7
In April 2006, we announced a six-year contract with IBM to bring together the operations and
management of all of Telstras internal IT systems. This contract replaces the previous long term
contract with IBM and will deliver economies of scale, with IBM responsible for an additional 1500
servers. We will realise savings of almost $270 million over the life of the contract, with $10
million in savings already achieved to date. We have automated the end-to-end ordering process for
IP products for business and corporate customers. This has been in operation for two months and is
already working to eliminate a 12-day delay in processing orders, at a reduced cost.
We are
reducing the number of business and operational systems originally 1,252 systems by 75 per cent
in the next three years, and 80 per cent in five years.
Six Quick Win programs delivering benefits in 2006/07:
1. |
|
Introducing an Integrated Desktop Solution to enable single sign-on and data entry for sales and
service staff. This removes duplication, increases speed and improves customer service. |
|
2. |
|
Simplifying the technology of relationship marketing. |
|
3. |
|
Delivering a Service Delivery Platform engine to support future product offerings around the 3G
850 network launch. |
|
4. |
|
Deploying Global Positioning System (GPS) technology in field workforce vans. GPS will ensure
better scheduling of work, greater safety for employees and quicker response to customers. The
first deployment to 100 vans in Queensland was achieved ahead of schedule. |
|
5. |
|
Modernising equipment used to monitor the health of the national network through various
projects at the Global Operations Centre (GOC). Fault detection times have reduced by up to 25 per
cent. |
|
6. |
|
Improving online billing for business customers. |
Eleven major transformational work programs are in various stages of completion for OSS (our
Operational Support Systems used to support internal business processes) and BSS (our Business
Support Systems for Customer Relationship Management, Care and Billing).
Achievements in this area reduce costs, increase efficiency and improve customer service.
Reducing business and
operational support systems
We are reducing the number of business and operational systems originally 1,252 systems by
75 per cent in the next three years, and 80 per cent in five years
Operational Support Systems (OSS) programs:
|
|
Customer Service Assurance |
|
|
|
Fulfilment |
|
|
|
Inventory |
|
|
|
Network Planning |
|
|
|
Network Service Assurance |
|
|
|
Enterprise Program Management |
|
|
|
Service Delivery Platform |
At end of June 2006, we selected the following key vendors Amdocs, Cramer, Syndesis, Metasolv,
Infovista and VPI.
Business Support Systems (BSS) programs:
|
|
Billing |
|
|
|
Care |
|
|
|
Online |
|
|
|
Data Warehouse |
Accenture, Comverse and Siebel contracts were signed by March; equipment orders have been placed
and two units of Suns new server, the Fire E25K, have been operational since May 2006. Ten
additional units were ordered in June 2006.
8
Reducing Telstras property portfolio
Telstras property portfolio covering 14,000 sites and 2.46 million square metres
(m2) is Australias largest with 182 buildings across the country. As part of the
transformation strategy, better management is reducing operating costs and delivering benefits to
business operations. As at 30 June 2006, Telstra had exited leases in 25 buildings in NSW,
Victoria, Qld, ACT, WA and SA. Thats office space of 44,911
m2 or seven
international-sized football pitches.* It represents annualised savings of $14 million. Employees
have been relocated to other sites. Office consolidation will continue in Brisbane where in April
Telstra sought 50,000
m2 of office space in the largest Expression of Interest in the
citys property history. A similar consolidation is underway in Canberra. The first Telstra Service
Mega Centre a depot for field technicians was opened in Broadmeadows in Melbourne in December
2005 and another is due to open in Canberra in 2007.
Brightstar: Providing customers with mobiles faster
A new, exclusive wireless device sourcing agreement between Telstra and the global
supply-chain specialist Brightstar, signed in October 2005, is giving Telstra customers access to
the latest handsets faster, cheaper and in some cases, ahead of the competition. Brightstars
global purchasing power has guaranteed production slots for Telstras handset requirements leading
to a more secure supply of mobile handsets to meet customer needs. Telstras sourcing contract with
Brightstar has delivered total net savings of $70 million (October 2005-June 2006). Phase two
improvements to Telstras retail supply chain management are on track and will begin contributing
to EBITDA in July 2006. These include launching web based portals to improve Telstras forecasting,
inventory management, product lifecycle management and supplier collaboration.
Increasing ADSL capacity, reducing Held Orders
Telstra created 800 new network infrastructure upgrade projects in September 2005, on top of
the existing 1,000 projects, to increase the capacity of the access network infrastructure and
reduce ADSL service cycle times. We also added new and recovered faulty ports in the exchange to
enable an extra 22,000 exchange ports. As a result, the number of Telstra customers awaiting
network build for ADSL services was reduced from 19,300 in September 2005 to 7,100 as of 20 June
2006.
We have also achieved a reduction in held orders or unsatisfied demand in fixed line phones by 20
per cent.
Impact of FY06 site exits
Brightstar procurement:
$70m savings to 30 June 2006
ADSL Held Orders reduced
9
Integrated services driving new revenue growth
Telstra has said new products and services will deliver 20 30 per cent of its revenue growth
by the end of 2008. The Melbourne 2006 Commonwealth Games showcased what happens when new, improved
and most importantly integrated products and services hit the market. From a business
perspective, the Commonwealth Games approach was the first serious chapter in that revenue story
Telstras 3G 850 network launch will be the next.
New revenues are also being generated from the extension of EVDO wireless broadband coverage across
272 new sites since December 2005, now reaching a total area greater than 7,600km2.
Key changes in our internal processes, introduced as part of the transformation, are also improving
the take-up of consumer products. An example is our 1,2,3 test. It reviews the number of steps
a customer takes to activate and use a product, reducing them to deliver a 1-click solution.
New home phone plans change the game
Based on extensive customer research, three new subscription-based pricing plans for home
phones have been launched. Offering greater value, simplicity and cost surety, they fundamentally
change the way Telstra prices its home phone services. Unlike capped plans, customers dont need to
worry about overspending their cap limit and are not locked into long term contracts.
Subscription-based pricing changes the game: it moves Telstra ahead of its competitors by launching
offerings we know customers want and changes our business model from price-based to value-based
competition, improving revenue potential.
New products and services will deliver 20 30 per cent of revenue growth by the end of
2008.
10
Churn changes for the better
Telstras new customer centric approach to marketing has delivered a marked improvement in
customer churn rates. In mobiles, Telstra is recording strong positive growth in consumer
Post-Paid, having just achieved the best result recorded over three years for activations on
Telstras mobile network.
In terms of fixed line (PSTN), the number of customers leaving Telstra (Churn Out) has been reduced
26 per cent in the 12 months to May this year and the acquisition of new customers has improved by
10 per cent in the same period.
Telstras efforts with bundled customers are also providing solid returns. Since June 2005,
Telstra has increased the number of customers with two or more products by 25 per cent, while those
customers with three or more products has grown by nearly 30 per cent.
Outbound sales increase revenue/market share
Telstras outbound calling group ProActive Sales is made up of 9 internal call centres,
including the recently opened call centre in Perth, two Industry Partners and the Personal Calling
Program (PCP). Running an average 40 to 50 campaigns each week, this channels primary focus is to
generate revenue and increase market share through a program of work driven by marketing. Over the
last 12 months, there have been continued improvements to the performance of the channel. Some
highlights include Mobiles Post Paid Activations increased by 285 per cent since March 2006 and 3G
handset sales have improved by 600 per cent in the last 3 months.
Customised solutions help big business move to next generation networks
Since November 2005, 16 virtual business centres have been set up to help enterprise and
government customers move to an IP environment so they can realise the commercial benefits that
next generation networks deliver. These centres are also developing new and integrated products to
generate new revenues to enable Telstra to grow faster than its competitors. Some solutions have
already been launched while a number of customer trials are also underway. Examples include: retail
media solutions involving content streaming, strategic acquisitions in the IP telephony space, new
mobility and wireless solutions and ramping up of contact centre technology solutions.
11
Wholesale uptake supports industry growth
In the first half of 2005/06, Telstra Wholesales sales revenue grew by 18 per cent compared
with the same period in the previous year. DSL services, ViSP (Virtual Internet Service Provider)
and Wholesale Ethernet sales were, and continue to be, significant contributors to growth. To
reduce labour costs and improve customer service, there was further automation of Telstra
Wholesales online ordering, billing and maintenance systems during the past year. Wholesale
customers derive the efficiency benefit of being able to conduct business transactions with Telstra
online, reducing manual orders as well as enabling them to make and track orders outside normal
business hours.
Location of non-Telstra fixed infrastructure competition
12
Obsolete, duplicated and aging products and network platforms are being removed or capped to
build the base for delivering integrated services to Telstras customers. By 30 June, 48 of
Telstras 330 network platforms were capped or exited. This rationalisation exceeds our December
2006 target towards cutting the number of network platforms by 60 per cent over three years.
Working with the customer is a crucial part of this program as they move off legacy systems. For
example: the final 60 customers using Telstras Time Services have exited the platform and many are
using alternative services. Likewise the final 80 customers using Telstras Intelex product now can
have services provided by an outsourced arrangement enabling another platform to be exited. Cutting
this complexity and the associated cost from Telstras operations is a critical, first step to
deliver customers a powerful and seamless user experience, integrating devices and platforms in a
simpler, 1-click way.
No. of platforms capped/exited meets schedule
By 30 June, 48 of Telstras 330 network platforms were capped or exited
During 2005/06 Telstra added 522 mobile base station sites including 113 sites to improve
coverage in the Sydney area, reinforcing Telstras reputation for network superiority. The
footprint for wireless data also expanded dramatically with an additional 272 EVDO* sites extending
overall coverage to more than
7,600km2. EVDO now reaches nearly half the countrys
population. The company has expanded the availability of ADSL broadband by bypassing network
blockages and investing in technology that dramatically extends the reach of ADSL. Telstra has also
modernised equipment used to monitor the health of the national network, including 400 new
high-powered computers at the Global Operations Centre. As a result of this upgrade program, fault
detection times have been reduced by up to 25 per cent.
|
|
|
* |
|
EVDO provides wireless broadband connectivity. |
13
New Training and Tools
Telstras technical field workforce is becoming more mobile and responsive to customer needs
with new tools and equipment to support their operational performance. As of 30 June, one hundred
Telstra vehicles in Queensland were equipped with Global Positioning System (GPS) technology with
additional deployment planned in 2006/07. The company is working towards extending the rostered
hours of technicians to provide service on evenings and weekends, and new systems permit more work
to be performed remotely without requiring customer attendance.
Telstra has announced it is investing an additional $210 million over the next three years in a new
training program for its technical, engineering and marketing people. The purpose: to equip them
with the right skills to build, operate and maintain next-generation networks and better serve
customers. Telstra is partnering with Accenture Learning, a global leader in the delivery of
learning services to establish the Telstra Learning Academy. The first program for field
technicians will start in August 2006 with a new focused curriculum replacing multiple outdated
courses. We are also introducing web-based programs, moderated in real-time by instructors.
Telstras investment in its technical workforce extends to giving its people the right tools.
Telstra is investing $6 million to:
|
|
roll-out new self-calibrating gas detectors |
|
|
|
provide high-speed wireless modems to field team managers |
|
|
|
fast-track a $2 million program to upgrade technicians mobile phones |
|
|
|
further deploy Customer Access Network test sets to the field workforce, enabling them to perform
auto tests at the completion of a telephone installation or repair |
14
Designing our business to create growth with market based management
Telstra wants to understand its customers and meet their needs better than anyone else. The
extent of the companys market research is unprecedented. Since August 2005, Telstra has conducted
more than half of 90,000 planned consumer interviews, aiming for the deepest understanding of who
Telstras customers are and what they want. In addition, Telstra has completed more than half of
its planned 16,000 small businesses interviews. This ongoing, high scale and high quality customer
research has guided the restructure of Telstras consumer and small business sales and marketing
teams around seven consumer and five small and mid-sized enterprise segments. It has also led to
the recent launch of a number of call centres and shops that provide, for the first time, a
dedicated customer service channel for small business customers.
This is no small scale restructure Telstra is literally redesigning the entire organisation
around its segment focus. Gone are Telstras traditional product focused silos. Its future is
organised around customers and value, not products and price. Market based management inevitably
changes the customer experience for the better because it will be implemented at every point the
customer touches the company, from technicians in the field to people serving in Telstra Shops. It
provides deep, knowledge of the customer so that Telstra can actively offer products and services
it knows the customer will find appealing or that match their needs. Telstras marketing workforce
is being trained through a specially designed academy to make sure all staff with customer contact
have the skills to work within the new approach.
Gone are Telstras traditional Product focused silos. Its future is organised around
customers and value, not products and price.
15
Brand, advertising, integration demonstrated at the Commonwealth Games
Prior to the 2006 Melbourne Commonwealth Games in March, Telstra launched a series of new
advertisements about helping customers have the experiences they want, when and where they want
them. The company presented its three major brands Telstra, BigPond and Sensis together as
never before. Audiences saw a plumber watching live BigPond Sport on a Telstra 3G mobile and a
rally driver using Sensis Whereis maps via 3G.
Telstras Commonwealth Games sponsorship turned out to be a timely opportunity to showcase the
reality of integrated communications. And it worked. Research found the advertising messages were
clearly conveyed.
More importantly, during the Commonwealth Games, Telstras customers started using the products and
services that were being advertised. Revenues increased.
It is worth spotlighting Telstras infrastructure investment, most of which was left in place after
the Games. Telstra delivered an IP-based data network customised for the Games, a spectrum-based
voice network and a radio network. This involved more than 4,000 fixed-line phones, 2,000
kilometres of optical fibre, 22,400 kilometres of cable and more than 100 different servers, 160
network switches and 44 routers.
The Commonwealth Games provided the first opportunity for Telstra to stream content live to mobiles
and the Internet. As part of the Games, BigPond launched its BigBlog service and the company
showcased new product offerings including Kodiak Push to Talk, TV to a handheld device, 3G
streaming and multimedia messaging.
The Commonwealth Games provided a window on the transformation of the Telstra brand work
continued through the Socceroos World Cup campaign and will also be showcased through Australian
Idol on Network Ten.
And the value?*
|
|
11.5m text messages were sent |
|
|
|
21,100 data sessions were held |
|
|
|
8.3m mobile calls were made |
|
|
|
Streamed minutes increased more than four times |
|
|
|
Average carriage consumption was up by almost five times |
|
|
|
Video calling increased by 70 per cent |
|
|
|
Call minutes increased 86 per cent |
|
|
|
3G ARPU increased 39 per cent |
|
|
|
3G data went up by 42 per cent |
|
|
|
Telstra Shop traffic rose 32 per cent |
|
|
|
The number of 3G handsets sold in stores was up 66 per cent |
|
|
|
* |
|
During the Commonwealth Games period |
16
Segmentation drives sponsorship value
Market based management is re-focusing Telstras ongoing commitment to supporting sports, arts
and business initiatives in Australia. Knowing our customers better includes understanding their
love of different sports, the programs they watch on TV or their interest in the arts or community
activities we sponsor.
Consistent with the new approach to knowing our customers better, we align sponsorship properties
to selected consumer and business segments. This strategy will boost returns from these
investments. Sponsorships connect us emotionally with our target audience when theyre engaged in activities
about which they are passionate whether thats attending a rugby league match, going to the
swimming or going to the ballet.
Sponsorships also enable Telstra to deliver a wider range of
content to customers, including online and 3G mobile content. BigPond is discussing new media
rights agreements to continue and extend the range of content we can provide our customers via
BigPond broadband and 3G mobiles.
Telstra
sponsorships*
|
|
|
* |
|
Selected Telstra sponsorships only, for indicative purposes |
17
Regional upgrades delivering the transformation benefits to all Australians
Telstra Country Wide* (TCW) has continued with its core business of improving the coverage and
availability of telecommunications services in outer metropolitan, regional, rural and remote parts
of Australia. In the past 12 months, Telstra has upgraded another 410 exchanges in regional
Australia with ADSL, bringing broadband access to another 152,000 Australians under the
Commonwealth Governments HiBIS and Broadband Connect schemes.
TCW has also recently established Local Area Marketing teams across Australia to work with its Area
General Managers and the rest of Telstra to conduct targeted, localised campaigns and research, to
better understand and meet its regional customers telecommunications needs.
|
|
|
* |
|
TCW was established in 2000 evidencing Telstras commitment to regional Australia.
TCWs local presence model of placing senior managers and staff on the ground, living and
working with their customers, has proved so successful that the model has been extended to
metropolitan areas. |
New attention to small to medium business
Part of Telstras renewed focus on its customers has been the creation of a new division
dedicated to serving small to medium enterprise customers. Established under Deena Shiff in
December 2005, the new Telstra Business Group will enter the new financial year fully operational
with five segment marketing teams, a direct sales force, dedicated call centres and business sales
consultants in Telstra shops to serve business customers. A range of new pricing plans will go to
market early in July and further products releases are in the pipeline to match the diverse needs
of business customers.
18
Innovation at Sensis drives growth
Sensis is Australias local search leader. Almost 13 million Australians turn to Sensis
print, online, voice, wireless and in-car services more than ten times a month. Sensis is on track
to meet 2005/06 targets, driven by online growth and a focus on efficiency. This has been achieved
by:
|
|
protecting and growing the core business with new print buying guides and advertising products |
|
|
|
search innovations, such as Sensis® SMS and Sensis® Mobile |
|
|
|
expanding into the lucrative accommodation category with the GoStay accommodation guide |
|
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providing the ability to buy online at tradingpost.com.au and GoStay |
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new innovations and services for Yellow Pages® OnLine, White Pages® OnLine, Whereis.com and
Telstra Mobile |
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the expansion of Whereis® into New Zealand |
Sensis growth continues to excel. Online usage has grown by 29 per cent in the last
year2. We
have also seen excellent Trading
Post® print readership3 and UBD unit
sales growth. The Yellow Pages® OnLine display customer base has grown by 20 per cent to more than
100,000. In 2006/07, Sensis will accelerate its innovation program, while improving both underlying
technologies and the services offered to users and advertisers.
New content drives growth in online information, search and transaction services
A key element of Sensis transformation is expanding and improving its online businesses and
better integrating them with Telstras online services. The result is rapid user and advertiser
growth. Since July 2005, Sensis has launched the GoStay online, voice and print accommodation
guide as well as added numerous innovations to its existing online services. These include a new
web site for Tradingpost.com.au with transaction services; improved search facilities, more local
mapping information and adding Choice Buyers Guides to Yellow Pages® OnLine; as well as
enhancements to Whereis.com, Australias leading digital mapping service. And, in an Australian
first, a trial of a click-to-call service in sensis.com.au was launched. Significant growth in
online usage has resulted from innovation. In the three months to May 2006, Sensis online network
had almost 7.5 million unique browsers a
month4,
having grown by nearly one third;
referrals from Telstra sites have grown to nearly
1.5 million5
and Yellow Pages® OnLine
display advertisers have grown to more than 100,000, up by 20 per cent. Online growth prospects
remain buoyant with a wide range of new content, new services and improvements coming right across
Sensis online network.
Sensis network overall online usage
Quarterly, March 2005 to May 2006
19
Digital mapping spurs growth
Through its UBD®, Gregorys® and Whereis® brands, Sensis now helps more Australians get from A
to B than any other business. Its latest Whereis® maps cover more than one million kilometres of
Australian roads and they power almost every in-car and personal satellite navigation system in
Australia. Whereis maps are also used in Sensis own services such as Yellow Pages® OnLine and
Telstras WAP and i-mode® phones. UBD and Gregorys street directories are also growing in range
and popularity. Ongoing investment and innovation in these services is driving growth. In the
financial year to May 2006, Whereis.com usage rose by 59 per
cent6 making it one of
Australias fastest growing major sites; sales of Whereis-powered satellite navigation units
doubled to almost 350,000; and street directory unit sales grew strongly 14 per cent in Sydney
and 20 per cent in Melbourne. Customers will see more innovations this year with new map formats,
wider coverage and new web and mobile services.
Breathing new life into Trading Post® drives triple-digit online revenue growth
Adding Trading Post to Sensis stable is creating new opportunities for shareholders and
customers. While competition in the print classifieds market continues, online innovations,
improved print and online category structure and integrating Trading Post® content on compatible
Telstra mobiles are positioning the business for future growth. In 2005/06, the Tradingpost.com.au
web site was improved to enable online transactions and the ability for people to manage their own
ads and purchases, while a new research centre was added to the popular motor vehicle section.
This has driven 40 per cent growth in online usage this year to almost 1.5 million unique browsers a
month7, while, according to Roy Morgan, print readership grew by 25 per cent over the past
two years8. The new services on Tradingpost.com.au have also sparked a rush in advertiser
and buyer activity. Since launching the online services last November, new registrations have grown
by approximately 7,000 per week and the average weekly volume of online only ads has grown by
nearly 60 per cent. The result: triple digit growth in online revenue. Future Trading Post®
initiatives will see customers access more products with enhanced online search, buying, selling
and security capabilities, as well as enhanced services for Telstras mobile phones.
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1, 3 & 8. Roy Morgan Single Source Australia, April 2005 March 2006, base Australians age 14+ |
|
2. Nielsen//NetRatings SiteCensus, based on 3 months to May 2005 vs 2006 |
|
4, 6 & 7. Nielsen//NetRatings
SiteCensus, based on 3 months to May 2006 |
|
5. Nielsen//NetRatings SiteCensus, May 2006 |
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Graphssource: Nielsen//NetRatings SiteCensus |
Online usage
Online usage
20
New broadband products driving growth
BigPond, Australias leading Internet Service Provider (ISP) with more than 2.3 million
broadband and dial-up customers at the end of December 2005, offers broadband through a combination
of ADSL, cable, wireless, satellite and ISDN. With coverage available to virtually 100 per cent of
the Australian population, broadband is one of the key drivers in Telstras transformation.
BigPond continues to stimulate and benefit from high levels of broadband uptake in Australia, with
strong growth and increased market share.
In the past 12 months, BigPond has launched two major access products Wireless Broadband and 17
Megabytes per second (Mbps) Cable Extreme as well as Australias first legal Movie Downloads
site, BigPond TV including webcasts of the Sydney Symphony, BigBlogs, BigPond Kids and BigPond
Games Shop.
BigPond has also assumed responsibility and branding for all Telstra 3G content.
Reduced churn reflects BigPonds #1 rating for customer service*
Integration is at the heart of Telstras transformation strategy and the company now talks
about Sensis, 3G and BigPond in the same sentences and the same campaigns. BigPond has a big role
in Telstras changing strategy: accelerated revenue growth, integrated products and services,
broadband expansion, market share, better customer experiences... the list goes on. In its second
industry study, independent benchmarker*, Global Reviews, found:
|
|
BigPond retained its number one
ranking for phone and email based customer support |
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|
BigPond telephone support performance remained
stable at 64.3 per cent, 14.8 per cent above the ISP (internet service provider) average |
|
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BigPond
email support performance rated at 73.4 per cent compared with second ranked at 59.4 per cent and
17.4 per cent above the ISP average |
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BigPond is the only ISP, among those tested in the study, to
report improved performance since the second quarter of 2005 |
In business terms, this improved
customer satisfaction reduces churn and increases customer loyalty; there are more word of mouth
recommendations and increased sales. With integration across platforms and offerings, BigPond and
Sensis excellence are very much at the centre of 3G, online and other new value propositions
Telstra is driving into the market.
* Research conducted in January and February 2006 and commissioned by Telstra. Research
methodology and report available on request.
21
The culture at Telstra delivering excellence to the customer
This year, the CEO and his senior team led one of Telstras largest ever staff briefing
programs, including meetings in 22 metropolitan and regional centres. The purpose: To review the
details of the New Telstra with employees to encourage their full engagement in the
transformation. Reason: Companies with highly engaged workforces deliver better outcomes. When
employees understand the mission, companies achieve higher average shareholder returns* and
productivity and discretionary efforts are higher**. The connection between staff engagement,
leadership and business results is well known.
The idea that Telstra people will put the customer first and compete to win is now central to the
companys Human Resources approach. Leadership, talent management and performance incentives at
Telstra have been recast this year to deliver essential culture change. Telstra is actively
equipping its workforce with the skills to do the job right for the customer, best illustrated
by the announcement in November 2005 of a three year $210 million training program for its
technical, engineering and marketing people. And, to make sure the right outcome is delivered and
targets are met, annual company-wide research involving every staff member will be used to
encourage and assist employee engagement.
Sensis has also actively re-aligned and supported its workforce to deliver on the Sensis strategy
for growth. The companys new people programs are a critical part of its growth strategy and one
of the key reasons why Sensis is on track to meet its 2005/06 financial targets.
* |
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Best Employers Study Hewitt (2005). |
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** |
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Driving Employee Performance & Retention Through Engagement Corporate Leadership Council
2004. |
Diversity strengthens senior management
When CEO Sol Trujillos direct reports met for their first meeting in 2006, there were more
women at the leadership table than in the 100 year history of Telstra and its predecessors
Telecom, the OTC and PMG. New Group Managing Directors, Kate McKenzie Telstra Wholesale; Holly
Kramer Product Management; and Andrea Grant Human Resources, joined Deena Shiff who now heads
Telstra Business having headed Wholesale as a CEO direct report since 2005. The appointment of
Fiona Balfour as Telstras Chief Information Officer in 2006 further illustrates why Telstra is now
recognised as one of Australias leading corporates in appointing women to senior management. Since
2002, the number of women in senior management has nearly doubled to more than 20 per cent.
Telstras diversity strategies include an active focus on the movement of women through management
levels, maintaining a high rate of return from maternity leave, implementing a range of initiatives
aimed at the future development and retention of women, and supporting initiatives to increase the
number of women in non-traditional work.
New Telstras cultural priorities
Customer. First
People. Power
Compete. Win
Done. Now
Anything. Possible
We get it.Together
22
Building the foundation to reverse long-term share price decline
The Telstra share price has traded in a wide range since the Government first sold shares to
the public via T1 in 1997. The share price hit a record high of $9.16 in November 1999, shortly
after T2 and at the height of the global technology boom and has also traded below $4.00 in 2003.
Since
the new management started in July 2005, the Telstra share price has continued its fall from
around $5.00 to $3.68 at the close of trading on 30 June 2006. In fact, the share price decline
started well before the new management started. The share price drop from post T2 levels can be
attributed to many factors including:
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Excessive regulations that increase costs and/or decrease opportunities to earn new revenues |
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Increasing competition and changing consumer behaviour impacting the financial performance of the
business |
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Local impacts of global collapse in telecoms share prices in 2000/01. |
On 15 November, Telstra set out its strategy for the next five years. Over the first two years the
company is undertaking a comphensive program of capital spending and rebuilding that will lay the
foundation for new revenue and improved earnings.
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T1 offer price : |
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$ |
3.30 |
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T2 offer price: |
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$ |
7.40 |
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Share price high: |
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$ |
9.16 |
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23
Building partnerships for change
The telecommunications sector has always been subject to wide and deep regulation by
government worldwide, not only in Australia. But today everything is changing again, not only
in Australia but worldwide. Examples:
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Ownership in the telecoms sector is changing from government ownership to private ownership by
individual shareholders and institutional investors. |
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The competitive environment is changing from a government-run or government-sanctioned monopoly
with one provider to competitive markets with many competing providers. |
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Technology is changing as digital technologies increasingly dominate the way we transmit words,
music, pictures, voice, and data. |
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Consumer preferences are changing as more consumers seek high-speed, always on connectivity
that is easy and simple to use and works anytime, anywhere. |
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Infrastructure is changing as consumer demand for anytime, anywhere connectivity gives rise to
the expansion of wireless technologies. |
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Industry structure is changing as the Internet and digital technologies blur the distinction
among media, content and telecommunications companies. |
Regulations, however, are not changing and it is a challenge for governments and the telecoms
sector worldwide (e.g. the current debate between the German government and the EU), not only in
Australia. Regulatory reform is essential to keep up with the rest of the world and to accommodate
the profound and widespread changes in the marketplace.
When outdated 20th century regulations, created for the old analogue telephone and telegraph days,
are used to regulate a 21st century business, they create problems and distortions in the market;
destroy shareholder value; undermine the development of a competitive and financially healthy
industry; and stunt the ability of the industry to serve national needs for jobs, growth, and
productivity including urban-rural parity and other aspects of the nations economic and social
development.
When regulatory change is needed, history shows the debate is typically initiated and led by the
people or institutions being regulated. Thats why the management team, following a review of
regulatory challenges facing Telstra, made a commitment last July to the Board and to shareholders
to work hard to achieve regulatory reform.
The management team is not opposed to all regulation. Regulations that protect the health and
safety of consumers is important and should apply equally to all telecoms providers. The management
team does not oppose regulations that support services to rural and regional Australia, provided
only that the full costs of this commitment are shared by the entire industry.
Most importantly, the management team is committed to regulatory reform that will provide a
foundation for a new approach to regulation regulation tailored to the realities and requirements
of a digital economy that will serve everyone in the new world of digital bits and bytes.
Many complex regulations apply only to Telstra
...the management team is committed to achieving regulatory reform...tailored to the realities
and requirements of a digital economy
24
Achievements during the first year include:
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Closer monitoring and assessment of the costs of regulation to Telstra shareholders and to the
public. |
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Increasing shareholder awareness of the impact of regulations on share value. |
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Increasing public understanding of the costs of regulation, including lost productivity gains, as
a result of regulations that stunt investment and disadvantage Australias global competitiveness. |
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Providing tools to shareholders to help them influence the process of regulatory reform and
particularly the reform of regulations that destroy shareholder value. |
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Increasing collaboration with regulators, and especially the ACCC, on matters of mutual concern.
Example: the exploration of guidelines that might be used to establish a new approach to regulating
digital networks (e.g., FTTN) in a way that encourages competition, stimulates investments, and
provides access to all competitors on equal terms and conditions and which also afford competitive
returns for investors. |
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On-going consultations with regulators e.g., with the ACCC to develop a workable approach to
pricing access to the copper line the so-called Unbundled Local Loop (ULL). |
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Reductions in red tape such as a reduction in the number of reports and statistics Telstra has
to report to ACMA. |
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Improving regulations that increase public health and safety. |
Regulations are part of our
business environment. Regulations affect our business directly and have a major impact on financial
outcomes: Sometimes they increase our costs and sometimes they undermine our ability to earn new
revenues. Regulations affect our shareholders because they affect our bottom line. Regulations
affect our customers because they can help or hinder what we are able to do for customers. So the
need for management to devote time, attention and other resources to regulatory reform should not
be trivialised.
Hence,
the management team is working hard with the ACCC, other regulators, the
government and other stakeholders to help shape new 21st century regulations that are in sync with
changing technologies and changing consumer preferences. Telstras transformation strategy includes
initiatives to create a new regulatory environment that is
pro-investment, pro-consumer,
pro-innovation and pro-competition. That is the kind of environment that is good for our business
and our shareholders and good for our industry and the national interest. That is also the kind of
environment we are seeking to achieve by working closely with the government, regulators, and
others who have a say in making the rules that will shape Australias future in the first decades
of this new century.
A lot remains to be done, to be sure. New value-destroying regulation
continues to be imposed such as operational separation, local presence plans, and the like. Still
the first years achievements provide a foundation not just for changes at the margin but for
fundamental reforms that can place Australia, the industry and Telstra in the front ranks of
regulatory and service delivery reform. Time will tell...
Regulations are part of our business environment...and have a major impact on financial
outcomes
Telstras transformation strategy includes initiatives to create a new regulatory environment
that is pro-investment, pro-consumer, pro-innovation and pro-competition.
25
Advocacy through innovative communications
On 7 December 2005, Telstra launched a new advocacy website called nowwearetalking to raise
awareness and encourage public debate about the issues facing the telecommunications industry and
the future of Australias largest telecommunications company.
The goal is to place significant industry issues on the public agenda including regulation, how
to deliver broadband to all Australians and industry customer service and encourage public
participation in an open debate. Nowwearetalking reflects the companys more open communications
strategy by providing a two-way channel to communicate directly with consumers and shareholders,
unmediated by the filtering and interpretation of traditional media channels. Using the latest new
media tools, such as online discussion forums and pod casts, the site encourages the airing of all
views and perspectives. Nowwearetalking is also the first Australian corporate website to feature
employee blogs. The site has had almost 150,000 visitors with nearly 2,000 comments published to
date.
The strong and favourable response to the site has encouraged Telstra to invest in further site
upgrades including the addition of automated notifications of site updates from May 2006.
Importantly, the site has helped increase public awareness about the issues facing the company and
is influencing debate about regulation in the telecommunications industry.
26
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Term |
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Explanation |
3G GSM
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Third Generation Global System for mobile communications is the evolution of the current GSM and CDMA
2G and 2.5G technology to support voice and high speed data and multimedia services. |
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3G 2100
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Third Generation mobile technology operating on 2100Mhz spectrum, offered by Telstra in partnership with
Hutchison Telecommunications Australia (HTA). |
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3G 850
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Third Generation mobile technology operating on 850Mhz spectrum: Telstras own new national network,
currently under construction, also uses 3G-HSDPA on 850Mhz, a technology enhancement which provides
greater breadth, much faster speeds when using HSDPA handsets and lower capital costs as 850 requires
fewer base stations than 2100 to achieve the same coverage. |
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ACCC
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Australian Competition and Consumer Commission its primary responsibility is to ensure that individuals
and businesses comply with the Commonwealth competition, fair trading and consumer protection laws. It
also regulates national infrastructure services, including the telecommunications industry. |
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ACMA
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Australian Communications and Media Authority responsible for the regulation of broadcasting, radio
communications, telecommunications and online content. |
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ADSL
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Asymmetric Digital Subscriber Line is a high-speed broadband technology that provides access to the
Internet. It allows high speed data to be carried over copper network phone lines. |
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ARPU
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Average Revenue Per User. In a broadband world, ARPUs tend to go up as the Internet plays a larger role
in how people live, work and play. |
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CDMA
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Code Division Multiple Access a mobile standard that provides voice, data, fax and short messaging
services. Telstra is replacing its CDMA network with a new 3G 850 mobile network to improve service and
functionality for the consumer. |
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Churn
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The number of subscribers switching between telecommunication providers. |
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DSLAM
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Digital Subscriber Line Access Multiplexor technology located at exchanges or in roadside cabinets that
takes the copper lines from customer premises and convert signals on/off them into a high speed pipeline
to the Internet. |
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EBIT
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Earnings Before Interest and Tax. A measure of company profitability. |
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EBITDA
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Earnings Before Interest Tax Depreciation and Amortisation. A measure of company profitability. |
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EVDO
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Evolution Data Optimised additional service for mobiles providing wireless high speed data transmission. |
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FTTN
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Fibre to the Node Infrastructure that delivers fibre optic cable to a connection point close to a
customers premises, to deliver broadband Internet, television and information services. |
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GSM
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Global System for Mobile Communications one of Telstras two digital networks. GSM covers 96 per cent
of the Australian population. |
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HiBIS
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Higher Bandwidth Incentive Scheme a government subsidy scheme. |
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IP
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Internet Protocol is a standard set of rules for the carriage of digital information such as voice,
video, data and images, across a global network. |
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IP Core
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The core element of a network that carries and logically splits voice, data and video using IP technology. |
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ISAM
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Internet Service Access Multiplexer ADSL technology manufactured by Alcatel. |
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ISDN
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Integrated Services Digital Network is an international communications standard for sending voice,
video, and data over digital telephone lines or normal telephone wires. An early form of digital
technology, its use has been largely surpassed by ASDL. |
27
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ISP
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Internet Service Provider a company that connects individuals or organisations to the Internet. |
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PSTN
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Public Switched Telephone Network referred to as fixed line the PSTN is the standard home
telephone service, delivered over copper wires. |
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SMS
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Short Messaging Service the text based message service on mobile phones. Also known as text
messages. |
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ULL
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Unconditioned Local Loop the Local Loop is the copper wire that connects the Telstra exchange
in your area to your house. Telstra is required to provide access to this wire to other
operators this connection is known as Unconditioned or Unbundled Local Loop. Other
telecommunications providers can provide customers with their own services like broadband and
the plain old telephone service by installing their own equipment in Telstra exchanges, and
connecting to the loop. |
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7 August 2006 |
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Office of the Company Secretary |
The Manager |
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Level 41 |
Company Announcements Office
Australian Stock Exchange
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
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242 Exhibition Street
MELBOURNE VIC 3000
AUSTRALIA |
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Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Fibre-to-the-node talks discontinued
Following discussions this morning with the ACCC, Telstra accepts that its negotiations with
the ACCC over a fibre-to-the-node broadband network have reached an impasse. Telstra sought
an outcome that would assure Telstra shareholders that their investment in the network would
not be used to subsidise network access by Telstras competitors. The negotiations have not
produced this outcome. The major stumbling block was the ACCCs unwillingness to recognise
the actual costs that Telstra incurs in providing its services and, especially, the costs it
incurs in providing services to rural, regional, and remote Australia. Until Telstras
actual costs are recognised and the ACCCs regulatory practices change, Telstra will not
invest in a fibre-to-the-node broadband network.
Telstra will be briefing media and analysts on this announcement later this morning and will
lodge a transcript of the briefing with the ASX when this becomes available.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
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7 August 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript from Telstra Fibre to the Node Briefing Teleconference
Attached is a copy of the transcript from todays Telstra Analyst Briefing on fibre to the
node, for release to the market. The Q&A transcript will also be released to the market
when available.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
TELSTRA FIBRE TO THE NODE BRIEFING
TELECONFERENCE 7 AUGUST 2006
ANDREW MAIDEN: Good morning everyone and thank you for joining todays briefing. We apologise for
the short notice. The reasons for that short notice will be apparent to you in a minute or two.
Phil Burgess will speak. Phil is the group managing director for public policy and communications.
When Phil is finished, you will be able to ask questions in the format described in the invitation
and at the conclusion this call Phils comments and your questions and his answers will be
transcribed and later this afternoon they will be posted with the ASX and following that Telstras
consumer web site www.nowwearetalking.com.au. So I will now hand over to Phil Burgess.
PHIL BURGESS: Thank you, Andrew. I have a brief statement, after which I would like to answer any
questions that you may have. For the question and answer part, I will be joined by two of my
colleagues; Tony Warren, who heads the Telstra regulatory affairs, and Frank Hatzenbuehler who led
our team in developing the high speed access service that I am going talk about a bit more later
and who leads our cost studies program.
I talked with ACCC chairman Graeme Samuel last Friday and again this morning. We
discussed the progress we are making in the FTTN talks, that is the talks between
Telstra and ACCC around the $4 billion high speed broadband fibre to the node network
that we want to build to provide high speed broadband connectivity to four million
households over the next 40 months.
Both these conversations were substantive, frank and civil.
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07.08.06
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Transcript produced by WordWave International |
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Both focused clearly on issues, critical issues that continue to divide us. These issues
are related primarily to two things: Actual cost and the way those costs would be recovered.
I called the chairman on Friday because I wanted to alert him as to how we were thinking about
these things and especially the cost issues. I also wanted to know the thinking behind his
public comments for us to go public with our FTTN proposal.
When we were talking again this morning the chairman and I agreed that we have reached an
impasse in our FTTN deliberations and it is only fair for us to inform stakeholders, including
Telstra shareholders, that this round of ACCC Telstra FTTN talks have failed. We have also
agreed that the FTTN and the ULL agendas that we are discussing include important issues for
Telstra, the industry and the nation and that we will continue to address these issues in a
variety of forums including, when it is appropriate, direct negotiations with the ACCC.
Let me talk a little bit about the chairmans public comments last week that we should go
public. He has urged us to go public with the FTTN proposal, in his words to see how the
public, the competition, the commentators react. I told him Friday that doesnt make any
sense for us, for several reasons: First of all, we agreed with him and the ACCC to go public
once we had some, what we called green lights and perhaps some amber lights from the ACCC, but
no red lights. As things now stand we have some green lights, a lot of them and I will talk
about those in a second, and amber lights but we also have some very bright red lights, so the
conditions for going public have not been met.
There is a second reason and that is the competition, going
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07.08.06
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Transcript produced by WordWave International |
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to the competition doesnt make a lot of sense because the competition have already
stated their opposition. For example, SingTel Optus CEO, Paul OSullivan, the leader of the
opposition to a Telstra FTTN investment in Australia was quoted in The Australian on 11 August
as saying: Telstras fibre to the node network should not be allowed to proceed. We will do
everything necessary to stop it.
I think it is unfortunate that these views exist in an industry that is so key to
Australias future. In fact, there is no need to stop Telstras FTTN project. The fact is
the FTTN project has been on hold since last year, last December, pending regulatory reforms
that could safeguard the investment of our shareholders. As we reported in our year end
summary last month, all aspects of Telstras transformation strategy are proceeding on or
ahead of schedule and on budget, except for regulatory reform to achieve the FTTN deployment
safeguard that will protect our shareholder investment. We initiated these talks with the
ACCC in the hope that we could resurrect the FTTN project which has been on hold since
December.
The third issue the chairman raised about our going public was that the decision to make
the investment could be informed by what the commentators think. The fact is that the FTTN
investment will not be affected by what commentators think. The FTTN investment will be made
if we are permitted by the ACCC to price the service at commercial rates, rates that reflect
all of our costs and under regulatory conditions that protect our shareholders $4 billion
investment from being pillaged by competitors. So the only thing that makes a difference in
the short term is what the ACCC thinks. The ACCC holds 100 per cent of the decision-making
power over the
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07.08.06
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Transcript produced by WordWave International |
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short term and can, with the stroke of a pen, set prices and make commitments that will
advance the FTTN investment by Telstra.
We have got a lot of tight time constraints on our side that are driven primarily by the
Telstra transformation investment schedule. We did not want to submit a FTTN undertaking to
the ACCC that would not be in the ballpark. Instead, we wanted an FTTN undertaking that
avoided issues that could kill us from the outset. An undertaking that is dead on arrival
helps no-one. These why we entered into these discussions in the first place.
As matters turned out, the ACCC was unable to give us the green light we need to proceed.
As a result, we will not be submitting an undertaking to build the FTTN. Because we will not
be submitting an undertaking, no purpose is served by submitting a discussion draft of our
proposal for review by the industry, though a detailed technical overview of our proposal will
be available on now we are talking web site later this afternoon.
I regret this outcome because households, businesses, government and non-profit
enterprises are headed for a digital future that will be characterised by new band width-hungry
applications. The need for advanced network technologies to cover the long distances, low
densities and difficult terrain found in Australia will become increasingly apparent. The
Telstra FTTN plan, however, has now been removed from the table, despite the best efforts of
Telstra and a lot of hard work by the ACCC. The discussions we had with them were affable,
they were professional, they involved a lot of hard work and I think both sides gave it a shot.
But instead of success, the failure of the ACCC and Telstra to find a way to advance our
FTTN plan is in my view a casualty not
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so much of the relationship that we had, but a casualty of confused, inconsistent and
ultimately counterproductive telecommunications policies and regulations that discourage
investment, including investment in new digital infrastructure. The failure of the FTTN talks
is only the latest example. We tried to get across the goal line and I believe the chairman
and his ACCC colleagues also gave it a go, but we didnt make it.
Let me just go into one other point before I turn it over to questions. Despite all the
stumbling blocks that we had, and cost was the primary one, it is important to note the areas
where we seemed to make progress and in some cases substantial progress and to reach
provisional agreement. I say seemed to and provisional because at the outset we agreed
that nothing would be agreed to until everything is agreed to. But I think it will be
instructive for people to know the extent to which we really did find a lot of agreement on a
whole range of issues. Let me just give you a sense for those.
These talks were not scuttled by disagreement over access. Even though early on we were
opposed to competitive access for all kinds of reasons our shareholders after all are
building this facility and, as the Group of Nine is already showing, anybody can build it the
ACCC had a different view. They thought access should be part of a new regime, so early on we
made a major concession to keep the talks moving. That concession was our agreement to decide
to design an FTTN access regime that would provide competitive access on commercial terms that
could be approved by the ACCC. We also agreed to design that service so that it provided
competitors with access on terms equivalent to those available to Telstras own retail
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unit. The result is our proposal for a high speed access service, we call it HAS, a
summary of which will, as I said, be available later this afternoon on Now we are talking.
Another point is talks were not scuttled over network management issues; that is, for
example ULL would be shut down on an exchange-by-exchange basis as the FTTN was turned on.
That could have been a stumbling block but they understood the logic and the wisdom of not
having these two things simultaneously.
Number three is talks were not scuttled by disagreements over transition management
issues. For example, we agreed that competitors could have access to our build-out plans,
including timetables, on an exchange-by-exchange basis to facilitate their transition,
management and capital spending plans.
Fourth, the talks were not scuttled by disagreements over the cost of the FTTN build-out.
We essentially agreed on those costs. Number five, talks were not scuttled by disagreements
over the cost of capital. We even reached agreement on that issue, which is often a stumbling
block in these kinds of things.
Number six, the costs were not scuttled by disagreements over the takeup rate used in the
calculation of prices. Number seven, the talks were not scuttled by disagreement over FTTN
service description, the bit stream service we call the high speed access service.
The talks were not scuttled by disagreements over the cost of providing the high speed
access service to access seekers, but we were in the process of working through differences
related to the costs of the elements, both copper and fibre, used in providing bit stream.
Those differences, in our view, and I think in the view of the
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ACCC, could have been resolved. The talks were not scuttled by disagreement over the
principle that the burden of paying for service in high cost areas could be shared by all 10
million, should be shared by all 10 million (fixed line) telecommunications users in
Australia.
Finally, the talks were not scuttled by disagreement over the principle that a bit stream
surcharge or subsidy would be the most competitively and technologically neutral way to ensure
that Telstra could underwrite the shortfall we incur and will continue to incur in providing
service delivery into high cost areas that we are obligated by law to do.
In short, we reached provisional agreement, and I emphasise it is provisional agreement,
on a wide range of very difficult issues that need to be resolved to create a new paradigm for
regulating the IP space. We almost got there. The last few yards are always the toughest and
we didnt make it.
So why did the talks fail? They failed because in our view we faced clashing world views
on the issue of costs. We ran into trouble not on the principles related to funding high cost
areas, but on the levels of funding required to deliver services to households and other
premises outside the FTTN footprint, including people and communities in regional, rural and
remote Australia as well as suburban areas outside the footprint.
These differences centred on our view of costs and the ACCCs view of costs. This is a
fundamental point: When you cant agree on costs, it is impossible to agree on prices and we
are here today because our different view of cost led to irreconcilable differences on price.
Let me just say a few words about funding high cost areas.
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Funding the high cost areas in rural and regional Australia was an issue from the outset
because the high speed access service would have to generate revenues to fund cost not covered
by the universal service obligation fund. We have been discussing this issue with the ACCC
since late 2005.
It is a long-standing policy of the Australian Government to protect the interests of
telecommunications users in regional and rural Australia. In its current form that policy
involves imposing on Telstra a range of obligations to supply services to those users to
regulate quality standards at prices that are no higher than those we charge to consumers in
the metropolitan area. We agree with that policy and we agree with the social compact that
includes a national, uniform price.
It is a policy that seems to have the support of most Australians who believe that people
in the bush should have the same access as people in the cities when it comes to
telecommunications and that access should be at roughly the same price, but we also require
that our shareholders be compensated for the costs that policy imposes on us.
These costs are simple to understand. When you are building or maintaining a network of
any kind, an electric power grid, a gas pipeline, highways, railroads or a telecommunications
network, there is what I call the DDT factor. DDT refers to distance, the longer the distance
the higher the cost; density, the lower the population density the higher the cost, for
example the low population density from sprawling suburbs to rural areas compared to a
down-town central business district are huge, the differences; and terrain, the more difficult
the terrain the higher the cost, for example providing
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telecommunication services to mountain areas or islands or swamps is enormous.
I was recently up at Tiwi Island where we saw first hand the enormous cost of servicing a
pay phone. We provide services in non-metropolitan areas at prices that are a fraction of the
costs involved. Just this month we spent $63,000 to provide a single service to a customer in
Mount Macedon by boring under an environmentally sensitive area to provide a line. There is a
project currently ongoing in Kirup in south-western Western Australia where it is costing
$107,000 to plough several kilometres of cable, some of it through rock, to provide a single
service.
So even though these costs are higher for telecom services in non-metropolitan areas, the
governments policy of national uniform price means the price is the same as a low cost
central business district and thats a policy that we agree with. The result is that revenues
from the high cost areas do not cover the costs which in some cases are more than $50,000 just
to connect the phone line to the network.
The result of the shortfall between the low nationally average price and the cost, which
exceeds the price in high cost areas, this shortfall has to be recovered from somewhere. As
matters now stand, there are two sources for that recovery: One is the universal service
obligation which most people know about and we can talk about more in detail. The other is
through cost subsidies and both of those are part of the way that we maintain a national
uniform price in this country.
The bottom line is that the ACCC cant keep cutting wholesale prices in cities where the
surplus comes from to pay for the
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bush and expect Telstra to continue to fund the bush. The money just wont be there, and
those kinds of issues were discussed repeatedly during our conversation.
The ACCC accepted the principle of a surcharge or a subsidy, but there was no meeting of
the minds on the amount required. What the ACCC was willing to contemplate in terms of an
amount would not have come close to covering the costs involved. In fact, in our discussions
we centred in on costs that were as low as $1.77 a month to costs that were as high as $13.63
a month. Those are very difficult gaps to fill.
The bottom line is that two world views are clashing; one, the policy world view of the
government, established in law for a national uniform pricing or price averaging for retail
consumers to generate funds to subsidise the bush, which is also the world view of Telstra,
and the world view of the ACCC, which has priced the averaging for wholesale providers that,
with increasing competition and lower ULL prices, will destroy the financial foundation of the
governments policy of urban/rural parity and the governments choice of funding mechanisms,
the cross subsidy model.
So, when all is said and done, the problem you see is really not between Telstra and the
ACCC; it is a conflict within the government between the policy making arms, the ministries
and Parliament and the regulatory arm, the ACCC. The government needs to get its own policy
house in order before there will be progress for all Australia on the FTTN talks. Until that
happens, Telstra shareholders will be caught in the crossfire of conflicting policies and
approaches inside the government, with the government and the ACCC wanting our shareholders to
pay the costs of confused,
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conflicted and counterproductive telecommunications policies and regulations that
discourage investment in new digital intra-structure. Because we will not let that happen,
because we are going to protect our shareholders investment, we have had an impasse. That, in
a nutshell, is why we hit the wall on FTTN.
If there are any questions, I will be happy to take them and Tony Warren and Frank
Hatzenbuehler are also here to do that. (Q and A follows.)
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7 August 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street
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SYDNEY NSW 2000 |
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript from Telstra Fibre to the Node Briefing Q&As
Attached is a copy of the transcript of the Q&As from todays Telstra Analyst Briefing on
fibre to the node, for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
TELSTRA TELECONFERENCE 7/8/06
Q AND A
QUESTION: (.Jesse Hogan, The Age.) Good morning Phil. The issues you did get agreement with,
like network access and the replacement of ULL, seemed to be a lot more contentious than price.
Does this mean your decision to withdraw is purely a cost decision rather than a philosophical
decision about access for competitors?
PHIL BURGESS: Thats a very good question and an insightful question, too, because I think most
people would have said five months ago we will never reach agreement on those kinds of issues of
network access and so on. So, yes, I am very proud of, I think Graeme Samuel also is proud of the
progress we made on some very tough issues. But, yes, the price was the reason, price was the
reason, price and cost were the reason that we reached the impasse and thats reason enough because
people invest in companies like Telstra or BHP or any other company because they want to get a
return on their investment and we are going to do everything we can to make sure shareholders get a
good return and when you start giving away your assets by below cost pricing, you are not serving
your shareholders and we are not going to do that. We are going to do everything we can to protect
their interests.
QUESTION: Just a second one. You said Telstra would not invest until the ACCC recognised the
actual cost. Assuming G9 thought that the actual cost was fair, has this changed your position on
co-operating with G9 either as an investor or someone that would buy wholesale access from a
network if it went ahead?
PHIL BURGESS: I think if the G9 can do this at a lower cost, they ought to do
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it, and if they succeed in doing it, then we will be first in line to be access seekers,
so that is something that is their decision to make and if they decide to go ahead, thats
fine.
QUESTION: So there is a possibility of being an access seeker but still not interested in being
part of the actual project?
PHIL BURGESS: Sol Trujillo has made clear, and I agree with him, that if you look around the world
it is hard to find very many examples of successful consortiums of this kind. I think it is better
if one company takes a risk, makes the investment, builds it out, manages it, tries to serve their
customers as best they can.
QUESTION: (Jennifer Hewett, the Financial Review.) Hi, Phil. You were talking about the idea of
cross-subsidisation and the fact that Telstra accepted that was the governments view. But it
seems that you will still be up for a lot of extra costs as far as you are concerned in
cross-subsidisation, so I dont quite understand why the FTTN, stopping the FTTN stops the problem
for you.
PHIL BURGESS: Well, it doesnt. The issue of being recompensed for the cross-subsidies that we
are required by law to provide has been on the table for a long time and will continue to be on the
table. The FTTN would have only hastened the decline in the cross-subsidy pools that would have
been available, so we are not going to engage in a new investment costing $4 billion that is just
going to hopefully bring more revenues in on the IP side, but hasten the depletion of revenues that
would otherwise be used to fund services to the bush, so thats an issue that is going to be with
us, it is still with us, but if we stayed in the FTTN talks and accepted them, we would be in even
deeper water than we are today.
QUESTION: This comes up of course just days, really a week before the
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government has to make a decision on the further privatisation of Telstra. What impact
do you think this will have?
PHIL BURGESS: I dont know. I havent really considered that. I mean I have actually gone for a
whole week without thinking about T3. T3 isnt our issue. Our issue is to serve customers and to
advance the interests of shareholders and to hopefully build out wall-to-wall broadband services in
this country through a combination of landline and wireless services and T3 is an issue for the
government. They make all the decisions related to T3 and Sol and our leadership have pledged
repeatedly, both in public and in private conversations, that we will do everything we are called
upon to do to cooperate with the T3 process. We want to see T3 go forward, we want to see the
sale, the retail sale happen, we want to see the entire block sold if possible, so we are in favour
of T3, but it is not something we have any control over.
QUESTION: (David Crowe from the AFR.) Hi, Phil. Last December when the Federal cabinet was
considering the ULL issue, out of the cabinet meeting came a statement by Helen Coonan on price
parity with regard to ULL. Is that the fundamental government decision which made this fibre to
the node project not possible? Do you trace it back to that decision?
PHIL BURGESS: Not at all. I mean the fibre to the node, the decision to do fibre to the node is
because that is what we want to do to bring new integrated services to the country. Thats what
the country needs to move into the next phase of the digital revolution as these band width-hungry
applications begin to arrive in education, health care, all these other areas, and the decisions
that were made last December by the government on ULL really didnt have a bearing on
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this one way or the other. These plans were in the hopper last summer, last winter, last
July and August and nothing that happened around the ULL at that time was related to these.
QUESTION: A follow-on question is earlier at the very start you talked about this round of talks
with the ACCC. So in what circumstances could there be another round of talks with the ACCC?
Would that for instance require government legislation to clarify this issue?
PHIL BURGESS: I think there is clearly a conflict between the policy-making branch of the
government and the regulatory branch of the government. The policy-making branch of the government
wants a national uniform price, the regulatory branch of the government is pushing for de-average
prices which would have much lower prices in low cost areas like the central cities and much higher
prices in the high cost areas like the bush.
If you are a theoretical economist, the point of view of the ACCC is unassailable, but in
a country like Australia where you have 80 per cent of the people living in highly urbanised
areas on a huge continental-size country, theoretical economics begins to break down because
of the DDT factor, because of distance, density and terrain, and so that has to be fixed
whether that gets fixed through legislation or whether that gets fixed through the principles
sitting down and talking.
However it gets fixed, it is not going to get fixed by us, it is going to get fixed
between the ACCC and the government and as far as we are concerned we will be dealing with the
ACCC every day on all kinds of issues and as far as this issue is concerned, whether it is ULL
or fibre to the node or any of these other big issues, as soon as we see there is an
opportunity for making some progress, we will be
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at the table if they will have us. I mean, look, the relationships that we developed I
think with the ACCC and the senior staff and the working staff over there I think were very
good. We, Graeme Samuel and I, talked at least once a week on the phone and met frequently
until the end of June and talked after that on the phone and exchanged e-mails.
I think the important thing is that I think we built some trust, I think we built some
credibility. We just couldnt reach decisions, a decision. We had a conflict in world view,
we had a different view of how the world worked, we had a different view of cost and yet those
differences of views were always carried out in the most professional and I have to say even
sometimes with a lot of levity. I mean it was a good working relationship and when I talked
to him this morning I told Graeme that I hope we can continue to find a way to address these
issues in a professional way because we have to get it resolved, we have to get it resolved
for Telstra, we have to get it resolved for the industry because this industry is not very
healthy right now.
All youve got to do is read the stuff thats coming out from the other competitors and
it is not good for Australia to be where we are among the OECD countries, ranked towards the
bottom of the list. We are moving to an era, not in 10 years or five years, but over the next
three to four years where there are going to be major new opportunities to improve
productivity and for businesses and educational institutions and health care institutions and
there is going to be huge new opportunities for household management and consumer convenience,
but these are going to require a lot of band width. You have places like Korea and Japan
already moving to 100
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megabits and here we are begging for the right to have our shareholders protected to
build out a 24 megabit system.
So, we think that it is time for people to kind of get their head out of the sand, look
around, see whats going on around the world and realise how this country can be very badly
damaged if it doesnt play catch-up soon because, once you get far behind, business starts
going other places and habits are not formed that would otherwise be formed. I think that we
need to continue these discussions with the ACCC on a whole range of issues and with the
government to make sure that we get the right policy and regulatory settings for the industry
and the country.
QUESTION: (Lyndal Mcfarlane, Dow Jones.) Hi, Phil. Just wondering if this outcome represents the
horrendous regulatory outcome John Stanhope was talking about with regards to the dividend policy.
PHIL BURGESS: I cant speak to that; thats above my pay grade. I think thats an issue for the
board and for Sol Trujillo and John Stanhope and I have no idea what the impact on that kind of
thing is.
QUESTION: Okay, and the contract with Alcatel, what will happen there? Will that be cancelled?
PHIL BURGESS: Once again thats above my pay grade. Its been on hold since December and what has
happened to that will be a matter for Greg Winn and Sol and John Stanhope and others who are over
this. What we do is try to you know, those guys are in the business of running the business in
the existing environment and we are in the business of trying to change the environment and how
they do things in the environment they operate in is not something I know a lot about or spend a
lot of time on. I know my job is to try to create a more favourable environment to grow the
company, to protect
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shareholders and to make it possible for our business units to serve their customers more
effectively.
QUESTION: (Alan Kohler from Fairfax.) Just to be clear about it, are you saying that Telstras
refusal to invest in fibre is caused by the mismatch or the disagreement between the government and
the ACCC over averaged or de-averaged prices between the bush and the city?
PHIL BURGESS: Yes.
QUESTION: Thats it?
PHIL BURGESS: The fact is that until they decide whether they are going to have they can have
de-averaged it at wholesale like the ACCC wants to do and then de-average at retail. If they want
to have it averaged at retail like the government wants to do, then you have to average it
wholesale.
QUESTION: And you wanted to have a subsidy on the city, is that correct?
PHIL BURGESS: Thats what the government policy is and we have no reason we are agnostic on
that. We just say no, they have to be together. We are agnostic on whether you have average
retail at wholesale or de-average retail at wholesale, but you cant have average in one place and
de-average in the other; it doesnt work. Its like fingers on a chalk board and drives everyone
crazy, so whats happening now is that the policies of the government for national average price,
the ability to implement that has been undermined very systematically and very rapidly by the
policies, the regulatory policies of the ACCC which are de-averaging.
QUESTION: This doesnt just apply to fibre, this applies to everything, right?
PHIL BURGESS: Sure.
QUESTION: So are you saying Telstra will not invest in anything until this is
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resolved?
PHIL BURGESS: No, because in other areas we dont face this issue. I mean in the non-regulated
areas such as wireless it is not an issue, so what this means is that we will simply live by the
rules as they exist and we will continue to do the other things that we are doing. We are building
out a 3G network, we are doing a number of other things that we announced on 15 November and we
will continue to do those.
QUESTION: (Gary Barker from The Age.) Hi, Phil. How far do you think, looking at it from the
users point of view and the need to have band width, will the 850 megahertz network fill the gap
anywhere in there? Is it an alternative, or not?
PHIL BURGESS: I think the 850 network will be a huge boon to the whole country. It is going to
cover 98 per cent of the population and population centres and I think that it is going to make a
huge difference, but there are limits to how much band width you can get out of a wireless system.
I mean physics establishes that, not Nokia or Telstra or anybody else, so there are laws of physics
that we run up against pretty quickly. If we start thinking about the kind of band width that the
Europeans are dealing with, that is 50 and above, that the Japanese and the Koreans are working
with, 100, or the kind that is now emerging in the United States where most of the DSL is 20, most
of the cable is 30, we really need to have a landline build-out of fibre and there are all kinds of
reasons for that, but band width speed is one.
There are others that are also important related to security, reliability, those kinds of
things, but I think what we need is a combination of technology. We have a situation now
where the regulator is really favouring some technologies over others, favouring
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some providers over others and this just has to get worked out before we can get a
healthy industry in this country and may mean the kinds of investments that need to be made.
We are not investing in this country in infrastructure and all you have to do is international
comparisons to see the extent to which thats true and why people arent concerned about that
puzzles me but I think that at some point people will have to wake up and smell the roses on
this.
QUESTION: (Michael Sainsbury, The Australian.) A couple of questions. The first one is what sort
of alternatives are you now looking at as part of the fixed line broadband deployment to get high
speeds to customers? The second one is with your description I guess of a confused regulatory
settings between the government and the ACCC, obviously these are things that Sol Trujillo and John
Stanhope have to talk about to investors if they are trying to sell the shares in T3. I mean, why
would people invest if this is the message coming from management?
PHIL BURGESS: Say your second point? I didnt get the second one. I got distracted here, so say
the second one?
QUESTION: The second one is about your description of the regulatory settings being confused and
unworkable and there is no reason for Telstra to invest. I mean if Sol Trujillo and John Stanhope
are going out to investors trying to sell T3 means there is going to be a confused message there,
you know, Come and invest in our company but we dont think it is worth investing money in
ourselves.
PHIL BURGESS: On the first question on the fixed line, I cant answer that. Once again thats not
what I do and thats going to be for Greg Winn and others to answer. On the second one, though, I
think Sol and John Stanhope and others have made clear from the outset that they
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are going to support T3 in every way that they can, but they have also said they are
going to tell the truth about what the regulatory and other risks are here. I mean thats
their obligation and thats what they are going to do and if the regulatory settings here are
a problem, they are going to have to say that.
I mean there are a lot of good things going on in Telstra and you wouldnt know that by
reading the paper but there are some incredible things happening with transformation and those
are things that they are going to be talking about, but they are also going to be talking
about the value-destroying regulations that weigh heavily on the financial performance of this
company. The bottom line is that we have to recover our costs in everything that we do and we
have to have the opportunity to make a competitive return on our investment.
Nobody gets upset with Macquarie Bank or with Woolies or with anything else when they are
very successful, but if we get to be very successful we have people say, Thats an
unreasonable return. Well, our view is that our shareholders want us to make large returns,
they want us to be very successful and thats what we intend to do and so, when they do the T3,
if our leadership has to go on the campaign trail, and Im sure they will, and number one and
number two Im sure they will have a great story to tell and, number three, Im sure there will
be some down sides in that story, one of which will be the regulatory setting but how they
destroy share value.
QUESTION: (John Durie from the AFR.) A couple of questions. Firstly, theres been several you
said you agreed on the weighted average cost of capital. There have been several figures out
there, one of 11, one of
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15, one of 18, so which one of those did you agree on?
TONY WARREN: We will put out a statement this afternoon with more of the cost details. It is
probably best if you have a look at that, John.
QUESTION: You cant tell me that now?
PHIL BURGESS: We are going to have a paper out this afternoon that has a lot of the details.
TONY WARREN: I dont have it in front of me, John, is the bottom line and the fact was it wasnt
the biggest issue on the planet so the other issues came back, the other issues that bit back are
the ones we were more prepared to talk about now.
QUESTION: Okay. Is the ACCC going to come up with a decision in the next few weeks on one of your
arbitrations on ULL pricing in which they are going to use a de-average price so what are you going
do about that?
PHIL BURGESS: We will have to wait till me see it. The one thing for sure is that we have an
average price around the country of $30. We have a price in band 2 where most of the customers are
of $22 and there are indications that they may be thinking about under $22. If they do, that
simply takes the money out of the pot that would be used to fund high cost areas, number one.
Number two, we have the question about what is the rationale for this. The cost of petrol is going
up, the cost of trucks is going on, the cost of copper is going up, the cost of labour is going up,
so it makes one wonder where do you get these kinds of 10 per cent and 20 per cent reductions in
cost and it also makes you want to ask where are the cost studies on the ACCC side?
I mean they have made clear to us they dont like our cost studies and we have gone back
and tried to update our cost studies,
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update our data, get a better hand on what we are saying, but we havent seen their cost
studies on any of this. I dont know what accounts for a decision they might make or theyre
reputed to be in the process of making that would lower that $22 band 2 price to something
south of $20 and, if that happens, what they are really doing is declaring war on our
shareholders because we have statutory obligations to fund high cost areas and the only way
that can be done with this kind of action is to take it out of our shareholders back pockets
and that is not something that management is willing to do.
QUESTION: So is that what todays exercise is all about, just to get the war settings right,
because you know thats what theyre going to do. They have already said they have rejected your
$30 price.
PHIL BURGESS: We think one step at a time. Right now we are dealing with FTTN issue and, whatever
happens in other areas, we will deal with those when they come along.
QUESTION: Can I ask another question? Theres been the 850 megahertz. Could you tell us how
thats going along? There have been some reports that there has been a lot of trouble with the
build of it.
PHIL BURGESS: The 3G 850 network is proceeding ahead of schedule. It is under budget and so far
things are going very well. I read that report you are referring to, but I didnt read that
anybody was quoted in it. It just said somebody said. I dont know if it was over the clothes
line or the TV set or where that somebody said something and who that somebody was and whether it
was one somebody or many somebodies, but the fact is that I think that people in Australia are
going to be very proud of the first nation-wide 3G network built more rapidly and to a larger area
than any other 3G installation in the
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world. It is going to be a world-class achievement that will I think get world-class
attention and it is a great gift to regional, rural and remote Australia because we are going
to have lots of people out there, within a year after we light it up, they are first of all
going to have over one and a half megabits and within a year upwards of 14 megabits and thats
the kind of service delivery that we are trying to achieve with these kinds of innovations.
QUESTION: One final question. From your HFC cable what sort of band width can you get there?
PHIL BURGESS: Say again?
QUESTION: Using your HFC cable, the existing one.
TONY WARREN: Currently, John, we have a 17 megabit service out there, as you know, and thats what
we are offering at the moment. Just to go back to your earlier question on the WACC, Telstras
starting point was 11.02 WACC. We agreed to reduce that as part of the discussions down to 10.32,
so I think that shows some of the fancy that has been in the press.
QUESTION: So you started at 11.02 and reduced to 10.3?
TONY WARREN: 10.32, and the bottom line is this wasnt a major stumbling block in the discussions.
As Phil said, the major stumbling block in discussions was around how much the FTTN high speed
access service contributes to the upkeep for the rural network and the bottom line is that gap
proved to be just impossible to bridge.
QUESTION: Is that something to be redressed by a large government subsidy?
PHIL BURGESS: By a large what?
QUESTION: Government subsidy?
PHIL BURGESS: I think the point is that there are all kinds of ways to do it. You can close that
gap. If you want to have nationally averaged
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prices, which is the policy of this country, which we agree with, then there are all kinds
of ways to pay for it. One way to pay for it is through an industry-funded model like the USO
here in Australia; another one is through a government funded USO model which is found in some
other countries around the world; another way to do it is through cross-subsidies; another way
to do it is through vouchers. There are all kinds of ways to pay for nationally averaged
prices.
In this country the decision has been made to pay for it using two mechanisms: Number
one, an industry-funded universal service fund, which by the way goes down 8 per cent every
year and, number two, supplement it by cross-subsidies where the nine million people in urban
areas subsidise one million people in rural areas. Thats a perfectly rational way to do it.
We are agnostic on how its done; it could be done any way the government wants to do it.
The only thing that we care about is that it is done in a competitively neutral way,
number one; in a technologically neutral way, number two; and number three, that it pays the
full cost of providing the services that we are required by law to provide to high cost areas
and those three standards need to be met in any good public policy. You dont want to favour
one company over another, you dont want to favour one technology over another and you dont
want to do this in a way that forces a company to pick the pockets of shareholders in order to
pay bills it is legally required to pay. That is, its the right thing to do.
QUESTION: (Fergus Maguire from Bloomberg.) Gidday, Phil. Can I just clarify: Now that you are
not going ahead with fibre at this stage, will you be increasing your investment in your pay TV
table?
PHIL BURGESS: Once again, Fergus, I dont know the answer to that. That is
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something that is for other people to deal with. I can tell you one thing. Let me go
back to something I said earlier. In this company what I think people dont know because they
are interested in other things is that everybody is totally focused on this transformation.
Everybody is working hard to change this company. You know, while people write these stories
about bright star and $70 million really isnt very much money after all and (indistinct),
those kind of things, the fact is we have got people out digging holes in Australia, digging
trenches across the landscape, putting fibre in to connect the 3G towers to give this country
more capacity, telecommunications capacity. That is what we are doing.
We are not issuing press releases like the G9 group, we are not talking about doing
things. We are actually out doing things and on July 1st we put out a report of 27 pages we
tried to outline for the media and for our shareholders and others the concrete achievements
that have been realised since last July and especially since November of 2005 and we have got
a very positive response from our shareholders on that. So, our focus is on doing things and
people like me, I am focused on trying to change the environment in which we do things, but
the rest of the crowd around here are people who simply have their nose to the grindstone
trying to make the transformation work on schedule and under budget and so far things are
looking pretty well.
QUESTION: Given that, as a part of that transformation, the fibre network and the new services
that were going to be offered over that were such an important part of that transformation, how is
Telstra going to be offering all these new content and media services that they want if they dont
have a fibre network?
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PHIL BURGESS: Once again, thats something I think you will hear Sol talking when he is ready
to talk about it. Sol is a guy and I dont think I have been to one senior team meeting since I
have been here where Sol hasnt surprised everybody with a new idea for something that we can do
with one or another of our platforms. I think that when we are ready to announce what we are going
to do, we will be ready when we are prepared to do it, thats when we will announce it and thats
when people will know.
I mean, we live in a competitive environment. Even though there are some in certain
quarters here who dont believe that, we live in a very competitive environment and we have a
leader now who is a competitor to the bone and so I think what you are going to see from us is
hard, aggressive, competition in every single market with every single market segment and as
new opportunities come along to do things on one or another of the platforms we have, you will
hear about them and we will see results from them. But we are not going to be saying in
advance what those are.
QUESTION: (Malcolm Maiden from The Age.) Hi there. I am wondering whether from your perspective
the impasse that you have reached in the regulatory settings as they now stand preclude a more
limited fibre roll-out in the denser urban areas.
PHIL BURGESS: Once again, Malcolm, when that happens it will happen. I mean we are going to do
everything we can to be effective competitors and what form that takes will be announced when it is
announced.
QUESTION: Is that a no?
PHIL BURGESS: We are not going to announce it in advance.
QUESTION: Thanks. And you said that you hadnt seen from the ACCC any costings by the ACCC. Was
that a ULL comment or was that also one
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that applied to the FTTN discussions?
PHIL BURGESS: I think one of the frustrations we had with the discussions with the ACCC is that
they ask us what our costs are and we tell them and then their response is I dont like that
cost. Well, why?
QUESTION: Thats during the FTTN discussions?
PHIL BURGESS: During any of the discussions that we have had and, if they dont like them, then
why dont they like them? I mean, on the one hand we use things like invoices and other hard costs
we have paid to establish what we our cost basis is and if the other side doesnt like it, then we
need to know why. To me a cheque book stub is worth a lot more than an economic model in terms of
establishing what a cost is and we deal in cheque book stubs.
QUESTION: Okay. Thanks.
QUESTION: (Rhys Haynes, Australian Associated Press.) In the last couple of minutes Graeme Samuel
has just told a colleague of mine that he is bewildered and disappointed by Telstras decision to
abandon the negotiations and he is not sure why it has killed off the negotiations, so I just
wanted to get your thoughts there.
PHIL BURGESS: I talked to Graeme, as I said, Friday. I talked to him again this morning and I
think that one of the - - -
QUESTION: Why did he come out and say these things, then? I dont understand why he would come
out and contradict you, thats all.
PHIL BURGESS: How is he contradicting me?
QUESTION: He just kind of made it seem like you both agreed to disagree but he seems a lot more
disappointed than - - -
PHIL BURGESS: We had a very explicit agreement when we talked this morning, that it is best to
call these off and then come back with fresh eyes to the range of issues that we are considering
and when we
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come back, I think the exact phrase I used was whether it is this week, next month or
three months from now, whenever it is, what we want to do is to keep the doors open.
Look, there is nobody more disappointed than I am about the collapse of these talks, but
we reached the point where we are at $13 and they are at $1.77 and we werent getting any
closer and I think that, when that happens, the best thing to do is to go back to the drawing
board and figure out what can be done next. I told Graeme this this morning. I said my hope
is that we can find some way to work together to develop an approach to costings that they can
be comfortable with, a fully transparent approach that they can be comfortable with, that we
can be comfortable with, that will show our real costs so that we can move on to the real
decision which is price. Price is what we have to be able to agree on and if you cant agree
on costs, you cant agree on prices. Thats just as fundamental as any rule in business, so I
am disappointed, as he is.
When we talked this morning I think both of us expressed that disappointment. I think
both of us I dont think I mean both of us agreed, because I wanted to make sure that one
of the things we agreed to early on is that, if we decided these talks were not going any
place, that we would talk to each other first. He kept his side of that bargain, I kept my
side of that bargain and today we agreed that we would terminate the discussions for now and I
dont care whether you use the term terminate or suspend or whatever you want to call
them.
We are going to be working with the ACCC every week on one issue or another and we are
going to be working with the ACCC on big issues like ULL and hopefully at some point again
fibre to the
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node, so we have built a great asset, I think, in the trust that exists on both sides as
a result of these talks and I hope that isnt undermined by anything that happens because we
werent able to reach agreement at this time. But I think my disappointment is as great as
his.
QUESTION: So this morning was he quite happy for you to come out and say that the negotiations
were over, or did he sort of say to you should we keep going with this or was it just your decision
to say its over?
PHIL BURGESS: No. I told him that we had reached a conclusion over this weekend that we didnt
see a lot of reason to continue and kind of asked him by implication does he see any reason not to
continue and he didnt. I mean he didnt have any response that indicated he saw reason why we
should continue.
From the beginning we have had the understanding, and I am going to spell this out more
later today, but we had what kind of what Graeme called a green light, amber light, red light
approach and we both wanted to get to a position. The ACCC cant approve anything, they cant
endorse anything, but they can say we think that where we are is worthy of industry discussion
and there are some green lights, a lot of green lights, some amber lights but no red lights.
The problem we had was we had a lot of red lights and we had a couple of big red lights and
those red lights really led us to the conclusion that we really need to get back to business
and it isnt going to be FTTN, it is going to be other things.
QUESTION: Thank you.
QUESTION: (Patrick Russell from Merrill Lynch.) I think my question has already been asked. It
is in relation to plan B, the HFC network and what the plans might be to (indistinct).
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PHIL BURGESS: Yes. I cant answer that. That is something you may want to bring up with Sol
or John Stanhope or others but thats not something we do.
QUESTION: (Andrew Hines from Morgan Stanley.) Hi, Phil. I guess you have been running this
campaign for 12 months or so on trying to get the regulatory environment in Australia changed with
not much success. It is not just the ACCC, I guess the highest levels of government have said they
are not going to change the rules and try and appeal the line sharing agreement from the ACCC to
the Australian (indistinct) tribunal who also upheld the costings of the ACCC. Do you think its
time now to (several indistinct words). One way to get around the regulation here is to separate
those parts of your business that are heavily regulated from those that arent and leave the
regulation to the regulation and get on with the retail part of what you can control?
PHIL BURGESS: I dont know why anybody would want what happened to BP to happen to them, but,
look, let me put it this way: You know, in this country like in my country there are lots of laws
and regulations that people adhere to but dont make a lot of sense and the people who oppose them
or suggest they ought to be reformed are always looked on as somehow why dont you just live with
the rules the way they are, but fortunately for this country the people who wanted to float the
dollar, who were viewed as kind of silly for a long time, you know, turned out that their views
prevailed and everybody looks back and says, You know, when we changed the rules and started to
float the dollar, things got better.
The same way on tariffs, I mean you had high tariffs for a long time and you had a bunch
of crazy people out there who decided
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we ought to have tariff reform and a more free trade approach and people who kind of
said, Why dont you just play by the rules and not worry about these things? In fact, this
country is prosperous today because you had tariff reform and you started to float the dollar.
So my view is that the rules that exist in this country prima facie are not good rules for
investment in telecommunications. I think the evidence is overwhelming to support that. That
is number one.
Number two, I think the evidence is overwhelming that the future for the next 25 years
for most of the developed countries is going to be shaped by biotechnology and
telecommunications. I dont know what the biotechnology industry is like in this country, but
I do know what the telecommunications industry is like and we have to have a healthier, more
competitive, more aggressive industry that has more freedom to invest and to explore and to
take risks than we have now.
There is a third point and that is that telecommunications has the biggest impact where
distances are long, where the terrain is difficult and where the densities are low because
those are the places where because telecommunications is the death of distance, but it costs
a lot to do it, it costs a lot to get a stranglehold on the distance issues and so that is
only going to be handled by investment.
We do not have a pro-investment policy in this country, so I appreciate what you are
saying and I think everybody ought to have some humility, but the fact is I think that,
despite the resistance, despite the inability to get people to see things our way, I do think
we have made progress and I do think that the positions we are taking, which is a
pro-investment, pro-consumer, pro-innovation, pro-growth
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approach for this country is the way to go and we are going to continue to talk about
that to our shareholders and to the public and hopefully people will come along just like they
did on floating the dollar and getting rid of onerous tariffs.
QUESTION: You dont see any merit in separating Telstra into structure and retail components?
PHIL BURGESS: Whats the merit?
QUESTION: Just in terms of having a regulated part of the business that can operate separately and
then a retail business that competes for equal access to that infrastructure along with all the
other competitors.
PHIL BURGESS: The point is I dont know where thats worked very well.
TONY WARREN: Andrew, it is Tony Warren here. Let me just add to that. When you see the details
of what we proposed this afternoon in these discussions, I think you will see very clearly that
what was proposed was very much equivalent access to this large investment. The problem here,
Andrew, is that we needed to get the settings right to make sure that that investment was
commercial and the regulatory regime in this country which you have derided us for trying to change
for the last year doesnt allow for those settings to be correctly put in place and as a result we
have decisions like today where unfortunately a substantial investment that would be very
beneficial to a large number of Australians has been killed off.
I mean this is not something that we look at and say This is fantastic, this is
something we look at and we are all quite disappointed on, but thats the nature of the beast,
thats what the regulatory regime has imposed on this company and this country and, until it
gets changed, this country is going to be stuck in the slow lane.
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QUESTION: (Tim Smeallie from Citigroup.) Phil, if we look back at November, I guess there
were three factors underpinning the new strategy. One was business transformation, the other was a
ULL at $30 and the other was FTTN to deliver the growth from 2009 onwards. Given two out of three
of these are no longer occurring, should we expect to see a new strategy outline on Thursday, is
probably my first question. And, secondly, are we now really reliant on the G9 to prevent
Australia becoming a broadband backwater given the technology problems with DSL?
PHIL BURGESS: On the first one, Tim, I cant say. Im going to be fighting for a front row seat
there just like you are to hear the answer. On the G9 thing, I dont know. I hope we are not
relying on the G9 because I havent seen much from them except press releases. I mean what we had
in our case for the FTTN, we had a deployment plan which we shared the deployment plan for
Melbourne, I think it was Melbourne or Sydney, I think it was Melbourne with the ACCC one day
showing exactly the exchanges, where things were going to do, what the footprint was and so on. We
also had a capital spending plan, we also had arrangements with vendors to build it, so I am not
sure what the G9 has. If they build it, I think it will be a good thing and, as I said, we will be
access seekers.
QUESTION: Phil, would you say given the problems with DSL that we are looking at trending back to
dial-up speeds within five years if we are relying on DSL?
PHIL BURGESS: I wouldnt say go back to dial-up speeds but I do think you are not going to have
the kinds of speeds that are increasingly demanded by the band width-hungry applications that are
anticipated and coming forward in some areas. I think that Korea
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and Japan are moving to 100 megabits for a reason and thats because, number one, people
want that, not because they want to have faster speeds, but because they want applications
that require those faster speeds, and the same thing is true in Europe and also in the United
States where people are moving up the speed limits because the applications require those
kinds of speeds and that is why it is so perplexing to us why a company that wants to build
this out, has the money to do it, has a plan to do it, has the talent to do it, is being
prevented from doing it because of the unwillingness of the regulator to give us the financial
assurances that we need to make sure our shareholders are not pillaged once it gets built.
I mean, just last week the ACCC declared a new service and under the current regime,
under the current legislative regime and other mandates that are available, they could do the
same thing with the FTTN. So we are not going to build, we are not going to spend $4 billion
just to have it taken away a year later or six months later by a regulator who decides they
can set the prices better than the market.
SPEAKER: Ladies and gentlemen, we are going to finish at 1 oclock which allows us three more
questions.
QUESTION: (Laurent Horrut from JP Morgan.) I just had a quick question on the discussion with
ACCC. You mentioned the fact that one of the differences were in fact the costs of providing
services to the bush. I was just wondering what is the logic for you to (indistinct) because these
costs on a network that was going to be available to metropolitan customers only.
PHIL BURGESS: The network wasnt going to be available to metropolitan customers only. That was
only the first phase. The first phase was the five cities. We said to the ACCC and they
understood and also it
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will be apparent when you see the summary of our plan that we will make available later
today, that the initial footprint would go to the five cities, but then it would expand within
the five cities over time and also leap-frog to other cities like Hobart or Newcastle or
Canberra or places where commercial opportunities develop, so the whole point is that this was
not for the cities only.
The second point is that the cities have always subsidised the bush. I mean that has
always been the case, so I mean thats one reason why this came up in the FTTN discussion
because, if we have a new bit stream service we call high speed access service, if we have a
new bit stream service, then the question is how are you going to continue to fund the
cross-subsidy pool thats used from the nine million people who live in urban and metropolitan
areas to pay for the high cost areas that have one million people and that is why it would be
irresponsible just to look at the cities. You have to look at the entire nation.
Just as the government says lets look at the entire nation, not just the cities, we are
not going to have an urban-centric policy, we are going to have a telecommunications policy
for the whole country; for the rural areas, for the bush, for the regional areas, not just for
the cities, and thats why we had to pay attention to some kind of a surcharge or other
approach that would allow for the FTTN regime to fill the coffers of the cross-subsidy pool
thats used to subsidise services to the bush.
TONY WARREN: To be very clear, thats been an issue thats been on the table with the commission
from the very beginning of these discussions. We made it very clear at the outset of these
discussions that we would need to have some kind of contribution from the FTTN
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footprint as there is at the moment and would have to continue to be into the future.
QUESTION: But then isnt the issue more the one of the universal service obligation funding, which
is a different framework for that one, so it would have definitely confused the discussion in that
sense.
TONY WARREN: The USO is Phil I think made clear in his opening statement that there are two
instruments in Australia to fund the bush. One is the USO, the second is cross-subsidisation. If
anyone in their right mind believes the USO covers the costs in and of itself, I think they really
need to go and have a look at that a bit more closely.
PHIL BURGESS: Lets take an example. The last study done by government of the cost of the bush
was done by ACA which is now ACFA(?). They said that it was $550 million, that was in the late
1990s, a year to provide services to the bush over and above the universal service, but the
government decided last year, for example, that it really wasnt 550, it was really only 170, so
the universal service fund was cut to $170 million and of that $170 million Telstra pays $110
million, the other competitors pay $60 million, so even if we take figures that are going on eight
to 10 years now, we are way behind in the amount of money provided by the universal service fund to
cover those costs.
QUESTION: Just a last one, if I can. Can you just clarify: When you said that you are still
talking with the ACCC and you will be talking to the ACCC in the future, are you still trying to
work through the issues or from your end the discussion is very much terminated at this stage?
PHIL BURGESS: These discussions are terminated and Graeme and I agreed on that this morning. But,
yes, we are still talking to them. We have to talk to them and they need to talk to us, too. I
mean we are the largest telco in the country and they are the regulator and we need to
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be talking with them every week about one thing or another and we will and, as Graeme and
I discussed this morning, at some point we are going to want to revisit these issues. I dont
know if it is going to be sooner or later, but at some point we want to revisit these issues
as well as other issues.
I dont view this as a break with the ACCC, not at all. I think one of the consequences
of this process has been that we have developed some good and trustful relationships and
throughout this those agreements and trusts have never been broken. We came close a couple of
times, we said we wouldnt negotiate in the press and I think Graeme Samuel slipped a couple
of times and I may have slipped a couple of times, I cant remember, but the fact is that I
think that we are going continue to work with them in every way we can and try to have as
positive and constructive a relationship as possible.
QUESTION: (Ian Martin ... ABN Amro.) Just a couple of questions. First, the obligations that
concern you here, the cross-subsidy on the national pricing, can you just confirm that just applies
to voice and in particular to the basic line rental product for voice? Secondly, in relation to an
earlier question about why you wouldnt do this project that presumably is profitable now on the
provisional access terms you have agreed, I think you said something like why do something thats
going to hasten the decline of revenue for this cross-subsidy. Just going back to the strategy
day, though, I think the understanding was that it would hasten the decline of voice revenue, that
the total pool of revenue would go up if you went ahead with this projects, that is the average
revenue per customer or the share of wallet would go up because of other services you could sell.
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TONY WARREN: The first question about does the (several indistinct words) price control
applies only to voice. However, you will probably know, as most do, that our ADSL broadband
pricing is actually nationally uniform, so in practice we do in the broadband level apply uniform
pricing construct.
In terms of the comment about hastening the end of the cross-subsidy, lets just be clear
about what happens, right? At the moment the bush is paid for by the USO contributions,
minimal as they are as Phil just expressed and, secondly, they are paid for by
cross-subsidies. Now, those cross-subsidies are borne by Telstra retail customers when they
pay their $30 a month basic access charge. If customers take a wholesale line under the
current ACCC pricing arrangements, ULL and, if this went ahead, under FTTN, they would not be,
on the ACCCs preferred model, continuing to contribute to the bush. So, what Phil said by
hastening this is at the moment they dont pay it on ULL and under the ACCCs proposal they
wouldnt pay a cross-subsidy on FTTN. Hence, the pool of money, if you like, for the
cross-subsidy would be getting narrower and narrower as more and more wholesale lines are
purchased.
PHIL BURGESS: The bottom line is if you cant recover todays costs, why invest another $4
billion? I mean, if you are not recovering your costs, you are not going to make it up on volume.
QUESTION: (Phil Campbell from Citigroup.) Thanks, guys. I just had a question on the kind of
second and third derivative of this decision because obviously this is a first derivative decision
you are making, but if we just look across the Tasman, several months ago Telecom New Zealand kind
of made several decisions based on the first derivative and the second and third derivatives were
extremely
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negative for that company.
So my question to you guys is what discussions have you had with (indistinct) or the
ministers office and have you built in any risk for any similar types of decisions that may
come out in terms of policy changes as a result of this decision?
TONY WARREN: First of all, let me take some umbrage about you comparing us to Telecom New Zealand.
I think Telecom New Zealand is about where we were in about 96/97 now, so we have got a little
way to go on that side of the channel. Look, clearly we understand that there are risks with all
these decisions. Clearly we understand that and we have thought through very carefully what all of
the second and third derivative items should be. But, putting it very simply, this company cannot
invest $4 billion of its shareholders money if it doesnt feel it can protect that investment and
so that is in fact our first, second and third derivative obligation under the Corporations Act and
we really do need to, I think, keep that squarely in our mind.
QUESTION: So if you are kind of, I suppose, doing some financial analysis on this, you can work
out that the value that you would lose from building, say, $4 billion of fibre to the node, given
if you agreed to some of the stuff (indistinct) is actually a better outcome than your analysis of
the second or third derivatives.
TONY WARREN: We dont ascribe to that (indistinct).
PHIL BURGESS: I guess times up. I just want to say thanks to everybody for coming. This was a
big decision on our part and I wish we had a different result from these five months but I think a
lot was gained in the five months. If you think back to the things I read out where we made
substantial progress, I think they were important and I think that they will lay ground work for
future work.
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If we can help you in any way, let us know later this afternoon. We will have on
our web site, now we are talking, some materials related to what we have been talking about
this morning and if you want to get more information you can go there or feel free to call
Andrew or Liz Jurman, our media staff, if you want to contact any of us to talk more about any
of this.
But I want to say in closing that Graeme Samuel and his colleagues at the ACCC worked
hard with us to try to make this happen. He said when we started he would make this his high
priority and he never disappointed me on that. I told him that we would make this our highest
priority and we did. I think we have invested close to $2 million trying to make this project
work because we had to undertake a lot of cost studies, we had to get lawyers involved to help
us think through some of the legislative and other issues that were involved, so I think
everybody on both sides made a big investment in the right spirit to make this thing work and
I have high regard for Graeme Samuel and his colleagues over there and we are going to do
everything we can to work with them in the future on the whole range of issues that touch us
that they have jurisdiction over.
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10 August 2006 |
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Office of the Company Secretary |
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Level 41 |
Company Announcements Office
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242 Exhibition Street |
Australian Stock Exchange
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MELBOURNE VIC 3000 |
4th Floor, 20 Bridge Street
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AUSTRALIA |
SYDNEY NSW 2000 |
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra Corporation Limited Financial Results for the Year ended 30 June 2006
In accordance with the Listing Rules, I enclose the following for immediate release:
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1. |
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Appendix 4E full year report |
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2. |
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Year end results and operations review financial highlights |
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3. |
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Media release |
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4. |
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Full year financial report for the year ended 30 June 2006 |
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5. |
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Directors report. |
Telstra will conduct an analyst briefing at 9.30 AM and media briefing at 11.30 AM on the full
year results. A webcast of the briefings will be available from 9.30 AM AEST at
http://www.telstra.com.au/abouttelstra/calendar/calendarevent.cfm?ObjectID=745 and transcripts
will be lodged with the ASX when available.
This Announcement has been released simultaneously to the New Zealand Stock Exchange.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
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Telstra Corporation Limited and controlled entities
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Preliminary final report |
Telstra Corporation Limited and controlled entities
Appendix 4E
Preliminary final report
for the year ended 30 June 2006
1
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Telstra Corporation Limited and controlled entities
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Preliminary final report |
Appendix 4E
Preliminary final report
30 June 2006
Telstra Corporation Limited ABN 33 051 775 556
Results for announcement to the market
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Telstra Group |
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Year ended 30 June |
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2006 |
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2005 |
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Movement |
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Movement |
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$m |
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$m |
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$m |
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% |
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Extract from the income statement |
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Revenue (including finance income) |
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22,838 |
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22,264 |
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574 |
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2.6 |
% |
Other income |
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328 |
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261 |
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67 |
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25.7 |
% |
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Profit for the year |
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3,181 |
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4,309 |
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(1,128 |
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(26.2 |
%) |
For fiscal 2006 and fiscal 2005, all items included in our income statement are considered to
be from continuing activities.
During fiscal 2006, the following items had a significant impact on
our income statement:
On 15 November 2005, we announced the results from the strategic review that was initiated on 1
July 2005. We unveiled a strategy for improving our business by:
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introducing a company wide market based management system; |
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the adoption of a one factory approach to managing operations;
and |
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delivering integrated services to our customers. |
We also announced several key decisions and commitments regarding our process systems and products
which will impact the future performance of the Company.
For the year ended 30 June 2006, we have recorded a number of redundancy and restructuring related
expenses totalling $1,126 million associated with the implementation of the strategic review
initiatives. A total provision of $427 million has been raised for redundancy and restructuring as
at 30 June 2006. This includes $395 million recorded in current and non current provisions, $18
million recorded as a reduction in inventory and $14 million recorded as an allowance for other
receivables.
The redundancy and restructuring costs include the following:
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redundancy costs associated with the reduction in our workforce, including those redundancies
that have been provided for; |
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the provision for restructuring costs associated with shutting down certain networks, platforms
and applications, property rationalisation, onerous lease costs and replacing customer equipment; |
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the impairment of assets due to the decision to shut down certain networks and platforms that are
no longer considered recoverable. This also includes the decision to cancel certain projects
relating to the development of software and the construction of property, plant and equipment; and |
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the accelerated recognition of depreciation and amortisation of certain assets that, while
currently in use, will be decommissioned as part of our decision to shut down certain networks,
platforms and applications. |
During fiscal 2005, there were no individual transactions that had a significant impact on our
income or expenses that required specific disclosure.
2
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Telstra Corporation Limited and controlled entities
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Preliminary final report |
Appendix 4E
Preliminary final report
30 June 2006
Telstra Corporation Limited ABN 33 051 775 556
Results for announcement to market (continued)
Dividends declared per ordinary share
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Telstra Group |
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Year ended 30 June |
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2006 |
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2005 |
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¢ |
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¢ |
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Interim dividend |
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14.0 |
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14.0 |
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Special dividend paid with the interim dividend |
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6.0 |
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6.0 |
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Final dividend |
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14.0 |
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14.0 |
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Special dividend paid with the final dividend |
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6.0 |
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Total |
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34.0 |
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40.0 |
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Our dividends for fiscal 2006 and fiscal 2005 are fully franked at a tax rate of 30%.
The interim dividend (including the special dividend paid with the interim dividend) for fiscal
2006 had a record date of 24 February 2006 and was paid on 24 March 2006.
The final dividend for fiscal 2006 was declared subsequent to balance date and will be paid in
fiscal 2007. Our final dividend in respect of fiscal 2006 has been disclosed as an event after
balance date. The final dividend has a record date of 25 August 2006 with payment to be made on 22
September 2006. Shares will trade excluding entitlement to the dividend on 21 August 2006.
In addition, our final dividend (including the special dividend paid with the final dividend) in
respect of fiscal 2005 was provided for and paid during fiscal 2006. The final dividend had a
record date of 30 September 2005 and payment was made on 31 October 2005.
3
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Telstra Corporation Limited and controlled entities
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Preliminary final report |
Telstra Corporation Limited and controlled entities
Australian Business Number (ABN): 33 051 775 556
Contents and reference page
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Appendix 4E items |
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Reference |
1. Reporting period and the previous corresponding period.
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Refer to the 30 June 2006 financial report lodged with this document. |
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2. Results for announcement to the market.
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Refer page 2 for results for announcement to the market. |
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3. Income statement with notes to the statement.
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Refer to the income statement on page 5 and statement of recognised
income and expense on page 7 of this report. |
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4. Balance sheet with notes to the statement.
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Refer to the balance sheet on page 6 of this report. |
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5. Statement of cash flows with notes to the statement.
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Refer to the statement of cash flows on page 8 of this report. |
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6. Details of individual and total dividends or distributions and
dividend or distribution payments.
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Refer to the results for announcement to the market on page 3 of this
report. Also refer to note 4: Dividends and note 34: Events after balance
date in the 30 June 2006 financial report lodged with this document for
additional information, including discussion on franking credits. |
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7. Details of dividend or distribution reinvestment plans in operation
and the last date for the receipt of an election notice for participation
in any dividend or distribution reinvestment plan.
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Refer item 1 on page 9 of this report. |
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8. Statement of retained earnings.
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Refer item 2 on page 9 of this report. |
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9. Net tangible assets per security.
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Refer item 3 on page 9 of this report. |
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10. Details of entities over which control has been gained or lost
during the period.
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Refer item 4 on page 9 of this report. |
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11. Details of joint venture entities and associated entities.
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Refer item 5 on page 11 of this report. |
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12. Any other significant information needed by an investor to make
an informed assessment of the entitys financial performance and
financial position.
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Refer item 6 on page 13 of this report. Also refer to results for
announcement to the market on page 2 of this report for details of the
current impact of our strategic review. |
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13. Accounting standards used in compiling reports by foreign
entities (e.g. International Accounting Standards).
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Not applicable. |
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14. A commentary on the results for the period.
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Refer item 7 on page 13 of this report. |
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15. A statement as to whether the report is based on accounts which
have been audited or subject to review, are in the process of being
audited or reviewed, or have not yet been audited or reviewed.
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Refer item 8 on page 16 of this report. |
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16. If the accounts have not yet been audited or subject to review and
are likely to be subject to dispute or qualification, a description of the
likely dispute or qualification.
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Not applicable. |
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17. If the accounts have been audited or subject to review and are
subject to dispute or qualification, a description of the dispute or
qualification.
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Not applicable. |
4
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Telstra Corporation Limited and controlled entities
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Preliminary final report |
Income Statement
for the year ended 30 June 2006
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Telstra Group |
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Year ended 30 June |
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|
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2006 |
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2005 |
|
|
|
$m |
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$m |
|
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|
|
Income |
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|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
22,772 |
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22,181 |
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Other income |
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|
328 |
|
|
|
261 |
|
|
|
|
|
|
|
23,100 |
|
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22,442 |
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Expenses |
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Labour |
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4,364 |
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3,858 |
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Goods and services purchased |
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|
4,730 |
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4,211 |
|
Other expenses |
|
|
4,427 |
|
|
|
3,815 |
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|
|
|
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|
13,521 |
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|
11,884 |
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Share of net (gain)/loss from jointly controlled and associated entities |
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(5 |
) |
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94 |
|
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|
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13,516 |
|
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|
11,978 |
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|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) |
|
|
9,584 |
|
|
|
10,464 |
|
Depreciation and amortisation |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
5,497 |
|
|
|
6,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
66 |
|
|
|
83 |
|
Finance costs |
|
|
1,002 |
|
|
|
963 |
|
|
|
|
Net finance costs |
|
|
936 |
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|
|
880 |
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|
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|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
4,561 |
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|
|
6,055 |
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|
|
|
|
|
|
|
Income tax expense |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
3,181 |
|
|
|
4,309 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (cents per share) |
|
cents |
|
|
cents |
|
|
|
|
Basic |
|
|
25.7 |
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|
|
34.7 |
|
Diluted |
|
|
25.7 |
|
|
|
34.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends declared (cents per share) |
|
|
34.0 |
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|
|
40.0 |
|
|
|
|
The above income statement is an extract from our full financial report. Refer to the 30 June 2006
financial report lodged with this document for the detailed notes to this statement.
5
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Telstra Corporation Limited and controlled entities
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Preliminary final report |
Balance Sheet
as at 30 June 2006
|
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|
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|
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Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
689 |
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|
|
1,548 |
|
Trade and other receivables |
|
|
3,701 |
|
|
|
3,549 |
|
Inventories |
|
|
224 |
|
|
|
232 |
|
Derivative financial assets |
|
|
21 |
|
|
|
4 |
|
Prepayments |
|
|
244 |
|
|
|
249 |
|
|
|
|
Total current assets |
|
|
4,879 |
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|
|
5,582 |
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|
Non current assets |
|
|
|
|
|
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|
|
Trade and other receivables |
|
|
87 |
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|
|
97 |
|
Inventories |
|
|
20 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
23 |
|
|
|
48 |
|
Property, plant and equipment |
|
|
23,622 |
|
|
|
22,891 |
|
Intangibles |
|
|
6,123 |
|
|
|
6,329 |
|
Deferred tax assets |
|
|
1 |
|
|
|
2 |
|
Derivative financial assets |
|
|
391 |
|
|
|
|
|
Defined benefit assets |
|
|
1,029 |
|
|
|
247 |
|
|
|
|
Total non current assets |
|
|
31,296 |
|
|
|
29,629 |
|
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|
Total assets |
|
|
36,175 |
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|
|
35,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
3,570 |
|
|
|
2,807 |
|
Borrowings |
|
|
1,969 |
|
|
|
1,507 |
|
Current tax liabilities |
|
|
428 |
|
|
|
534 |
|
Provisions |
|
|
737 |
|
|
|
421 |
|
Derivative financial liabilities |
|
|
12 |
|
|
|
11 |
|
Revenue received in advance |
|
|
1,170 |
|
|
|
1,132 |
|
|
|
|
Total current liabilities |
|
|
7,886 |
|
|
|
6,412 |
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
197 |
|
|
|
250 |
|
Borrowings |
|
|
11,409 |
|
|
|
10,941 |
|
Deferred tax
liabilities |
|
|
1,704 |
|
|
|
1,804 |
|
Provisions |
|
|
974 |
|
|
|
894 |
|
Derivative financial liabilities |
|
|
768 |
|
|
|
864 |
|
Revenue received in advance |
|
|
405 |
|
|
|
388 |
|
|
|
|
Total non current liabilities |
|
|
15,457 |
|
|
|
15,141 |
|
|
|
|
Total liabilities |
|
|
23,343 |
|
|
|
21,553 |
|
|
|
|
Net assets |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Share capital |
|
|
5,569 |
|
|
|
5,536 |
|
Reserves |
|
|
(160 |
) |
|
|
(153 |
) |
Retained profits |
|
|
7,177 |
|
|
|
8,273 |
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
12,586 |
|
|
|
13,656 |
|
Minority interests |
|
|
246 |
|
|
|
2 |
|
|
|
|
Total equity |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
|
The above balance sheet is an extract from our full financial report. Refer to the 30 June 2006
financial report lodged with this document for the detailed notes to this statement.
6
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
Statement of Recognised Income and Expense
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
Equity accounting our interest in jointly controlled and associated entities |
|
|
1 |
|
|
|
(2 |
) |
Translation of financial statements of non-Australian controlled entities |
|
|
(36 |
) |
|
|
(193 |
) |
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
Net hedging gains recognised directly in equity |
|
|
327 |
|
|
|
|
|
Net hedging gains removed from equity and included in profit for the year |
|
|
(420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
General reserve |
|
|
|
|
|
|
|
|
Equity accounting our interest in jointly controlled and associated entities |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Retained profits |
|
|
|
|
|
|
|
|
Actuarial gain/(loss) on our defined benefit plans |
|
|
958 |
|
|
|
(90 |
) |
|
|
|
|
|
|
830 |
|
|
|
(280 |
) |
Income tax on equity items |
|
|
(256 |
) |
|
|
24 |
|
|
|
|
Net income/(expense) recognised directly in equity |
|
|
574 |
|
|
|
(256 |
) |
Profit for the year |
|
|
3,181 |
|
|
|
4,309 |
|
|
|
|
Total recognised income for the year |
|
|
3,755 |
|
|
|
4,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in accounting policy attributable to Telstra Entity |
|
|
74 |
|
|
|
1,223 |
|
|
|
|
The above statement of recognised income and expense is an extract from our full financial report.
Refer to the 30 June 2006 financial report lodged with this document for the detailed notes to this
statement.
7
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
Statement of Cash Flows
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Receipts from customers (inclusive of goods and services tax (GST)) |
|
|
25,229 |
|
|
|
24,526 |
|
Payments to suppliers and to employees (inclusive of GST) |
|
|
(14,785 |
) |
|
|
(13,848 |
) |
|
|
|
Net cash generated by operations |
|
|
10,444 |
|
|
|
10,678 |
|
Income taxes paid |
|
|
(1,882 |
) |
|
|
(1,718 |
) |
|
|
|
Net cash provided by operating activities |
|
|
8,562 |
|
|
|
8,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Payments for: |
|
|
|
|
|
|
|
|
- property, plant and equipment |
|
|
(3,636 |
) |
|
|
(2,995 |
) |
- intangibles |
|
|
(619 |
) |
|
|
(544 |
) |
|
|
|
Capital expenditure (before investments) |
|
|
(4,255 |
) |
|
|
(3,539 |
) |
- shares in controlled entities (net of cash acquired) |
|
|
(43 |
) |
|
|
(573 |
) |
- payments for other investments |
|
|
(5 |
) |
|
|
(17 |
) |
|
|
|
Total capital expenditure |
|
|
(4,303 |
) |
|
|
(4,129 |
) |
Proceeds from: |
|
|
|
|
|
|
|
|
- sale of property, plant and equipment |
|
|
50 |
|
|
|
68 |
|
- sale of shares in controlled entities |
|
|
4 |
|
|
|
|
|
- sale of other investments |
|
|
89 |
|
|
|
176 |
|
Net proceeds from CSL New World Mobility merger |
|
|
42 |
|
|
|
|
|
Issue of additional shares by controlled entities |
|
|
6 |
|
|
|
|
|
Redemption of PCCW converting note |
|
|
|
|
|
|
76 |
|
Proceeds from share buy-back by jointly controlled and associated entities |
|
|
34 |
|
|
|
|
|
Loan to jointly controlled and associated entities |
|
|
|
|
|
|
(37 |
) |
Interest received |
|
|
66 |
|
|
|
78 |
|
Dividends received |
|
|
|
|
|
|
2 |
|
|
|
|
Net cash used in investing activities |
|
|
(4,012 |
) |
|
|
(3,766 |
) |
|
|
|
Operating cash flows less investing cash flows |
|
|
4,550 |
|
|
|
5,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
8,641 |
|
|
|
6,433 |
|
Proceeds from Telstra bonds |
|
|
|
|
|
|
983 |
|
Repayment of borrowings |
|
|
(7,624 |
) |
|
|
(5,735 |
) |
Repayment of Telstra bonds |
|
|
(517 |
) |
|
|
(272 |
) |
Repayment of finance lease principal amounts |
|
|
(7 |
) |
|
|
(16 |
) |
Staff repayments of share loans |
|
|
24 |
|
|
|
19 |
|
Purchase of shares for employee share plans |
|
|
(6 |
) |
|
|
|
|
Finance costs paid |
|
|
(940 |
) |
|
|
(879 |
) |
Dividends paid |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
Share buy-back |
|
|
|
|
|
|
(756 |
) |
|
|
|
Net cash used in financing activities |
|
|
(5,399 |
) |
|
|
(4,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash |
|
|
(849 |
) |
|
|
847 |
|
Foreign currency translation on opening balances |
|
|
4 |
|
|
|
(3 |
) |
Cash at the beginning of the year |
|
|
1,534 |
|
|
|
690 |
|
|
|
|
Cash at the end of the year |
|
|
689 |
|
|
|
1,534 |
|
|
|
|
The above statement of cash flows is an extract from our full financial report. Refer to the 30
June 2006 financial report lodged with this document for the detailed notes to this statement.
8
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
1. Details of dividend or distribution plans in operation
During fiscal 2006 and fiscal 2005, we had no dividend or
distribution reinvestment plans in operation.
2. Statement of retained profits
A reconciliation of our movements in our retained profits is as follows:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Opening balance |
|
|
8,273 |
|
|
|
8,618 |
|
- adjustment to opening balance on
adoption of new accounting standard |
|
|
(5 |
) |
|
|
|
|
|
|
|
Adjusted opening balance |
|
|
8,268 |
|
|
|
8,618 |
|
- profit for the year |
|
|
3,181 |
|
|
|
4,309 |
|
- actuarial gain/(loss) on our defined benefit
plans |
|
|
958 |
|
|
|
(90 |
) |
- income tax on our actuarial gain on
defined benefit plans |
|
|
(284 |
) |
|
|
24 |
|
- dividends paid |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
- share buy-back |
|
|
|
|
|
|
(476 |
) |
- transfer from consolidation fair value
reserve |
|
|
6 |
|
|
|
6 |
|
- transfers of reserve on sale of associates |
|
|
|
|
|
|
6 |
|
- dilution gain recognised on CSL New World
Mobility Group merger |
|
|
18 |
|
|
|
|
|
|
|
|
Closing balance |
|
|
7,177 |
|
|
|
8,273 |
|
|
|
|
3. Net tangible assets per security
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
¢ |
|
|
¢ |
|
|
|
|
Net tangible assets per security after
providing for estimated tax on unrealised
gains and losses |
|
|
51.9 |
|
|
|
58.9 |
|
|
|
|
Our fiscal 2005 net tangible assets per security has been
restated to reflect the adoption of Australian equivalents to
International Financial Reporting Standards.
4. Details of entities which control has been gained
or lost during the period
Entities which control has been gained during the period
|
|
On 11 August 2005, we established a new entity named
Platefood Limited to facilitate a new investment for
nominal consideration. |
|
|
|
On 25 August 2005, we established a new entity named
Sensis (Victoria) Pty Ltd to facilitate a new
investment for nominal consideration. |
|
|
|
On 1 July 2005, we acquired 100% of the issued capital
of Keycorp Solutions Limited for a total consideration of
$56 million including acquisition costs. Subsequent to
acquisition, the entity was renamed Telstra Payment
Solutions Pty Limited. |
|
|
|
On 31 March 2006, we acquired 100% of the issued
capital of the Converged Networks Group for a total
consideration of $5 million including acquisition costs.
Converged Networks Group included the following
controlled entities: |
|
|
|
Converged Networks Pty Ltd; |
|
|
|
|
Communications Network Holdings Pty Ltd; |
|
|
|
Advanced Digital Communications (WA) Pty Ltd; and |
|
|
|
|
Western Communications Solutions Pty Ltd. |
|
|
Converged Networks Group is a provider of voice and
data networks which operates primarily in Western
Australia. |
|
|
|
On 31 March 2006, we merged our 100% owned Hong Kong
mobile operations (Telstra CSL Group) with the Hong Kong
mobile operations of New World PCS Holdings Limited and
its controlled entities (New World Mobility Group) to
form the CSL New World Mobility Group. |
|
|
|
Under the merger agreement, Telstra CSL Limited issued new shares to New World Mobility Holdings Limited in return for
100% of the issued capital of the New World Mobility Group
and $42 million in net proceeds (net of acquisition costs).
The fair value of the Telstra CSL Limited shares issued
amounted to $577 million and diluted Telstras ownership in
the merged group to 76.4%. Our merger with the New World
Mobility Group included the acquisition of the following
controlled entities: |
|
|
New World PCS Holdings Limited; |
|
|
|
New World 3G Limited; |
|
|
|
New World PCS Limited; and |
|
|
|
New World Mobility Limited. |
|
|
The CSL New World Mobility Group is a provider of
mobile telecommunication products and services which
operates primarily in Hong Kong. |
9
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
4. Details of entities which control has been gained
or lost during the period (continued)
Other acquisitions
|
|
On 1 July 2005, our controlled entity Sensis Holdings
Pty Ltd acquired a further 25% of the issued share
capital of Invizage Pty Ltd for a total cash
consideration of $5 million including acquisition costs. |
|
|
|
Invizage Pty Ltd is a provider of information technology
services for small and medium Australian organisations. |
|
|
|
On 22 December 2005, our controlled entity Kaz Group Pty
Limited acquired a further 40% of the issued share
capital of Enhanced Processing Technologies Inc for
nominal consideration, giving us ownership of the entity.
Prior to this date, Enhanced Processing Technologies was
classified as a jointly controlled entity. |
|
|
|
Enhanced Processing Technologies Inc is a provider of
cheque processing technology and services which operates
primarily in the United States. |
|
|
|
On 1 February 2006, we acquired a further 24.7% of the
issued capital of Adstream (Aust) Pty Ltd and its
controlled entities (Adstream Group) for a total
consideration of $21 million including acquisition costs,
giving us a controlling interest of 58%. Prior to this
date, Adstream (Aust) Pty Ltd was classified as a jointly
controlled entity. Our acquisition of the Adstream Group
included the following controlled entities: |
|
|
|
Adstream Ltd; and |
|
|
|
|
Quickcut (Aust) Pty Ltd. |
|
|
The Adstream Group is a provider of on-line services to
advertisers that streamlines client approval and
distribution of electronic advertising to media outlets. |
Entities where control has been lost during the period
Sales and disposals
|
|
On 31 August 2005, Trading Post Group Pty Limited (TPG)
sold its investment in Just Listed Pty Ltd to Sensis Pty
Ltd (Sensis). |
|
|
|
In addition, Sensis sold its 33% interest in TPG to
Trading Post (Australia) Holdings Pty Ltd on 31 August
2005. |
|
|
|
These controlled entities are all within the Telstra Group. |
|
|
|
On 1 May 2006, our controlled entity KAZ Group Pty
Limited divested its interest in Fundi Software Pty Ltd
in a management buy-out for a total consideration of $4
million. |
|
|
|
On 26 June 2006, ESA Holding Pty Ltd sold its investment
in Telstra Business Systems Pty Ltd to the Telstra
Entity. |
10
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
5. Details of investments in joint ventures
and associated entities
Our investments in jointly controlled and associated entities are listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
Ownership interest |
|
|
|
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
Name of entity |
|
Principal activities |
|
% |
|
|
% |
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
FOXTEL Partnerships (i) |
|
Pay television |
|
|
50.0 |
|
|
|
50.0 |
|
Customer Services Pty Limited |
|
Customer service |
|
|
50.0 |
|
|
|
50.0 |
|
FOXTEL Management Pty Limited |
|
Management services |
|
|
50.0 |
|
|
|
50.0 |
|
FOXTEL Cable Television Pty Ltd |
|
Pay television |
|
|
80.0 |
|
|
|
80.0 |
|
Reach Ltd (incorporated in Bermuda) (ii) |
|
International connectivity services |
|
|
50.0 |
|
|
|
50.0 |
|
Xantic B.V. (incorporated in The Netherlands) (ii) (b) |
|
Global satellite communications |
|
|
|
|
|
|
35.0 |
|
TNAS Limited (incorporated in New Zealand) (iii) |
|
Toll free number portability in New |
|
|
|
|
|
|
|
|
|
|
Zealand |
|
|
33.3 |
|
|
|
33.3 |
|
Money Solutions Pty Ltd |
|
Financial advice and education |
|
|
|
|
|
|
|
|
|
|
services |
|
|
50.0 |
|
|
|
50.0 |
|
HelpYouPay Systems Pty Ltd (b) |
|
Debt management services |
|
|
|
|
|
|
50.0 |
|
HelpYouPay Pty Ltd (b) |
|
Debt management services |
|
|
|
|
|
|
50.0 |
|
Enhanced Processing Technologies Pty Ltd |
|
Business process outsourcing |
|
|
60.0 |
|
|
|
60.0 |
|
Enhanced Processing Technologies Inc
(incorporated in United States) (a) |
|
Software sales |
|
|
|
|
|
|
60.0 |
|
Adstream (Aust) Pty Ltd (a) |
|
Digital advertising and asset |
|
|
|
|
|
|
|
|
|
|
management |
|
|
|
|
|
|
33.3 |
|
3GIS Pty Ltd (ii) |
|
Management services |
|
|
50.0 |
|
|
|
50.0 |
|
3GIS Partnership (ii) |
|
3G network services |
|
|
50.0 |
|
|
|
50.0 |
|
Bridge Mobile Pte Ltd (incorporated in Singapore) |
|
Regional roaming provider |
|
|
12.5 |
|
|
|
12.5 |
|
m.Net Corporation Limited (c) |
|
Mobile phone content provider |
|
|
26.4 |
|
|
|
39.5 |
|
Associated entities |
|
|
|
|
|
|
|
|
|
|
Australia-Japan Cable Holdings Limited
(incorporated in Bermuda) (ii) (c) |
|
Network cable provider |
|
|
46.9 |
|
|
|
39.9 |
|
Telstra Super Pty Ltd |
|
Superannuation trustee |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Keycorp Limited (c) |
|
Electronic transactions solutions |
|
|
47.6 |
|
|
|
47.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Foundation Ltd |
|
Charitable trustee organisation |
|
|
100.0 |
|
|
|
100.0 |
|
LinkMe Pty Ltd |
|
Internet recruitment provider |
|
|
40.0 |
|
|
|
40.0 |
|
|
|
|
(i) |
|
This includes both the FOXTEL partnership and the FOXTEL television partnership. |
|
(ii) |
|
Balance date is 31 December. |
|
(iii) |
|
Balance date is 31 March. |
Unless noted, all investments are incorporated in Australia.
11
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
5. Details of investments in joint ventures
and associated entities (continued)
(a) Investments no longer equity accounted
|
|
On 22 December 2005, we acquired the remaining 40%
shareholding in Enhanced Processing Technologies Inc
giving us a controlling interest. Prior to this date
Enhanced Processing Technologies Inc was a jointly
controlled entity and was equity accounted. |
|
|
On 1 February 2006, we acquired an additional 24.7%
shareholding in Adstream (Aust) Pty Ltd giving us a
controlling interest. Prior to this date Adstream (Aust)
Pty Ltd was a jointly controlled entity and was equity
accounted. |
(b) Sale of investments
|
|
On 30 July 2005, we completed the sale of our 50%
shareholding in HelpYouPay Pty Ltd. The revenue on sale
of the investment was not considered significant. |
|
|
On 30 July 2005, we completed the sale of our 50%
shareholding in HelpYouPay Systems Pty Ltd. The revenue
on sale of the investment was not considered significant. |
|
|
On 16 February 2006, we completed the sale of our 35%
shareholding in Xantic B.V. for $89 million (US$67
million). During fiscal 2006, we received $18 million
(US$13 million) as a result of a capital return by Xantic
B.V. |
(c) Other changes in jointly controlled and associated entities
|
|
On 1 July 2005, we acquired an intangible asset from our
associated entity Keycorp Limited (Keycorp) for $55
million. We reduced the value of the intangible asset
recognised and increased our investment in Keycorp to the
extent to which this transaction is unrealised outside
the Telstra Group. This resulted in a $26 million
increase in the carrying value of our investment. Under
the terms of the transaction, Keycorp also returned
capital to its shareholders, our share amounting to $16
million. |
|
|
|
In addition, our investment in Keycorp decreased from 47.8%
to 47.6% on 29 August 2005. The decrease was due to a
dilution in our shareholding. |
|
|
On 10 August 2005, our investment in m.Net Corporation
Limited decreased from 39.5% to 26.4%. The decrease was
due to a dilution in our shareholding. |
|
|
On 16 November 2005, our investment in Australia-Japan
Cable Holdings Limited increased from 39.9% to 46.9%.
The increase was due to another investor forfeiting their
interest in the investment. |
Share of jointly controlled and associated entities net
(profits)/ losses
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Net (profit)/loss from jointly controlled and
associated entities has been contributed by
the following entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
- FOXTEL Partnerships |
|
|
5 |
|
|
|
5 |
|
- Stellar Call Centres Pty Ltd. |
|
|
|
|
|
|
(3 |
) |
- Xantic B.V. |
|
|
(12 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
- Keycorp Limited |
|
|
1 |
|
|
|
(5 |
) |
- LinkMe Pty Ltd |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
(8 |
) |
|
|
|
Net (profit)/loss from jointly controlled
entities has been adjusted by the following: |
|
|
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
- Reach Ltd (i) |
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
(5 |
) |
|
|
94 |
|
|
|
|
(i) In fiscal 2005, previously recognised equity accounted
losses in Reach Ltd (Reach) were recognised due to our
commitment to fund 50% of Reachs committed capital
expenditure, which was accounted for as an investment in
Reach.
Refer note 30 in our financial statements lodged with this
document for further details on our jointly controlled and
associated entities.
12
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
6. Any other significant information needed by an
investor to make an informed assessment of the entitys
financial performance
Balance Sheet
We continue to maintain a strong balance sheet with net assets
of $12,832 million, compared with net assets of $13,658
million as at 30 June 2005. The decrease in net assets of
$826 million comprised an increase in total liabilities of
$1,790 million, offset by an increase in our total assets of
$964 million.
The increase in total liabilities of $1,790 million was
primarily due to a $930 million rise in total borrowings to
fund our working capital requirements including dividend
payments. In addition, our trade and other payables grew by
$710 million, reflecting additional accrued expenditure
associated with the roll out of the 3GSM850 network.
The increase in total assets of $964 million was mainly due to
the net impact of the following movements during the year:
|
|
our defined benefit assets increased by $782 million
primarily due to the recognition of actuarial gains on the
Telstra Superannuation Scheme; |
|
|
|
our property, plant and
equipment increased by $731 million, largely due to the assets
acquired in the CSL New World Mobility merger and additional
capital expenditure, offset by depreciation expense; offset by |
|
|
|
a decrease in cash and cash equivalents of $859 million
mainly due to cash required to fund financing activities. |
Statement of Cash Flows
We reported a strong free cash flow position, which enabled
the company to pay increased dividends and fund the
acquisition of a number of new entities. We continue to
source cash through ongoing operating activities and through
careful capital and cash management.
Our cash flow before financing activities (free cash flow)
position remains strong despite declining to $4,550 million
in the year from $5,194 million in the prior year. This
decline was driven by higher levels of external expenditure,
and increased cash used in investing activities as we
undertake our network and information technology platform
transformation.
Cash used in investing activities was $4,012 million,
representing an increase of $246 million over the prior year.
The increase is mainly attributable to capital expenditure to
upgrade our telecommunications networks, eliminate components
that are no longer useful and improve the systems used to
operate our networks. Our investing expenditure also includes
$312 million of deferred payments in relation to our purchase
of the third generation radio access network assets from
Hutchison Australia Pty Ltd in fiscal 2005.
Our cash used in financing activities was $5,399 million,
representing mainly the funding of dividend payments and the
refinancing of our maturing debt, offset by net proceeds from
borrowings received from a number of our private placements.
7. Commentary on the results for the period
Income Statement
Our net profit for the year was $3,181 million, representing a
decrease of 26.2% on the prior years net profit of $4,309
million. Earnings before interest and income tax expense
(EBIT) for fiscal 2006 was $5,497 million, representing a
decrease of 20.7% on the prior year result of $6,935 million.
Total revenue (excluding finance income) for the year
increased by 2.7% to $22,772 million (2005: $22,181 million).
Revenue growth was mainly attributable to:
|
|
mobile goods and services growth of $284 million or 6.1%; |
|
|
|
an increase in Internet and IP solutions revenue of $530
million or 38.5%; |
|
|
|
advertising and directories revenue growth
of $126 million or 7.9%; and |
|
|
|
an increase in pay TV bundling
of $57 million or 21.7%. |
These increases have been partially offset by a decline in
PSTN revenues of $540 million or 6.7%. There has been a
general reduction in PSTN volumes and yields have also
declined due to competitive pricing pressure and continuing
customer migration to other products.
Mobile goods and services revenue increased largely due to
the performance of mobiles data revenue, international
roaming and mobile interconnection revenues.
Internet and IP solutions revenue experienced growth due to
an increase in the subscriber base for our broadband
products, partially due to migration from narrowband
products, but also due to growth in the overall online
market.
Our advertising and directories revenue increased over the
prior year due to the continued strong performance of our
Yellow and White pages directories.
Pay TV bundling revenue increased due to the migration of
customers to FOXTEL digital, as well as promotions during the
period, offering minimal price installation and discounted
packages.
Total expenses (before finance costs, income tax expense and
our share of profit/(loss) from jointly controlled and
associated entities) increased by 13.8% to $13,521 million
from $11,884 million in the prior year. A significant portion
of this increase was attributable to our redundancy and
restructuring related expenses associated with the
implementation of the strategic review initiatives.
13
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
7. Commentary on the results for the period (continued)
Income Statement (continued)
Labour expenses increased by 13.1% to $4,364 million (2005:
$3,858 million). The higher labour costs were due to
increased levels of redundancy, salary increases as part of
the normal annual salary review process, a full year of
ownership of several subsidiaries acquired part way through
fiscal 2005 (such as KAZ and Telstra Business Systems), and
acquisition of new entities such as the New World Mobility
group and Adstream.
Goods and services purchased increased by 12.3% to $4,730
million in fiscal 2006 (2005: $4,211 million) due to higher
cost of goods sold, mobile handsets subsidies and network
payments, as well as a restructuring provision in relation to
the replacement of certain items and additional customer and
dealer costs associated with the shut down of our CDMA network
in the future.
Depreciation and amortisation costs grew to $4,087 million or
by 15.8% in fiscal 2006, primarily due to our reassessment of
service lives for our assets as part of the transformation
strategy. As a result, we have accelerated depreciation and
amortisation on our CDMA network, switching systems, certain
business and operational support systems and related software
totalling $422 million for the year.
Other expenses increased by 16.0% to $4,427 million (2005:
$3,815 million) due mainly to restructuring costs associated
with property rationalisation, cancellation of server leases,
and the decommissioning of certain IT platforms and
operational and business support systems. The maintenance of
the existing 3G network and the operational expenditure
associated with the construction of the new 3G network,
higher consultancy costs and increased market research
activity due to a focus on understanding customer needs were
also contributors to the increased other expenses.
Income tax expense decreased by 21.0% to $1,380 million in
fiscal 2006 mainly as a result of the lower profit. The
effective tax rate in the current year was 30.3% compared with
the prior year rate of 28.8%. The effective tax rate
increased from the prior year mainly due to the reduction in
differences for partnership losses and an increase in the
under provision of tax from prior periods.
Investor return and other key ratios
Our basic earnings per share decreased to 25.7 cents per share
in fiscal 2006 from 34.7 cents per share in the prior year.
The decrease was due to lower profit in fiscal 2006. We have
declared a final fully franked dividend of 14 cents per share
($1,739 million), bringing dividends per share for fiscal 2006
to 34 cents per share. The prior year dividends amounted to
40 cents per share.
Other relevant measures of return to investors include the following:
|
|
Return on average assets 2006: 15.8% (2005: 20.6%) |
|
|
Return on average equity 2006: 24.2% (2005: 30.6%) |
Return on average assets is lower in fiscal 2006 primarily due
to the lower profit as previously discussed. The decrease in
return on average equity is also attributable to lower profit
and the reduction in shareholders equity, resulting from
increased dividend payments in fiscal 2006.
Segment information
For segment reporting purposes, the Telstra Group is organised
along the following segments:
|
|
Telstra Consumer Marketing and Channels; |
|
|
|
Telstra Business; |
|
|
|
Telstra Enterprise and Government; |
|
|
|
Telstra International; |
|
|
|
Telstra Operations; |
|
|
|
Telstra Wholesale; |
|
|
|
Sensis; and |
|
|
|
Other (including Telstra BigPond, Telstra Media,
Telstra Country Wide, Strategic Marketing and our
corporate areas). |
Refer note 5 to our financial statements for details on the
nature of the products and services provided by these
segments.
The majority of our revenue is derived from Telstra Consumer
and Channels, Telstra Business, Telstra Enterprise and
Government and Telstra Wholesale.
Telstra Consumer Marketing and Channels revenue decreased by
0.4% to $8,897 million in fiscal 2006. This segment
experienced revenue increases due to the continued growth in
mobile services, primarily international roaming, mobile data
usage and handset sales. In addition, strong growth in
BigPond broadband and pay television services were experienced
due to increased in marketing activities and improved
retention of existing customers through bundling initiatives.
Offsetting growth in revenue was a decline in PSTN revenue as
a result of competition, product substitution and decreased
consumer usage.
Telstra Consumer Marketing and Channels EBIT decreased by 8.4%
to $5,721 million in fiscal 2006 driven by expense growth in
handsets, dealer costs, network payments and labour in line
with revenue and customer growth in emerging products and
services. In addition, EBIT was impacted by one off costs
associated with renegotiating dealer contracts and redundancy
and restructuring costs resulting from our transformation
project.
14
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
7. Commentary on the results for the period (continued)
Segment information (continued)
Telstra Business revenue declined by 1.5% to $3,053 million
in fiscal 2006 primarily due to a decline in PSTN revenue.
This segment experienced growth in mobile products including
voice, data, Messagebank and international roaming, which
partially offset the decrease in PSTN revenues. In addition,
Internet and IP products revenue grew in fiscal 2006,
reflecting the increase in broadband subscribers.
Telstra Business EBIT decreased by 3.0% to $2,412 million in
fiscal 2006 predominantly due to a decline in revenues and an
increase in expenses. Expenses grew as a result of a rise in
network payments, cost of goods sold and other directly
variables costs associated with product offerings.
Telstra Enterprise and Governments revenue increased by 0.8%
to $4,607 million in fiscal 2006, mainly due to strong growth
in domestic Information and Communication Technology (ICT)
services, Internet and IP products, and offshore revenues.
This increase has been partially offset by reductions in sales
revenue from the underlying core carriage business, consisting
mainly of a decline in traditional PSTN and ISDN revenues.
This segment continues to experience change in usage patterns
with traditional product usage migrating to alternative access
offerings such as wireless, broadband and other IP product
offerings.
Telstra Enterprise and Government EBIT decreased by 3.8% to
$2,706 million in fiscal 2006 reflecting a changing product
mix, which resulted in reductions in sales volumes of higher
margin core access technologies, and growth in lower margin
ICT services and offshore revenues.
Telstra Wholesale revenue increased by 15.0% to $2,607 million
in fiscal 2006 driven by continuing demand for broadband and
data services, new growth relating to Hutchinsons 3G
partnership network extension and an increase in wholesale
basic access revenues. Telstra Wholesale experienced
significant revenue growth in several products such as
facilities access as a variety of carriers extend their DSL
capabilities in preparation for building their own
infrastructure via unconditioned local loop and spectrum
sharing. Data and Internet service revenues also showed solid
growth, which was mainly driven by wholesale broadband
offerings and associated ISP related data carriage and
transmission services. Growth in revenue was partly offset by
a decrease in local call revenues due to ongoing product
substitution to mobiles and broadband.
Telstra Wholesale EBIT increased by 18% to $2,693 million in
fiscal 2006 compared with $2,283 million in fiscal 2005. The
increase in EBIT was driven by revenue growth, and a decrease
in expenses. The expense decline consisted of a decrease in
Telstra Wholesales allocated share of domestic outpayments,
reflecting lower rates and a decrease in international voice
traffic expenses, which was assisted by an appreciating
Australian dollar. Lower labour costs was due to the decrease
in staff numbers as part of our transformation project and the
movement of staff to other areas in Telstra as part of overall
business restructure. In addition, service contract costs
were lower due to the discontinuation of the payment incentive
rebates with certain
customers. The expense decline was partly offset by increased
IT professional services costs driven by growth in system
support and automation costs to deliver ongoing operational
productivity and revenue growth.
Other information
No significant events have occurred after balance date for
the year ended 30 June 2006, other than:
Dividend declaration
On 10 August 2006, the directors of Telstra Corporation
Limited declared a fully franked final dividend of 14 cents
per ordinary share. The record date for the final dividend
will be 25 August 2006 with payment to be made on 22 September
2006. Shares will trade excluding the entitlement to the
dividend on 21 August 2006.
A provision for dividend payable has been raised as at the
date of declaration, amounting to $1,739 million. The final
dividend will be fully franked at a tax rate of 30%. The
financial effect of the dividend declaration was not brought
to account as at 30 June 2006.
There are no income tax consequences for the Telstra Group and
Telstra Entity resulting from the declaration and payment of
the final ordinary dividend, except for $745 million of
franking debits arising from the payment of this dividend that
will be adjusted for in our franking account balance.
FOXTEL loan facility
On 31 July 2006, our 50% owned pay television joint venture
FOXTEL entered into a new $600 million syndicated secured term
loan facility to fund the refinancing of previous loan
facilities (including the $550 million syndicated facility),
and to enable it to meet future cash flow and expenditure
requirements.
The equity contribution deed (ECD) entered into by us and
FOXTELs other ultimate shareholders, News Corporation
Limited and Publishing and Broadcasting Limited has been
terminated.
Under this arrangement, recourse to our controlled entity
Telstra Media Pty Ltd, as a FOXTEL partner, is limited to
the assets of the FOXTEL Partnerships.
15
|
|
|
Telstra Corporation Limited and controlled entities
|
|
Preliminary final report |
|
|
|
Appendix 4E
|
|
Year ended 30 June 2006 |
8. Statement about the audit status
Our preliminary final report is based on the Telstra
Corporation Limited and controlled entities financial report
as at 30 June 2006, which has been audited by the Australian
National Audit Office (ANAO). Refer to the 30 June 2006
financial report for the independent audit report to the
members of Telstra Corporation Limited.
9. Adoption of International Financial Reporting
Standards
Australian entities reporting under the Corporations Act
2001 are required to prepare their financial reports for
financial years commencing on or after 1 January 2005 under
the Australian equivalents of International Financial
Reporting Standards (A-IFRS) as adopted by the Australian
Accounting Standards Board (AASB). We implemented accounting
policies in accordance with A-IFRS on 1 July 2004, except for
those relating to financial instruments, which were
implemented on 1 July 2005.
The transitional rules for first time adoption of A-IFRS
required that we restate our comparative financial report
using A-IFRS, except for AASB 132: Financial Instruments:
Disclosure and Presentation and AASB 139: Financial
Instruments: Recognition and Measurement, where comparative
information was not required to be restated. In addition, we
have elected to early adopt AASB 7: Financial Instruments:
Disclosures, which supersedes the disclosure requirements of
AASB 132.
Comparatives were remeasured and restated for the financial
year ended 30 June 2005. Most of the adjustments on
transition were made to opening retained profits at the
beginning of the first comparative period (ie. at 1 July
2004), except for the accounting policies in respect of
financial instruments which required adoption from 1 July
2005.
Our adoption of A-IFRS has impacted the accounting policy
and reported amounts of the following items:
|
|
share based payments; |
|
|
|
business combinations; |
|
|
|
income taxes; |
|
|
|
property, plant and equipment; |
|
|
|
leases; |
|
|
|
employee benefits; |
|
|
|
changes in foreign exchange rates; |
|
|
|
borrowing costs; |
|
|
|
investments in associates and joint ventures; |
|
|
|
impairment of assets; |
|
|
|
intangible assets; and |
|
|
|
financial instruments. |
Reconciliations and descriptions of the impact of transition
to A-IFRS on the Telstra Group income statement, balance sheet
and statement of cash flows are provided in note 36 of the
full financial report lodged with this document.
Other than the adoption of A-IFRS, we have had no significant
change in accounting policy during fiscal 2006 and fiscal
2005.
16
Telstra Corporation Limited and controlled entities
Results and operations review
Year ended 30 June 2006
Business transformation on track tough medicine continues
Results
|
|
Sales revenue grew by 2.7% or $589 million to $22,750 million |
|
|
|
Operating expenses grew by 13.8% or $1,637 million to $13,521 million |
|
|
|
EBIT declined by 20.7% or $1,438 million to $5,497 million |
|
|
|
Profit after tax declined by 26.2% or $1,128 million to $3,181 million |
|
|
|
Cash capital expenditure (including investments) of $4,303 million, up 4.2% |
|
|
|
Basic earnings per share of 25.7 cents, down 9 cents |
|
|
|
Final dividend declared of 14 cents per share, fully franked |
|
|
|
Broadband revenue grew by 64.5% or $467 million to $1,191 million |
|
|
|
Mobiles revenue grew by 6.1% or $284 million to $4,972 million |
|
|
|
Advertising and directories revenue grew by 7.9% or $126 million to $1,711 million |
|
|
|
PSTN revenue declined by 6.7% or $540 million to $7,478 million |
|
|
|
Thursday, 10 August, 2006
|
|
|
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Financial Highlights
Year ended 30 June 2006
Business transformation on track tough medicine continues
Telstra Corporation Limited and its controlled entities (Telstra) reported profit after tax of
$3,181 million for the year ended 30 June 2006, a decrease of 26.2% on the prior year. Basic
earnings per share (EPS) declined from 34.7 cents to 25.7 cents. Earnings before interest and tax
(EBIT) decreased by 20.7% to $5,497 million.
Margins declined with a decrease in EBIT margin of 7.1% to 24.2% and an EBITDA margin decrease of
5.1% to 42.1%.
The results achieved are at the better end of the guidance previously advised to the market.
Income
Total income grew by 2.9% or $658 million in the current year to $23,100 million. Revenue
growth was achieved through increases in broadband, mobiles, IP solutions, advertising and
directories, intercarrier services and pay TV bundling. However, revenue growth was negatively
impacted by a decline in PSTN revenue of 6.7%, as well as declines in specialised data and ISDN
products.
Domestic sales revenue grew by 2.2% to $20,995 million.
Expenses
Operating expenses (before depreciation, amortisation, interest and tax) increased by 13.8%
due to higher labour costs, in particular redundancy costs, higher goods and services purchased,
and increases in other expenses supporting revenue growth. Expenses were also significantly
impacted by the recognition of a provision at year end for redundancy and restructuring expenses
expected to be incurred mainly over the next two years as part of our business transformation.
Total expenses (before interest and tax) increased by 14.2%, which includes depreciation and
amortisation growth of 15.8%.
Net finance costs grew by 6.4% due to higher average borrowings following high capital expenditures
and dividends paid in the current year, and share buy-backs and acquisitions of controlled entities
in the prior year.
Income tax expense decreased by 21.0% to $1,380 million.
Business Transformation
On 15 November 2005, our transformation strategy was announced. The business transformation
is progressing well and our customers are beginning to see the preliminary result as we execute our
vision.
As we have foreshadowed in our market announcements, the process of transforming the business will
require significant investment and our financial results for fiscal 2006 reflect this as we
continue
the process of driving efficiencies through the business by transforming networks and systems. The
key financial impacts that you will see throughout this document include the following:
|
|
Labour costs we have achieved a significant reduction in our workforce numbers, with
reductions in the number of contractors, agency staff and employed staff. This has had a
positive impact on our salary and wage expense, but has necessarily caused a significant
increase in our redundancy expenditure in the current year. Labour costs are higher in the
short term but the benefits will be seen in the longer term; |
1
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
|
|
Provision for restructuring and redundancy costs under Australian accounting standards we
are required to make provision for the expected costs of restructuring the business as part of
our transformation. A large part of the provision expense relates to the cost of certain
redundancies expected over the next two years. Also included are expenses such as IT
decommissioning costs, stock obsolescence, write-off of certain commission and incentive
arrangements and rationalisation of property activities; |
|
|
Depreciation we have accelerated the rate of depreciation of certain network and IT assets
due to our intended retirement of the CDMA network and rationalisation of many of our IT
platforms and software applications. This is reflected in the increase in depreciation and
amortisation expenditure in fiscal 2006; and |
|
|
Other operational costs associated with the various aspects of implementing our business
transformation. |
The business transformation will provide a new customer experience and enhance long term
shareholder value. It is necessary to incur costs in the short term in order to deliver the
transformation.
Australian Equivalents to International Financial Reporting Standards
The year ended 30 June 2006 is the first period reported under Australian Equivalents to
International Financial Reporting Standards (A-IFRS). The new standards have impacted both the
recognition and classification of many items in our income statement, balance sheet and cash flow
statement. Prior period comparative numbers have been restated where appropriate to reflect the
impact of adoption of A-IFRS, with the exception of the accounting standard relating to financial
instruments, which was only adopted from 1 July 2005. For detailed information regarding the
impact of A-IFRS on our financial information, refer to the 2006 financial statements. These are
available on our investor relations website
at www.telstra.com.au/abouttelstra/investor/index.cfm
Cash flow
Operating cash flow less investing cash flow (free cash flow) decreased by 12.4% for the year
ended 30 June 2006 to $4,550 million. This decline was due to a reduction in net cash provided by
operating activities of 4.4% driven by higher levels of external expenditure, and increased cash
used in investing activities of 6.5% as we undertake our 3G network and IP core transformation.
Capital expenditure
Cash capital expenditure for the year ended 30 June 2006 increased by 4.2% to $4,303 million.
Core operating expenditure increased by 18.7% to $4,192 million. Higher capital expenditure was
driven primarily by our roll out of the new 3G 850 network and implementation of our next
generation network wireline technology. This was partially offset by a reduction in our
acquisitive investment expenditure by 91.9%, with fiscal 2005 including the acquisitions of the KAZ
Group, PSINet, Telstra Business Systems (Damovo), Universal Publishers and Sytec.
Treasury operations
Telstras financial position remains strong with current long-term credit ratings as of July
2006 of A, A2 and A+ from S&P, Moodys and Fitch respectively. All three rating agencies have
Telstra on a negative outlook with major factors being uncertainty surrounding the regulatory environment,
intensifying competition, technological advances and PSTN revenue declines.
The net debt position was $13,053 million, which was a $1,281 million increase on the equivalent
balance at 30 June 2005, largely due to high cash balances at 30 June 2005 after the receipt of our
Euro borrowings late in June 2005 and increased debt holdings across the year. The balance sheet
continues to have strong capital settings.
2
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Dividend
A fully franked final ordinary dividend of 14 cents per share has been declared and is payable
on 22 September 2006. No decision has been made with respect to the payment or funding of future
ordinary dividends. The Board will make these decisions in the normal cycle having regard to,
among other factors, the companys earnings and cash flow as well as regulatory decisions.
Outlook
We are in the process of executing our strategy that was announced in November 2005. We have
incurred significant costs and we have seen margin pressure continue as our revenue mix changes.
Earnings have declined at both the EBITDA and EBIT lines, impacted by the accelerating decline in
high margin PSTN product revenue as expected.
With our next generation networks, we are putting in place the infrastructure to reduce our
reliance on our traditional fixed line revenue streams and to grow our mobiles, internet and other
next generation revenues while reducing the costs of operations.
As foreshadowed in our plan, we expect revenue growth of between 2.0% and 2.5% compounded annually
between now and 2010.
EBITDA margins have been and will continue to be impacted by regulatory outcomes.
We expect depreciation and amortisation expense to remain high over the next few years as we invest
heavily in transforming the network and IT base, together with accelerating depreciation and
write-offs of certain assets that are to be phased out in the 2007 fiscal year. The provision for
redundancy and restructuring in fiscal 2006 will have a positive impact on expense movements.
Cash flow will be impacted by our investment in capital expenditure over the next two to three
years and free cash flow is expected to reflect this. Cash operating capital expenditure is
expected to be in the range of $5.4 billion to $5.7 billion in fiscal 2007.
Our priority continues to be achieving our strategy to give customers a seamless user experience
across all devices and platforms fixed, wireless and internet providing a 1-click, 1-touch,
1-button, 1-screen, 1-step solution, whether that customer is an individual, small business, large
business, government agency or non-profit organisation.
For enquiries on these results contact:
John Stanhope
Chief Financial Officer
Telstra Corporation Limited
David Anderson
General Manager, Investor Relations
Telstra Corporation Limited
Phone: +61 (3) 9634 8014
Email: Investor.relations@team.telstra.com
3
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Table of Contents
|
|
|
|
|
|
|
Page |
|
for the year ended 30 June 2006 |
|
Number |
|
Summary Financial Information |
|
|
|
|
Results of Operations |
|
|
5 |
|
Cash Flow Summary |
|
|
6 |
|
Balance Sheet Summary |
|
|
7 |
|
|
|
|
|
|
Segment Information |
|
|
8 |
|
Statistical Data Summary |
|
|
9 |
|
|
|
|
|
|
Analysis information |
|
|
|
|
Operating Revenues |
|
|
10 |
|
PSTN Products |
|
|
12 |
|
Mobiles |
|
|
16 |
|
Internet and IP Solutions |
|
|
19 |
|
ISDN |
|
|
21 |
|
Specialised Data |
|
|
22 |
|
Advertising and Directories |
|
|
23 |
|
Intercarrier Services |
|
|
24 |
|
Inbound Calling Products |
|
|
25 |
|
Solutions Management |
|
|
26 |
|
Offshore Controlled Entities |
|
|
27 |
|
Payphones |
|
|
28 |
|
Pay TV Bundling |
|
|
28 |
|
Customer Premises Equipment |
|
|
29 |
|
Other Sales and Services |
|
|
29 |
|
Other Income |
|
|
30 |
|
Operating Expenses |
|
|
31 |
|
Labour |
|
|
32 |
|
Goods and Services Purchased |
|
|
34 |
|
Other Expenses |
|
|
36 |
|
Share of net gain/loss of jointly controlled entities and associated entities |
|
|
38 |
|
Depreciation and Amortisation |
|
|
38 |
|
Net Finance Costs |
|
|
39 |
|
Income Tax Expense |
|
|
39 |
|
Sensis Financial Summary |
|
|
40 |
|
CSL New World Mobility Group Financial Summary |
|
|
41 |
|
TelstraClear Financial Summary |
|
|
42 |
|
REACH |
|
|
43 |
|
Cash flow |
|
|
44 |
|
Balance sheet |
|
|
48 |
|
|
|
|
|
|
Glossary |
|
|
50 |
|
|
|
|
|
|
A-IFRS Adjustments |
|
|
52 |
|
Product Restatement |
|
|
60 |
|
Revenue Half Yearly Comparison |
|
|
61 |
|
4
Telstra
Corporation Limited and Controlled entities
Full year results and operations review June 2006
Summary financial information
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
Sales revenue |
|
|
22,750 |
|
|
|
22,161 |
|
|
|
589 |
|
|
|
2.7 |
% |
Other revenue (excl. finance income) |
|
|
22 |
|
|
|
20 |
|
|
|
2 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
Total revenue |
|
|
22,772 |
|
|
|
22,181 |
|
|
|
591 |
|
|
|
2.7 |
% |
Other income |
|
|
328 |
|
|
|
261 |
|
|
|
67 |
|
|
|
25.7 |
% |
|
|
|
|
|
|
|
Total income (excl. finance income) |
|
|
23,100 |
|
|
|
22,442 |
|
|
|
658 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (excl. interest expense and depreciation and amortisation) |
|
|
13,521 |
|
|
|
11,884 |
|
|
|
1,637 |
|
|
|
13.8 |
% |
Share of net (gain)/loss from jointly controlled and associated entities |
|
|
(5 |
) |
|
|
94 |
|
|
|
(99 |
) |
|
|
(105.3 |
%) |
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) |
|
|
9,584 |
|
|
|
10,464 |
|
|
|
(880 |
) |
|
|
(8.4 |
%) |
Depreciation & amortisation |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
558 |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
Earnings before interest & income tax expense (EBIT) |
|
|
5,497 |
|
|
|
6,935 |
|
|
|
(1,438 |
) |
|
|
(20.7 |
%) |
Net finance costs |
|
|
936 |
|
|
|
880 |
|
|
|
56 |
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
6,055 |
|
|
|
(1,494 |
) |
|
|
(24.7 |
%) |
Income tax expense |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
(366 |
) |
|
|
(21.0 |
%) |
|
|
|
|
|
|
|
Net profit for the year |
|
|
3,181 |
|
|
|
4,309 |
|
|
|
(1,128 |
) |
|
|
(26.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
30.3 |
% |
|
|
28.8 |
% |
|
|
|
|
|
|
1.5 |
% |
EBITDA margin on sales revenue |
|
|
42.1 |
% |
|
|
47.2 |
% |
|
|
|
|
|
|
(5.1 |
%) |
EBIT margin on sales revenue |
|
|
24.2 |
% |
|
|
31.3 |
% |
|
|
|
|
|
|
(7.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
cents |
|
|
cents |
|
|
cents |
|
|
% change |
|
Basic earnings per share (i) |
|
|
25.7 |
|
|
|
34.7 |
|
|
|
(9.0 |
) |
|
|
(25.9 |
%) |
Diluted earnings per share (i) |
|
|
25.7 |
|
|
|
34.6 |
|
|
|
(8.9 |
) |
|
|
(25.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid or declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend paid |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend paid with interim dividend |
|
|
6.0 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
Final dividend declared (2005 paid) |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend to be paid with final dividend (2005 paid) |
|
|
|
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Basic and diluted earnings per share are impacted by the effect of shares held in trust for
employee share plans and instruments held under executive remuneration plans. |
5
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Cash Flow Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
Receipts from customers (inclusive of GST) |
|
|
25,229 |
|
|
|
24,526 |
|
|
|
703 |
|
|
|
2.9 |
% |
Payments to suppliers/employees (inclusive of GST) |
|
|
(14,785 |
) |
|
|
(13,848 |
) |
|
|
(937 |
) |
|
|
6.8 |
% |
|
|
|
|
|
|
|
Net cash generated by operations |
|
|
10,444 |
|
|
|
10,678 |
|
|
|
(234 |
) |
|
|
(2.2 |
%) |
Income tax paid |
|
|
(1,882 |
) |
|
|
(1,718 |
) |
|
|
(164 |
) |
|
|
9.5 |
% |
|
|
|
|
|
|
|
Net cash generated by operations (i) |
|
|
8,562 |
|
|
|
8,960 |
|
|
|
(398 |
) |
|
|
(4.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for property, plant and equipment |
|
|
(3,636 |
) |
|
|
(2,995 |
) |
|
|
(641 |
) |
|
|
21.4 |
% |
Payments for intangibles |
|
|
(619 |
) |
|
|
(544 |
) |
|
|
(75 |
) |
|
|
13.8 |
% |
|
|
|
|
|
|
|
Capital expenditure before investments |
|
|
(4,255 |
) |
|
|
(3,539 |
) |
|
|
(716 |
) |
|
|
20.2 |
% |
Investment expenditure |
|
|
(48 |
) |
|
|
(590 |
) |
|
|
542 |
|
|
|
(91.9 |
%) |
|
|
|
|
|
|
|
Capital expenditure |
|
|
(4,303 |
) |
|
|
(4,129 |
) |
|
|
(174 |
) |
|
|
4.2 |
% |
Repayment of loans to jointly controlled entities and associated entities |
|
|
|
|
|
|
(37 |
) |
|
|
37 |
|
|
|
|
|
Receipts from asset sales/other proceeds/dividends |
|
|
225 |
|
|
|
322 |
|
|
|
(97 |
) |
|
|
(30.1 |
%) |
Interest received |
|
|
66 |
|
|
|
78 |
|
|
|
(12 |
) |
|
|
(15.4 |
%) |
|
|
|
|
|
|
|
Net cash used in investing activities (i) |
|
|
(4,012 |
) |
|
|
(3,766 |
) |
|
|
(246 |
) |
|
|
6.5 |
% |
|
|
|
|
|
|
|
Operating cash flows less investing cash flows (i) |
|
|
4,550 |
|
|
|
5,194 |
|
|
|
(644 |
) |
|
|
(12.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements in borrowings/finance leases |
|
|
493 |
|
|
|
1,393 |
|
|
|
(900 |
) |
|
|
(64.6 |
%) |
Employee share loans |
|
|
24 |
|
|
|
19 |
|
|
|
5 |
|
|
|
26.3 |
% |
Dividends paid |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
|
|
(846 |
) |
|
|
20.5 |
% |
Share buy-back |
|
|
|
|
|
|
(756 |
) |
|
|
756 |
|
|
|
|
|
Finance costs paid |
|
|
(940 |
) |
|
|
(879 |
) |
|
|
(61 |
) |
|
|
6.9 |
% |
Purchase of shares for employee share plans |
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities (i) |
|
|
(5,399 |
) |
|
|
(4,347 |
) |
|
|
(1,052 |
) |
|
|
24.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow |
|
|
(849 |
) |
|
|
847 |
|
|
|
(1,696 |
) |
|
|
(200.2 |
%) |
|
|
|
|
|
|
|
|
|
|
(i) |
|
Please note: Due to the implementation of A-IFRS, we have revised the presentation of the cash
flow summary and our statutory reported statement of cash flows. This has resulted in some
reclassifications between our key cash flow totals (net cash provided by operating activities, net
cash used in investing activities and net cash used in financing activities). Consequently, the
2005 comparative totals disclosed for these lines have changed from the amounts disclosed as at 30
June 2005. The most significant change is the reclassification of our finance costs paid from
operating into financing, and the reclassification of interest received from operating into
investing. |
6
Telstra
Corporation Limited and Controlled entities
Full year results and operations review June 2006
Balance Sheet Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
Current assets |
|
|
4,879 |
|
|
|
5,582 |
|
|
|
(703 |
) |
|
|
(12.6 |
%) |
Intangibles |
|
|
6,123 |
|
|
|
6,329 |
|
|
|
(206 |
) |
|
|
(3.3 |
%) |
Property, plant and equipment |
|
|
23,622 |
|
|
|
22,891 |
|
|
|
731 |
|
|
|
3.2 |
% |
Total non-current assets |
|
|
31,296 |
|
|
|
29,629 |
|
|
|
1,667 |
|
|
|
5.6 |
% |
Total liabilities |
|
|
(23,343 |
) |
|
|
(21,553 |
) |
|
|
(1,790 |
) |
|
|
8.3 |
% |
Net assets/shareholders equity |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
(826 |
) |
|
|
(6.0 |
%) |
Gross debt (i) |
|
|
(13,746 |
) |
|
|
(13,319 |
) |
|
|
(427 |
) |
|
|
3.2 |
% |
Net debt (i) |
|
|
(13,057 |
) |
|
|
(11,772 |
) |
|
|
(1,285 |
) |
|
|
10.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Interest Cover (times) |
|
|
10.2 |
|
|
|
11.9 |
|
|
|
(1.7 |
) |
|
|
(14.3 |
%) |
Net Debt to EBITDA |
|
|
1.4 |
|
|
|
1.1 |
|
|
|
0.3 |
|
|
|
27.3 |
% |
Return on average assets |
|
|
15.8 |
% |
|
|
20.6 |
% |
|
|
|
|
|
|
(4.8 |
%) |
Return on average equity |
|
|
24.2 |
% |
|
|
30.6 |
% |
|
|
|
|
|
|
(6.4 |
%) |
Return on average investment |
|
|
21.4 |
% |
|
|
27.2 |
% |
|
|
|
|
|
|
(5.8 |
%) |
Net debt to capitalisation |
|
|
50.4 |
% |
|
|
45.9 |
% |
|
|
|
|
|
|
4.5 |
% |
|
|
|
(i) |
|
The Net Debt and Gross Debt balances as at 30 June 2005 do not reflect the impact of the
relevant A-IFRS standard for financial instruments as this standard was only adopted as at 1 July
2005. Had it been adopted for 30 June 2005, Gross Debt would have been $13,208 million and Net
Debt would have been $11,660 million. |
7
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Segment Information
Segment information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
|
|
|
|
Segment EBIT |
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006/2005 |
|
|
2006 |
|
|
2005 |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
Telstra Consumer, Marketing and Channels |
|
|
8,897 |
|
|
|
8,931 |
|
|
|
(0.4 |
%) |
|
|
5,721 |
|
|
|
6,248 |
|
|
|
(8.4 |
%) |
Telstra Business |
|
|
3,053 |
|
|
|
3,099 |
|
|
|
(1.5 |
%) |
|
|
2,412 |
|
|
|
2,488 |
|
|
|
(3.1 |
%) |
Telstra Enterprise and Government |
|
|
4,664 |
|
|
|
4,622 |
|
|
|
0.9 |
% |
|
|
2,706 |
|
|
|
2,812 |
|
|
|
(3.8 |
%) |
Telstra Wholesale |
|
|
2,899 |
|
|
|
2,551 |
|
|
|
13.6 |
% |
|
|
2,693 |
|
|
|
2,283 |
|
|
|
18.0 |
% |
Sensis |
|
|
1,836 |
|
|
|
1,719 |
|
|
|
6.8 |
% |
|
|
864 |
|
|
|
812 |
|
|
|
6.4 |
% |
Telstra International |
|
|
1,481 |
|
|
|
1,398 |
|
|
|
5.9 |
% |
|
|
156 |
|
|
|
11 |
|
|
|
n/m |
|
Telstra Operations |
|
|
309 |
|
|
|
238 |
|
|
|
29.8 |
% |
|
|
(4,175 |
) |
|
|
(3,371 |
) |
|
|
23.9 |
% |
Other (i) |
|
|
113 |
|
|
|
87 |
|
|
|
29.9 |
% |
|
|
(4,909 |
) |
|
|
(4,351 |
) |
|
|
12.8 |
% |
Eliminations |
|
|
(480 |
) |
|
|
(464 |
) |
|
|
3.4 |
% |
|
|
29 |
|
|
|
3 |
|
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telstra (ii) |
|
|
22,772 |
|
|
|
22,181 |
|
|
|
2.7 |
% |
|
|
5,497 |
|
|
|
6,935 |
|
|
|
(20.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m not meaningful
(i) Revenue for the other segment relates primarily to our revenue earned by Telstra Media
for our share of FOXTEL cable subscriber revenue and for services provided to FOXTEL. The Asset
Accounting Group is the main contributor to the segment EBIT for this segment, which is primarily
depreciation and amortisation charges.
(ii) The allocations noted above reflect managements accountability framework and internal
reporting system and accordingly no reasonable basis for reallocation to the respective business
segments exists. As a consequence, there are several things that should be noted about the
information above:
|
|
Because no reasonable basis for allocation exists, sales revenue associated with mobile
handsets for the Consumer, Business and Enterprise and Government segments are allocated
totally to the Consumer segment, with the exception of some products sold in relation to small
to medium enterprises which are allocated to the Business segment. Ongoing prepaid and
postpaid mobile revenues derived from our mobile usage is recorded in all three of these
segments depending on the type of customer serviced. In addition, the majority of goods and
services purchased associated with our mobile revenues are allocated to the Consumer segment. |
|
|
Revenue received in advance in relation to installation and connection fees is allocated
totally to the Consumer segment. |
|
|
Revenue derived from our BigPond Internet products are recorded in the customer facing
business segments of Consumer, Business and Enterprise and Government. Certain distribution
costs in relation to these products are recognised in these three business segments. Telstra
Operations recognises certain expenses in relation to the installation and running of the
broadband cable network. In accordance with our application of the business segment
definition in relation to customer type, we have not reallocated these items to the Telstra
BigPond business segment. |
8
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Statistical Data Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
% change |
|
|
|
|
Billable traffic data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls (number of calls) |
|
|
7,432 |
|
|
|
8,469 |
|
|
|
(1,037 |
) |
|
|
(12.2 |
%) |
National long distance minutes (i) |
|
|
7,215 |
|
|
|
7,743 |
|
|
|
(528 |
) |
|
|
(6.8 |
%) |
Fixed to mobile minutes |
|
|
4,491 |
|
|
|
4,375 |
|
|
|
116 |
|
|
|
2.7 |
% |
International direct minutes |
|
|
534 |
|
|
|
580 |
|
|
|
(46 |
) |
|
|
(7.9 |
%) |
Mobile voice telephone minutes (ii) |
|
|
7,311 |
|
|
|
6,746 |
|
|
|
565 |
|
|
|
8.4 |
% |
Inbound Calling Products B Party Minutes |
|
|
2,922 |
|
|
|
2,773 |
|
|
|
149 |
|
|
|
5.4 |
% |
Inbound Calling Products A Party Calls |
|
|
1,012 |
|
|
|
940 |
|
|
|
72 |
|
|
|
7.7 |
% |
Number of short messaging service (SMS) sent |
|
|
3,019 |
|
|
|
2,289 |
|
|
|
730 |
|
|
|
31.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network and operations data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.46 |
|
|
|
5.60 |
|
|
|
(0.14 |
) |
|
|
(2.5 |
%) |
Business |
|
|
2.32 |
|
|
|
2.45 |
|
|
|
(0.13 |
) |
|
|
(5.3 |
%) |
|
|
|
|
|
|
|
Total retail customers |
|
|
7.78 |
|
|
|
8.05 |
|
|
|
(0.27 |
) |
|
|
(3.4 |
%) |
Domestic wholesale |
|
|
2.16 |
|
|
|
2.07 |
|
|
|
0.09 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
Total basic access lines in services |
|
|
9.94 |
|
|
|
10.12 |
|
|
|
(0.18 |
) |
|
|
(1.8 |
%) |
|
|
|
|
|
|
|
ISDN access (basic lines equivalents) (in thousands) (iv) |
|
|
1,214 |
|
|
|
1,208 |
|
|
|
6 |
|
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services in operation (SIO) (in thousands) (v) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3G |
|
|
317 |
|
|
|
|
|
|
|
317 |
|
|
|
|
|
GSM |
|
|
6,468 |
|
|
|
6,894 |
|
|
|
(426 |
) |
|
|
(6.2 |
%) |
CDMA |
|
|
1,703 |
|
|
|
1,333 |
|
|
|
370 |
|
|
|
27.8 |
% |
|
|
|
|
|
|
|
Mobile services in operation |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
261 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
Total Wholesale mobile SIOs (in thousands) |
|
|
119 |
|
|
|
83 |
|
|
|
36 |
|
|
|
43.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online subscribers (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband subscribers |
|
|
1,027 |
|
|
|
1,205 |
|
|
|
(178 |
) |
|
|
(14.8 |
%) |
|
|
|
|
|
|
|
Broadband subscribers Retail |
|
|
1,476 |
|
|
|
856 |
|
|
|
620 |
|
|
|
72.4 |
% |
Broadband subscribers Wholesale (vi) |
|
|
1,427 |
|
|
|
888 |
|
|
|
539 |
|
|
|
60.7 |
% |
|
|
|
|
|
|
|
Total Broadband subscribers |
|
|
2,903 |
|
|
|
1,744 |
|
|
|
1,159 |
|
|
|
66.5 |
% |
|
|
|
|
|
|
|
Total online subscribers |
|
|
3,930 |
|
|
|
2,949 |
|
|
|
981 |
|
|
|
33.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FOXTEL subscribers (in thousands) |
|
|
1,130 |
|
|
|
1,023 |
|
|
|
107 |
|
|
|
10.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full time staff (vii) |
|
|
37,599 |
|
|
|
39,680 |
|
|
|
(2,081 |
) |
|
|
(5.2 |
%) |
Full time staff and equivalents (viii) |
|
|
44,452 |
|
|
|
46,227 |
|
|
|
(1,775 |
) |
|
|
(3.8 |
%) |
Total workforce (ix) |
|
|
49,443 |
|
|
|
52,705 |
|
|
|
(3,262 |
) |
|
|
(6.2 |
%) |
|
|
|
(i) |
|
Includes national long distance minutes from our public switched telephone network (PSTN)
and independently operated payphones. Excludes minutes related to calls from non-PSTN networks,
such as ISDN and virtual private networks. |
|
(ii) |
|
Includes all calls made from mobile telephones including long distance and international
calls, excludes data, messagebank, international roaming and CSL New World. |
|
(iii) |
|
Excludes Incontact services (a free service with restrictive calling access) and advanced access services,
such as ISDN services. |
|
(iv) |
|
Expressed in equivalent number of clear voice channels. Comparatives have been restated to
reflect updated assessment of channels per SIO on ISDN 10/20/30. The previous assessment was based
on a calculation of channel configurations across sample services. The revised assessment is based
on the entire customer base. |
|
(v) |
|
Excludes CSL New World SIOs. |
|
(vi) |
|
Within Broadband, retail products include cable, satellite, BigPond Wireless, HyperConnect,
ADSL and Symmetrical HDSL, while wholesale products include DSL Layer 1, DSL Layer 2, DSL layer 3,
Spectrum Sharing and vISP Broadband. Total Broadband subscribers exclude Broadband component of ULL
and Mobile Broadband which form part of intercarrier services and mobiles revenue respectively. |
|
(vii) |
|
Excludes offshore, casual and part time employees. June 2005 has been restated, refer to
Labour section for further information. |
|
(viii) |
|
Includes all domestic and offshore employees, including controlled entities. June 2005 has
been restated, refer to Labour section for further information. |
|
(ix) |
|
Includes all domestic and offshore employees, including controlled entities, as well
as contractors and agency staff. June 2005 has been restated, refer to Labour section for
further information. |
9
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Operating Revenues
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
(% change) |
|
|
|
|
PSTN Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
3,318 |
|
|
|
3,362 |
|
|
|
(44 |
) |
|
|
(1.3 |
%) |
Local calls |
|
|
1,023 |
|
|
|
1,284 |
|
|
|
(261 |
) |
|
|
(20.3 |
%) |
PSTN value added services |
|
|
246 |
|
|
|
250 |
|
|
|
(4 |
) |
|
|
(1.6 |
%) |
National long distance calls |
|
|
913 |
|
|
|
1,013 |
|
|
|
(100 |
) |
|
|
(9.9 |
%) |
Fixed to mobile |
|
|
1,491 |
|
|
|
1,566 |
|
|
|
(75 |
) |
|
|
(4.8 |
%) |
International direct |
|
|
201 |
|
|
|
234 |
|
|
|
(33 |
) |
|
|
(14.1 |
%) |
Fixed interconnection |
|
|
286 |
|
|
|
309 |
|
|
|
(23 |
) |
|
|
(7.4 |
%) |
|
|
|
|
|
|
|
Total PSTN |
|
|
7,478 |
|
|
|
8,018 |
|
|
|
(540 |
) |
|
|
(6.7 |
%) |
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services Retail |
|
|
3,846 |
|
|
|
3,736 |
|
|
|
110 |
|
|
|
2.9 |
% |
Mobile services Wholesale |
|
|
36 |
|
|
|
24 |
|
|
|
12 |
|
|
|
50.0 |
% |
Mobile services Interconnection |
|
|
623 |
|
|
|
547 |
|
|
|
76 |
|
|
|
13.9 |
% |
Mobile handsets |
|
|
467 |
|
|
|
381 |
|
|
|
86 |
|
|
|
22.6 |
% |
|
|
|
|
|
|
|
Total Mobiles |
|
|
4,972 |
|
|
|
4,688 |
|
|
|
284 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
Internet and IP solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband |
|
|
220 |
|
|
|
275 |
|
|
|
(55 |
) |
|
|
(20.0 |
%) |
Retail broadband |
|
|
730 |
|
|
|
463 |
|
|
|
267 |
|
|
|
57.7 |
% |
Wholesale broadband |
|
|
461 |
|
|
|
261 |
|
|
|
200 |
|
|
|
76.6 |
% |
Internet direct |
|
|
143 |
|
|
|
123 |
|
|
|
20 |
|
|
|
16.3 |
% |
IP solutions |
|
|
285 |
|
|
|
207 |
|
|
|
78 |
|
|
|
37.7 |
% |
Other |
|
|
68 |
|
|
|
48 |
|
|
|
20 |
|
|
|
41.7 |
% |
|
|
|
|
|
|
|
Total Internet and IP solutions |
|
|
1,907 |
|
|
|
1,377 |
|
|
|
530 |
|
|
|
38.5 |
% |
|
|
|
|
|
|
|
ISDN products |
|
|
807 |
|
|
|
890 |
|
|
|
(83 |
) |
|
|
(9.3 |
%) |
Specialised data |
|
|
884 |
|
|
|
966 |
|
|
|
(82 |
) |
|
|
(8.5 |
%) |
Advertising and Directories |
|
|
1,711 |
|
|
|
1,585 |
|
|
|
126 |
|
|
|
7.9 |
% |
Intercarrier services |
|
|
351 |
|
|
|
290 |
|
|
|
61 |
|
|
|
21.0 |
% |
Inbound calling products |
|
|
449 |
|
|
|
449 |
|
|
|
|
|
|
|
0.0 |
% |
Solutions management |
|
|
989 |
|
|
|
931 |
|
|
|
58 |
|
|
|
6.2 |
% |
HKCSL New World |
|
|
830 |
|
|
|
734 |
|
|
|
96 |
|
|
|
13.1 |
% |
TelstraClear |
|
|
620 |
|
|
|
625 |
|
|
|
(5 |
) |
|
|
(0.8 |
%) |
Offshore services revenue |
|
|
295 |
|
|
|
252 |
|
|
|
43 |
|
|
|
17.1 |
% |
Payphones |
|
|
104 |
|
|
|
121 |
|
|
|
(17 |
) |
|
|
(14.0 |
%) |
Pay TV bundling |
|
|
320 |
|
|
|
263 |
|
|
|
57 |
|
|
|
21.7 |
% |
Customer premises equipment |
|
|
274 |
|
|
|
231 |
|
|
|
43 |
|
|
|
18.6 |
% |
Other sales & service |
|
|
759 |
|
|
|
741 |
|
|
|
18 |
|
|
|
2.4 |
% |
|
|
|
|
|
|
|
Sales revenue |
|
|
22,750 |
|
|
|
22,161 |
|
|
|
589 |
|
|
|
2.7 |
% |
Other revenue |
|
|
22 |
|
|
|
20 |
|
|
|
2 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
Total revenue |
|
|
22,772 |
|
|
|
22,181 |
|
|
|
591 |
|
|
|
2.7 |
% |
Other income |
|
|
328 |
|
|
|
261 |
|
|
|
67 |
|
|
|
25.7 |
% |
|
|
|
|
|
|
|
Total income |
|
|
23,100 |
|
|
|
22,442 |
|
|
|
658 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
10
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
In the following discussion, we analyse revenue for each of our major products and services.
The principal areas of operating revenue growth for fiscal 2006 were:
|
|
mobiles; |
|
|
|
internet and IP solutions; |
|
|
|
advertising and directories; and |
|
|
|
Pay TV bundling. |
In fiscal 2006, our sales revenue growth was partially offset by a 6.7% decline in PSTN product
revenues as customers continue to move towards new products and services to satisfy their
requirements and competition intensifies in the market.
Competition has continued to intensify and as a result, we have seen our revenues decline in some
areas despite increasing volumes. We have also seen a continued shift in revenue from our
traditional higher margin retail operations (such as our PSTN products) to our lower margin retail
products (such as mobiles and broadband). We have continued to concentrate on product bundling
initiatives and managing the migration of customers to other products. In the second half of fiscal
2006, we introduced our first subscription price based offers into the Consumer market to help
address the decline of our traditional product revenues and to make pricing simple for our
customers. We have also introduced market based management to enable us to better serve our
customers needs as we understand them better.
We expect that there will be continued competitive pressure in some of our traditional product
areas. However, the volume of telecommunications services purchased in Australia has increased
and the range of products and services offered continues to expand. Based on the overall growth
anticipated in the volume of telecommunication services, we expect our operating revenue to
continue to grow.
11
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
PSTN Products
PSTN Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
(% change) |
|
|
|
|
Basic access revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
2,592 |
|
|
|
2,725 |
|
|
|
(133 |
) |
|
|
(4.9 |
%) |
Domestic wholesale |
|
|
726 |
|
|
|
637 |
|
|
|
89 |
|
|
|
14.0 |
% |
|
|
|
|
|
|
|
Total basic access revenue |
|
|
3,318 |
|
|
|
3,362 |
|
|
|
(44 |
) |
|
|
(1.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local call revenue |
|
|
1,023 |
|
|
|
1,284 |
|
|
|
(261 |
) |
|
|
(20.3 |
%) |
PSTN value added services revenue |
|
|
246 |
|
|
|
250 |
|
|
|
(4 |
) |
|
|
(1.6 |
%) |
National long distance call revenue |
|
|
913 |
|
|
|
1,013 |
|
|
|
(100 |
) |
|
|
(9.9 |
%) |
Fixed to mobile revenue |
|
|
1,491 |
|
|
|
1,566 |
|
|
|
(75 |
) |
|
|
(4.8 |
%) |
International direct revenue |
|
|
201 |
|
|
|
234 |
|
|
|
(33 |
) |
|
|
(14.1 |
%) |
Fixed interconnection |
|
|
286 |
|
|
|
309 |
|
|
|
(23 |
) |
|
|
(7.4 |
%) |
|
|
|
|
|
|
|
Total PSTN revenue |
|
|
7,478 |
|
|
|
8,018 |
|
|
|
(540 |
) |
|
|
(6.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.46 |
|
|
|
5.60 |
|
|
|
(0.14 |
) |
|
|
(2.5 |
%) |
Business |
|
|
2.32 |
|
|
|
2.45 |
|
|
|
(0.13 |
) |
|
|
(5.3 |
%) |
|
|
|
|
|
|
|
Total Retail |
|
|
7.78 |
|
|
|
8.05 |
|
|
|
(0.27 |
) |
|
|
(3.4 |
%) |
Domestic wholesale |
|
|
2.16 |
|
|
|
2.07 |
|
|
|
0.09 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
Total access lines in service |
|
|
9.94 |
|
|
|
10.12 |
|
|
|
(0.18 |
) |
|
|
(1.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of local calls (in millions) |
|
|
7,432 |
|
|
|
8,469 |
|
|
|
(1,037 |
) |
|
|
(12.2 |
%) |
National long distance minutes (in millions) (i) |
|
|
7,215 |
|
|
|
7,743 |
|
|
|
(528 |
) |
|
|
(6.8 |
%) |
Fixed to mobile minutes (in millions) |
|
|
4,491 |
|
|
|
4,375 |
|
|
|
116 |
|
|
|
2.7 |
% |
International direct minutes (in millions) |
|
|
534 |
|
|
|
580 |
|
|
|
(46 |
) |
|
|
(7.9 |
%) |
Note: statistical data represents managements best estimates.
(i) |
|
Includes national long distance minutes from our public switched telephone network (PSTN)
and independently operated payphones. Excludes minutes related to calls from non-PSTN networks,
such as ISDN and virtual private networks. |
Total PSTN products revenue is $7,478 million, which declined by 6.7% or $540 million during
fiscal 2006. This compares with a decline of 3.6% in fiscal 2005 (inclusive of fixed
interconnection).
There has been a general reduction in PSTN volumes, with a decline in retail basic access lines,
and volume reductions across local calls, national long distance calls, international direct calls
and fixed interconnection. Yields have also declined in local calls, national long distance, fixed
to mobile, international direct and fixed interconnection due to competitive pricing pressure.
During the second half of the year, we introduced subscription pricing plans for our PSTN
customers, which offer greater choice and value from the home phone, including untimed national
long distance calls and low or no charge local calls. These plans are yet to show any significant
impact on our PSTN revenues.
Basic access
Our basic access revenue includes monthly rental fees, installation charges and connection
charges, from telephone service connections between a customers premises and our PSTN network.
12
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Basic access revenues are affected by:
|
|
housing growth; |
|
|
|
competition; |
|
|
|
demand for telephone services and additional lines; |
|
|
|
regulatory constraints in relation to wholesale basic access; |
|
|
|
migration to other products such as broadband and mobiles; and |
|
|
|
price changes. |
Under our basic access pricing structure, we have a range of access and call pricing packages to
give our residential and business customers choice in the plan they select, along with a range of
reward options. These pricing packages are reviewed regularly to reflect the changing needs of
customers. For the most part, wholesale customers receive the pricing plan which only incorporates
the basic telephone service with local call rates, excluding long distance and fixed to mobile
calls (with a residential and business differentiation still applying).
Our operating revenue from basic access services was also affected by competition during fiscal
2006. During fiscal 2006, the number of retail residential and business basic access lines
decreased due to strong competition and migration to alternative products such as broadband and
mobiles. Domestic wholesale basic access lines in service grew, reflecting the increased
penetration of our competitors into the retail basic access market. In the retail segment, we saw a
decline of 270,000 lines in service or 3.4%, mainly driven by the migration to other technologies
which is underpinning the retail trend across PSTN revenues. This decline was partially offset by
an increase of 90,000 lines in service or 4.3% in the wholesale market.
Overall our operating revenue from basic access services decreased. During fiscal 2006, we
introduced various basic access packages, which reduced the decline in yield in this area, despite
an overall decrease in basic access lines in service.
Rental revenue increased due to a rise in line rental price charges from December 2005, which
included a rise in basic access prices for wholesale and non preselected retail residential
customers. In addition, penetration of higher value HomeLine plans including HomeLine Ultimate, a
new subscription based plan introduced in April 2006, is also expected to contribute positively.
Partly offsetting this was an increase in the discounts to Whole of Business customers and
pensioners.
Local calls
Our local call revenue from local call charges, consists of revenue from local calls on our
PSTN network and includes revenue from our megapop product which allows ISPs to offer untimed local
call PSTN dial up access for their customers via a single national dial up 019 number. For the most
part we charge for local calls without a time limit.
Our local call revenue is affected by:
|
|
the number of basic access lines in service and customers moving from our basic
access service to our other access services, such as mobiles and broadband; |
|
|
|
competition; |
|
|
|
increasing use of email; |
|
|
|
customers migrating to mobile and fixed to mobile calling; and |
|
|
|
pricing changes. |
Local call revenue decreased by $261 million or 20.3% in fiscal 2006, with both our retail and
wholesale revenues being negatively impacted by ongoing product substitution from fixed calling to
mobile voice calls and SMS, which is accelerated by the take up of capped mobile plans currently
being heavily promoted by competitors. Substitution of
13
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
data local calls continues to occur due to the migration of dial up internet customers to
broadband. The price in the wholesale market also declined as a result of a rise in volume
discounts.
Generally, call volumes have continued to fall during fiscal 2006, reflecting the impact of
customers migrating to other products, such as mobiles, fixed to mobile, and broadband products.
This is highlighted by the fact that the number of local calls reduced by 12.2% during the year.
Work continues on the integration of mobile, fixed and broadband services to add value to the
fixed line. This is aimed at arresting the decline in fixed line use.
PSTN value added services
Our revenue from PSTN value added services declined by $4 million or 1.6% during fiscal 2006.
This decrease was driven by a reduction in a number of mature products, such as Indial, Siteline,
Enhanced faxstream and other access products nearing the end of their lifecycle. Customers are also
migrating to product offerings such as internet products and premium voice communication
applications.
Messaging and call completion products increased marginally during fiscal 2006. Calling number
display continued to grow due to attractive packaging discounts resulting in subscriber numbers
increasing by 10%. This has been partially offset by call return revenue which declined by 14% due
to lower overall call volumes and substitution to other products.
National long distance calls
Our operating revenue from national long distance consists of revenue from national long
distance calls made from our PSTN network to the fixed network.
We generally charge for national long distance calls based on the time of day, day of week,
destination and duration of the call, but packages are also offered on a capped price basis and
under subscription pricing arrangements. A variety of promotions and pricing options are offered to
encourage our customers to use our service and to inform them about the price and value of our
service. The majority of our operating revenue from national long distance calls comes from our
residential and small business customers.
General economic conditions and customer perceptions about the cost and value of our service
relative to competitor alternatives, largely drive our national long distance call revenue.
Competitive activity continues to negatively affect this revenue category directly through override
and preselection, and indirectly through competition for access lines. In addition, national long
distance calls are impacted by customers migrating to mobile, broadband and fixed to mobile
calling.
Our operating revenue from national long distance calls declined by $100 million or 9.9% in fiscal
2006 compared with fiscal 2005. Competitor activity in the fixed line market continues to be high
and most carriers have a fixed or mobile cap, or a combination of both in the market. This is
having a direct impact on our national long distance revenues particularly where competitors are
bundling these calls with broadband offerings. Volumes are down as a result of lower basic access
services in operation and the impact of fixed to mobile substitution and other calling options
available to customers. We have increased discounts compared to fiscal 2005 in order to retain and
win back customers.
We continue to respond to competition with competitively priced packages. However, with the strong
growth in mobile and internet services in the Australian market, we expect national long distance
call revenue to continue to be negatively impacted by ongoing migration of customers to mobile and
internet products, and by the continued
14
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
growth of subscription pricing plans. Work continues on the integration of mobile, fixed and
broadband services to add value to the fixed line. This is aimed at arresting the decline in fixed
line use.
Fixed to mobile calls
Our fixed to mobile revenue is generated by calls originating on our fixed networks and
terminating on any mobile network. We generally charge for fixed to mobile calls based on time of
day and mobile carrier, however packages are also offered on a capped price basis. Our operating
revenue for fixed to mobile calls is approximately split evenly between business and residential
customers. The growth of the Australian mobile telecommunications market has driven revenue
expansion in this product category in recent times. However, the introduction of capped plans in
the mobile market has now impacted the volume of fixed to mobile activity as customers continue to
slowly move their usage from our PSTN products. The fixed to mobile environment is influenced by
fixed to mobile preselection, whereby the carriage service provider (CSP) selected by a customer
for national long distance calls automatically becomes the customers provider for fixed to mobile
calls.
During fiscal 2006, fixed to mobile revenue declined by $75 million or 4.8%. We experienced a
decline of $114 million due to lower yields resulting from higher discounts arising from ongoing
competitive pressure, including incorporating fixed to mobile calls in reward offerings and the
changing mix in (Services In Operation) SIOs from PSTN to ISDN and CustomNet. This increase in the
level of discounting is representative of our increased campaign activity aimed at reducing
customer churn to other providers and win customers in the market place.
This decline in revenue was partially offset by growth in call volumes mainly due to the continued
expansion of mobile services in the Australian market. The positive volume growth for fiscal 2006
contributed $38 million due to higher calls and minutes of use. This growth is consistent with the
growth in the total market mobile SIOs, i.e. a higher number of mobiles on which fixed calls can
terminate, and the higher number of calls.
International direct calls
Our operating revenue from international direct relates to revenue we generate from
international calls made from Australia to a destination outside Australia (outbound). This revenue
is largely driven by general economic conditions, customer perceptions about the cost and value of
our service, competition, migration to broadband alternatives and promotion and advertising.
Our international direct revenue declined by 14.1% to $201 million in fiscal 2006 primarily as a
result of lower volumes and continued competitive pressure on price. Factors which have influenced
this trend include the competitive pressures from calling cards, fixed to mobile substitution and
the growth of Voice over IP in the market place. Despite major international events and the
occurrence of unfortunate circumstances which have provided short term stimulus to call traffic,
international direct minutes declined 7.9% for the year.
Fixed Interconnection
Fixed interconnection is made up of local and non local PSTN/ISDN access interconnection
services provided to other carriers. This category is a highly regulated area of the Australian
telecommunication market.
Our operating revenue from fixed interconnection decreased by 7.4% to $286 million during fiscal
2006 driven by reduction in both volume and price. Volume declines are in line with cross company
trends in PSTN traffic and have been particularly impacted by migration to mobiles and, to a
smaller degree, ULL (unconditioned local loop) build. The decline due to price arose from lower
charges consistent with our undertakings lodged with the ACCC for PSTN.
15
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Mobiles
Our operating revenue from mobiles consists of revenue from access fees and call charges, as
well as value added services comprising international roaming, mobile MessageBank® and mobile data.
It also includes revenue from the sale of mobile handsets and interconnection charges where calls
from other carriers customers terminate on our network.
During fiscal 2006, we commenced the construction of a new 3G GSM network that will operate in the
850 megahertz spectrum. Until recently, we operated only two primary mobile networks, GSM and CDMA.
Over time we will migrate our customers from our old networks onto our new 3G network. The new
network is intended to reduce our level of network costs and complexity and enable us to provide
our customers with faster speeds, better coverage and enable them to access a far greater range of
services and content than our older network. We continue to offer 3G services to our customers over
our existing 3G 2100 network through our joint venture with Hutchison Telecommunication (Australia)
Limited (Hutchison).
The mobile telecommunications market has continued to grow during fiscal 2006, although at a lower
rate of growth than in the prior year. The growth was driven by the increase in capped price plans,
heightened campaign activity particularly around 3G services, and the increasing use of mobile data
services such as Blackberry and 1xRTT. While voice continues to be the largest contributor to
mobiles revenue, value added services (inclusive of mobile data) is the fastest growing, now
representing 25.4% of mobile services revenue in fiscal 2006. With competition intensifying, we
have introduced a comprehensive and broad reaching program of segment based customer management to
enable us to provide the best service and solutions to all of our customers.
Mobiles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
(% change) |
|
|
|
|
Access fees and call charges |
|
|
2,703 |
|
|
|
2,765 |
|
|
|
(62 |
) |
|
|
(2.2 |
%) |
|
|
|
|
|
|
|
Value added services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- International roaming |
|
|
266 |
|
|
|
243 |
|
|
|
23 |
|
|
|
9.5 |
% |
- Mobile messagebank |
|
|
199 |
|
|
|
187 |
|
|
|
12 |
|
|
|
6.4 |
% |
- Short message service (SMS) |
|
|
494 |
|
|
|
457 |
|
|
|
37 |
|
|
|
8.1 |
% |
- Other mobile data |
|
|
184 |
|
|
|
84 |
|
|
|
100 |
|
|
|
119.0 |
% |
|
|
|
|
|
|
|
Total value added services |
|
|
1,143 |
|
|
|
971 |
|
|
|
172 |
|
|
|
17.7 |
% |
|
|
|
|
|
|
|
Total Mobile services revenue retail |
|
|
3,846 |
|
|
|
3,736 |
|
|
|
110 |
|
|
|
2.9 |
% |
Mobile services revenue wholesale |
|
|
36 |
|
|
|
24 |
|
|
|
12 |
|
|
|
50.0 |
% |
Mobile services revenue mobiles interconnection |
|
|
623 |
|
|
|
547 |
|
|
|
76 |
|
|
|
13.9 |
% |
|
|
|
|
|
|
|
Total mobile services revenue |
|
|
4,505 |
|
|
|
4,307 |
|
|
|
198 |
|
|
|
4.6 |
% |
Mobile handset sales |
|
|
467 |
|
|
|
381 |
|
|
|
86 |
|
|
|
22.6 |
% |
|
|
|
|
|
|
|
Total mobile goods and services revenue (i) |
|
|
4,972 |
|
|
|
4,688 |
|
|
|
284 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3G mobile SIO (thousands) |
|
|
317 |
|
|
|
|
|
|
|
317 |
|
|
|
|
|
GSM mobile SIO (thousands) |
|
|
6,468 |
|
|
|
6,894 |
|
|
|
(426 |
) |
|
|
(6.2 |
%) |
CDMA mobile SIO (thousands) |
|
|
1,703 |
|
|
|
1,333 |
|
|
|
370 |
|
|
|
27.8 |
% |
|
|
|
|
|
|
|
Total mobile SIO (thousands) |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
261 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Wireless EVDO SIO (thousands) (included in CDMA SIO above) |
|
|
60 |
|
|
|
19 |
|
|
|
41 |
|
|
|
215.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid mobile SIO (thousands) |
|
|
3,597 |
|
|
|
3,570 |
|
|
|
27 |
|
|
|
0.8 |
% |
Postpaid mobile SIO (thousands) |
|
|
4,891 |
|
|
|
4,657 |
|
|
|
234 |
|
|
|
5.0 |
% |
|
|
|
|
|
|
|
16
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Mobiles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$ m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
Total mobile SIO (thousands) |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
261 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDMA wholesale mobile SIO (thousands) |
|
|
73 |
|
|
|
62 |
|
|
|
11 |
|
|
|
17.7 |
% |
GSM wholesale mobile SIO (thousands) |
|
|
46 |
|
|
|
21 |
|
|
|
25 |
|
|
|
119.0 |
% |
|
|
|
|
|
|
|
Total wholesale mobile SIO (thousands) |
|
|
119 |
|
|
|
83 |
|
|
|
36 |
|
|
|
43.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of SMS sent (in millions) |
|
|
3,019 |
|
|
|
2,289 |
|
|
|
730 |
|
|
|
31.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deactivation rate |
|
|
23.4 |
% |
|
|
19.2 |
% |
|
|
4.2 |
% |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile voice telephone minutes (in millions) (ii) |
|
|
7,311 |
|
|
|
6,746 |
|
|
|
564 |
|
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue per user per month $s (iii) |
|
|
38.35 |
|
|
|
39.33 |
|
|
|
(0.98 |
) |
|
|
(2.5 |
%) |
Average prepaid revenue per user per month $s (iii) |
|
|
10.85 |
|
|
|
12.24 |
|
|
|
(1.39 |
) |
|
|
(11.4 |
%) |
Average postpaid revenue per user per month $s (iii) |
|
|
58.99 |
|
|
|
59.06 |
|
|
|
(0.07 |
) |
|
|
(0.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average mobile data revenue per user per month (iv) |
|
|
6.77 |
|
|
|
5.70 |
|
|
|
1.07 |
|
|
|
18.8 |
% |
Note: statistical data represents managements best estimates.
(i) |
|
Excludes revenue from: |
|
- |
|
calls from our fixed network which we categorise as
fixed to mobile; and |
|
- |
|
CSL New World which is recognised
separately as controlled entity revenue. |
|
(ii) |
|
Includes all calls made from mobile telephones including long distance and international
calls, excludes data, messagebank, international roaming and CSL New World. |
|
(iii) |
|
Average retail revenue per user per month is calculated using average retail SIO and includes
mobile data, messagebank and roaming revenues. It excludes interconnection and wholesale revenue. |
|
(iv) |
|
Includes mobile wireless EVDO revenue, excludes BigPond wireless. |
During fiscal 2006, mobile service revenue increased mainly due to the continued growth in the
number of mobile telephone subscribers and expanding minutes of use, offset by continued pressure
on prices. In addition, we experienced strong growth in our value added services revenue for
example messagebank, SMS, Blackberry and 1xRTT.
Access fees and call charges declined by 2.2% to $2,703 million in fiscal 2006 reflecting a
decrease in GSM revenues partially offset by an increase in CDMA revenues. Both technology
categories have been impacted during the year by the competitive environment and the growth in
capped price plans which has directly impacted yields. CDMA prepaid was also impacted by lower
revenues attributable to a promotion which gave CDMA subscribers half price calls for a year.
During the year we moved from 1% of our mobile customers on capped plans to 4.3% on capped plans.
SIOs increased overall, but it was CDMA that drove the growth with a 27.8% increase whilst GSM
(including 3G) reduced marginally by 1.6%. The CDMA revenues benefited from an increased emphasis
on activations and the availability of more competitively priced handsets. Call minutes generally
increased for each technology, but these benefits did not outweigh the impact on price for the
period. Average revenue per user (ARPU) dropped by 98 cents over the year led by a reduction in
prepaid ARPU by 11.4% or $1.39, with postpaid ARPUs stable.
17
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Revenue from international roaming grew by 9.5% to $266 million in fiscal 2006. The rise was
primarily due to an increase in outbound roaming minutes and a marginal increase in revenue per
call. In addition, inbound roaming revenue remained steady as price increases were equally offset
by decreased usage.
Revenue from MessageBank® increased by 6.4% to $199 million in fiscal 2006 primarily due to growth
in minutes resulting from higher mobile usage and SIOs.
SMS and Multimedia Messaging Services (MMS) revenues increased by 8.1% to $494 million after a
significant increase in the number of messages sent. There is a component of migration from voice
communication to message communication which is evident in the reported growth rates. This has been
stimulated by a 1 cent text offer and other rewards and bonus options offered during the year. In
addition, mobile data growth was also experienced in the corporate segment through the Blackberry
and Telstra Mobile Broadband products on the CDMA network. This is reflected in the average mobile
data revenue per user per month increasing over fiscal 2006.
Revenue from handset sales increased by 22.6% to $467 million in fiscal 2006 primarily due to
growth in the number of GSM mobile handsets sold. This growth is attributed to an increase in
marketing campaign activity focusing on the sale of 3G handsets, particularly in the second half of
the year.
Mobiles interconnection revenue has grown 13.9% to $623 million. The main product driving this is
GSM wholesale domestic roaming which grew in fiscal 2006 by $43 million after Hutchison 3G roaming
commencing in April 2005. This corresponds directly to an $8 million drop in CDMA roaming after
Hutchison introduced their 3G product as an alternative to CDMA. SMS interconnect has grown $17
million due to an increase in traffic resulting from growth in mobile SIOs as well as a continued
increase in the popularity of text messaging as a cheaper alternative to mobile voice calling. In
addition, mobiles terminating revenue grew by $24 million due to a 12% increase in termination
volumes, partially offset by price reductions resulting from regulatory pricing pressures on mobile
terminating rates. The increase in termination volumes has resulted from growth in retail SIOs,
particularly in CDMA and pre-paid services.
Wholesale mobile service revenue increased in fiscal 2006 by 50.0% or $12 million due to growth in
the Wholesale GSM resale product introduced in fiscal 2005. It enabled resellers to develop and
market their own branded mobile solutions including voice, text, multimedia messaging and
Messagebank on the GSM network which they could only previously do on the CDMA network. Minutes of
use have grown significantly since this product was introduced.
The deactivation rate has increased by 4.2% which is all driven by prepaid activity. After a system
change in fiscal 2005 all relevant prepaid SIOs were automatically given a recharge period of 12
months, extended from the normal 6 month period. In the last quarter of fiscal 2006, these SIOs
reached the end of this period and many were subsequently deactivated. This contributed to the
deactivation of 1.1 million prepaid SIOs in fiscal 2006. This change in recharge period has not
impacted the year on year growth rate but has impacted the timing of deactivations occurring
throughout the year.
18
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Internet and IP Solutions
Our operating revenue from IP and internet services is driven primarily by:
|
|
demand for capacity to support business networking; |
|
|
|
the increased use of IP services by business customers (small to medium enterprises); |
|
|
|
the introduction of new products to meet customer needs; |
|
|
|
the increased use of the Internet by businesses and consumers; |
|
|
|
the movement of our customers from basic access and associated calling products to
other access services such as ADSL; and |
|
|
|
demand for greater bandwidth services such as broadband. |
While the IP and internet markets have been experiencing growth, competition has put pressure on
our prices. We expect that these trends will continue.
Internet & IP Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
(% change) |
|
|
|
|
Narrowband |
|
|
220 |
|
|
|
275 |
|
|
|
(55 |
) |
|
|
(20.0 |
%) |
Retail broadband |
|
|
730 |
|
|
|
463 |
|
|
|
267 |
|
|
|
57.7 |
% |
Wholesale broadband |
|
|
461 |
|
|
|
261 |
|
|
|
200 |
|
|
|
76.6 |
% |
Internet direct |
|
|
143 |
|
|
|
123 |
|
|
|
20 |
|
|
|
16.3 |
% |
IP solutions |
|
|
285 |
|
|
|
207 |
|
|
|
78 |
|
|
|
37.7 |
% |
Other |
|
|
68 |
|
|
|
48 |
|
|
|
20 |
|
|
|
41.7 |
% |
|
|
|
|
|
|
|
Total internet & IP solutions revenue |
|
|
1,907 |
|
|
|
1,377 |
|
|
|
530 |
|
|
|
38.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband subscribers retail (in thousands) (i) |
|
|
1,476 |
|
|
|
856 |
|
|
|
620 |
|
|
|
72.4 |
% |
Broadband subscribers wholesale (in thousands) |
|
|
1,427 |
|
|
|
888 |
|
|
|
539 |
|
|
|
60.7 |
% |
|
|
|
|
|
|
|
Total Broadband subscribers (in thousands) |
|
|
2,903 |
|
|
|
1,744 |
|
|
|
1,159 |
|
|
|
66.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband subscribers retail (in thousands) |
|
|
1,027 |
|
|
|
1,205 |
|
|
|
(178 |
) |
|
|
(14.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total online subscribers |
|
|
3,930 |
|
|
|
2,949 |
|
|
|
981 |
|
|
|
33.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue per retail broadband subscriber per month ($s) |
|
|
52.16 |
|
|
|
60.10 |
|
|
|
(7.94 |
) |
|
|
(13.3 |
%) |
Note: statistical data represents managements best estimates.
(i) Telstra mobile broadband and Telstra internet direct (Retail ADSL) are not included in retail
broadband revenue and subcriber numbers.
Our narrowband products allow customers to connect to the internet from any telephone line in
Australia. Our broadband products allow customers to experience an always on connection to the
Internet, although this is not available to all lines due to technology limitations. In fiscal
2006, continued demand for capacity combined with competitive pricing has resulted in customers
migrating their narrowband services to broadband. This trend placed additional price pressure on
our narrowband products and resulted in a significant decline in our narrowband revenues.
We offer a range of internet products and packages under our BigPond brand. Telstra BigPond home
and business packages offer dial-up modem services to residential and business customers across
Australia. Telstra BigPond
19
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
We offer a range of internet products and packages under our BigPond brand. Telstra BigPond
home and business packages offer dial-up modem services to residential and business customers
across Australia. Telstra BigPond broadband provides broadband internet services to consumer and
business customers via HFC (Hybrid Fibre Coaxial) cable, ADSL, satellite and mobile access
technologies.
During fiscal 2006, our internet and IP solutions revenue grew by 38.5% or $530 million to $1,907
million, despite a reduction in prices. The subscriber base for our broadband products grew
significantly during this time, partially due to migration from narrowband products but also due to
growth in the overall online market. As at 30 June 2006, we had approximately 2.9 million broadband
customers, nearly 1.5 million retail customers. There has been a significant rise in demand
resulting from competitive pricing strategies.
Narrowband revenue decreased to $220 million in fiscal 2006. This decline highlights the growing
impact of dial-up to broadband migration as the dial-up market proceeds with its decline. We expect
this trend to continue with further price adjustments likely to occur as broadband prices fall and
customers require higher speeds.
Retail broadband revenue increased by 57.7% to $730 million in fiscal 2006, mainly due to strong
increases in SIOs. SIO growth has occurred across all technologies but ADSL has been the key driver
of the growth. We have introduced a number of key price and value campaigns to stimulate broadband
take up including a combination of discounting access and installation offers. We have also
introduced new products and plans including a wireless EVDO offer and enhanced focus on our cable
offerings. The Australian Governments Higher Bandwidth Incentive Scheme (HiBIS) and broadband
regional connect packages have also enabled affordable broadband and higher bandwidth to be
provided to regional and remote locations and encourage take up in those areas. Given this strong
take up, increased competition and resultant price offerings, average revenue per user has declined
across the majority of products.
Wholesale broadband revenue increased by 76.6% to $461 million in fiscal 2006 driven by a
continuing strong market demand for high bandwidth services. Wholesale DSL internet grade has grown
by $181 million driven by volume increases with a 60.7% growth in SIOs.
Internet direct is our business oriented internet access product with a range of data access
options and features to meet the needs of business. Internet direct revenue increased by 16.3%
during fiscal 2006 to $143 million. The result was driven by our virtual ISP product which
increased by $14 million, mainly because of a new commercial deal signed resulting in a significant
increase in data usage. SIOs for this product category increased by 258% in fiscal 2006.
IP solutions revenue increased by 37.7% to $285 million in fiscal 2006, mainly due to the products
in this category being in the growth phase of their lifecycle. Fiscal 2006 saw an increase of $48
million in IP MAN/Ethernet, our next generation data access services which provide high speed IP
and Ethernet access solutions respectively for large and medium corporate enterprises. The
government sector has been the key user and driver of this product. IP WAN grew by $29 million,
after growth was stimulated through competitive pricing and improved network performance. It is
also evident that customers now appear more willing to move towards IP based solutions.
Other internet and IP solutions revenue grew by $20 million due to growth in wholesale internet and
data traffic, in particular in our Wholesale Ethernet product, and increased revenue from our
wholly owned entity, Chief Entertainment which is a media production house that provides internet
content.
20
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
ISDN
ISDN is a flexible, switched network based on digital technology. It can support many
applications at one time (such as voice, data and video) while using a single access point to the
network. ISDN services are offered to residential and business customers across Australia. Our ISDN
products revenue is impacted by offerings and packages in the broadband market, growth in the
number of DSL enabled exchanges and migration to advanced data products such as IP solutions.
ISDN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
Access |
|
|
418 |
|
|
|
421 |
|
|
|
(3 |
) |
|
|
(0.7 |
%) |
Data calls |
|
|
118 |
|
|
|
165 |
|
|
|
(47 |
) |
|
|
(28.5 |
%) |
Voice calls |
|
|
271 |
|
|
|
304 |
|
|
|
(33 |
) |
|
|
(10.9 |
%) |
|
|
|
|
|
|
|
Total calls |
|
|
389 |
|
|
|
469 |
|
|
|
(80 |
) |
|
|
(17.1 |
%) |
|
|
|
|
|
|
|
Total ISDN revenue |
|
|
807 |
|
|
|
890 |
|
|
|
(83 |
) |
|
|
(9.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN access lines (basic access line equivalents) (in thousands) (i) |
|
|
1,214 |
|
|
|
1,208 |
|
|
|
6 |
|
|
|
0.5 |
% |
Note: statistical data represents managements best estimates.
(i) |
|
Statistical data- we have adjusted comparative data to show a more accurate
reflection of the market. Conversion factors have been adjusted in calculating ISDN access
lines. |
ISDN access revenue has declined marginally to $418 million in fiscal 2006. Growth in access
lines has slowed in recent years from 3.3% in fiscal 2005 to 0.5% in the current year. Data access
line declines in the consumer segment have been driven by customer movement to broadband, whilst
declines in the business segment have arisen as a result of the migration to alternative
technologies such as ADSL, symmetrical HDSL. Data access line declines have been offset by voice
access line growth, driven by customers taking up ISDN as a stepping stone towards a full IP
environment. Whole of customer discounts in the enterprise segment have also impacted the result in
the current year.
ISDN voice calls revenue, which is made up of local, national and international voice calls made on
the integrated services digital network, declined by 10.9% or $33 million in fiscal 2006, mainly
due to declines in the local and national categories. National voice calls revenue was negatively
impacted by competitor price pressure during the year. Local voice calls revenue was negatively
impacted by a decrease of 14% in minutes of use primarily because calls on our Priority® One3 and
1300 A Party products have been reclassified from ISDN to inbound calling revenues. This
reclassification amounted to $13 million in fiscal 2006.
ISDN data calls revenue declined in fiscal 2006 by 28.5% or $47 million. Both ISDN local and
national data calls contributed to the decline. ISDN local data and ISDN national local data calls
revenue declined by 28% and 32% respectively due to customers migrating to alternative products
such as ADSL and symmetrical HDSL, as a result of improved bandwidths at reduced prices in each of
these products.
21
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Specialised Data
Specialised data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Frame Relay |
|
|
305 |
|
|
|
351 |
|
|
|
(46 |
) |
|
|
(13.1 |
%) |
ATM |
|
|
90 |
|
|
|
89 |
|
|
|
1 |
|
|
|
1.1 |
% |
Digital data services |
|
|
198 |
|
|
|
227 |
|
|
|
(29 |
) |
|
|
(12.8 |
%) |
Leased lines |
|
|
229 |
|
|
|
235 |
|
|
|
(6 |
) |
|
|
(2.6 |
%) |
International private lines |
|
|
30 |
|
|
|
26 |
|
|
|
4 |
|
|
|
15.4 |
% |
Other specialised data |
|
|
32 |
|
|
|
38 |
|
|
|
(6 |
) |
|
|
(15.8 |
%) |
|
|
|
|
|
|
|
Total data revenue |
|
|
884 |
|
|
|
966 |
|
|
|
(82 |
) |
|
|
(8.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Frame access ports (in thousands) |
|
|
30 |
|
|
|
34 |
|
|
|
(4 |
) |
|
|
(11.8 |
%) |
Note: statistical data represents managements best estimates.
Specialised data revenue is comprised mainly of revenue from frame relay, digital data
services and leased lines. Frame relay offers high speed data transmission from 64kb to 45Mb per
second to customers connecting any number of sites to other national or international locations. It
is frequently used as a building block to construct corporate wide area networks. Digital data
services provide high quality, leased line digital data transmission offering dedicated bandwidth
from 1.02Kb to 1,984Kb per second, which may be used for communication between all major capital
cities, and most regional and country areas in Australia. Analogue leased lines provide high
quality, low cost, low bandwidth and dedicated end-to-end connections between customer sites.
During fiscal 2006, total specialised data revenue decreased to $884 million, reflecting a decline
in mature products such as frame relay, digital data and leased line services. This decline has
been driven by product substitution to more technologically advanced IP and DSL based product
options, included with our internet and IP solutions revenue category.
Frame relay revenue decreased as this product enters the declining stages of its product life cycle
with customers migrating to new technologies such as Business DSL which offers the same coverage
and similar assurance, but at a lower price. In addition, we introduced price discounting to retain
existing customers. Reduced frame relay revenue was due to a combination of a reduction in ports by
11.8% with an equivalent reduction in revenue per customer.
Digital data services are mature products that declined 12.8% to $198 million during fiscal 2006
primarily due to customers transferring to newer technologies and price pressures experienced from
alternative products.
Leased line revenues have experienced a 2.6% reduction to $229 million, mainly due to customers
with voice graded dedicated lines moving to DSL, wireless or IP telephony based solutions. Other
high capacity products such as wideband have grown. New business has also been generated by
offering premium packages in combination with Internet Direct but they tend to be short distance
services which are low revenue generating.
22
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Advertising and Directories
Our advertising and directories revenue is predominantly derived from our wholly owned Sensis
group. Sensis provides innovative advertising and local search solutions through a print, online,
voice, wireless and satellite navigation network.
The majority of Sensis revenue is derived from its print and online directories Yellow Pages®
and White Pages® which have grown steadily overall due to the introduction of new print and
directory advertising initiatives.
Product innovation and customer demand continue to drive growth in our broader online and
electronic advertising and non-directories advertising business.
Advertising and Directories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Advertising and Directories revenue |
|
|
1,711 |
|
|
|
1,585 |
|
|
|
126 |
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
Yellow Pages revenue increased by 5.8% to $1,172 million, primarily due to the strong
performance in our non-metropolitan books and 54% growth in Yellow Pages® OnLine revenue. The
growth in non-metropolitan books has been driven by new category guides and subheadings, higher
uptake of half page advertisements and the release of three new local directories. Online
performance was driven by a 25% rise in Yellow Pages OnLine display customer numbers and higher
uptake of Platinum advertising, leading to increased yields.
During fiscal 2006, White Pages® revenue grew by 12.2% to $302 million, reflecting continued growth
in both print and online, with improved sales force effectiveness through better go to market
strategies. Growth has continued with the success of coloured listings and logos resulting in
higher revenue per customer.
Our emerging businesses delivered 17.1% revenue growth, driven by strong growth in Whereis®
location-based search revenues and in MediaSmart®. Fiscal 2006 includes a full year of revenue for
our mapping and travel related products company Universal Publishers.
We also acquired QuickCut and Adstream in February 2006. This business provides a unique software
and online interface which allows advertising content to be stored, repurposed and distributed
across a wide range of media. This business contributed a further $8 million for the year.
Overall revenue performance was impacted by a decline in Classifieds revenue over the period. This
was driven by competition and economic weakness in the Sydney and Melbourne markets.
23
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Intercarrier Services
Our operating revenue from intercarrier services comprises a number of products and services
relating to the provision of telecommunications services to other carriers (including REACH), CSPs
and Internet service providers (ISPs). The majority of this revenue base is derived from
interconnect and access services which is a highly regulated area of the Australian
telecommunications market. Interconnection revenues relating to our PSTN and mobile products are
included in those product categories. The remaining revenue component in intercarrier services is
derived from wholesale specific product offerings such as facilities access, wholesale transmission
and ULL which, while they are subject to significant price pressures resulting from ongoing
oversupply of capacity in the market place, are a focus for delivering incremental revenue growth
for us in the coming years.
Intercarrier services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Intercarrier services revenue |
|
|
351 |
|
|
|
290 |
|
|
|
61 |
|
|
|
21.0 |
% |
|
|
|
|
|
|
|
Intercarrier Services revenue has grown by 21.0% to $351 million due to increases in
facilities access, wholesale transmission solutions and other wholesale revenues mainly consisting
of ULL.
Our growth in facilities access was 40.7% or $24 million for the year largely driven by demand for
equipment building and mobile tower access as other carriers and service providers have sought to
expand their infrastructure over time.
Growth in wholesale transmission relates to leased transmission services led by a rise in demand
from internet service providers for backhaul transmission to expand their DSL network coverage.
Partly offsetting the overall increase in intercarrier revenue was the unfavourable impact of a
backdated rate adjustment for MCI Worldcom in September 2005 as well as a decline in services
leased by the same customer.
Other Wholesale revenue growth of $18 million is due to ULL which has been driven by a number of
factors such as:
|
|
carriers have reached customer density thresholds on wholesale DSL and resale PSTN
to be able to undertake viable ULL; and |
|
|
falling equipment prices have reduced the capital required by carriage service
providers to undertake ULL build. |
24
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Inbound Calling Products
Our operating revenue from inbound calling products consists principally of the fees we charge
our business customers for the provision of inbound calling numbers:
|
|
for Freecall 1800, the cost of the call, charged to the party called, with no cost
incurred by the caller; |
for Priority® 1300 and Priority® One3:
|
|
|
the calling party from a PSTN service incurs a cost of 25 cents (including
GST) from anywhere in Australia. Different charges apply for calls made from ISDN,
mobiles and payphones; and |
|
|
|
|
the service owner incurs the other components of the call charges as
applicable. |
Also included is revenue from enhanced call centre products using network voice processing, which
provides access to advanced call handling capabilities, without customers having to purchase and
maintain their own networks.
Our inbound calling products revenue therefore is driven by two different streams, the caller (A
party) and the lessee of the inbound service (B party). The A party revenues are affected by
substitution to other voice products such as mobiles and the Internet. B party revenues are
affected by increased customer competition impacting prices.
Revenue from inbound calling products remained steady at $449 million in fiscal 2006 mainly due to
an increase in Priority® One3 and 1300 A Party products offset by Priority® One3 and 1300 B Party
products.
Inbound calling products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Inbound calling products revenue |
|
|
449 |
|
|
|
449 |
|
|
|
0 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B Party minutes (in millions) |
|
|
2,922 |
|
|
|
2,773 |
|
|
|
149 |
|
|
|
5.4 |
% |
A Party calls (in millions) |
|
|
1,012 |
|
|
|
940 |
|
|
|
72 |
|
|
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
3,934 |
|
|
|
3,713 |
|
|
|
221 |
|
|
|
6.0 |
% |
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates.
Our overall revenue from Priority®One3 and 1300 B Party products declined in fiscal 2006 due
to very competitive market pressures resulting in lower returns. Minutes of use and services in
operation have actually increased in this category of calls, but large customers are being won or
retained at lower prices resulting in reduced revenues. This is offset by higher call volumes on
our Priority® One3 and 1300 A Party products after calls from our ISDN and Siteline products to
these numbers were reclassified in the current year to inbound calling. This amounted to $13
million in fiscal 2006. There is also an increasing trend for calls to these numbers being made
from mobile phones which resulted in the revenue being recorded as mobiles revenue.
Revenue from Freecall 1800 has declined mainly due to intense price competition leading to reduced
price and a declining customer base. Our other inbound calling products, such as Enterprise speech
solutions, have continued to grow strongly throughout fiscal 2006.
25
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Solutions Management
Our operating revenue from solutions management is derived from managing all or part of a
customers communications and IT solutions and services covering:
|
|
managed network services which is network based voice and data products, including
IP based networks and IP telephony, CPE management, radio networks and new wireless based
technologies; |
|
|
IT services which is managed customer infrastructure (e.g. desktop and end user
devices), managed storage and security services, in addition to hosting and application
development. IT services also includes the provision of professional consulting and
deployment services; and |
|
|
|
other refers to our eBusiness solutions and global data centre. |
Solutions management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Managed network services |
|
|
337 |
|
|
|
337 |
|
|
|
|
|
|
|
0.0 |
% |
IT services |
|
|
632 |
|
|
|
572 |
|
|
|
60 |
|
|
|
10.5 |
% |
Other |
|
|
20 |
|
|
|
22 |
|
|
|
(2 |
) |
|
|
(9.1 |
%) |
|
|
|
|
|
|
|
Solutions management revenue |
|
|
989 |
|
|
|
931 |
|
|
|
58 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
In fiscal 2006, solutions management revenue increased 6.2% or $58 million mainly due to
increases in IT services.
IT services grew by 10.5% or $60 million in the current year mainly due to our wholly owned entity
KAZ winning major contracts, one of which was a five-year contract for an estimated $200 million to
provide the Department of Defences Central Office IT Infrastructure Support Services. Fiscal 2006
IT services revenue also included an additional $12 million due to a full 12 months of results for
KAZ compared to only 11 months in the previous fiscal year. Managed professional services revenue
also contributed to the growth in IT services, with an increase of $16 million due mainly to
increased project work on an existing contract.
In addition to increases in IT services, managed data, managed WAN and managed radio, which are in
managed network services, all contributed positively to the revenue growth due mainly to
increases in a number of existing contracts. Managed voice however offset this growth in revenue,
declining due to the scaling back of some of our existing contracts in this area.
26
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Offshore Controlled Entities
The offshore controlled entities category relates to our offshore subsidiaries, which provide
a variety of products and services within their various regions of operation. Included in this
category are the following significant offshore controlled entities:
|
|
CSL New World Mobility Group (CSLNW), which generates its revenues from the Hong
Kong mobiles market. CSLNW was formerly known as Hong Kong CSL Limited, though in March
2006 this entity merged with Hong Kong based mobile company New World PCS. As result of
this transaction, we own 76.4% of the merged entity; |
|
|
TelstraClear, which generates its revenues from providing full integrated services
to the New Zealand market; and |
|
|
other offshore controlled entities predominantly in the Telstra Enterprise and
Government segment, which mainly generate revenues from the provision of global
communication solutions to multinational corporations through our interests in the United
Kingdom, Asia and North America. |
Offshore controlled entities revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
CSL New World |
|
|
830 |
|
|
|
734 |
|
|
|
96 |
|
|
|
13.1 |
% |
TelstraClear |
|
|
620 |
|
|
|
625 |
|
|
|
(5 |
) |
|
|
(0.8 |
%) |
Other offshore controlled entities |
|
|
295 |
|
|
|
252 |
|
|
|
43 |
|
|
|
17.1 |
% |
|
|
|
|
|
|
|
Total offshore controlled entities revenue |
|
|
1,745 |
|
|
|
1,611 |
|
|
|
134 |
|
|
|
8.3 |
% |
|
|
|
|
|
|
|
Consolidated revenue from offshore controlled entities increased in fiscal 2006 primarily due
to the following factors:
|
|
CSLNW experienced revenue growth across the majority of its revenue streams except
for local voice, which continues to be impacted by sustained pricing pressure. The merger
between Hong Kong CSL and New World PCS resulted in increased revenue in the current year
of $64 million. Excluding this component, revenue has grown in both prepaid and postpaid
categories after increased subscribers and handset revenue due to recent promotional
activity. Revenue growth was also assisted by a $11 million favourable foreign exchange
rate impact. |
|
|
TelstraClear experienced a net decline in revenue of 0.8% to $620 million. There
were significant declines in calling revenues largely due to price erosion and pricing
plan reductions in the Internet and IP business due to heavy retail competition. Revenue
was
also negatively impacted by the NZ$ exchange rate, causing a $22 million decline. These
declines were mostly offset by strong growth in the business sector and an increased
contribution from a full years ownership of the Sytec business. There were also a number
of one-off implementation revenues from the provision of new and/or additional services to
a number of key customers. |
|
|
The 17.1% growth in revenue to $295 million from other offshore controlled entities
was mainly due to growth in Europe, Asia and the US. In Europe, the inclusion of a full 12
months ownership of PSINet contributed $15 million in revenue growth. Both Telstra
Singapore and Telstra Hong Kong started to grow revenue by selling the full suite of
international data products in the Asia market. KAZ also exhibited strong growth in the
same region due to the synergies gained by combining this business with our
telecommunications business in one bundle to customers. Growth in the US of $15 million
was mainly the result of a major contract to provide telecommunications solutions over an
integrated global IP-based network, contributing $12 million to revenue growth. |
For further detail regarding our major off shore subsidiaries CSLNW and TelstraClear refer to the
business summaries on pages 41 and 42.
27
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Payphones
Payphones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Payphone revenue |
|
|
104 |
|
|
|
121 |
|
|
|
(17 |
) |
|
|
(14.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra owned and operated payphones (thousands) |
|
|
30 |
|
|
|
31 |
|
|
|
(1 |
) |
|
|
(3.2 |
%) |
Privately owned and operated payphones (thousands) |
|
|
27 |
|
|
|
30 |
|
|
|
(3 |
) |
|
|
(10.0 |
%) |
|
|
|
|
|
|
|
Total number of payphones (in thousands) |
|
|
57 |
|
|
|
61 |
|
|
|
(4 |
) |
|
|
(6.6 |
%) |
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates.
Payphone revenue declined by 14.0% to $104 million in fiscal 2006, impacted by substitution to
other products, particularly prepaid mobile phones and competitors prepaid calling cards. As a
result of this migration, we removed a number of low usage phones resulting in a 3.2% reduction in
the number of Telstra owned and operated payphones. There has also been a decline in privately
owned and operated payphones of 10.0%, as private operators removed their support for unprofitable
payphones. Telstra owned and operated payphones also reduced due to the loss of some payphones to
private operators and lower demand in new growth locations.
Pay TV Bundling
Pay TV Bundling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay TV Bundling revenue |
|
|
320 |
|
|
|
263 |
|
|
|
57 |
|
|
|
21.7 |
% |
|
|
|
|
|
|
|
|
FOXTEL Pay TV Bundling subscribers (thousands) |
|
|
292 |
|
|
|
280 |
|
|
|
12 |
|
|
|
4.3 |
% |
Austar Pay TV Bundling subscribers (thousands) |
|
|
51 |
|
|
|
55 |
|
|
|
(4 |
) |
|
|
(7.3 |
%) |
|
|
|
|
|
|
|
Total Pay TV Bundling subscribers (thousands) |
|
|
343 |
|
|
|
335 |
|
|
|
8 |
|
|
|
2.4 |
% |
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates.
Total pay TV bundling revenue grew by $57 million, comprising FOXTEL $46 million and AUSTAR
$11 million.
FOXTEL bundled services revenue grew by 20.0% or $46 million after an increase in subscribers and
higher revenue per user. As customers have migrated from analogue to digital services, discount
plans have been phased out and customers are upgrading their packages. The growth in subscribers
was driven by low price installation/upgrade offers made to the market along with the FOXTEL 10th
Anniversary promotion, which targeted both new customers and existing customers through digital
migration. FOXTEL IQ, an interactive digital feature available to all FOXTEL digital subscribers
also performed well, aided by a low installation price point campaign. At 30 June 2006, analogue
services in operation represented 14.7% of FOXTEL bundled customers compared with 36.8% at the
start of the year.
AUSTAR bundled services revenue growth for fiscal 2006 of $11 million was driven by an increase in
the average revenue per user after a change in the subscription offerings. Subscriptions however,
fell due to lower advertising activity, which resulted in slower sales rates while the
disconnection rate remained consistent.
28
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Customer Premises Equipment
Customer premises equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Customer premises equipment revenue |
|
|
274 |
|
|
|
231 |
|
|
|
43 |
|
|
|
18.6 |
% |
|
|
|
|
|
|
|
Customer premises equipment (CPE) revenue increased by 18.6% to $274 million mainly driven by
strong growth in the sales of PBX equipment and communication packages known as Telstra Business
Systems (TBS) packages. TBS sales more than tripled in the current fiscal year due to an expansion
of the vendor base combined with new carriage pricing plans and investment made in support tools
that enabled improved processing and reduced transaction time.
The current years revenue also includes a full 12 months of operations for Telstra Business
Systems Pty Ltd (formerly known as Damovo (Australia) Pty Ltd) as it was acquired September 2004.
We also acquired Converged Networks Pty Ltd, Western Australias largest CPE dealer in April 2006.
This growth was partially offset by an $11 million decline in first phones/extensions due to
continued substitution of rental phones due to sales of CPE and mobiles.
Other Sales and Services
Other sales and services revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Telstra information and connection services |
|
|
120 |
|
|
|
134 |
|
|
|
(14 |
) |
|
|
(10.4 |
%) |
Customnet and spectrum |
|
|
110 |
|
|
|
112 |
|
|
|
(2 |
) |
|
|
(1.8 |
%) |
Virtual private network |
|
|
17 |
|
|
|
15 |
|
|
|
2 |
|
|
|
13.3 |
% |
Card services |
|
|
50 |
|
|
|
59 |
|
|
|
(9 |
) |
|
|
(15.3 |
%) |
Security products |
|
|
34 |
|
|
|
33 |
|
|
|
1 |
|
|
|
3.0 |
% |
HFC cable usage |
|
|
84 |
|
|
|
65 |
|
|
|
19 |
|
|
|
29.2 |
% |
Conferlink |
|
|
48 |
|
|
|
47 |
|
|
|
1 |
|
|
|
2.1 |
% |
Commercial and recoverable works |
|
|
57 |
|
|
|
58 |
|
|
|
(1 |
) |
|
|
(1.7 |
%) |
External construction |
|
|
108 |
|
|
|
85 |
|
|
|
23 |
|
|
|
27.1 |
% |
Other |
|
|
131 |
|
|
|
133 |
|
|
|
(2 |
) |
|
|
(1.5 |
%) |
|
|
|
|
|
|
|
Total other sales and services revenue |
|
|
759 |
|
|
|
741 |
|
|
|
18 |
|
|
|
2.4 |
% |
|
|
|
|
|
|
|
In fiscal 2006, operating revenue from other sales and services increased by 2.4% or $18
million mainly due to HFC cable usage and external construction revenue.
HFC cable usage is made up of revenue received from FOXTEL for cable installations and service
calls. Revenue increased by $19 million this year due to FOXTEL promotional activity which resulted
in an increase in services in operation. There was also a scheduled FOXTEL contract rate increase
during the period.
External construction, which delivers communications network infrastructure solutions, had revenue
growth of 27.1% or $23 million in fiscal 2006. This growth can be mainly attributed to increased
activity relating to the construction of the 3G 2100 network in conjunction with our joint venture
partner, Hutchison.
29
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
The above increases were partially offset by a $14 million decline in information and
connection services revenue as a result of lower call volumes. Also, card services declined by
15.3% or $9 million. This was due to products such as Homelink 1800 and telecard being mature
products and are being impacted by substitution to more cost effective convenient products such as
pre-paid cards and mobiles.
Other Income
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Proceeds from sale of property, plant and equipment |
|
|
46 |
|
|
|
51 |
|
|
|
(5 |
) |
|
|
(9.8 |
%) |
Proceeds from sale of investments |
|
|
93 |
|
|
|
252 |
|
|
|
(159 |
) |
|
|
(63.1 |
%) |
|
|
|
|
|
|
|
Asset/investment sales |
|
|
139 |
|
|
|
303 |
|
|
|
(164 |
) |
|
|
(54.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of property, plant & equipment |
|
|
(23 |
) |
|
|
(42 |
) |
|
|
19 |
|
|
|
(45.2 |
%) |
Cost of investment |
|
|
(31 |
) |
|
|
(173 |
) |
|
|
142 |
|
|
|
(82.1 |
%) |
|
|
|
|
|
|
|
Cost of asset / investment sale |
|
|
(54 |
) |
|
|
(215 |
) |
|
|
161 |
|
|
|
(74.9 |
%) |
|
|
|
|
|
|
|
Net gain/loss on assets/investment sale |
|
|
85 |
|
|
|
88 |
|
|
|
(3 |
) |
|
|
(3.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO Levy Receipts |
|
|
58 |
|
|
|
63 |
|
|
|
(5 |
) |
|
|
(7.9 |
%) |
Government subsidies |
|
|
135 |
|
|
|
71 |
|
|
|
64 |
|
|
|
90.1 |
% |
Miscellaneous income |
|
|
50 |
|
|
|
39 |
|
|
|
11 |
|
|
|
28.2 |
% |
|
|
|
|
|
|
|
Other income |
|
|
243 |
|
|
|
173 |
|
|
|
70 |
|
|
|
40.5 |
% |
|
|
|
|
|
|
|
Total other income |
|
|
328 |
|
|
|
261 |
|
|
|
67 |
|
|
|
25.7 |
% |
|
|
|
|
|
|
|
In fiscal 2006, total other income increased by 25.7% or $67 million.
In fiscal 2006 proceeds from sale of investments of $93 million were due mainly to the sale of
Xantic and Fundi Software Pty Ltd, with Xantic yielding a net gain of approximately $58 million. In
fiscal 2005, proceeds from the sale of our investments was mainly made up of the sale of our
interests in Intelsat Limited, Infonet Services Corporation and the redemption of the convertible
note issued by PCCW.
The majority of the growth in government subsidy revenue was sourced from Higher Bandwidth
Incentive Scheme (HiBIS) receipts and the broadband Connect Australia scheme, which can be
attributed to an increase in the provision of broadband services to regional, rural and remote
areas of Australia. Refer to the Internet and IP products section for further details regarding
HiBIS.
30
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Labour expense |
|
|
4,364 |
|
|
|
3,858 |
|
|
|
506 |
|
|
|
13.1 |
% |
Goods and services purchased |
|
|
4,730 |
|
|
|
4,211 |
|
|
|
519 |
|
|
|
12.3 |
% |
Other expenses |
|
|
4,427 |
|
|
|
3,815 |
|
|
|
612 |
|
|
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
13,521 |
|
|
|
11,884 |
|
|
|
1,637 |
|
|
|
13.8 |
% |
Share of net (gain)/loss from
jointly controlled and associated
entities |
|
|
(5 |
) |
|
|
94 |
|
|
|
(99 |
) |
|
|
(105.3 |
%) |
|
|
|
|
|
|
|
|
|
|
13,516 |
|
|
|
11,978 |
|
|
|
1,538 |
|
|
|
12.8 |
% |
Depreciation and amortisation |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
558 |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
Total operating expenses |
|
|
17,603 |
|
|
|
15,507 |
|
|
|
2,096 |
|
|
|
13.5 |
% |
|
|
|
|
|
|
|
In fiscal 2006, our total operating expenses (including share of net (gain)/loss from jointly
controlled and associated entities) was $17,603 million, compared with $15,507 million in fiscal
2005. One of the major drivers of the 13.5% increase was the inclusion of a restructuring and
redundancy provision of $427 million, which has impacted all three of the expense categories. Our
operating expenses have been impacted by the following factors:
|
|
costs associated with transformational initiatives and certain project write-offs; |
|
|
|
increased costs associated with network rehabilitation; |
|
|
higher redundancy expense as a result of reduced staff numbers as efficiencies have
been achieved; |
|
|
higher goods and services purchased costs due to increased marketing campaign
activities and new offers aiming to stimulate sales growth in a range of our products and
services; |
|
|
the benefit of ongoing cost control programs, including the consolidation of
vendors and IT systems; |
|
|
growth in our communications plant asset base, along with the impact of a service
life review of our asset base to align with the transformation program, has increased our
depreciation and amortisation expense during fiscal 2006; and |
|
|
the consolidation of additional operating expenses of $68 million in fiscal 2006
from our acquisition activity including the merger between CSL and New World PCS, as well
as the inclusion of a full fiscal year of expenses relating to entities we acquired in
fiscal 2005. These included Universal Publishers from December 2004, Telstra Business
Systems (formerly Damovo (Australia) Pty Ltd) from September 2004, PSINet from August
2004, and KAZ from July 2004. |
31
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Labour Expense
Labour expense includes:
|
|
salary, wages and related on-costs, including superannuation costs, share based
payments, workers compensation, leave entitlements and payroll tax; |
|
|
|
costs of engaging contractor labour and agency costs; and |
|
|
|
restructuring costs, including redundancy expenses. |
In the table below, our domestic full time employees include domestic full time staff, domestic
fixed term contracted staff and expatriate staff in overseas subsidiary entities. Domestic full
time employees do not include employees in our offshore subsidiary entities, or casual and part
time employees. Our full time employees and equivalents include the total of our domestic and
offshore full time employees, and casual and part time employees measured on an equivalent basis.
Our total workforce includes domestic and offshore full time, casual and part time employees as
well as contractors and staff employed through agency arrangements measured on an equivalent basis.
During fiscal 2006, we have undertaken a comprehensive review of the sources of our workforce
numbers and this has resulted in a restatement of our workforce figure as at the end of fiscal
2005. For 30 June 2005, we previously reported domestic full time employees of 39,657, full time
employees and employed equivalents of 46,336 and total workforce of 51,764. We have revised these
numbers for fiscal 2006 reporting purposes after standardising our subsidiary entities methodology
for reporting workforce numbers and reviewing some of our data capture systems. We have also
revised the way we count staff on long term leave to exclude them from both the opening and closing
staff balances to enable us to better manage the business. Staff on long term leave will be
excluded from the balance for future reporting.
The vast majority of the net impact of the changes relates to the number of contractors and agency
staff.
Labour expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Labour expense |
|
|
4,364 |
|
|
|
3,858 |
|
|
|
506 |
|
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full time
employees (whole
numbers) (i) |
|
|
37,599 |
|
|
|
39,680 |
|
|
|
(2,081 |
) |
|
|
(5.2 |
%) |
Full-time employees
and employed
equivalents (whole
numbers) (ii) |
|
|
44,452 |
|
|
|
46,227 |
|
|
|
(1,775 |
) |
|
|
(3.8 |
%) |
Total workforce ,
including
contractors and
agency staff (whole
numbers) (iii) |
|
|
49,443 |
|
|
|
52,705 |
|
|
|
(3,262 |
) |
|
|
(6.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in total
workforce in fiscal
2006 |
|
|
(3,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in total
workforce in fiscal
2006 excluding
impact of New World
merger |
|
|
(3,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates.
|
|
|
(i) |
|
Excludes offshore, casual and parttime employees. June 2005 balance has been restated, refer to
details above. |
|
(ii) |
|
Includes all domestic and offshore employees, including those of our subsidiary entities. June
2005 balance has
been restated, refer to details above. |
|
(iii) |
|
Includes all domestic and offshore employees,
including subsidiary entities as well as contractors and agency staff. June 2005 balance has been
restated, refer to details above. |
During fiscal 2006, our total workforce decreased by 6.2% or 3,262 full time equivalent staff,
contractors and agency staff. This decrease is predominantly due to specific efforts across the
business to rationalise the number of people working for the Telstra group as part of our business
transformation initiatives. During the year, our subsidiary Hong Kong CSL merged with New World
PCS, which resulted in the Telstra Group acquiring 597 new employees. Excluding
32
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
the impact of the New World PCS merger on staff numbers, our total full time equivalent staff,
contractors and agency staff reduced by 3,859 full time equivalent staff.
We incurred redundancy expenses of $348 million in fiscal 2006 compared with $91 million in fiscal
2005. The higher redundancy expense reflects the implementation of cost control initiatives to
improve the efficiency of our operational structure. In addition, a further $186 million of
redundancy expense is included as part of a restructuring and redundancy provision as at year end
to account for the redundancies over the next 2 years that are considered to have arisen as part of
the business restructure.
Our labour expense increased by 13.1% in fiscal 2006 mainly due to:
|
|
the increased levels of redundancy and the redundancy provision referred to above; |
|
|
salary increases averaging between 2% and 4% for employees as specified in our
enterprise agreements and as per the normal annual salary review process; and |
|
|
a full year of ownership of several subsidiaries acquired part way through fiscal
2005 (such as KAZ and Telstra Business Systems), and acquisition of new entities such as
the New World Mobility group and a controlling interest in Adstream. |
The above increases in labour expense were partially offset by cost reductions associated with the
6.2% decrease in the number of employed staff, contractors and agency staff.
Excluding the impact of redundancy expense, labour expense increased by 1.7%.
Based on the latest detailed actuarial report provided on the financial position of the Telstra
Superannuation Scheme (Telstra Super) as at 30 June 2003, we have reported that a surplus in this
superannuation fund continues to exist. In accordance with the recommendations within the actuarial
investigation, we were not expected to, and did not make employer contributions to Telstra Super
during fiscal 2006 and fiscal 2005. As at 30 June 2006, the vested benefits index (the ratio of
fund assets to members vested benefits) of the defined benefit divisions of Telstra Super was
115%. Our contributions to Telstra Super will recommence when the vested benefit index of the
defined benefit divisions falls to 103%. The continuance of our contribution holiday is dependent
on the performance of the fund and the level of contributions required to meet employer
obligations.
In fiscal 2006, we recognised $185 million of pension costs in our labour expenses compared
with $203 million in fiscal 2005. This expense is due to the relevant A-IFRS standard requiring us
to recognise the actuarially defined movement in our defined benefit pension plans in our operating
results.
33
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Goods and Services Purchased
Goods and services purchased includes core costs of our business that vary according to
business activity. The largest component of this expense category is network payments, which are
payments made to other carriers to terminate international and domestic outgoing calls and
international transit traffic. Other significant items includes the costs of mobile handsets and
internet modems, costs of mobile sales (including subsidy costs, usage commissions and dealer
incentives), managed services costs (including service contractors, sub-contractors and leases),
service fees (predominantly in relation to our pay television services) and paper purchases and
printing costs.
Goods and services purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
|
Cost of goods sold |
|
|
917 |
|
|
|
726 |
|
|
|
191 |
|
|
|
26.3 |
% |
Usage commissions |
|
|
281 |
|
|
|
289 |
|
|
|
(8 |
) |
|
|
(2.8 |
%) |
Handset subsidies |
|
|
504 |
|
|
|
424 |
|
|
|
80 |
|
|
|
18.9 |
% |
Network payments |
|
|
2,002 |
|
|
|
1,904 |
|
|
|
98 |
|
|
|
5.1 |
% |
Service fees |
|
|
319 |
|
|
|
273 |
|
|
|
46 |
|
|
|
16.8 |
% |
Managed Services |
|
|
242 |
|
|
|
190 |
|
|
|
52 |
|
|
|
27.4 |
% |
Dealer performance commissions |
|
|
113 |
|
|
|
41 |
|
|
|
72 |
|
|
|
175.6 |
% |
Paper purchases and printing |
|
|
147 |
|
|
|
159 |
|
|
|
(12 |
) |
|
|
(7.5 |
%) |
Other |
|
|
205 |
|
|
|
205 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
Total goods and services purchased |
|
|
4,730 |
|
|
|
4,211 |
|
|
|
519 |
|
|
|
12.3 |
% |
|
|
|
|
|
|
|
Our goods and services purchased increased in fiscal 2006 mainly due to higher cost of goods
sold, mobile handset subsidies and network payments. Increases were experienced across most
categories within goods and services purchased except for usage commissions and paper costs.
Additionally, a restructuring provision of $54 million has been raised in relation to the
replacement of EVDO cards and additional customer and dealer costs associated with the shut down of
our CDMA network in the future.
Our goods and services purchased increased by 12.3% to $4,730 million in fiscal 2006 due to the
following factors:
|
|
the inclusion of the full financial year of expenses relating to our subsidiary
entities acquired part way through the prior fiscal year, including KAZ, Telstra Business
Systems (formerly Damovo (Australia) Pty Ltd), PSINet and Universal Publishers. In fiscal
2006, we also acquired New World PCS, the consolidation of which has caused an increase of
goods and services purchased expense of $29 million; |
|
|
a rise in cost of goods sold mainly due to higher sales volumes for mobile
handsets, primarily driven by increased market campaign activity, strong BigPond broadband
demand, costs of supporting the Commonwealth Games, together with sales growth in other
product categories such as EVDO, CPE for small business customers, Managed WAN equipment
and voice related products. Also contributing to the increase are payments made to
Brightstar, in accordance with our procurement agreement with them to centrally source
wireless devices from global suppliers with a view to achieving cost savings. Inclusive of
these payments, the Brightstar arrangement has provided net savings of approximately $70
million, primarily relating to handset costs; |
|
|
an increase in mobile handset subsidies, attributable to a rise in the take up of
handsets on subsidised plans as well as higher average subsidies offered, especially
following a significant campaign undertaken in the last quarter, whereby a greater range
of handsets are being subsidised. As a result, our average subscriber acquisition cost has
increased from $120 to $137. In addition, the CSL New World Mobility Group has implemented
a more aggressive |
34
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
|
|
handset subsidy policy in order to increase handset sales. In fiscal 2006, we have also
made an A-IFRS accounting policy change to expense handset subsidies as incurred, as
opposed to previously deferring and amortising them over the contract period. The prior
year comparative figure has been adjusted to allow a like for like comparison; |
|
|
network payments continued to grow due to volume increases of domestic mobile and SMS
traffic terminating on other carriers networks, partially offset by a reduction in
the average mobile terminating rate. Additionally, expansion and growth in our UK, USA
and Asian operations have driven growth in our offshore outpayments. Also attributable to
this increase is higher outbound roaming revenue, partly offset by a reduction of costs
through routing traffic to overseas carriers that offer lower prices and favourable foreign
exchange variations in our New Zealand operations. Additional Network Access Charges were
also incurred as a result of our 3G 2100 partnership activities with Hutchison; |
|
|
|
service fees increased by 16.8% to $319 million in fiscal 2006 led by a rise in bundling
of pay television services due to growth in bundled FOXTEL subscribers; |
|
|
|
managed services costs grew by 27.4% to $242 million in fiscal 2006, mainly attributable
to increased third party maintenance and service costs for the support of customer
contracts. There are also a number of reclassifications from other expenses such as service
contracts, service fees and consultancy amounting to $26 million. Offsetting this increase
are decreases due to lease renegotiations; |
|
|
|
growth in dealer performance commissions, mainly attributable to increased proactive
sales activity in our personal calling program. New dealer payments resulting from the
implementation of the new dealer remuneration model have also contributed to the growth;
and |
|
|
|
an increase in other goods and services purchased due to the inclusion of a
restructuring provision of $54 million in fiscal 2006, offset by a decrease in commercial
project payments as described below. |
|
These increases were partially offset by a decrease in
other goods and services expenses such as usage commissions, commercial project payments
and paper purchases and printing costs. |
|
|
|
usage commissions decreased by $8 million mainly as a result of the discontinuation of
commission payments to Keycorp following our acquisition of their Transaction Network
Solutions business during the year. This was partly offset by increased dealer commissions
mainly associated with non-mobile related products, including BigPond products; |
|
|
|
commercial project payments declined from $59 million in fiscal 2005 to $34 million in
fiscal 2006 mainly relating to a lower level of deferral and amortisation of our basic
access installation costs. The expense fluctuates in accordance with our installations over
the five prior years. An equivalent amount is amortised into revenue and hence there is no
EBIT impact. Also contributing to the decline was a change in the line usage billing
arrangement for outsourced faxstream costs; and |
|
|
|
paper purchase and printing costs decreased from $159 million in fiscal 2005 to $147
million in fiscal 2006 due to savings achieved through printing contract discounts,
together with a reclassification of expenses into cost of goods sold. There was also a
reduction in printing costs relating to superannuation industry contracts after a push
towards the use of online notifications. |
35
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Other Expenses
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Property and IT rental expense |
|
|
559 |
|
|
|
572 |
|
|
|
(13 |
) |
|
|
(2.3 |
%) |
Net foreign currency conversion losses/(gains) |
|
|
2 |
|
|
|
(40 |
) |
|
|
42 |
|
|
|
(105.0 |
%) |
Audit fees |
|
|
8 |
|
|
|
7 |
|
|
|
1 |
|
|
|
14.3 |
% |
Service contracts and other agreements |
|
|
1,836 |
|
|
|
1,556 |
|
|
|
280 |
|
|
|
18.0 |
% |
Promotion and advertising |
|
|
356 |
|
|
|
330 |
|
|
|
26 |
|
|
|
7.9 |
% |
General and administration |
|
|
793 |
|
|
|
806 |
|
|
|
(13 |
) |
|
|
(1.6 |
%) |
Other operating expenses |
|
|
544 |
|
|
|
394 |
|
|
|
150 |
|
|
|
38.1 |
% |
Impairment and diminution expenses |
|
|
329 |
|
|
|
190 |
|
|
|
139 |
|
|
|
73.2 |
% |
|
|
|
|
|
|
|
Total other expenses |
|
|
4,427 |
|
|
|
3,815 |
|
|
|
612 |
|
|
|
16.0 |
% |
|
|
|
|
|
|
|
Our other expenses were $4,427 million in fiscal 2006 and $3,815 million in fiscal 2005,
representing a 16.0% increase year on year. A restructuring provision of $137 million was raised at
year end mainly relating to property rationalisation, cancellation of server leases, the
decommissioning of certain IT platforms and operational and business support systems and related
stock obsolescence. Excluding the impact of the provision, our total other expenses grew by 12.5%
to $4,290 million.
Our other expenses in fiscal 2006 include an additional $17 million of expenses attributable to the
merger of CSL with New World PCS during the period. In addition, a full twelve months of expenses
have been included in fiscal 2006 for KAZ, PSINet, Universal Publishers, and Telstra Business
Systems (formerly Damovo), which were acquired part way through fiscal 2005.
The movement in the significant categories of other expenses is discussed below.
The largest component within this expense category is service contracts and other agreements. The
expense increased from $1,556 million in fiscal 2005 to $1,836 million in fiscal 2006, mainly
driven by the following factors:
|
|
increased network maintenance and rehabilitation activity; |
|
|
costs associated with transformational initiatives; |
|
|
maintenance of the existing 3G 2100 MHZ network and the operational expenditure relating
to the construction of the new 3G 850 MHZ network; |
|
|
volume based increases including installations for digital pay television, as well as
increased activations and fault rectifications for BigPond products due to product growth;
and |
|
|
a rise in consultancy costs associated with the company transformation activity and
increased market research activity due to a focus on understanding customer needs. |
The above increases are partly offset by savings from the renegotiation of a major vendor contract,
a reduction in mainframe server lease charges as well as the completion of consulting work from
fiscal 2005.
General and administration expenses decreased from $806 million in fiscal 2005 to $793 million in
fiscal 2006. This was driven by lower IT costs resulting from savings achieved in repairs and
maintenance through continued infrastructure consolidation. The closure of an IT system and the
decommissioning of an IT platform have also contributed to reduced IT related costs. Discretionary
costs such as seminars and conferences, travel and entertainment costs have decreased in fiscal
2006 as a result of a strong focus on cost reduction. Legal costs have however risen in the year
due
36
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
to increased litigation and other legal work, especially around the C7 case (refer to note 27
of the annual report for further details), operational separation issues and various project
initiatives.
Other operating expenses increased from $394 million to $544 million during fiscal 2006 primarily
due to the provision for restructuring of $105 million raised in this category. Excluding the
impact of the provision, our other operating expenses increased by $45 million. This was largely
driven by lower construction activity resulting in higher operations and maintenance activity being
expensed.
Property and IT rental expense decreased by 2.3% to $559 million, mainly due to reduced PC leasing
costs driven through a consolidation of server leases, which has enabled us to negotiate contracts
at a more competitive rate. The decommissioning of an old IT platform and the consolidation of
various vendor contracts have also contributed to the decrease in IT rental costs.
Our promotion and advertising costs increased by 7.9% to $356 million during fiscal 2006 mainly due
to increased spend during the Commonwealth Games, as well as more marketing activity in the face of
increased competition and efforts to stimulate revenue.
Our impairment and diminution expense has increased from $190 million in fiscal 2005 to $329
million in fiscal 2006, mainly attributable to the retirement of a number of IT assets and
increased costs associated with the cancellation of partially completed capital projects after a
review of project direction as part of our transformation strategy. Also included in fiscal 2006 is
a provision relating to restructuring of $32 million. Our inventory write down expense has also
risen due to increased write-offs in our construction business, as well as the impact of our active
promotion of mobile handsets, causing slow moving stock to be written off more quickly. This
increase is partly offset by the decrease in our bad and doubtful debts, which decreased from $150
million in fiscal 2005 to $139 million in fiscal 2006. Improved credit management performance has
led to lower provision requirements and write-offs, as well as fewer payments to external debt
collection agents.
Net foreign currency conversion costs represents the remaining foreign currency exposure after
taking into account our hedging activities. The loss of $2 million in fiscal 2006 compared with a
gain of $40 million in fiscal 2005 is mainly due to an A-IFRS accounting adjustment relating to the
REACH capacity prepayment, which was processed in fiscal 2005.
37
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Share of net (gain)/loss from jointly controlled and associated entities
Share of net (gain)/loss from jointly controlled and associated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Share of net (gain)/loss from jointly controlled and associated entities |
|
|
(5 |
) |
|
|
94 |
|
|
|
(99 |
) |
|
|
(105.3 |
%) |
|
|
|
|
|
|
|
Our share of net (gain)/loss from jointly controlled and associated entities includes our
share of both profits and losses from equity accounted investments.
In fiscal 2005, we entered into an agreement with our joint venture entity, REACH, which included a
commitment to fund half of REACHs committed capital expenditure for a period until 2022. Under
A-IFRS, this transaction was deemed to be part of our investment in REACH and resulted in equity
accounted losses being recognised in the fiscal 2005 year.
The current year equity accounting gain has arisen after improved performance from our joint
venture entity Xantic prior to its sale.
Depreciation and Amortisation
Our depreciation and amortisation expense remains a major component of our cost structure,
reflecting our expenditure on capital items.
Depreciation and amortisation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Depreciation |
|
|
3,183 |
|
|
|
2,876 |
|
|
|
307 |
|
|
|
10.7 |
% |
Amortisation |
|
|
904 |
|
|
|
653 |
|
|
|
251 |
|
|
|
38.4 |
% |
|
|
|
|
|
|
|
Total depreciation and amortisation |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
558 |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
Our depreciation and amortisation expense has risen by 15.8% to $4,087 million in fiscal 2006.
During fiscal 2006, we have undertaken a strategic review of the service lives of our assets as
part of the transformation strategy. As a result, we have accelerated depreciation and amortisation
by $422 million mainly relating to the CDMA network, our switching systems, certain business and
operational support systems and related software.
Excluding the impact of the review, our depreciation and amortisation grew by 3.9% to $3,665
million, mainly attributable to:
|
|
growth in our communications plant asset base, which is consistent with our level of
capital expenditure over recent years; and |
|
|
consolidation of $16 million of depreciation and amortisation expenses from our newly
merged entity, New World PCS, along with the inclusion of a full 12 months of depreciation
and amortisation expenses relating to entities acquired in fiscal 2005. |
38
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Net Finance Costs
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Finance costs |
|
|
1,002 |
|
|
|
963 |
|
|
|
39 |
|
|
|
4.0 |
% |
Finance income |
|
|
(66 |
) |
|
|
(83 |
) |
|
|
17 |
|
|
|
(20.5 |
%) |
|
|
|
|
|
|
|
Net finance costs |
|
|
936 |
|
|
|
880 |
|
|
|
56 |
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
Our borrowing costs are influenced by:
|
|
our debt maturity profile; |
|
|
our interest payment profile; and |
|
|
our level of cash assets (affects net debt). |
In fiscal 2006, our net debt levels increased from $11,772 million to $13,057 million. This
increase was driven by our cash requirements to fund the payment of the fiscal 2005 final dividend
and the fiscal 2006 interim dividend, both of which included a 14c per share ordinary dividend and
a 6c per share special dividend. This level of dividend payments is higher than in previous periods
and hence, required an increase in our borrowing levels. No decision has been made with respect to
the level of payment of future dividends.
The higher level of net debt has driven an increase in our net finance costs despite the fact that
our net cost of debt has declined marginally during the year. The reason for the decline in average
cost of debt is that long term bonds which were issued at historically high interest rates are
maturing and being refinanced at the current, comparatively lower, interest rates.
Income tax expense
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Income Tax Expense |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
(366 |
) |
|
|
(21.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
30.3 |
% |
|
|
28.8 |
% |
|
|
|
|
|
|
1.5 |
% |
In fiscal 2006, our income tax expense decreased by 21.0% to $1,380 million. The primary
driver of the reduction in tax expense is lower profits for the year compared to fiscal 2005.
In fiscal 2006, the effective tax rate increased to 30.3% compared with the effective tax rate of
28.8% in fiscal 2005. The higher effective tax rate is due to a change in the taxation adjustments
for items that have different treatments for accounting and taxation purposes, such as equity
accounted FOXTEL losses and the depreciation of certain items of plant and equipment. In addition,
the current year tax expense includes an amount for under provision of tax in the prior year that
is $34 million higher than the amount included in fiscal 2005 for under provision in fiscal 2004.
39
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Major Subsidiaries Financial Summaries
Below is a summary of the major reporting lines for our three largest subsidiaries: Sensis,
TelstraClear and CSL New World Mobility. This information is in addition to the product analysis
previously provided in the document and is intended to show these businesses as stand alone
entities.
Sensis Financial Summary
Sensis financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
Change |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
% |
|
|
Sales revenue |
|
|
1,826 |
|
|
|
1,708 |
|
|
|
118 |
|
|
|
6.9 |
% |
Total income |
|
|
1,827 |
|
|
|
1,708 |
|
|
|
119 |
|
|
|
7.0 |
% |
Total expenses |
|
|
(917 |
) |
|
|
(863 |
) |
|
|
(54 |
) |
|
|
6.3 |
% |
EBITDA |
|
|
1,001 |
|
|
|
908 |
|
|
|
92 |
|
|
|
10.2 |
% |
EBIT |
|
|
910 |
|
|
|
845 |
|
|
|
65 |
|
|
|
7.7 |
% |
CAPEX |
|
|
100 |
|
|
|
83 |
|
|
|
17 |
|
|
|
20.5 |
% |
|
EBITDA margin |
|
|
54.8 |
% |
|
|
53.2 |
% |
|
|
|
|
|
|
1.6 |
% |
Amounts included for Sensis represent the contribution included in Telstras consolidated result.
We are a leading provider of advertising and search services through our advertising business
Sensis and its respective subsidiaries. Sensis provides innovative advertising and local search
solutions through a print, online, voice, wireless and satellite navigation network.
The 6.9% increase in sales revenue to $1,826 million has primarily been driven by advertising and
directories revenue as described in the Advertising and Directories product discussion. The growth
in this area has been driven by good performance in White Pages and Yellow Pages print and online.
The inclusion of acquired entities in fiscal 2006 has also contributed to growth in the current
year.
Operating expenses increased by 6.3% due mainly to the following:
|
|
Labour expenses grew by $18 million due to organic growth of the workforce, redundancy
costs and a $10 million write back of a deferred expense provision. |
|
|
Cost of goods sold increased by $14 million after the inclusion of a full 12 months of
results from Universal Publishers acquired mid way through fiscal 2005; and |
|
|
Increased depreciation and amortisation expense by $27 million after commissioning new
software, the inclusion of amortisation for Universal Publishers and Adstream and the
revision of certain software service lives as part of Telstras transformation program. |
Cost management and growing yields and margins in print and online led to EBITDA growth of 10.2% in
fiscal 2006.
40
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
CSL New World Mobility Group Financial Summary
In February 2001, we acquired a 60% ownership interest in CSL. We paid US$1,694 million
($3,085 million), including incidental acquisition costs, to acquire this controlling interest. In
June 2002, we acquired the remaining 40% ownership interest in CSL as part of our redemption of a
convertible note from PCCW. In March 2006, we merged the CSL entity with New World PCS to form the
CSL New World Mobility Group (CSLNW). This transaction involved us exchanging a 23.6% share in CSL
and receiving a a controlling interest in the merged group of 76.4%.
CSLNW operates in the highly competitive Hong Kong mobile market and has delivered revenue growth
in fiscal 2006 despite a difficult operating environment, characterised by significant market
competition and local voice price erosion. CSL and New World PCS have retained their own brandings
as they target different market segments. CSL remains Hong Kongs premium provider of mobile voice
and data services whilst New World PCS targets value conscious customers with a low cost business
model. The merged entity provides a much broader customer base for growth.
CSL New World financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
|
A$m |
|
|
A$m |
|
|
% |
|
|
HK$m |
|
|
HK$m |
|
|
% |
|
|
Total income |
|
|
833 |
|
|
|
735 |
|
|
|
13.3 |
% |
|
|
4,831 |
|
|
|
4,308 |
|
|
|
12.1 |
% |
Total expense |
|
|
(757 |
) |
|
|
(648 |
) |
|
|
16.8 |
% |
|
|
(4,145 |
) |
|
|
(3,583 |
) |
|
|
15.7 |
% |
EBITDA |
|
|
240 |
|
|
|
217 |
|
|
|
10.6 |
% |
|
|
1,390 |
|
|
|
1,272 |
|
|
|
9.3 |
% |
EBIT |
|
|
77 |
|
|
|
87 |
|
|
|
(11.5 |
%) |
|
|
686 |
|
|
|
725 |
|
|
|
(5.4 |
%) |
CAPEX |
|
|
98 |
|
|
|
128 |
|
|
|
(23.4 |
%) |
|
|
568 |
|
|
|
755 |
|
|
|
(24.8 |
%) |
|
EBITDA margin |
|
|
28.8 |
% |
|
|
29.5 |
% |
|
|
(0.8 |
%) |
|
|
28.8 |
% |
|
|
29.5 |
% |
|
|
(0.8 |
%) |
Note: Amounts presented in HK$ have been prepared in accordance with A-IFRS.
Amounts presented in A$ represent amounts included in Telstras consolidated result including
additional depreciation and amortisation arising from consolidation fair value adjustments.
Amounts include 3 months of New World PCS in fiscal 2006.
Total income increased by 12.1% or HK$523 million in fiscal 2006. The majority of the
increase resulted from the inclusion of the New World PCS business from March 2006. This resulted
in an 8.7% increase in total income year on year. The remaining revenue growth was driven by
rising data, international voice, and prepaid revenues offset by a decline in local voice revenues
after sustained pressure on prices. Mobile handset revenue also increased after recent handset
promotions.
Total operating expenses increased by 15.7% mainly due to the following:
|
|
the incorporation of costs after the merger with New World PCS; |
|
|
increased subsidies as part of heightened promotional activity to drive sales; and |
|
|
higher offshore outpayments associated with higher international voice revenues. |
Depreciation and amortisation expense increased as CSLNW is now carrying higher network assets due
to the roll out of their 3G network. EBITDA increased by 9.3% or HK$118 million whilst EBIT
decreased by 5.4% or HK$39 million due to the impact of higher depreciation.
CSLNW continues to enhance its 3G network and promote 3G services through the deployment of
pioneering technology and innovative applications. In February 2006, the company announced the
launch of Hong Kongs first 3G Mobile TV service enabling customers to enjoy a variety of news and
infotainment stations.
41
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
TelstraClear Financial Summary
TelstraClear, the second largest full service carrier in New Zealand, has been operating in
its current form since December 2001. In December 2001, we merged our 50% owned joint venture,
TelstraSaturn and CLEAR Communications, to form TelstraClear. As part of this transaction, we
acquired an additional 8.4% interest in the merged entity and began the consolidation of 58.4% of
TelstraClears results. In April 2003, we acquired the remaining 41.6% interest in TelstraClear
and consolidated 100% of TelstraClears results from that date.
TelstraClear financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
|
A$m |
|
|
A$m |
|
|
% |
|
|
NZ$m |
|
|
NZ$m |
|
|
% |
|
|
Total income |
|
|
620 |
|
|
|
625 |
|
|
|
(0.8 |
%) |
|
|
693 |
|
|
|
676 |
|
|
|
2.5 |
% |
Total expense |
|
|
(645 |
) |
|
|
(648 |
) |
|
|
(0.5 |
%) |
|
|
(713 |
) |
|
|
(695 |
) |
|
|
2.6 |
% |
EBITDA |
|
|
111 |
|
|
|
112 |
|
|
|
(0.9 |
%) |
|
|
124 |
|
|
|
122 |
|
|
|
1.6 |
% |
EBIT |
|
|
(25 |
) |
|
|
(24 |
) |
|
|
4.2 |
% |
|
|
(20 |
) |
|
|
(19 |
) |
|
|
5.3 |
% |
CAPEX |
|
|
126 |
|
|
|
115 |
|
|
|
9.6 |
% |
|
|
141 |
|
|
|
125 |
|
|
|
12.8 |
% |
EBITDA margin |
|
|
17.8 |
% |
|
|
18.0 |
% |
|
|
(0.1 |
%) |
|
|
17.9 |
% |
|
|
18.0 |
% |
|
|
(0.2 |
%) |
Note: Amounts presented in NZ$ represent the New Zealand business excluding intercompany
transactions and have been prepared in accordance with A-IFRS.
Amounts presented in A$ represent
amounts included in Telstras consolidated result and include the Australian dollar value of
adjustments to consolidate TelstraClear into the Group result.
In fiscal 2006, revenue increased by 2.5% to NZ $693 million for the following
reasons:
|
|
the full year impact of the national HomePlan offering in the consumer segment; and |
|
|
the current year included the first whole year of Sytec revenue after its acquisition in November 2004. |
These increases were offset by:
|
|
access and call revenue declines in the wholesale and small to medium enterprise
segments due to price erosion caused by competition in the market. This was moderated by
growth in our customer bases in those segments; and |
|
|
Internet revenues have declined, particularly in the second half, as reduced pricing
plans have impacted yield in the business segment. |
Total operating expense increased by 2.6% to NZ $713 million due to the following:
|
|
an increase in outpayments due to higher revenue; and |
|
|
a small increase in labour expenses driven by the inclusion of a full year of Sytec costs. |
TelstraClears acquisition of local ICT service provider, Sytec Resources Limited in November 2004
and its controlled entities was an important step to leverage TelstraClears existing service
capability and provided growth and opportunities in this segment in fiscal 2006. New Zealand is a
strategically important market for our trans-Tasman customers and the combination of TelstraClear
and Telstra enables us to provide customers on both sides of the Tasman with seamless communication
and IT solutions.
42
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
REACH
REACH is primarily focused on meeting the increasing needs of its shareholders, Telstra and
PCCW, as well as third party voice and satellite services. We are the premier provider of
international voice and satellite services in Asia via the operation and management of the most
diverse high-speed network in the region.
In February 2001, we sold our global wholesale business, including certain offshore controlled
entities, to REACH in exchange for 50% ownership in REACH.
Since the original transaction, REACH has been operating in a difficult environment. Prices for
international voice and data carriage have fallen, but growth in usage has not been sufficient to
compensate for the loss in revenue caused by the price reductions. Consequently, we have
previously been required to make a write down of our investment, reducing the carrying value to
nil. Equity accounting was suspended at that date and remains suspended. As a result, our share
of net profits/ (losses) in relation to REACH are not booked in the Telstra Group results.
Fiscal 2006 operational performance of the business continued to track according to plan with a
focus on consolidation of a new operating model. Data volumes continue to grow strongly and voice
business volumes are stable. REACH has also recently signed a memorandum of understanding (MOU)
with a consortium of entities to plan and develop a proposal to build an international undersea
cable linking South East Asia with the United States of America (USA). In addition, in October
2005, Reach announced the launch of the first stage of its international IP enabled Next Generation
Network.
43
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Cash flow
Cash flow data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Receipts from customers |
|
|
25,229 |
|
|
|
24,526 |
|
|
|
703 |
|
|
|
2.9 |
% |
Payments to suppliers/employees |
|
|
(14,785 |
) |
|
|
(13,848 |
) |
|
|
(937 |
) |
|
|
6.8 |
% |
|
|
|
|
|
|
|
Net cash generated by operations |
|
|
10,444 |
|
|
|
10,678 |
|
|
|
(234 |
) |
|
|
(2.2 |
%) |
Income tax paid |
|
|
(1,882 |
) |
|
|
(1,718 |
) |
|
|
(164 |
) |
|
|
9.5 |
% |
|
|
|
|
|
|
|
Net cash provided by operating activities (i) |
|
|
8,562 |
|
|
|
8,960 |
|
|
|
(398 |
) |
|
|
(4.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities (i) (see table below) |
|
|
(4,012 |
) |
|
|
(3,766 |
) |
|
|
(246 |
) |
|
|
6.5 |
% |
|
|
|
|
|
|
|
Operating cash flow less investing cash flow (i) |
|
|
4,550 |
|
|
|
5,194 |
|
|
|
(644 |
) |
|
|
(12.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements in borrowings/finance leases |
|
|
493 |
|
|
|
1,393 |
|
|
|
(900 |
) |
|
|
(64.6 |
%) |
Employee share loans |
|
|
24 |
|
|
|
19 |
|
|
|
5 |
|
|
|
26.3 |
% |
Dividends paid |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
|
|
(846 |
) |
|
|
20.5 |
% |
Share buy-back |
|
|
|
|
|
|
(756 |
) |
|
|
756 |
|
|
|
|
|
Finance costs paid |
|
|
(940 |
) |
|
|
(879 |
) |
|
|
(61 |
) |
|
|
6.9 |
% |
Purchase of shares for employee share plans |
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities (i) |
|
|
(5,399 |
) |
|
|
(4,347 |
) |
|
|
(1,052 |
) |
|
|
24.2 |
% |
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash |
|
|
(849 |
) |
|
|
847 |
|
|
|
(1,696 |
) |
|
|
(200.2 |
%) |
|
|
|
|
|
|
|
|
|
|
(i) |
|
Please note: Due to the implementation of A-IFRS, we have revised the presentation of the cash
flow summary and our statutory reported statement of cash flows. This has resulted in some
reclassifications between our key cash flow totals (net cash provided by operating activities, net
cash used in investing activities and net cash used in financing activities). Consequently, the
2005 comparative totals disclosed for these lines have changed from the amounts disclosed as at 30
June 2005. The most significant change is the reclassification of our finance costs paid from
operating into financing, and the reclassification of interest received from operating into
investing. |
Net cash provided by operating activities
Our primary source of liquidity is cash generated from our operations. Net cash provided by
operating activities includes receipts from trade and other receivables, payments to suppliers and
employees, income tax paid, and GST received, paid and remitted to the Australian Taxation Office.
During fiscal 2006, net cash provided by operating activities decreased by 4.4% to $8,562 million.
Higher revenue and lower working capital items were offset by higher expense payments. The key
drivers of our increased revenue were our mobiles and broadband products. Our higher expense
payments were mainly due to increased labour costs, in particular redundancy payments, our variable
operating expenditure items that increase with revenue and our service contracts and agreements
expenditure.
In addition, our cash paid to the Australian Taxation Office was $164 million higher in fiscal 2006
than in fiscal 2005 due to a low tax instalment rate requiring us to make a larger final tax
payment in respect of the 2005 fiscal year. The timing of the final payment fell into the 2006
fiscal year.
44
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Net cash used in investing activities
Net cash used in investing activities represents amounts paid for capital assets and
investments, offset by cash receipts from the sale of capital assets and investments, and other
cash receipts from our investing activities.
Net cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Switching |
|
|
452 |
|
|
|
338 |
|
|
|
114 |
|
|
|
33.7 |
% |
Transmission |
|
|
426 |
|
|
|
358 |
|
|
|
68 |
|
|
|
19.0 |
% |
Customer access |
|
|
800 |
|
|
|
870 |
|
|
|
(70 |
) |
|
|
(8.0 |
%) |
Mobile telecommunications networks |
|
|
1,043 |
|
|
|
497 |
|
|
|
546 |
|
|
|
109.9 |
% |
International assets |
|
|
338 |
|
|
|
279 |
|
|
|
59 |
|
|
|
21.1 |
% |
Capitalised software |
|
|
556 |
|
|
|
523 |
|
|
|
33 |
|
|
|
6.3 |
% |
Specialised network functions |
|
|
237 |
|
|
|
291 |
|
|
|
(54 |
) |
|
|
(18.6 |
%) |
Other |
|
|
340 |
|
|
|
377 |
|
|
|
(37 |
) |
|
|
(9.8 |
%) |
|
|
|
|
|
|
|
Operating capital expenditure |
|
|
4,192 |
|
|
|
3,533 |
|
|
|
659 |
|
|
|
18.7 |
% |
Other intangibles |
|
|
63 |
|
|
|
6 |
|
|
|
57 |
|
|
|
950.0 |
% |
|
|
|
|
|
|
|
Capital expenditure before investments |
|
|
4,255 |
|
|
|
3,539 |
|
|
|
716 |
|
|
|
20.2 |
% |
Add: investment expenditure |
|
|
48 |
|
|
|
590 |
|
|
|
(542 |
) |
|
|
(91.9 |
%) |
|
|
|
|
|
|
|
Capitalised expenditure and investments |
|
|
4,303 |
|
|
|
4,129 |
|
|
|
174 |
|
|
|
4.2 |
% |
Sale of capital equipment, investments and other proceeds |
|
|
(139 |
) |
|
|
(244 |
) |
|
|
105 |
|
|
|
(43.0 |
%) |
Proceeds from other investments |
|
|
(86 |
) |
|
|
(76 |
) |
|
|
(10 |
) |
|
|
13.2 |
% |
Repayment of loans to jointly controlled and associated entities |
|
|
|
|
|
|
37 |
|
|
|
(37 |
) |
|
|
|
|
Interest received |
|
|
(66 |
) |
|
|
(78 |
) |
|
|
12 |
|
|
|
(15.4 |
%) |
Dividend received |
|
|
|
|
|
|
(2 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
4,012 |
|
|
|
3,766 |
|
|
|
246 |
|
|
|
6.5 |
% |
|
|
|
|
|
|
|
In fiscal 2006, our expenditure on operating capital, intangibles and investments amounted to
$4,303 million, an increase of 4.2% on the previous fiscal year. This growth was driven by our
next generation network transformation program, which is part of our ongoing strategy of
transforming the business.
The increases in our operating capital expenditure were across most capital expenditure categories,
with the exception of minor decreases in customer access and specialised network functions. The
drivers of our operating capital expenditure for fiscal 2006 were as follows:
|
|
higher domestic switching as a result of our wireline transformation program, which
involves building a new IP core and the next generation ethernet transmission network.
Further expenditure was also incurred to cater for increasing demand for broadband ADSL and
specialised wideband services; |
|
|
higher transmission expenditure to support the new 3G 850 network and to provide
capacity to support increased broadband demand for digital subscriber line (DSL)
technology; |
|
|
lower expenditure on customer access due to the achievement of operational efficiencies
and the use of new IP ADSL technology at a lower unit cost; |
|
|
significantly higher expenditure on our mobile networks primarily due to 2 items:
payments to Hutchison amounting to $312 million for the purchase of a 50% share of their 3G
2100 network, acquired in fiscal 2005 but payment was deferred until fiscal 2006; and costs
incurred in relation to the roll out of our own 3G 850 network. Most of the expenditure
incurred on the 3G 850 network relates to installing and updating our base stations to |
45
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
|
|
enable them to carry the new network. During fiscal 2006, we installed 3,500 base stations
out of an intended long term program in excess of 5,000 base stations; |
|
|
higher expenditure on international assets, predominantly related to the purchase of
additional international transmission capacity to facilitate increased internet traffic
with the United States; |
|
|
marginally higher expenditure on capitalised software as we embark on a 3 to 5 year
program of transformational projects. In this early stage of the program we have been
through a process of rationalising and streamlining our software applications; and |
|
|
lower expenditure on specialised network functions due to the postponement of a number
of projects while we undergo a review process to ensure alignment of each project with our
strategic direction. The expenditure we made during the year was mainly in relation to
improving the reliability and robustness of the network and on improving the IP telephony
network infrastructure platform. |
Our expenditure on investments and other intangibles amounted to $111 million in fiscal 2006,
compared with $596 million in fiscal 2005. Investment expenditure was significantly higher in
fiscal 2005 predominantly due to our acquisitions of KAZ and PSINet.
In fiscal 2006, our cash payments for investments and intangibles resulted from the following
items:
|
|
$56 million for the acquisition of the TNS business assets and customer bases from our
associated entity Keycorp Limited; |
|
|
$21 million for the acquisition of a further 25% of the issued share capital of Adstream
Australia Limited, to increase our shareholding to 58% making Adstream a controlled entity; |
|
|
$5 million cash contribution to our joint venture entity FOXTEL; and |
|
|
other minor investments. |
In fiscal 2005, our cash payments for investments resulted from the following items:
|
|
$340 million for the acquisition of 100% of the issued share capital of KAZ; |
|
|
$124 million for the acquisition of 100% of the issued share capital of PSINet; |
|
|
$66 million for the acquisition of 100% of the issued share capital of ESA Holding Pty
Ltd and its controlled entity Damovo (Australia) Pty Ltd (now known as Telstra Business
Systems), and Damovo HK Limited for $66 million; and |
|
|
$46 million for the acquisition of 100% of the issued share capital of Universal
Publishers. |
Our proceeds from the sale of capital equipment, sale of investments and other proceeds amounted to
$139 million in fiscal 2006, compared with $244 million in fiscal 2005.
Our cash proceeds from asset sales in fiscal 2006 included the following:
|
|
the sale of our share of Xantic B.V. of $89 million; and |
|
|
sale of property, plant and equipment for cash receipts of $50 million. |
Our cash proceeds from asset sales in fiscal 2005 included the following:
|
|
the sale of our 1.7% shareholding in Intelsat Limited for $69 million; |
|
|
proceeds from sale of property, plant and equipment of $68 million; and |
|
|
the sale of our 5.3% shareholding in Infonet Services Corporation for $65 million. |
46
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
During fiscal 2006 and fiscal 2005 we also received cash from other investment transactions. These included:
|
|
receipt of $42 million as part of the settlement of the merger transaction with New World PCS in fiscal 2006; |
|
|
receipt of $18 million from a share buy-back performed by Xantic prior to our disposal
of our interest in the company in fiscal 2006; |
|
|
receipt of $16 million from our associated entity Keycorp, due to a return of capital return in fiscal 2006; and |
|
|
the redemption of the converting note issued by PCCW with a cash consideration of $76 million in fiscal 2005. |
We expect to incur future capital expenditure in the following areas:
|
|
meeting ongoing customer demand for existing products and services, while ensuring
service levels are improved; |
|
|
developing new products and services to meet the changing needs of our customers; |
|
|
asset lifecycle management; |
|
|
providing additional coverage and depth on our 3G mobile network; |
|
|
upgrading our customer access network by delivering a new wireline IP core; |
|
|
further development of our broadband and online infrastructure to meet future growth; |
|
|
providing telecommunications services to rural and remote areas; and |
|
|
internal business support infrastructure to ensure continued productivity
improvements, operational efficiencies and customer relationship process improvements. |
We believe our cash flow from operating activities and available borrowings will be sufficient to
meet our anticipated capital expenditure and investment requirements.
Net cash used in financing activities
Our net cash used in financing activities increased in fiscal 2006 by 24.2%.
A significant portion of our net financing cash outflows relate to payment of dividends and, in
fiscal 2005, a share buy-back. The combined amount paid to shareholders in fiscal 2005 via
dividends and the share buy-back was largely consistent with the amount paid to shareholders in
fiscal 2006. In fiscal 2006, shareholders received the payment of two additional special dividends
of 6c each per share, amounting to $1,494 million.
We also receive and repay significant amounts in relation to our borrowings which increase and
decrease to match our working capital requirements and other business needs.
The net increase in cash used in financing activities is due to a higher net level of proceeds from
our debt issuances in fiscal 2005. Our net proceeds from debt were high during fiscal 2005 due to
the refinancing of debt which matured during the year and our need to increase our level of
liquidity to fund dividend payments.
During the year, we received $8,641 million in borrowed funds and repaid $8,141 million. In fiscal
2005, we received $7,416 million in borrowed funds and repaid $6,007 million. This resulted in a
net increase in cash outflow of $909 million. This position offsets the outflows from the payment
of dividends and finance costs.
47
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Balance Sheet
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
689 |
|
|
|
1,548 |
|
|
|
(859 |
) |
|
|
(55.5 |
%) |
Other current assets |
|
|
4,190 |
|
|
|
4,034 |
|
|
|
156 |
|
|
|
3.9 |
% |
|
|
|
|
|
|
|
Total current assets |
|
|
4,879 |
|
|
|
5,582 |
|
|
|
(703 |
) |
|
|
(12.6 |
%) |
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
23,622 |
|
|
|
22,891 |
|
|
|
731 |
|
|
|
3.2 |
% |
Intangibles goodwill |
|
|
2,073 |
|
|
|
2,037 |
|
|
|
36 |
|
|
|
1.8 |
% |
Intangibles other |
|
|
4,050 |
|
|
|
4,292 |
|
|
|
(242 |
) |
|
|
(5.6 |
%) |
Other non current assets |
|
|
1,551 |
|
|
|
409 |
|
|
|
1,142 |
|
|
|
279.2 |
% |
|
|
|
|
|
|
|
Total non current assets |
|
|
31,296 |
|
|
|
29,629 |
|
|
|
1,667 |
|
|
|
5.6 |
% |
|
|
|
|
|
|
|
Total assets |
|
|
36,175 |
|
|
|
35,211 |
|
|
|
964 |
|
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
1,969 |
|
|
|
1,507 |
|
|
|
462 |
|
|
|
30.7 |
% |
Other current liabilities |
|
|
5,917 |
|
|
|
4,905 |
|
|
|
1,012 |
|
|
|
20.6 |
% |
|
|
|
|
|
|
|
Total current liabilities |
|
|
7,886 |
|
|
|
6,412 |
|
|
|
1,474 |
|
|
|
23.0 |
% |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
11,409 |
|
|
|
10,941 |
|
|
|
468 |
|
|
|
4.3 |
% |
Other non current liabilities |
|
|
4,048 |
|
|
|
4,200 |
|
|
|
(152 |
) |
|
|
(3.6 |
%) |
|
|
|
|
|
|
|
Total non current liabilities |
|
|
15,457 |
|
|
|
15,141 |
|
|
|
316 |
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
Total liabilities |
|
|
23,343 |
|
|
|
21,553 |
|
|
|
1,790 |
|
|
|
8.3 |
% |
|
|
|
|
|
|
|
Net assets |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
(826 |
) |
|
|
(6.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
12,586 |
|
|
|
13,656 |
|
|
|
(1,070 |
) |
|
|
(7.8 |
%) |
Minority interests |
|
|
246 |
|
|
|
2 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
(826 |
) |
|
|
(6.0 |
%) |
|
|
|
|
|
|
|
We continue to maintain a strong financial position with net assets of $12,832 million as at
30 June 2006 and $13,658 million as at 30 June 2005. The decrease in net assets of $826 million
comprised an increase in total liabilities of $1,790 million offset by an increase in total assets
of $964 million.
The movement in total assets of $964 million was primarily due to:
|
|
cash assets decreased by $859 million partially due to the proceeds on our 1
billion bond issue being received just prior to 30 June 2005, which was subsequently
invested in the short term money market. The current level of cash is more reflective
of our normal cash holdings; |
|
|
our property, plant and equipment increased by $731 million, largely due to high
capital expenditure on our network and our new wireline IP core driven by our next
generation network transformation projects; |
|
|
other intangibles decreased by $242 million, mainly because the amortisation of our
software assets was greater than our expenditure on new software during the year with
the rationalisation and streamlining of many of our software applications as part of
our business transformation; and |
|
|
other non current assets increased by $1,142 million mainly due to an increase in
the actuarially determined value of our defined benefit pension asset. |
48
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
The movement in total liabilities of $1,790 million was primarily due to:
|
|
total borrowings, current and non-current, increased by $930 million. This
increase reflects our need to increase our level of liquidity during the year to fund
our various working capital and business requirements, along with two special dividend
payments made during the fiscal year; |
|
|
other current liabilities increased by $1,012 million primarily due to an increase
in our trade creditors and accruals reflecting the large amount of activity, in
particular construction activity, undertaken toward the end of the fiscal year. In
addition, included in both current and non-current liabilities, we have provided for
restructuring and redundancy expenses planned to be incurred as part of our
transformation of the business over the next two years; and |
|
|
other non-current liabilities decreased by $152 million primarily due to a change
in our cross currency swap position in line with currency movements and our hedging
requirements. |
49
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
Glossary
1xRTT (One Time Radio Transmission Technology): a 3G development of CDMA technology for high
speed packet switched data.
3G GSM: Third Generation Global System for mobile communications is the evolution of the current
GSM and CDMA 2G and 2.5G technology to support voice and high speed data and multimedia services.
3G 850: Third generation mobile technology operating on 850Mhz spectrum.
3G 2100: Third generation mobile technology operating on 2100Mhz spectrum.
ACCC: Australian Competition and Consumer Commission.
A-IFRS: Australian equivalents of International Financial Reporting Standards.
ADSL: Asymmetric Digital Subscriber Line is a high-speed broadband technology that provides
access to the internet. It allows high speed data to be carried over copper network phone lines.
ARPU: Average Revenue Per User
CDMA: Code Division Multiple Access a mobile standard that provides voice, data, fax and short
messaging services. Telstra is replacing its CDMA network with a new 3G 850 mobile network to
improve service and functionality to our customers.
Churn: The net number of subscribers switching between telecommunication providers.
EBIT: Earnings Before Interest and Tax. This is a measure of company profitability.
EBITDA: Earnings Before Interest, Tax, Depreciation and Amortisation. This is a measure of company
profitability.
EVDO: Evolution Data Only or Evolution Data Optimised This is an addition to the existing CDMA
network that supports high speed packet data transmission.
GSM: Global System for Mobile Communications one of Telstras two digital networks. GSM covers
96% of the Australian population.
HDSL: High bit rate Digital Subscriber Line.
HFC: A shared access architecture using optical fibre between exchanges and hubs in suburban
streets, and coaxial cables between the hubs and customers to carry FOXTEL pay TV and BigPond Cable
services.
HiBIS: Higher Bandwidth Incentive Scheme a government subsidy scheme.
IP: Internet Protocol a standard set of rules for the carriage of digital information such as
voice, video, data and images, across a global network.
IP Core: The core element of a network that carries and logically splits voice, data and video
using IP technology.
IPWAN: Telstra IP Solution product, providing Corporate Virtual Private Networks to customers. IP
WAN uses Telstras private network infrastructure to combine all of a companys communications
between sites and mobiles.
50
Telstra Corporation Limited and controlled entities
Full year results and operations review June 2006
ISDN: Integrated Services Digital Network an international communications standard for
sending voice, video and data over digital telephone lines or normal telephone wires. An early
form of digital technology, its use has been largely surpassed by ADSL.
MMS: Multimedia Messaging Service.
PSTN: Public Switched Telephone Network referred to as the fixed line network, it is the
standard home telephone service delivered over copper wires.
SIO: Services in operation
SMS: Short Messaging Service the text based message service on mobile phones.
ULL: Unconditioned or Unbundled Local Loop the local loop is the copper wire that connects the
Telstra exchange in your area to your house. Telstra is required to provide access to this wire to
other operators. Other telecommunications providers can provide customers with their own services,
like broadband or a telephone service, by installing their own equipment in Telstra exchanges and
connecting to the loop.
WAN: Wide Area Network
51
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
A-IFRS Transitional Adjustments 1 July 2004
|
|
|
|
|
|
|
|
|
1 Jul 04 |
|
|
A-IFRS Adjustment |
|
Adjustment |
|
|
Retained Profits |
|
$m |
|
Explanation of Adjustment |
AASB 2 Share-based payments
|
|
|
51 |
|
|
Share-based remuneration is recognised as an expense over the vesting period
the transitional adjustment primarily represents the reversal of the expense
recognised under previous AGAAP. |
AASB 112 Income tax (Impact of
change in tax methodology)
|
|
|
68 |
|
|
This adjustment represents the change in method of accounting for income taxes,
giving rise to items not previously recognised. This adjustment also includes
the tax impacts of the other adjustments to retained profits. |
AASB 117 Operating Leases
|
|
|
(37 |
) |
|
Adjustment to reflect the straight line basis of expense recognition approach
to leases under A-IFRS. |
AASB 119 Recognise net pension
asset
|
|
|
537 |
|
|
Recognition of the net position of the defined benefit plans on adoption of
A-IFRS. |
AASB 121 Resetting Foreign
Currency Translation Reserve
(FCTR) to zero
|
|
|
(46 |
) |
|
This adjustment reflects our decision to elect under A-IFRS to reset the FCTR
balance to nil on transition, after the impact of other A-IFRS adjustments. |
AASB 121 Restating goodwill
from an Australian dollar
denominated balance to a foreign
currency denominated balance
|
|
|
(297 |
) |
|
Under the transitional rules we elected to restate goodwill and fair value
adjustments arising from all business combinations before transition based on
the exchange rate at transition. |
AASB 123 Write off of borrowing
costs previously capitalised
|
|
|
(462 |
) |
|
We elected on transition to A-IFRS to change its accounting policy to expense
all borrowing costs. |
AASB 128 Equity accounting Reach
losses against the Capacity
Prepayment (CPP)
|
|
|
(348 |
) |
|
On transition to A-IFRS the Reach Capacity Prepayment was deemed an extension
of our investment in Reach, triggering equity accounting. The investment
balance is eliminated by carried forward equity accounting losses from Reach
not previously recognised. |
AASB 138 Expensing handset
subsidies previously deferred
|
|
|
(239 |
) |
|
Under previous AGAAP, we capitalised the subsidised component of handset, sold
as part of a service contract, as a subscriber acquisition cost, to be
amortised over the contract term. UIG 1042 excludes the cost of telephones from
subscriber acquisition costs and as a result we have changed our accounting
policy to expense handset subsidies as incurred. |
|
|
|
|
|
|
|
Total net decrease to retained
profits
|
|
|
(773 |
) |
|
|
|
|
|
|
|
|
|
52
Telstra Corporation Limited and controlled entities
Full year results and operations review-June 2006
A-IFRS Transitional Adjustments 1 July 2004
|
|
|
|
|
|
|
|
|
1 Jul 04 |
|
|
A-IFRS Adjustment |
|
Adjustment |
|
|
Equity |
|
$m |
|
Explanation of Adjustment |
AASB 112 Asset
Revaluation Reserve
|
|
|
(32 |
) |
|
Recognition of the deferred tax impact of
previously revalued items of property, plant and
equipment. |
AASB 2 Share based
payments
|
|
|
(287 |
) |
|
Adjustment against share capital for the
reclassification of the employee share loans and
to recognise the Telstra shares held by the
Growthshare Trust. |
AASB 121/128 Foreign
Currency Translation
Reserves (FCTR)
|
|
|
186 |
|
|
Represents the reset of the FCTR on transition. |
|
|
|
|
|
|
|
Total debit to equity
balances
|
|
|
(133 |
) |
|
|
|
|
|
|
|
|
|
53
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
Restatement of 30 June 2005 Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous |
|
A-IFRS |
|
|
|
|
|
|
AGAAP |
|
Restated |
|
|
|
|
|
|
30 Jun 05 |
|
30 Jun 05 |
|
Movement |
|
|
Balance sheet |
|
$m |
|
$m(1) |
|
$m |
|
Explanation of movements |
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash
equivalents
|
|
|
1,540 |
|
|
|
1,548 |
|
|
|
8 |
|
|
|
Trade & other
receivables
|
|
|
3,577 |
|
|
|
3,549 |
|
|
|
(28 |
) |
|
Reduction in receivables due mainly
to reclassification of the employee
share loans against share capital in
accordance with AASB 2 |
Inventories
|
|
|
232 |
|
|
|
232 |
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
Other assets
|
|
|
796 |
|
|
|
249 |
|
|
|
(547 |
) |
|
Reclassification of deferred
expenditure to intangiblesother in non
current assets ($305m), and write off
of deferred handset subsidies
($241m) |
Non current
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade & other
receivables
|
|
|
272 |
|
|
|
97 |
|
|
|
(175 |
) |
|
Reduction in receivables due to
reclassification of the employee share
loans against share capital ($131m) and
the elimination of the loan to the
Growthshare Trust ($44m) |
Inventories
|
|
|
15 |
|
|
|
15 |
|
|
|
|
|
|
Investments
|
|
|
49 |
|
|
|
48 |
|
|
|
(1 |
) |
|
|
PP&E
|
|
|
23,351 |
|
|
|
22,891 |
|
|
|
(460 |
) |
|
Reduction due mainly to ceasing
capitalisation of borrowing costs |
Intangibles
|
|
|
3,868 |
|
|
|
6,329 |
|
|
|
2,461 |
|
|
Net increase due to reclassification
from other current and non current
assets (software and deferred
expenditure) ($2,875m), cessation of
goodwill amortisation ($145m), and
recognition of the Hong Kong 3G
spectrum licence ($108m). This is
partially offset by a reduction in CSL
goodwill ($457m) and equity
accounting against the Reach IRU ($217m) |
Deferred tax
assets
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
Other assets
|
|
|
2,608 |
|
|
|
247 |
|
|
|
(2,361 |
) |
|
Reflects the reclassification to
Intangibles ($2,546m) and the write off
of deferred handset subsidies
($62m), partially offset by the
recognition of the defined benefit
asset ($247m) |
54
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
Restatement of 30 June 2005 Balance Sheet (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous |
|
A-IFRS |
|
|
|
|
|
|
AGAAP |
|
Restated |
|
|
|
|
|
|
30 Jun 05 |
|
30 Jun 05 |
|
Movement |
|
|
Balance sheet |
|
$m |
|
$m(1) |
|
$m |
|
Explanation of movements |
Current
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade & other
payables
|
|
|
2,809 |
|
|
|
2,807 |
|
|
|
(2 |
) |
|
|
Borrowings
|
|
|
1,518 |
|
|
|
1,507 |
|
|
|
(11 |
) |
|
|
Current tax
liabilities
|
|
|
534 |
|
|
|
534 |
|
|
|
|
|
Provisions
|
|
|
389 |
|
|
|
421 |
|
|
|
32 |
|
|
Recognition of current portion
of the liability for Reach
committed capex |
Derivatives
|
|
|
|
|
|
|
11 |
|
|
|
11 |
|
|
|
Revenue in
advance
|
|
|
1,132 |
|
|
|
1,132 |
|
|
|
|
|
|
Non current
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade & other
payables
|
|
|
122 |
|
|
|
250 |
|
|
|
128 |
|
|
Recognition of the future
obligations under the Hong
Kong 3G licence and
recognition of operating
leases on a straight line basis |
Borrowings
|
|
|
11,816 |
|
|
|
10,941 |
|
|
|
(875 |
) |
|
Represents the
reclassification to the
derivatives line item |
Deferred tax
liabilities
|
|
|
1,885 |
|
|
|
1,804 |
|
|
|
(81 |
) |
|
Decrease in deferred tax
liability due to the tax effect
of our A-IFRS adjustments,
partially offset by the impact
of a change in accounting for
tax under A-IFRS |
Provisions
|
|
|
836 |
|
|
|
894 |
|
|
|
58 |
|
|
Recognition of non current
portion of the liability for the
Reach committed capex |
Derivatives
|
|
|
|
|
|
|
864 |
|
|
|
864 |
|
|
Reclassification of derivatives
from borrowings |
Revenue in
advance
|
|
|
388 |
|
|
|
388 |
|
|
|
|
|
55
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
Restatement of 30 June 2005 Balance Sheet (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous |
|
A-IFRS |
|
|
|
|
|
|
AGAAP |
|
Restated |
|
|
|
|
|
|
30 Jun 05 |
|
30 Jun 05 |
|
Movement |
|
Explanation of |
Balance sheet |
|
$m |
|
$m(1) |
|
$m |
|
movements |
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
5,793 |
|
|
|
5,536 |
|
|
|
(257 |
) |
|
Reclassification of employee
share loans and adjustment
to reflect Telstra shares
held by the Growthshare Trust |
Reserves
|
|
|
(157 |
) |
|
|
(153 |
) |
|
|
4 |
|
|
|
Retained
profits
|
|
|
9,243 |
|
|
|
8,273 |
|
|
|
(970 |
) |
|
Refer to reconciliation
of retained profits |
|
|
|
(1) |
|
These balances exclude the 1 July 2005 A-IFRS adjustments in respect of AASB 139 (see separate
table for 1 July 2005 adjustments). |
56
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
Reconciliation of Retained Profits Movement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 Jun 05 |
|
|
1 Jul 04 Transition |
|
Movement to |
|
A-IFRS |
|
|
Adjustments |
|
30 Jun 05 |
|
Ret Profits |
A-IFRS Adjustments |
|
$m |
|
$m |
|
$m |
Retained profits previous AGAAP |
|
|
9,391 |
|
|
|
(148 |
) |
|
|
9,243 |
|
Share-based payments |
|
|
51 |
|
|
|
15 |
|
|
|
66 |
|
Deferred tax (tax effect of A-IFRS
adjustments & impact of change in
methodology) |
|
|
68 |
|
|
|
99 |
|
|
|
167 |
|
Operating leases |
|
|
(37 |
) |
|
|
(11 |
) |
|
|
(48 |
) |
Recognition of net defined benefit asset
(excluding tax impact) |
|
|
537 |
|
|
|
(266 |
) |
|
|
271 |
|
Re-setting of FCTR to nil & impact of
restating goodwill |
|
|
(343 |
) |
|
|
11 |
|
|
|
(332 |
) |
Expensing of capitalised borrowing costs
(excluding tax impact) |
|
|
(462 |
) |
|
|
4 |
|
|
|
(458 |
) |
Equity accounting losses against Reach CPP/IRU |
|
|
(348 |
) |
|
|
(102 |
) |
|
|
(450 |
) |
Expensing of handset subsidies (excluding tax
impact) |
|
|
(239 |
) |
|
|
(64 |
) |
|
|
(303 |
) |
Cessation of goodwill amortisation |
|
|
|
|
|
|
147 |
|
|
|
147 |
|
Recognition of Hong Kong 3G spectrum licence |
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
Change in discount rate and cessation of
capitalised interest on deferred PP&E payment |
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
Retained profits under A-IFRS |
|
|
8,618 |
|
|
|
(345 |
) |
|
|
8,273 |
|
57
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
Restatement of 30 June 2005 Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous |
|
A-IFRS |
|
|
|
|
|
|
AGAAP |
|
Restated |
|
|
|
|
Income |
|
30 Jun 05 |
|
30 Jun 05 |
|
Diff |
|
|
statement |
|
$m |
|
$m |
|
$m |
|
Explanation of movements |
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
22,657 |
|
|
|
22,181 |
|
|
|
(476 |
) |
|
Net gain on sale of non-current assets is
now reported in other income, rather
than gross proceeds in revenue |
Other income
|
|
|
|
|
|
|
261 |
|
|
|
261 |
|
|
Net gain on sale of non current assets
reported in other income under A-IFRS |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour
|
|
|
3,693 |
|
|
|
3,858 |
|
|
|
165 |
|
|
Represents the pension cost in respect of
the defined pension plans ($175m),
partially offset by a lower cost associated
with share-based payments ($10m) |
Goods &
services
purchased
|
|
|
4,147 |
|
|
|
4,211 |
|
|
|
64 |
|
|
Reflects the impact of handset subsidies
being expensed under A-IFRS |
Other
expenses
|
|
|
4,055 |
|
|
|
3,815 |
|
|
|
(240 |
) |
|
This difference reflects the change in
reporting the net gain on sale of non
current assets in other income and the
impact of currency movements and the
impact of straight line recognition of our
operating leases. |
Share of
(gains)/losses
from
associates
|
|
|
(9 |
) |
|
|
94 |
|
|
|
103 |
|
|
This movement represents the
continuation of equity accounting losses
under A-IFRS arising from our
commitment to Reach for the committed
capex |
EBITDA
|
|
|
10,771 |
|
|
|
10,464 |
|
|
|
(307 |
) |
|
|
Depreciation &
amortisation
|
|
|
3,766 |
|
|
|
3,529 |
|
|
|
(237 |
) |
|
Primarily relates to the cessation of
goodwill amortisation ($145m) and
impact of the transitional write off of
accumulated capitalised borrowing costs
($94m) |
EBIT
|
|
|
7,005 |
|
|
|
6,935 |
|
|
|
(70 |
) |
|
|
Net finance
costs
|
|
|
736 |
|
|
|
880 |
|
|
|
144 |
|
|
Difference due mainly to the decision not
to capitalise borrowing costs under A-IFRS |
Income tax
expense
|
|
|
1,822 |
|
|
|
1,746 |
|
|
|
(76 |
) |
|
Reduction due to the impact of the
various A-IFRS changes, offset by an
increase in tax expense from the change
in methodology |
Profit after
tax
|
|
|
4,447 |
|
|
|
4,309 |
|
|
|
(138 |
) |
|
|
58
Telstra Corporation Limited and controlled entities
Full year results and operations review- June 2006
A-IFRS Adjustment Balance Sheet 1 July 2005
|
|
|
|
|
|
|
|
|
1 Jul 05 |
|
|
A-IFRS Adjustment- |
|
Adjustment |
|
|
Balance Sheet |
|
$m |
|
Explanation of Adjustment |
AASB 139- Increase in assets |
|
|
|
|
|
|
- Current assets: derivatives
|
|
|
6 |
|
|
Represents the
recognition and
measurement of
derivatives at fair
value as at 1 July 2005
transition date for AASB
139. |
- Non current assets: derivatives
|
|
|
512 |
|
|
|
AASB 139- Increase in current liabilities |
|
|
|
|
|
|
- Current borrowings
|
|
|
3 |
|
|
|
- Current derivatives
|
|
|
5 |
|
|
|
AASB 139- Increase in non current liabilities -
|
|
|
|
|
|
|
- Non current borrowings
|
|
|
219 |
|
|
Increase due to
remeasuring borrowings
at fair value as at the
1 July 2005 transition
date. |
-
Non current derivatives
|
|
|
185 |
|
|
Represents the
recognition and
measurement of
derivatives at fair
value as at the 1 July
2005. |
- Deferred tax liabilities
|
|
|
32 |
|
|
Deferred tax
liability associated
with the fair value
adjustments described
above. |
59
|
|
|
|
|
Telstra Corporation Limited (ABN 033 051 775 556) |
|
|
Product reconciliation to align comparative figures with the current year reported presentation |
|
|
Year ended 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
previously |
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
released |
|
New Hierarchy |
|
|
|
|
|
|
|
|
|
|
|
|
Jun-05 |
|
Jun-05 |
|
Movement |
|
|
|
Amount |
|
|
|
Amount |
|
|
$m |
|
$m |
|
$m |
|
Included |
|
$m |
|
Excluded |
|
$m |
PSTN products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
3,362 |
|
|
|
3,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls |
|
|
1,284 |
|
|
|
1,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSTN value added services |
|
|
250 |
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National long distance calls |
|
|
1,013 |
|
|
|
1,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed to mobile |
|
|
1,566 |
|
|
|
1,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International direct |
|
|
234 |
|
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSTN interconnect |
|
|
|
|
|
|
309 |
|
|
|
309 |
|
|
Fixed
interconnection(i) |
|
|
309 |
|
|
|
|
|
|
|
Total PSTN products |
|
|
7,709 |
|
|
|
8,018 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services |
|
|
3,760 |
|
|
|
4,307 |
|
|
|
547 |
|
|
Mobiles
Interconnection(ii) |
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles Terminating (Declared) |
|
|
446 |
|
|
|
|
|
|
|
Mobile handsets |
|
|
381 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mobiles |
|
|
4,141 |
|
|
|
4,688 |
|
|
|
547 |
|
|
|
|
|
547 |
|
|
|
|
|
|
|
Internet and IP solutions |
|
|
1,377 |
|
|
|
1,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN Products |
|
|
890 |
|
|
|
890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and Directories |
|
|
1,585 |
|
|
|
1,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercarrier services |
|
|
1,146 |
|
|
|
290 |
|
|
|
(856 |
) |
|
|
|
|
|
|
|
Fixed interconnection |
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles Interconnection |
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles Terminating (Declared) |
|
|
(446 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solutions management |
|
|
931 |
|
|
|
931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSL New World |
|
|
734 |
|
|
|
734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TelstraClear |
|
|
625 |
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offshore services revenue |
|
|
252 |
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inbound calling products |
|
|
449 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay TV bundling |
|
|
263 |
|
|
|
263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer premises equipment |
|
|
229 |
|
|
|
231 |
|
|
|
2 |
|
|
Enhanced Fee For Service |
|
|
2 |
|
|
|
|
|
|
|
Payphones |
|
|
121 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other sales & service |
|
|
743 |
|
|
|
741 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
Enhanced Fee For Service |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue |
|
|
21,195 |
|
|
|
21,195 |
|
|
|
|
|
|
|
|
|
858 |
|
|
|
|
|
(858 |
) |
|
|
|
(i) |
|
Fixed Interconnection revenue has moved from Intercarrier Services revenue into the relevant
product category, PSTN Products. |
|
(ii) |
|
Mobiles Interconnection and Mobiles Terminating revenue have moved from Intercarrier Services
into the relevant product category, Mobile Services. |
60
|
|
|
|
|
Telstra Corporation Limited (ABN 033 051 775 556) |
|
|
Half Yearly Comparison |
|
|
Half year ended 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half 1 |
|
|
|
|
|
Half 2 |
|
|
|
|
|
Full Year |
|
|
|
|
|
Half 1 |
|
|
|
|
|
Half 2 |
|
|
|
|
|
Full Year |
|
|
|
|
|
Half 1 |
|
|
|
|
|
Half 2 |
|
|
|
|
|
Full Year |
|
|
Summary Reported(i) Half Yearly Data |
|
Dec-03 |
|
Growth |
|
Jun-04 |
|
Growth |
|
Jun-04 |
|
Growth |
|
Dec-04 |
|
Growth |
|
Jun-05 |
|
Growth |
|
Jun-05 |
|
Growth |
|
Dec-05 |
|
Growth |
|
Jun-06 |
|
Growth |
|
Jun-06 |
|
Growth |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services Retail |
|
|
1,733 |
|
|
|
6.2 |
% |
|
|
1,721 |
|
|
|
7.9 |
% |
|
|
3,454 |
|
|
|
7.0 |
% |
|
|
1,885 |
|
|
|
8.8 |
% |
|
|
1,850 |
|
|
|
7.5 |
% |
|
|
3,736 |
|
|
|
8.2 |
% |
|
|
1,940 |
|
|
|
2.9 |
% |
|
|
1,906 |
|
|
|
3.0 |
% |
|
|
3,846 |
|
|
|
2.9 |
% |
Mobile services Wholesale |
|
|
7 |
|
|
|
16.7 |
% |
|
|
9 |
|
|
|
50.0 |
% |
|
|
16 |
|
|
|
33.3 |
% |
|
|
11 |
|
|
|
57.1 |
% |
|
|
13 |
|
|
|
44.4 |
% |
|
|
24 |
|
|
|
50.0 |
% |
|
|
16 |
|
|
|
45.5 |
% |
|
|
20 |
|
|
|
53.8 |
% |
|
|
36 |
|
|
|
50.0 |
% |
Mobile Interconnection |
|
|
257 |
|
|
|
1.2 |
% |
|
|
258 |
|
|
|
9.3 |
% |
|
|
515 |
|
|
|
5.1 |
% |
|
|
283 |
|
|
|
10.1 |
% |
|
|
265 |
|
|
|
2.7 |
% |
|
|
548 |
|
|
|
6.4 |
% |
|
|
319 |
|
|
|
12.7 |
% |
|
|
304 |
|
|
|
14.7 |
% |
|
|
623 |
|
|
|
13.7 |
% |
|
Mobile services |
|
|
1,997 |
|
|
|
5.5 |
% |
|
|
1,988 |
|
|
|
8.2 |
% |
|
|
3,985 |
|
|
|
6.9 |
% |
|
|
2,179 |
|
|
|
9.1 |
% |
|
|
2,127 |
|
|
|
7.0 |
% |
|
|
4,308 |
|
|
|
8.1 |
% |
|
|
2,275 |
|
|
|
4.4 |
% |
|
|
2,230 |
|
|
|
4.8 |
% |
|
|
4,505 |
|
|
|
4.6 |
% |
Mobile handsets |
|
|
186 |
|
|
|
8.1 |
% |
|
|
166 |
|
|
|
(22.4 |
%) |
|
|
352 |
|
|
|
(8.8 |
%) |
|
|
198 |
|
|
|
6.5 |
% |
|
|
183 |
|
|
|
10.2 |
% |
|
|
381 |
|
|
|
8.2 |
% |
|
|
211 |
|
|
|
6.6 |
% |
|
|
256 |
|
|
|
39.9 |
% |
|
|
467 |
|
|
|
22.6 |
% |
|
Total Mobiles |
|
|
2,183 |
|
|
|
5.8 |
% |
|
|
2,153 |
|
|
|
5.0 |
% |
|
|
4,337 |
|
|
|
5.4 |
% |
|
|
2,377 |
|
|
|
8.9 |
% |
|
|
2,310 |
|
|
|
7.3 |
% |
|
|
4,688 |
|
|
|
8.1 |
% |
|
|
2,486 |
|
|
|
4.6 |
% |
|
|
2,486 |
|
|
|
7.6 |
% |
|
|
4,972 |
|
|
|
6.1 |
% |
Internet and IP solutions |
|
|
468 |
|
|
|
19.7 |
% |
|
|
545 |
|
|
|
27.9 |
% |
|
|
1,013 |
|
|
|
24.0 |
% |
|
|
624 |
|
|
|
33.3 |
% |
|
|
753 |
|
|
|
38.2 |
% |
|
|
1,377 |
|
|
|
35.9 |
% |
|
|
888 |
|
|
|
42.3 |
% |
|
|
1,019 |
|
|
|
35.3 |
% |
|
|
1,907 |
|
|
|
38.5 |
% |
PSTN products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
1,610 |
|
|
|
3.5 |
% |
|
|
1,627 |
|
|
|
6.5 |
% |
|
|
3,237 |
|
|
|
5.0 |
% |
|
|
1,700 |
|
|
|
5.6 |
% |
|
|
1,662 |
|
|
|
2.2 |
% |
|
|
3,362 |
|
|
|
3.9 |
% |
|
|
1,658 |
|
|
|
(2.5 |
%) |
|
|
1,660 |
|
|
|
(0.1 |
%) |
|
|
3,318 |
|
|
|
(1.3 |
%) |
Local calls |
|
|
778 |
|
|
|
(2.3 |
%) |
|
|
726 |
|
|
|
(5.8 |
%) |
|
|
1,504 |
|
|
|
(4.0 |
%) |
|
|
689 |
|
|
|
(11.4 |
%) |
|
|
595 |
|
|
|
(18.0 |
%) |
|
|
1,284 |
|
|
|
(14.6 |
%) |
|
|
553 |
|
|
|
(19.7 |
%) |
|
|
470 |
|
|
|
(21.0 |
%) |
|
|
1,023 |
|
|
|
(20.3 |
%) |
PSTN value added services |
|
|
134 |
|
|
|
(5.0 |
%) |
|
|
125 |
|
|
|
(10.1 |
%) |
|
|
259 |
|
|
|
(7.5 |
%) |
|
|
126 |
|
|
|
(6.0 |
%) |
|
|
124 |
|
|
|
(0.8 |
%) |
|
|
250 |
|
|
|
(3.5 |
%) |
|
|
123 |
|
|
|
(2.4 |
%) |
|
|
123 |
|
|
|
(0.8 |
%) |
|
|
246 |
|
|
|
(1.6 |
%) |
National long distance calls |
|
|
578 |
|
|
|
(0.7 |
%) |
|
|
543 |
|
|
|
(6.4 |
%) |
|
|
1,121 |
|
|
|
(3.5 |
%) |
|
|
527 |
|
|
|
(8.8 |
%) |
|
|
486 |
|
|
|
(10.5 |
%) |
|
|
1,013 |
|
|
|
(9.6 |
%) |
|
|
471 |
|
|
|
(10.6 |
%) |
|
|
442 |
|
|
|
(9.1 |
%) |
|
|
913 |
|
|
|
(9.9 |
%) |
Fixed to mobile |
|
|
808 |
|
|
|
7.3 |
% |
|
|
789 |
|
|
|
3.3 |
% |
|
|
1,597 |
|
|
|
5.3 |
% |
|
|
806 |
|
|
|
(0.2 |
%) |
|
|
760 |
|
|
|
(3.7 |
%) |
|
|
1,566 |
|
|
|
(1.9 |
%) |
|
|
761 |
|
|
|
(5.6 |
%) |
|
|
730 |
|
|
|
(3.9 |
%) |
|
|
1,491 |
|
|
|
(4.8 |
%) |
International direct |
|
|
139 |
|
|
|
(13.7 |
%) |
|
|
127 |
|
|
|
(13.0 |
%) |
|
|
266 |
|
|
|
(13.4 |
%) |
|
|
124 |
|
|
|
(10.8 |
%) |
|
|
110 |
|
|
|
(13.4 |
%) |
|
|
234 |
|
|
|
(12.0 |
%) |
|
|
106 |
|
|
|
(14.5 |
%) |
|
|
95 |
|
|
|
(13.6 |
%) |
|
|
201 |
|
|
|
(14.1 |
%) |
Fixed Interconnect |
|
|
177 |
|
|
|
2.9 |
% |
|
|
159 |
|
|
|
(10.2 |
%) |
|
|
336 |
|
|
|
(3.7 |
%) |
|
|
159 |
|
|
|
(10.2 |
%) |
|
|
150 |
|
|
|
(5.7 |
%) |
|
|
309 |
|
|
|
(8.0 |
%) |
|
|
146 |
|
|
|
(8.2 |
%) |
|
|
140 |
|
|
|
(6.7 |
%) |
|
|
286 |
|
|
|
(7.4 |
%) |
|
Total PSTN products |
|
|
4,224 |
|
|
|
1.5 |
% |
|
|
4,096 |
|
|
|
(0.2 |
%) |
|
|
8,320 |
|
|
|
0.7 |
% |
|
|
4,131 |
|
|
|
(2.2 |
%) |
|
|
3,887 |
|
|
|
(5.1 |
%) |
|
|
8,018 |
|
|
|
(3.6 |
%) |
|
|
3,818 |
|
|
|
(7.6 |
%) |
|
|
3,660 |
|
|
|
(5.8 |
%) |
|
|
7,478 |
|
|
|
(6.7 |
%) |
Specialised Data |
|
|
516 |
|
|
|
(5.3 |
%) |
|
|
518 |
|
|
|
0.8 |
% |
|
|
1,034 |
|
|
|
(2.4 |
%) |
|
|
495 |
|
|
|
(4.1 |
%) |
|
|
471 |
|
|
|
(9.1 |
%) |
|
|
966 |
|
|
|
(6.6 |
%) |
|
|
453 |
|
|
|
(8.5 |
%) |
|
|
431 |
|
|
|
(8.5 |
%) |
|
|
884 |
|
|
|
(8.5 |
%) |
ISDN Products |
|
|
473 |
|
|
|
(3.3 |
%) |
|
|
454 |
|
|
|
0.2 |
% |
|
|
927 |
|
|
|
(1.6 |
%) |
|
|
453 |
|
|
|
(4.2 |
%) |
|
|
437 |
|
|
|
(3.7 |
%) |
|
|
890 |
|
|
|
(4.0 |
%) |
|
|
421 |
|
|
|
(7.1 |
%) |
|
|
386 |
|
|
|
(11.7 |
%) |
|
|
807 |
|
|
|
(9.3 |
%) |
Advertising and Directories(ii) |
|
|
764 |
|
|
|
5.5 |
% |
|
|
578 |
|
|
|
20.2 |
% |
|
|
1,342 |
|
|
|
11.4 |
% |
|
|
888 |
|
|
|
16.2 |
% |
|
|
697 |
|
|
|
20.6 |
% |
|
|
1,585 |
|
|
|
18.1 |
% |
|
|
944 |
|
|
|
6.3 |
% |
|
|
767 |
|
|
|
10.0 |
% |
|
|
1,711 |
|
|
|
7.9 |
% |
Intercarrier services |
|
|
129 |
|
|
|
(17.3 |
%) |
|
|
123 |
|
|
|
(13.4 |
%) |
|
|
251 |
|
|
|
(15.5 |
%) |
|
|
138 |
|
|
|
7.0 |
% |
|
|
152 |
|
|
|
23.6 |
% |
|
|
290 |
|
|
|
15.5 |
% |
|
|
166 |
|
|
|
20.3 |
% |
|
|
185 |
|
|
|
21.7 |
% |
|
|
351 |
|
|
|
21.0 |
% |
Solutions management(iii) |
|
|
243 |
|
|
|
1.7 |
% |
|
|
265 |
|
|
|
1.1 |
% |
|
|
508 |
|
|
|
1.4 |
% |
|
|
463 |
|
|
|
90.5 |
% |
|
|
468 |
|
|
|
76.6 |
% |
|
|
931 |
|
|
|
83.3 |
% |
|
|
480 |
|
|
|
3.7 |
% |
|
|
509 |
|
|
|
8.8 |
% |
|
|
989 |
|
|
|
6.2 |
% |
CSL New
World(iv) |
|
|
377 |
|
|
|
(22.1 |
%) |
|
|
349 |
|
|
|
(17.7 |
%) |
|
|
726 |
|
|
|
(20.0 |
%) |
|
|
380 |
|
|
|
0.8 |
% |
|
|
354 |
|
|
|
1.4 |
% |
|
|
734 |
|
|
|
1.1 |
% |
|
|
373 |
|
|
|
(1.8 |
%) |
|
|
457 |
|
|
|
29.1 |
% |
|
|
830 |
|
|
|
13.1 |
% |
TelstraClear |
|
|
282 |
|
|
|
3.3 |
% |
|
|
292 |
|
|
|
6.2 |
% |
|
|
574 |
|
|
|
4.7 |
% |
|
|
304 |
|
|
|
7.8 |
% |
|
|
321 |
|
|
|
9.9 |
% |
|
|
625 |
|
|
|
8.9 |
% |
|
|
321 |
|
|
|
5.6 |
% |
|
|
299 |
|
|
|
(6.9 |
%) |
|
|
620 |
|
|
|
(0.8 |
%) |
Offshore Services Revenue(v) |
|
|
48 |
|
|
|
26.3 |
% |
|
|
83 |
|
|
|
66.0 |
% |
|
|
131 |
|
|
|
48.4 |
% |
|
|
119 |
|
|
|
147.9 |
% |
|
|
133 |
|
|
|
60.2 |
% |
|
|
252 |
|
|
|
93.0 |
% |
|
|
139 |
|
|
|
16.8 |
% |
|
|
156 |
|
|
|
17.3 |
% |
|
|
295 |
|
|
|
17.1 |
% |
Inbound calling products |
|
|
238 |
|
|
|
(5.2 |
%) |
|
|
238 |
|
|
|
(2.1 |
%) |
|
|
476 |
|
|
|
(3.6 |
%) |
|
|
231 |
|
|
|
(2.9 |
%) |
|
|
218 |
|
|
|
(8.4 |
%) |
|
|
449 |
|
|
|
(5.7 |
%) |
|
|
225 |
|
|
|
(2.6 |
%) |
|
|
224 |
|
|
|
2.8 |
% |
|
|
449 |
|
|
|
0.0 |
% |
PayTV |
|
|
65 |
|
|
|
N/M |
|
|
|
89 |
|
|
|
287.0 |
% |
|
|
154 |
|
|
|
569.6 |
% |
|
|
121 |
|
|
|
86.2 |
% |
|
|
142 |
|
|
|
59.6 |
% |
|
|
263 |
|
|
|
70.8 |
% |
|
|
156 |
|
|
|
28.9 |
% |
|
|
164 |
|
|
|
15.5 |
% |
|
|
320 |
|
|
|
21.7 |
% |
Customer premises equipment(vi) |
|
|
94 |
|
|
|
(10.5 |
%) |
|
|
92 |
|
|
|
(4.2 |
%) |
|
|
186 |
|
|
|
(7.5 |
%) |
|
|
108 |
|
|
|
14.9 |
% |
|
|
123 |
|
|
|
33.7 |
% |
|
|
231 |
|
|
|
24.2 |
% |
|
|
135 |
|
|
|
25.0 |
% |
|
|
139 |
|
|
|
13.0 |
% |
|
|
274 |
|
|
|
18.6 |
% |
Payphones |
|
|
72 |
|
|
|
(4.0 |
%) |
|
|
69 |
|
|
|
(5.5 |
%) |
|
|
141 |
|
|
|
(4.7 |
%) |
|
|
63 |
|
|
|
(12.5 |
%) |
|
|
58 |
|
|
|
(15.9 |
%) |
|
|
121 |
|
|
|
(14.2 |
%) |
|
|
54 |
|
|
|
(14.3 |
%) |
|
|
50 |
|
|
|
(13.8 |
%) |
|
|
104 |
|
|
|
(14.0 |
%) |
Other sales & service |
|
|
281 |
|
|
|
(40.5 |
%) |
|
|
336 |
|
|
|
(18.4 |
%) |
|
|
617 |
|
|
|
(30.2 |
%) |
|
|
380 |
|
|
|
35.2 |
% |
|
|
362 |
|
|
|
7.7 |
% |
|
|
741 |
|
|
|
20.1 |
% |
|
|
380 |
|
|
|
0.0 |
% |
|
|
379 |
|
|
|
4.7 |
% |
|
|
759 |
|
|
|
2.4 |
% |
|
Sales revenue |
|
|
10,457 |
|
|
|
(0.1 |
%) |
|
|
10,280 |
|
|
|
2.5 |
% |
|
|
20,737 |
|
|
|
1.2 |
% |
|
|
11,275 |
|
|
|
7.8 |
% |
|
|
10,886 |
|
|
|
5.9 |
% |
|
|
22,161 |
|
|
|
6.9 |
% |
|
|
11,439 |
|
|
|
1.5 |
% |
|
|
11,311 |
|
|
|
3.9 |
% |
|
|
22,750 |
|
|
|
2.7 |
% |
Other revenue |
|
|
13 |
|
|
|
(31.6 |
%) |
|
|
11 |
|
|
|
(31.3 |
%) |
|
|
24 |
|
|
|
(29.4 |
%) |
|
|
11 |
|
|
|
(15.4 |
%) |
|
|
9 |
|
|
|
(18.2 |
%) |
|
|
20 |
|
|
|
(16.7 |
%) |
|
|
10 |
|
|
|
(9.1 |
%) |
|
|
12 |
|
|
|
33.3 |
% |
|
|
22 |
|
|
|
10.0 |
% |
Other income |
|
|
268 |
|
|
|
(6.6 |
%) |
|
|
138 |
|
|
|
0.0 |
% |
|
|
406 |
|
|
|
(4.5 |
%) |
|
|
74 |
|
|
|
(72.4 |
%) |
|
|
187 |
|
|
|
35.5 |
% |
|
|
261 |
|
|
|
(35.7 |
%) |
|
|
129 |
|
|
|
74.3 |
% |
|
|
199 |
|
|
|
6.4 |
% |
|
|
328 |
|
|
|
25.7 |
% |
|
Total income |
|
|
10,738 |
|
|
|
(0.3 |
%) |
|
|
10,429 |
|
|
|
2.4 |
% |
|
|
21,167 |
|
|
|
1.0 |
% |
|
|
11,360 |
|
|
|
5.8 |
% |
|
|
11,082 |
|
|
|
6.3 |
% |
|
|
22,442 |
|
|
|
6.0 |
% |
|
|
11,578 |
|
|
|
1.9 |
% |
|
|
11,522 |
|
|
|
4.0 |
% |
|
|
23,100 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected statistical data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile voice telephone minutes |
|
|
3,011 |
|
|
|
16.1 |
% |
|
|
3,134 |
|
|
|
17.8 |
% |
|
|
6,145 |
|
|
|
16.9 |
% |
|
|
3,404 |
|
|
|
13.0 |
% |
|
|
3,342 |
|
|
|
6.7 |
% |
|
|
6,746 |
|
|
|
9.8 |
% |
|
|
3,611 |
|
|
|
6.1 |
% |
|
|
3,700 |
|
|
|
10.7 |
% |
|
|
7,311 |
|
|
|
8.4 |
% |
Short Message Service (SMS) (number of messages) |
|
|
928 |
|
|
|
45.6 |
% |
|
|
1,016 |
|
|
|
28.8 |
% |
|
|
1,944 |
|
|
|
36.3 |
% |
|
|
1,142 |
|
|
|
23.0 |
% |
|
|
1,147 |
|
|
|
12.9 |
% |
|
|
2,289 |
|
|
|
17.8 |
% |
|
|
1,318 |
|
|
|
15.4 |
% |
|
|
1,700 |
|
|
|
48.2 |
% |
|
|
3,019 |
|
|
|
31.9 |
% |
Mobile services in operation (thousands) |
|
|
6,985 |
|
|
|
14.5 |
% |
|
|
7,604 |
|
|
|
15.8 |
% |
|
|
7,604 |
|
|
|
15.8 |
% |
|
|
7,983 |
|
|
|
14.3 |
% |
|
|
8,227 |
|
|
|
8.2 |
% |
|
|
8,227 |
|
|
|
8.2 |
% |
|
|
8,572 |
|
|
|
7.4 |
% |
|
|
8,488 |
|
|
|
3.2 |
% |
|
|
8,488 |
|
|
|
3.2 |
% |
Broadband Retail subscribers |
|
|
288 |
|
|
|
53.3 |
% |
|
|
427 |
|
|
|
77.8 |
% |
|
|
427 |
|
|
|
77.8 |
% |
|
|
623 |
|
|
|
116.5 |
% |
|
|
856 |
|
|
|
100.5 |
% |
|
|
856 |
|
|
|
100.6 |
% |
|
|
1,173 |
|
|
|
88.3 |
% |
|
|
1,476 |
|
|
|
72.5 |
% |
|
|
1,476 |
|
|
|
72.4 |
% |
Broadband Wholesale subscribers |
|
|
220 |
|
|
|
288.9 |
% |
|
|
379 |
|
|
|
213.4 |
% |
|
|
379 |
|
|
|
213.4 |
% |
|
|
611 |
|
|
|
177.9 |
% |
|
|
888 |
|
|
|
134.4 |
% |
|
|
888 |
|
|
|
134.4 |
% |
|
|
1,164 |
|
|
|
90.5 |
% |
|
|
1,427 |
|
|
|
60.7 |
% |
|
|
1,427 |
|
|
|
60.7 |
% |
Total Broadband subscribers (thousands) |
|
|
508 |
|
|
|
107.8 |
% |
|
|
806 |
|
|
|
123.2 |
% |
|
|
806 |
|
|
|
123.2 |
% |
|
|
1,234 |
|
|
|
143.1 |
% |
|
|
1,744 |
|
|
|
116.5 |
% |
|
|
1,744 |
|
|
|
116.5 |
% |
|
|
2,337 |
|
|
|
89.4 |
% |
|
|
2,904 |
|
|
|
66.5 |
% |
|
|
2,904 |
|
|
|
66.4 |
% |
Narrowband subscribers (thousands) |
|
|
1,178 |
|
|
|
6.8 |
% |
|
|
1,194 |
|
|
|
3.1 |
% |
|
|
1,194 |
|
|
|
3.1 |
% |
|
|
1,201 |
|
|
|
1.9 |
% |
|
|
1,205 |
|
|
|
1.0 |
% |
|
|
1,205 |
|
|
|
1.0 |
% |
|
|
1,143 |
|
|
|
(4.9 |
%) |
|
|
1,027 |
|
|
|
(14.8 |
%) |
|
|
1,027 |
|
|
|
(14.8 |
%) |
Retail basic access lines in service |
|
|
8.64 |
|
|
|
(3.8 |
%) |
|
|
8.44 |
|
|
|
(4.2 |
%) |
|
|
8.44 |
|
|
|
(4.2 |
%) |
|
|
8.21 |
|
|
|
(5.0 |
%) |
|
|
8.05 |
|
|
|
(4.6 |
%) |
|
|
8.05 |
|
|
|
(4.6 |
%) |
|
|
7.87 |
|
|
|
(4.1 |
%) |
|
|
7.78 |
|
|
|
(3.4 |
%) |
|
|
7.78 |
|
|
|
(3.4 |
%) |
Wholesale basic access lines in service |
|
|
1.71 |
|
|
|
22.1 |
% |
|
|
1.84 |
|
|
|
18.7 |
% |
|
|
1.84 |
|
|
|
18.7 |
% |
|
|
1.98 |
|
|
|
15.8 |
% |
|
|
2.07 |
|
|
|
12.5 |
% |
|
|
2.07 |
|
|
|
12.5 |
% |
|
|
2.15 |
|
|
|
8.6 |
% |
|
|
2.16 |
|
|
|
4.3 |
% |
|
|
2.16 |
|
|
|
4.3 |
% |
Total Basic access lines in service |
|
|
10.35 |
|
|
|
(0.3 |
%) |
|
|
10.28 |
|
|
|
(0.8 |
%) |
|
|
10.28 |
|
|
|
(0.8 |
%) |
|
|
10.19 |
|
|
|
(1.5 |
%) |
|
|
10.12 |
|
|
|
(1.6 |
%) |
|
|
10.12 |
|
|
|
(1.6 |
%) |
|
|
10.02 |
|
|
|
(1.7 |
%) |
|
|
9.94 |
|
|
|
(1.8 |
%) |
|
|
9.94 |
|
|
|
(1.8 |
%) |
Local calls (number of calls) |
|
|
4,831 |
|
|
|
(3.7 |
%) |
|
|
4,566 |
|
|
|
(4.4 |
%) |
|
|
9,397 |
|
|
|
(4.0 |
%) |
|
|
4,412 |
|
|
|
(8.7 |
%) |
|
|
4,057 |
|
|
|
(11.1 |
%) |
|
|
8,469 |
|
|
|
(9.9 |
%) |
|
|
3,882 |
|
|
|
(12.0 |
%) |
|
|
3,550 |
|
|
|
(12.5 |
%) |
|
|
7,432 |
|
|
|
(12.2 |
%) |
National long distance minutes |
|
|
4,343 |
|
|
|
(6.7 |
%) |
|
|
4,177 |
|
|
|
(7.3 |
%) |
|
|
8,520 |
|
|
|
(7.0 |
%) |
|
|
3,977 |
|
|
|
(8.4 |
%) |
|
|
3,766 |
|
|
|
(9.8 |
%) |
|
|
7,743 |
|
|
|
(9.1 |
%) |
|
|
3,666 |
|
|
|
(7.8 |
%) |
|
|
3,549 |
|
|
|
(5.8 |
%) |
|
|
7,215 |
|
|
|
(6.8 |
%) |
Fixed to mobile minutes |
|
|
2,099 |
|
|
|
7.3 |
% |
|
|
2,127 |
|
|
|
7.0 |
% |
|
|
4,226 |
|
|
|
7.2 |
% |
|
|
2,206 |
|
|
|
5.1 |
% |
|
|
2,169 |
|
|
|
2.0 |
% |
|
|
4,375 |
|
|
|
3.5 |
% |
|
|
2,234 |
|
|
|
1.3 |
% |
|
|
2,257 |
|
|
|
4.1 |
% |
|
|
4,491 |
|
|
|
2.7 |
% |
International direct minutes |
|
|
338 |
|
|
|
(12.7 |
%) |
|
|
313 |
|
|
|
(11.3 |
%) |
|
|
651 |
|
|
|
(12.0 |
%) |
|
|
304 |
|
|
|
(10.1 |
%) |
|
|
276 |
|
|
|
(11.8 |
%) |
|
|
580 |
|
|
|
(10.9 |
%) |
|
|
273 |
|
|
|
(10.2 |
%) |
|
|
261 |
|
|
|
(5.4 |
%) |
|
|
534 |
|
|
|
(7.9 |
%) |
ISDN access (basic lines equivalents) (thousands)(vii) |
|
|
1,108 |
|
|
|
(6.9 |
%) |
|
|
1,169 |
|
|
|
(3.6 |
%) |
|
|
1,169 |
|
|
|
(3.6 |
%) |
|
|
1,200 |
|
|
|
8.3 |
% |
|
|
1,208 |
|
|
|
3.4 |
% |
|
|
1,208 |
|
|
|
3.4 |
% |
|
|
1,205 |
|
|
|
0.4 |
% |
|
|
1,214 |
|
|
|
0.5 |
% |
|
|
1,214 |
|
|
|
0.5 |
% |
Pay TV bundling |
|
|
208 |
|
|
|
1489.6 |
% |
|
|
257 |
|
|
|
103.1 |
% |
|
|
257 |
|
|
|
103.1 |
% |
|
|
309 |
|
|
|
48.5 |
% |
|
|
335 |
|
|
|
30.2 |
% |
|
|
335 |
|
|
|
30.2 |
% |
|
|
341 |
|
|
|
10.4 |
% |
|
|
344 |
|
|
|
2.6 |
% |
|
|
344 |
|
|
|
2.6 |
% |
|
|
|
|
(i) |
|
The revenue reported prior to December 2004 was prepared under the previous AGAAP and
has not been restated under A-IFRS. However, A-IFRS changes have only impacted on the
Other Income line and Sales Revenue has remained the same as it was under AGAAP. |
|
(ii) |
|
The growth rates relating to advertising and directories have been impacted by
the acquisition of the Trading Post group in March 2004. |
|
(iii) |
|
The growth rates relating to solutions management have been impacted by the acquisition of
the KAZ group in July 2004. |
|
(iv) |
|
The growth rates in CSL New World revenue has been impacted by the merger of Hong Kong CSL
Limited and New World PCS Limited in March 2006. |
|
(v) |
|
The growth rates in offshore services revenue have been impacted by the acquisition of Cable
Telecom in February 2004 and the PSINet group in August 2004. |
|
(vi) |
|
The growth rates relating to customer premises equipment have been impacted by the
acquisition of Telstra Business Systems (formerly known as Damovo) in September 2004. (vii)
ISDN access (basic lines equivalents) have been restated due to a revision of the channel
allocation basis to SIOs. |
|
(vii) |
|
ISDN access (basic lines equivalents) have been restated due to a revision of the channel
allocation basis to SIOs. |
61
|
|
|
Media Release
|
|
|
|
|
|
10 August 2006
|
|
147/2006 |
Telstras earnings at better end of guidance and transformation on target
Telstra today announced a profit after tax of $3.18 billion for the financial year ended 30
June 2006, a decrease of $1.13 billion or 26.2 per cent on the prior year. Earnings before interest
and tax (EBIT) declined by 20.7 per cent or $1.44 billion to $5.50 billion, at the better end of
the market guidance decline of 21 to 26 per cent.
Telstra Chief Executive Officer, Mr Sol Trujillo, said the companys financial performance had been
shaped by new investments required by this years commencement of a three to five year
transformation of the company and provisions made during the year for future restructuring to
improve long-term shareholder value.
This result, delivered at the better end of our earnings guidance, reflects the fact that we are
on or ahead of plan on virtually all fronts of our transformation. We are still taking the tough
medicine but after our strong second half sales performance our competitors are having to take some
tough medicine of their own, particularly in the broadband and mobiles markets, he said.
We are executing our transformation with a sense of urgency; we have momentum; we are showing
results; and the results are promising. We are attracting the high calorie customers that every
business needs.
Total income (excluding finance income) grew by 2.9 per cent or $658 million to $23.10 billion due
to increases in broadband, mobiles, Sensis, IP solutions, inter-carrier services and pay TV
bundling, offset by a decline in revenues from PSTN, specialised data and ISDN products. Sales
revenue grew 3.9 per cent in the second half, more than double the first half growth rate, and 2.7
per cent for the year.
Total expenses (before finance costs and income tax) increased by 13.5 per cent or $2.10 billion to
$17.60 billion, significantly impacted by the recognition of a redundancy and restructuring
provision of $427 million, and other transformational costs including higher redundancy expense
due to a significant reduction in workforce numbers, and increased depreciation and amortisation
expense due to bringing forward the closure of the CDMA network and the transformation of the
network and systems.
As we have advised the market, the process of transforming the business will be costly in the
short term. We are seeing the impact of this on our results for fiscal 2006 and our transformation
spending will remain high over the next year. However, much of the cost increase is intended to
provide long term benefits as we transform the business to provide improved operations and service,
a new customer experience and enhanced shareholder value, Mr Trujillo said.
Internet and IP services revenue grew $530 million or 38.5 per cent to $1.91 billion, driven by
retail broadband revenue growth of $267 million or 57.7 per cent and increased use of data services
by business customers.
The number of retail broadband subscribers continued strong growth to 1.48 million. Telstra added
303,000 retail broadband subscribers in the second half and 620,000 for the full year.
Our broadband market share has increased again, to 44 per cent, and weve added retail customers
at three times the rate of our nearest competitor. Our focus on meeting customers needs and
offering a superior value proposition, rather than simply competing on price, is delivering
results, Mr Trujillo said.
Total mobile goods and services revenue growth was 6.1 per cent or $284 million to $4.97 billion.
1
Mr Trujillo said that while value added services grew strongly and minutes of use expanded,
continued intense competition and migration to capped plans saw the mobiles growth rate decrease.
Telstra added 261,000 mobile SIOs over the year for a total of 8.49 million, an increase of 3.2 per
cent.
Our second half saw strong mobiles revenue growth of 7.6 per cent as we improved our offerings
using research based customer segmentation, Mr Trujillo said.
3G will become increasingly important as the market evolves, and this is where our efforts are
focussed. We are building towards market leadership, with subscribers increasing around 500 per
cent in the second half, including wireless broadband. This 3G liftoff is important as ARPUs are
$20 higher than for 2G customers.
Total subscriber numbers in the second half were distorted by a system change in fiscal 2005 which
contributed to the deactivation of 1.1 million prepaid SIOs in fiscal 2006.
Sensis revenue grew by 6.9 per cent or $118 million to $1.83 billion, reflecting a strong
performance in Yellow Pages online and non-metropolitan books and Sensis emerging businesses.
Revenue grew 9 per cent in the second half compared with 5.3 per cent in the first. Sensis
online revenue grew strongly and has become the primary growth driver, exceeding print growth in
dollar terms for the first time, Mr Trujillo said.
PSTN products revenue was $7.48 billion, a decline of 6.7 per cent or $540 million for the year,
with a decline of 7.6 per cent in the first half and 5.8 per cent in the second. There has been a
general reduction in PSTN volumes and yield declines due to competitive pricing pressure and
continuing customer migration to other products. Since June 2005, Telstra has lost 270,000 retail
lines, while wholesale gained 90,000 lines.
The shift in revenue from traditional higher margin products and services to new and emerging
products and services with lower margins has continued. However, we are tackling this hard and have
slowed the PSTN decline by integrating services, bundling initiatives and customer winback
programs. The introduction of innovative value based subscription plans has also started to make a
positive contribution, Mr Trujillo said.
Importantly, we have also seen 46 per cent growth in our new wave revenues from products and
services over next generation platforms.
Internationally, total offshore controlled entities revenue increased by 8.3 per cent or $134
million to $1.75 billion for the year. CSL New World revenues increased 13.1 per cent assisted by
increased revenue from the merger between Hong Kong CSL and New World PCS. In New Zealand,
TelstraClear revenues remained steady while revenue from other offshore controlled entities grew by
17.1 per cent.
Other key financial outcomes included:
|
|
Excluding the redundancy and restructuring provision, EBIT declined 14.6 per cent to $5.92
billion, slightly better than the market guidance of a 15 to 20 per cent decline. After further
excluding net transformation costs of $535 million, EBIT declined 6.9 per cent to $6.46 billion,
also slightly better than the 7 to 10 per cent guidance range provided to the market. |
|
|
|
EBIT margin declined 7.1 percentage points to 24.2 per cent and EBITDA margin decreased 5.1
percentage points to 42.1 per cent. Without transformation costs, EBIT margin declined by 2.9
percentage points to 28.4 per cent and EBITDA margin by 2.7 percentage points to 44.5 per cent. |
|
|
|
Total cash capital expenditure increased 4.2 per cent to $4.30 billion, within our revised
guidance range. Domestic transformation expenditure was $1.35 billion in the second half. |
|
|
|
Free cash flow declined 12.4 per cent to $4.55 billion, from $5.19 billion in the prior year,
due to lower earnings, higher tax paid due to an instalment rate correction by the Australian
Tax Office, higher capital expenditure due to transformation and lower asset sales. |
Mr Trujillo said Telstras customers and shareholders were already seeing the companys landmark
transformation strategy start to deliver results. Our transformation is on track and the building
blocks for long-term shareholder value are being put in place. The under construction sign is up
but the new Telstra is already emerging, he said.
2
He said key transformation achievements in the 2005/06 financial year included:
|
|
Construction of the new 3G 850 network is ahead of schedule and more than three-quarters
completed. |
|
|
|
Total workforce reduced by 3,859 full time equivalent staff, contractors and agency staff
excluding the CSL New World merger (3,262 allowing for the merger). |
|
|
|
Securing cash capital expenditure savings of $500 million through tough negotiation with vendors
and discontinuing projects that did not advance the transformation strategy. |
|
|
|
52 platforms already capped or exited, placing Telstra ahead of December 2006 target. |
|
|
|
Data centre transition contract with IBM to deliver savings of $250 million over six years. |
|
|
|
Creation of seven consumer and five business segments, with 120 micro-segments, using Market
Based Management research. |
|
|
|
Reducing unsatisfied demand (held orders) for ADSL broadband by nearly two-thirds. |
|
|
|
Marked improvement in PSTN churn rates and a 42 per cent increase in the number of customers
using three or more Telstra products. |
|
|
|
Creating a new business unit to serve the growing importance of digital services to customers in
the small and medium-sized business sector. |
|
|
|
Telstra staff development, including the launch of a $210 million employee training package. |
|
|
|
Improved network reliability and service levels in the past year, with customer satisfaction
results improving significantly in both connections and fault repair. |
Mr Trujillo said it was disappointing that the substantial time, talent and resources Telstra had
devoted to discussions with the ACCC had not secured regulation reform enabling Telstra to build a
fibre-to-the-node (FTTN) broadband network.
We sought an outcome that would assure our shareholders that their investment in the network would
not be used to subsidise network access by Telstras competitors. The negotiations have not
produced this outcome. The ACCC was unwilling to recognise the actual costs that Telstra incurs in
providing its services and, especially, the costs incurred in providing services to rural,
regional, and remote Australia. Until Telstras actual costs are recognised and the ACCCs
regulatory practices change, Telstra will not invest in a FTTN network, he said.
Mr Trujillo said the company had also devoted enormous effort to assisting the Government in
preparations for the T3 sale, should the Government decide to go down that path.
Commenting on the companys fiscal 2007 outlook, Mr Trujillo said that the company expects*:
|
|
Revenue growth of 2.0 to 2.5 per cent; |
|
|
|
EBIT growth of 4.0 to 6.0 per cent; |
|
|
|
Underlying EBIT (excluding transformation costs) to be flat to minus 2.0 per cent; |
|
|
|
Cash Operating CAPEX spend of between $5.4 and $5.7 billion. |
|
|
|
The level of future dividends remains subject to key regulatory decisions and will be considered
by the Board at the appropriate time. |
The Telstra Board of Directors declared a final ordinary dividend of 14 cents per share, fully
franked at a tax rate of 30 per cent. This brings the total ordinary dividend declared for the year
to 28 cents per share, or a total of $3.48 billion. The record date for the dividend will be 25
August 2006 with payment to be made on 22 September 2006. Telstra shares will commence trading
excluding entitlement to the dividend on 21 August 2006.
Telstra Media Contact: Andrew Maiden Tel: 02 9298 5259 or 0428
310 700.
* Guidance on reported numbers. Assumes no FTTN build, Band 2 $22 ULL price, FY2007 the largest
transformational spend year and no additional redundancy and restructuring provisioning.
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
For news, views and discussion on telecommunications in Australia see: www.nowwearetalking.com.au
Telstra Corporation Limited
ABN: 33 051 775 556
3
Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities
Australian Business Number (ABN): 33 051 775 556
|
|
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|
|
|
Financial Report |
|
|
|
Page |
|
as at 30 June 2006 |
|
|
|
Number |
|
|
Financial Statements |
|
|
|
|
Income Statement |
|
|
2 |
|
Balance Sheet |
|
|
3 |
|
Statement of Recognised Income and Expense |
|
|
4 |
|
Statement of Cash Flows |
|
|
5 |
|
Notes to the Financial Statements |
|
|
|
|
Note 1 |
|
- Basis of preparation |
|
|
6 |
|
Note 2 |
|
- Summary of accounting policies |
|
|
9 |
|
Note 3 |
|
- Earnings per share |
|
|
26 |
|
Note 4 |
|
- Dividends |
|
|
27 |
|
Note 5 |
|
- Segment information |
|
|
29 |
|
Note 6 |
|
- Income |
|
|
36 |
|
Note 7 |
|
- Profit from continuing operations |
|
|
38 |
|
Note 8 |
|
- Remuneration of auditors |
|
|
42 |
|
Note 9 |
|
- Income taxes |
|
|
43 |
|
Note 10 |
|
- Cash and cash equivalents |
|
|
46 |
|
Note 11 |
|
- Trade and other receivables |
|
|
47 |
|
Note 12 |
|
- Inventories |
|
|
48 |
|
Note 13 |
|
- Investments |
|
|
49 |
|
Note 14 |
|
- Property, plant and equipment |
|
|
50 |
|
Note 15 |
|
- Intangible assets |
|
|
55 |
|
Note 16 |
|
- Derivative financial assets |
|
|
60 |
|
Note 17 |
|
- Trade and other payables |
|
|
61 |
|
Note 18 |
|
- Borrowings |
|
|
62 |
|
Note 19 |
|
- Provisions |
|
|
65 |
|
Note 20 |
|
- Derivative financial liabilities |
|
|
68 |
|
Note 21 |
|
- Share capital |
|
|
69 |
|
Note 22 |
|
- Reserves |
|
|
71 |
|
Note 23 |
|
- Retained profits and minority interests |
|
|
73 |
|
Note 24 |
|
- Notes to the statement of cash flows |
|
|
74 |
|
Note 25 |
|
- Impairment |
|
|
79 |
|
Note 26 |
|
- Expenditure commitments |
|
|
81 |
|
Note 27 |
|
- Contingent liabilities and contingent assets |
|
|
84 |
|
Note 28 |
|
- Post employment benefits |
|
|
87 |
|
Note 29 |
|
- Investments in controlled entities |
|
|
95 |
|
Note 30 |
|
- Investments in jointly controlled and associated entities |
|
|
104 |
|
Note 31 |
|
- Employee share plans |
|
|
110 |
|
Note 32 |
|
- Key management personnel compensation |
|
|
126 |
|
Note 33 |
|
- Related party disclosures |
|
|
133 |
|
Note 34 |
|
- Events after balance date |
|
|
143 |
|
Note 35 |
|
- Financial and capital risk management |
|
|
144 |
|
Note 36 |
|
- Adoption of International Financial Reporting Standards |
|
|
160 |
|
Note 37 |
|
- United States generally accepted accounting principles disclosures |
|
|
181 |
|
|
|
|
|
|
|
|
Directors Declaration |
|
|
203 |
|
|
|
|
|
|
|
|
Independent Audit Report |
|
|
204 |
|
1
Telstra Corporation Limited and controlled entities
Income Statement
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
6 |
|
|
|
22,772 |
|
|
|
16,904 |
|
|
|
22,181 |
|
|
|
20,485 |
|
|
|
19,831 |
|
Other income |
|
|
6 |
|
|
|
328 |
|
|
|
243 |
|
|
|
261 |
|
|
|
163 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,100 |
|
|
|
17,147 |
|
|
|
22,442 |
|
|
|
20,648 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
7 |
|
|
|
4,364 |
|
|
|
3,239 |
|
|
|
3,858 |
|
|
|
3,483 |
|
|
|
3,082 |
|
Goods and services purchased |
|
|
7 |
|
|
|
4,730 |
|
|
|
3,511 |
|
|
|
4,211 |
|
|
|
3,305 |
|
|
|
2,958 |
|
Other expenses |
|
|
7 |
|
|
|
4,427 |
|
|
|
3,286 |
|
|
|
3,815 |
|
|
|
4,562 |
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,521 |
|
|
|
10,036 |
|
|
|
11,884 |
|
|
|
11,350 |
|
|
|
9,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled
and associated entities |
|
|
30 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,516 |
|
|
|
10,032 |
|
|
|
11,978 |
|
|
|
11,350 |
|
|
|
9,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation
and amortisation (EBITDA) |
|
|
|
|
|
|
9,584 |
|
|
|
7,115 |
|
|
|
10,464 |
|
|
|
9,298 |
|
|
|
10,446 |
|
Depreciation and amortisation |
|
|
7 |
|
|
|
4,087 |
|
|
|
3,034 |
|
|
|
3,529 |
|
|
|
3,657 |
|
|
|
3,206 |
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
5,497 |
|
|
|
4,081 |
|
|
|
6,935 |
|
|
|
5,641 |
|
|
|
7,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
6 |
|
|
|
66 |
|
|
|
49 |
|
|
|
83 |
|
|
|
63 |
|
|
|
101 |
|
Finance costs |
|
|
7 |
|
|
|
1,002 |
|
|
|
744 |
|
|
|
963 |
|
|
|
985 |
|
|
|
943 |
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
936 |
|
|
|
695 |
|
|
|
880 |
|
|
|
922 |
|
|
|
842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
4,561 |
|
|
|
3,386 |
|
|
|
6,055 |
|
|
|
4,719 |
|
|
|
6,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
9 |
|
|
|
1,380 |
|
|
|
1,024 |
|
|
|
1,746 |
|
|
|
1,482 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (cents per share) |
|
|
|
|
|
cents |
|
US cents |
|
cents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
3 |
|
|
|
25.7 |
|
|
|
19.0 |
|
|
|
34.7 |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
3 |
|
|
|
25.7 |
|
|
|
19.0 |
|
|
|
34.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends declared (cents per share) |
|
|
4 |
|
|
|
34.0 |
|
|
|
25.0 |
|
|
|
40.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
2
Telstra Corporation Limited and controlled entities
Balance Sheet
as at 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
10 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,548 |
|
|
|
474 |
|
|
|
1,368 |
|
Trade and other receivables |
|
|
11 |
|
|
|
3,701 |
|
|
|
2,747 |
|
|
|
3,549 |
|
|
|
3,344 |
|
|
|
3,538 |
|
Inventories |
|
|
12 |
|
|
|
224 |
|
|
|
166 |
|
|
|
232 |
|
|
|
175 |
|
|
|
194 |
|
Derivative financial assets |
|
|
16 |
|
|
|
21 |
|
|
|
16 |
|
|
|
4 |
|
|
|
21 |
|
|
|
4 |
|
Prepayments |
|
|
|
|
|
|
244 |
|
|
|
181 |
|
|
|
249 |
|
|
|
172 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
4,879 |
|
|
|
3,621 |
|
|
|
5,582 |
|
|
|
4,186 |
|
|
|
5,277 |
|
|
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
11 |
|
|
|
87 |
|
|
|
65 |
|
|
|
97 |
|
|
|
127 |
|
|
|
115 |
|
Inventories |
|
|
12 |
|
|
|
20 |
|
|
|
15 |
|
|
|
15 |
|
|
|
20 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
13 |
|
|
|
23 |
|
|
|
17 |
|
|
|
48 |
|
|
|
18 |
|
|
|
41 |
|
Investments other |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,953 |
|
|
|
6,136 |
|
Property, plant and equipment |
|
|
14 |
|
|
|
23,622 |
|
|
|
17,535 |
|
|
|
22,891 |
|
|
|
21,765 |
|
|
|
21,223 |
|
Intangibles |
|
|
15 |
|
|
|
6,123 |
|
|
|
4,545 |
|
|
|
6,329 |
|
|
|
2,465 |
|
|
|
2,751 |
|
Deferred tax assets |
|
|
9 |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Derivative financial assets |
|
|
16 |
|
|
|
391 |
|
|
|
290 |
|
|
|
|
|
|
|
391 |
|
|
|
|
|
Defined benefit assets |
|
|
28 |
|
|
|
1,029 |
|
|
|
764 |
|
|
|
247 |
|
|
|
1,004 |
|
|
|
242 |
|
|
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
31,296 |
|
|
|
23,232 |
|
|
|
29,629 |
|
|
|
31,743 |
|
|
|
30,523 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
36,175 |
|
|
|
26,853 |
|
|
|
35,211 |
|
|
|
35,929 |
|
|
|
35,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
17 |
|
|
|
3,570 |
|
|
|
2,650 |
|
|
|
2,807 |
|
|
|
3,065 |
|
|
|
1,956 |
|
Borrowings |
|
|
18 |
|
|
|
1,969 |
|
|
|
1,462 |
|
|
|
1,507 |
|
|
|
3,374 |
|
|
|
3,892 |
|
Current tax liabilities |
|
|
|
|
|
|
428 |
|
|
|
318 |
|
|
|
534 |
|
|
|
400 |
|
|
|
519 |
|
Provisions |
|
|
19 |
|
|
|
737 |
|
|
|
547 |
|
|
|
421 |
|
|
|
679 |
|
|
|
356 |
|
Derivative financial liabilities |
|
|
20 |
|
|
|
12 |
|
|
|
9 |
|
|
|
11 |
|
|
|
12 |
|
|
|
11 |
|
Revenue received in advance |
|
|
|
|
|
|
1,170 |
|
|
|
868 |
|
|
|
1,132 |
|
|
|
919 |
|
|
|
912 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,886 |
|
|
|
5,854 |
|
|
|
6,412 |
|
|
|
8,449 |
|
|
|
7,646 |
|
|
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
17 |
|
|
|
197 |
|
|
|
146 |
|
|
|
250 |
|
|
|
65 |
|
|
|
61 |
|
Borrowings |
|
|
18 |
|
|
|
11,409 |
|
|
|
8,469 |
|
|
|
10,941 |
|
|
|
11,376 |
|
|
|
10,907 |
|
Deferred tax liabilities |
|
|
9 |
|
|
|
1,704 |
|
|
|
1,265 |
|
|
|
1,804 |
|
|
|
1,832 |
|
|
|
1,961 |
|
Provisions |
|
|
19 |
|
|
|
974 |
|
|
|
723 |
|
|
|
894 |
|
|
|
924 |
|
|
|
837 |
|
Derivative financial liabilities |
|
|
20 |
|
|
|
768 |
|
|
|
570 |
|
|
|
864 |
|
|
|
768 |
|
|
|
864 |
|
Revenue received in advance |
|
|
|
|
|
|
405 |
|
|
|
301 |
|
|
|
388 |
|
|
|
400 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,457 |
|
|
|
11,474 |
|
|
|
15,141 |
|
|
|
15,365 |
|
|
|
15,011 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
23,343 |
|
|
|
17,328 |
|
|
|
21,553 |
|
|
|
23,814 |
|
|
|
22,657 |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
12,115 |
|
|
|
13,143 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
21 |
|
|
|
5,569 |
|
|
|
4,134 |
|
|
|
5,536 |
|
|
|
5,569 |
|
|
|
5,536 |
|
Reserves |
|
|
22 |
|
|
|
(160 |
) |
|
|
(119 |
) |
|
|
(153 |
) |
|
|
210 |
|
|
|
194 |
|
Retained profits |
|
|
23 |
|
|
|
7,177 |
|
|
|
5,327 |
|
|
|
8,273 |
|
|
|
6,336 |
|
|
|
7,413 |
|
|
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
12,586 |
|
|
|
9,342 |
|
|
|
13,656 |
|
|
|
12,115 |
|
|
|
13,143 |
|
Minority interests |
|
|
23 |
|
|
|
246 |
|
|
|
183 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
12,115 |
|
|
|
13,143 |
|
|
|
|
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
3
Telstra Corporation Limited and controlled entities
Statement of Recognised Income and Expense
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity accounting our interest in jointly controlled and associated entities |
|
|
1 |
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
Translation of financial statements of non-Australian controlled entities |
|
|
(36 |
) |
|
|
(27 |
) |
|
|
(193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net hedging gains recognised directly in equity |
|
|
327 |
|
|
|
243 |
|
|
|
|
|
|
|
327 |
|
|
|
|
|
Net hedging gains removed from equity and included in profit for the year |
|
|
(420 |
) |
|
|
(312 |
) |
|
|
|
|
|
|
(421 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity accounting our interest in jointly controlled and associated entities |
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gain/(loss) on our defined benefit plans |
|
|
958 |
|
|
|
711 |
|
|
|
(90 |
) |
|
|
945 |
|
|
|
(85 |
) |
|
|
|
|
|
|
|
|
830 |
|
|
|
616 |
|
|
|
(280 |
) |
|
|
851 |
|
|
|
(85 |
) |
Income tax on equity items |
|
|
(256 |
) |
|
|
(190 |
) |
|
|
24 |
|
|
|
(256 |
) |
|
|
24 |
|
|
|
|
|
|
Net income/(expense) recognised directly in equity |
|
|
574 |
|
|
|
426 |
|
|
|
(256 |
) |
|
|
595 |
|
|
|
(61 |
) |
Profit for the year |
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
|
|
|
|
|
Total recognised income for the year |
|
|
3,755 |
|
|
|
2,788 |
|
|
|
4,053 |
|
|
|
3,832 |
|
|
|
4,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of changes in accounting policy attributable to Telstra Entity |
|
|
74 |
|
|
|
55 |
|
|
|
1,223 |
|
|
|
77 |
|
|
|
737 |
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
4
Telstra Corporation Limited and controlled entities
Statement of Cash Flows
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receipts from customers (inclusive of goods and services tax (GST)) |
|
|
|
|
|
|
25,229 |
|
|
|
18,779 |
|
|
|
24,526 |
|
|
|
21,928 |
|
|
|
21,343 |
|
Payments to suppliers and to employees (inclusive of GST) |
|
|
|
|
|
|
(14,785 |
) |
|
|
(11,026 |
) |
|
|
(13,848 |
) |
|
|
(11,754 |
) |
|
|
(11,079 |
) |
|
|
|
|
|
|
|
|
|
Net cash generated by operations |
|
|
|
|
|
|
10,444 |
|
|
|
7,753 |
|
|
|
10,678 |
|
|
|
10,174 |
|
|
|
10,264 |
|
Income taxes paid |
|
|
|
|
|
|
(1,882 |
) |
|
|
(1,397 |
) |
|
|
(1,718 |
) |
|
|
(1,863 |
) |
|
|
(1,712 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
24 |
|
|
|
8,562 |
|
|
|
6,356 |
|
|
|
8,960 |
|
|
|
8,311 |
|
|
|
8,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- property, plant and equipment |
|
|
|
|
|
|
(3,636 |
) |
|
|
(2,699 |
) |
|
|
(2,995 |
) |
|
|
(3,483 |
) |
|
|
(2,715 |
) |
- intangibles |
|
|
|
|
|
|
(619 |
) |
|
|
(459 |
) |
|
|
(544 |
) |
|
|
(502 |
) |
|
|
(460 |
) |
|
|
|
|
|
|
|
|
|
Capital expenditure (before investments) |
|
|
|
|
|
|
(4,255 |
) |
|
|
(3,158 |
) |
|
|
(3,539 |
) |
|
|
(3,985 |
) |
|
|
(3,175 |
) |
- shares in controlled entities (net of cash acquired) |
|
|
24 |
|
|
|
(43 |
) |
|
|
(32 |
) |
|
|
(573 |
) |
|
|
(27 |
) |
|
|
(28 |
) |
- payments for other investments |
|
|
|
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
Total capital expenditure |
|
|
|
|
|
|
(4,303 |
) |
|
|
(3,194 |
) |
|
|
(4,129 |
) |
|
|
(4,012 |
) |
|
|
(3,209 |
) |
Proceeds from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- sale of property, plant and equipment |
|
|
|
|
|
|
50 |
|
|
|
37 |
|
|
|
68 |
|
|
|
72 |
|
|
|
79 |
|
- sale of shares in controlled entities |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- sale of other investments |
|
|
|
|
|
|
89 |
|
|
|
66 |
|
|
|
176 |
|
|
|
89 |
|
|
|
164 |
|
Net proceeds from CSL New World Mobility merger |
|
|
24 |
|
|
|
42 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of additional shares by controlled entities |
|
|
|
|
|
|
6 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of PCCW converting note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
|
|
|
|
76 |
|
Proceeds from share buy-back by jointly controlled and associated entities |
|
|
|
|
|
|
34 |
|
|
|
25 |
|
|
|
|
|
|
|
34 |
|
|
|
|
|
Loan to jointly controlled and associated entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
Interest received |
|
|
|
|
|
|
66 |
|
|
|
49 |
|
|
|
78 |
|
|
|
63 |
|
|
|
79 |
|
Dividends received |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(4,012 |
) |
|
|
(2,979 |
) |
|
|
(3,766 |
) |
|
|
(3,754 |
) |
|
|
(2,810 |
) |
|
|
|
|
|
|
|
|
|
Operating cash flows less investing cash flows |
|
|
|
|
|
|
4,550 |
|
|
|
3,377 |
|
|
|
5,194 |
|
|
|
4,557 |
|
|
|
5,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
|
|
|
|
8,641 |
|
|
|
6,413 |
|
|
|
6,433 |
|
|
|
8,680 |
|
|
|
6,611 |
|
Proceeds from Telstra bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
983 |
|
|
|
|
|
|
|
983 |
|
Repayment of borrowings |
|
|
|
|
|
|
(7,624 |
) |
|
|
(5,659 |
) |
|
|
(5,735 |
) |
|
|
(7,703 |
) |
|
|
(6,478 |
) |
Repayment of Telstra bonds |
|
|
|
|
|
|
(517 |
) |
|
|
(384 |
) |
|
|
(272 |
) |
|
|
(517 |
) |
|
|
(272 |
) |
Repayment of finance lease principal amounts |
|
|
|
|
|
|
(7 |
) |
|
|
(5 |
) |
|
|
(16 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
Staff repayments of share loans |
|
|
|
|
|
|
24 |
|
|
|
18 |
|
|
|
19 |
|
|
|
24 |
|
|
|
19 |
|
Purchase of shares for employee share plans |
|
|
21 |
|
|
|
(6 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
Finance costs paid |
|
|
|
|
|
|
(940 |
) |
|
|
(698 |
) |
|
|
(879 |
) |
|
|
(953 |
) |
|
|
(892 |
) |
Dividends paid |
|
|
4 |
|
|
|
(4,970 |
) |
|
|
(3,689 |
) |
|
|
(4,124 |
) |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
Share buy-back |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
(756 |
) |
|
|
|
|
|
|
(756 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
|
|
|
|
(5,399 |
) |
|
|
(4,008 |
) |
|
|
(4,347 |
) |
|
|
(5,451 |
) |
|
|
(4,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash |
|
|
|
|
|
|
(849 |
) |
|
|
(631 |
) |
|
|
847 |
|
|
|
(894 |
) |
|
|
822 |
|
Foreign currency translation on opening balances |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
Cash at the beginning of the year |
|
|
|
|
|
|
1,534 |
|
|
|
1,139 |
|
|
|
690 |
|
|
|
1,368 |
|
|
|
546 |
|
|
|
|
|
|
|
|
|
|
Cash at the end of the year |
|
|
24 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,534 |
|
|
|
474 |
|
|
|
1,368 |
|
|
|
|
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
5
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements
1. Basis of preparation
In this financial report, we, us, our, Telstra and
the Telstra Group all mean Telstra Corporation Limited,
an Australian corporation and its controlled entities as
a whole. Telstra Entity is the legal entity, Telstra
Corporation Limited.
Our financial or fiscal year ends on 30 June.
Unless we state differently the following
applies;
|
|
year, fiscal year or financial year means the year
ended 30 June; |
|
|
|
balance date means the date 30 June;
and |
|
|
|
2006 means fiscal 2006 and similarly for other fiscal years. |
The financial report of the Telstra Group and the Telstra
Entity for the year ended 30 June 2006 was authorised for
issue in accordance with a resolution of the Telstra
Board of Directors on 10 August 2006.
The principal accounting policies used in preparing the
financial report of the Telstra Group and the Telstra
Entity are listed in note 2 to our financial statements.
1.1 Basis of preparation of the financial report
This financial report is a general purpose financial
report prepared in accordance with the requirements of
the Australian Corporations Act 2001 and Accounting
Standards applicable in Australia.
Both the functional and presentation currency of the
Telstra Entity and its Australian controlled entities is
Australian dollars. The functional currency of certain
non Australian controlled entities is not Australian
dollars. As a result, the results of these entities are
translated to Australian dollars for presentation in the
Telstra Group financial report.
This financial report is prepared in accordance with
historical cost, except for some categories of
investments, which are equity accounted and some
financial assets and liabilities (including derivative
instruments) which are recorded at fair value. Cost is
the fair value of the consideration given in exchange
for net assets acquired.
In preparing this financial report, we are required to
make judgements and estimates that impact:
|
|
income and expenses for the year; |
|
|
|
the reported amounts of assets and liabilities; and |
|
|
|
the disclosure of off balance sheet arrangements,
including contingent assets and contingent
liabilities. |
We continually evaluate our judgements and estimates. We
base our judgements and estimates on historical
experience, various other assumptions we believe to be
reasonable under the circumstances and, where
appropriate, practices adopted by international
telecommunications companies.
Actual results may differ from our estimates in the
event that the scenarios on which our judgements are
based prove to be different.
1.2 Statement of compliance
This financial report complies with Accounting
Standards applicable in Australia, which include
Australian equivalents to International Financial
Reporting Standards (A-IFRS). Compliance with A-IFRS
ensures that the Telstra Group and Telstra Entity
financial statements and notes comply with International
Financial Reporting Standards (IFRS). The financial
statements of Telstra Entity are considered separate
financial statements.
This is our first full year financial report prepared in
accordance with A-IFRS. AASB 1: First time adoption of
Australian equivalents to International Financial
Reporting Standards (AASB 1) has been applied in
preparing this financial report. Our financial reports
up to 30 June 2005 had been prepared in accordance with
previous Australian Generally Accepted Accounting
Principles (AGAAP). AGAAP differs in certain respects
from A-IFRS.
When preparing this financial report we have amended
certain accounting and valuation methods applied in the
previous AGAAP financial statements to comply with
A-IFRS. With the exception of financial instruments, the
comparative figures were restated to reflect these
adjustments. We have taken the exemption available under
AASB 1 to only apply AASB 132: Financial Instruments:
Disclosure and Presentation (AASB 132) and AASB 139:
Financial Instruments: Recognition and Measurement
(AASB 139), from 1 July 2005. In addition, we have
elected to early adopt AASB 7: Financial Instruments:
Disclosures, which supersedes the disclosure
requirements of AASB 132.
Reconciliations and descriptions of the impact of the
transition to A-IFRS on the Telstra Group and Telstra
Entitys income statement, balance sheet and statement
of cash flow are provided in note 36.
1.3 Clarification of terminology used in our
income statement
Under the requirements of AASB 101: Presentation of
Financial Statements, we must classify all of our
expenses (apart from any finance costs and our share of
net (gain)/loss from jointly controlled and associated
entities) according to either the nature (type) of the
expense or the function (activity to which the expense
relates). We have chosen to classify our expenses using
the nature classification as it more accurately reflects
the type of operations we undertake.
6
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
1. Basis of preparation (continued)
1.3 Clarification of terminology used in our
income statement (continued)
Earnings before interest, income tax expense,
depreciation and amortisation (EBITDA) reflects our
profit for the year prior to including the effect of net
finance costs, income taxes, depreciation and
amortisation. We believe that EBITDA is a relevant and
useful financial measure used by management to measure
the companys operating profit.
Our management uses EBITDA, in combination with other
financial measures, primarily to evaluate the companys
operating performance before financing costs, income tax
and non-cash capital related expenses. In consideration
of the capital intensive nature of our business, EBITDA
is a useful supplement to net income in understanding
cash flows generated from operations that are available
for payment of income taxes, debt service and capital
expenditure.
In addition, we believe EBITDA is useful to investors
because analysts and other members of the investment
community largely view EBITDA as a key and widely
recognised measure of operating performance.
Earnings before interest and income tax expense (EBIT)
is a similar measure to EBITDA, but takes into account
the effect of depreciation and amortisation.
When a specific item from continuing operations is of
such a size, nature or incidence that its disclosure
is relevant in explaining our operating performance
for the reporting period, its nature and amount is
disclosed separately in note 7(b).
1.4 Adoption of accounting standards before
their application date
Certain new accounting standards and Urgent Issues
Group (UIG) interpretations have been issued with an
application date after the year ended 30 June 2006. As a
result, these accounting standards and UIG
interpretations are not mandatory for adoption in our
financial report for the year ended 30 June 2006.
Under subsection 334(5) of the Corporations Act 2001,
we elected to early adopt the following accounting
standards before the application date:
|
|
AASB 119: Employee Benefits (issued December
2004)(AASB 119); and |
|
|
|
AASB 7: Financial Instruments: Disclosures (AASB 7). |
Due to the early adoption of the revised AASB 119, we
also elected to adopt the related omnibus accounting
standard, AASB 2005-3: Amendments to Australian
Accounting Standards. Our comparatives for the year
ended 30 June 2005 were fully restated for these
accounting standards in accordance with AASB 1.
Due to the early adoption of AASB 7, we also elected to
adopt the related omnibus accounting standard, AASB
2005-10: Amendments to Australian Accounting Standards.
We have taken the exemption available under AASB 1 to
only apply these standards from 1 July 2005.
1.5 United States generally accepted
accounting principles (USGAAP)
This financial report combines the disclosure
requirements for both A-IFRS and United States Generally
Accepted Accounting Principles (USGAAP). Note 37
contains a reconciliation of the major differences
between our financial report prepared under A-IFRS and
USGAAP.
This financial report has been prepared using our
presentation currency, Australian dollars (A$). For
the convenience of readers outside Australia we have
converted our financial statements and USGAAP
disclosures from A$ to US$ for fiscal 2006.
These conversions appear under columns headed US$m and
represent rounded millions of US dollars. The conversion
has been made using the noon buying rate in New York City
for cable transfers in non-US currencies. This rate is
certified for custom purposes by the Federal Reserve Bank
of New York. The rate on 30 June 2006 was A$1.00 =
US$0.7423.
These conversions are indicative only and do not mean
that the A$ amounts could be converted to US$ at the
rate indicated.
1.6 Recently issued accounting standards to be
applied in Australia in future reporting periods
The accounting standards and UIG interpretation that
have not been early adopted for the year ended 30 June
2006, but will be applicable to the Telstra Group and
Telstra Entity in future reporting periods are detailed
below. Apart from these standards, we have considered
other accounting standards that will be applicable in
future periods, however they have been considered
insignificant to Telstra.
7
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
1. Basis of preparation (continued)
1.6 Recently issued accounting standards to be
applied in Australia in future reporting periods
(continued)
Lease arrangements
UIG 4: Determining Whether an Arrangement Contains a
Lease (UIG 4) is applicable to annual reporting periods
beginning on or after 1 January 2006. We will apply this
interpretation in our financial report for the half-year
ended 31 December 2006. A related omnibus standard AASB
2005-5: Amendments to Australian Accounting Standards
will also be adopted for the half-year ended 31 December
2006.
UIG 4 requires entities to assess whether the
arrangements they enter into contain leases. An
arrangement contains a lease if fulfilment of the
arrangement is dependent on the use of specific assets
and it conveys a right to use those assets to the
customer. The lease component of the arrangement is then
separated and accounted for as either a finance or
operating lease depending on the nature of the
arrangement. Under our current accounting policy we do
not separately account for leases that are embedded
within our service agreements.
UIG 4 will align our accounting under A-IFRS to our
policy adopted under USGAAP (refer to note 37(p)).
However, our USGAAP policy is only applied to
arrangements that were entered into or modified after 1
July 2003. UIG 4 is applicable to all arrangements in
existence as of the transition date.
Financial guarantees
AASB 2005-9: Amendments to Australian Accounting
Standards is applicable to annual reporting periods
beginning on or after 1 January 2006. We will apply this
interpretation in our financial report for the half-year
ended 31 December 2006.
These amendments require that liabilities arising from
the issue of financial guarantee contracts be recognised
on the balance sheet. Management has not yet determined
the effect the adoption of these amendments will have on
our balance sheet, income statement or statement of
cashflows.
1.7 Rounding
All dollar amounts in this financial report (except
where indicated) have been rounded to the nearest million
dollars ($m) for presentation. This has been done in
accordance with Australian Securities and Investments
Commission (ASIC) Class Order 98/100, dated 10 July 1998,
issued under section 341(1) of the Corporations Act 2001.
8
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies
2.1 Change in accounting policies
The following accounting policy changes occurred during fiscal 2006:
The transition to Australian equivalents to International
Financial Reporting Standards (A-IFRS) resulted in
changes to a number of our accounting policies. The
accounting policies set out below have been applied in
preparing the financial report for the year ended 30 June
2006, the comparative information presented in these
financial statements and in the preparation of the
opening A-IFRS balance sheet as at 1 July 2004, except
for the accounting policies in respect of financial
instruments.
Reconciliations and descriptions of the impact of the
transition to A-IFRS on the Telstra Group and Telstra
Entitys income statement, balance sheet and statement
of cash flow are provided in note 36.
There were no accounting policy changes during fiscal 2005.
Accounting policies
2.2 Principles of consolidation
The consolidated financial report includes the assets
and liabilities of the Telstra Entity and its controlled
entities as a whole as at the end of the year and the
consolidated results and cash flows for the year. The
effect of all intergroup transactions and balances are
eliminated in full from our consolidated financial
statements.
Where we do not control an entity for the entire year,
results and cash flows for those entities are only
included from the date on which control commences, or up
until the date on which there is a loss of control.
Our consolidated retained profits include retained
profits/ accumulated losses of controlled entities from
the time they became a controlled entity until control
ceases. Minority interests in the results and equity of
controlled entities are shown separately in our
consolidated income statement and consolidated balance
sheet.
The financial statements of controlled entities are
prepared for the same reporting period as the Telstra
Entity, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar
accounting policies.
An entity is considered to be a controlled entity where
we are able to dominate decision making, directly or
indirectly, relating to the financial and operating
policies of that entity so as to obtain benefits from its
activities.
We account for the acquisition of our controlled entities
using the purchase method of accounting. This involves
recognising the acquirees identifiable assets,
liabilities and contingent liabilities at their fair
value at the date of acquisition. Any excess of the cost
of acquisition over our interest in the fair value of the
acquirees identifiable assets, liabilities and
contingent liabilities is recognised as goodwill.
2.3 Foreign currency translation
(a) Transactions and balances
Foreign currency transactions are converted into the
relevant functional currency at market exchange rates
applicable at the date of the transactions. Amounts
payable or receivable in foreign currencies at balance
date are converted into the relevant functional currency
at market exchange rates at balance date. Any currency
translation gains and losses that arise are included in
our profit or loss for the year. Where we enter into a
hedge for a specific expenditure commitment or for the
construction of an asset, hedging gains and losses are
accumulated in equity over the period of the hedge and
are transferred to the carrying value of the asset upon
completion, or included in the income statement at the
same time as the discharge of the expenditure commitment.
(b) Translation of financial reports of foreign
operations that have a functional currency that is not
Australian dollars.
The consolidated financial statements are presented in
Australian dollars, which is the functional and
presentation currency of Telstra Corporation Limited.
Our operations include subsidiaries, associates, and
jointly controlled entities, the activities and
operations of which are in an economic environment where
the functional currency is not Australian dollars. The
financial statements of these entities are translated to
Australian dollars (our presentation currency) using the
following method:
|
|
assets and liabilities are translated into Australian
dollars using market exchange rates at balance date; |
|
|
|
equity at the date of investment is translated
into Australian dollars at the exchange rate current at
that date. Movements post-acquisition (other than
retained profits/ accumulated losses) are translated at
the exchange rates current at the dates of those
movements; |
|
|
|
income statements are translated into Australian
dollars at average exchange rates for the year, unless
there are significant identifiable transactions, which
are translated at the exchange rate that existed on the
date of the transaction; and |
|
|
|
currency translation gains and losses are recorded in the foreign currency translation reserve. |
9
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.3 Foreign currency translation (continued)
Exchange differences relating to foreign currency
monetary items forming part of the net investment in
our entities operating in an economic environment where
the functional currency is not Australian dollars, together with related tax effects,
are eliminated against the foreign currency translation
reserve in our consolidated financial statements.
Where we hedge our investment in entities which are in an
economic environment where the functional currency is not
Australian dollars, the gains or losses on the hedging
instrument are recognised in the foreign currency
translation reserve until we dispose of the operation, at
which time the cumulative gains and losses are
transferred to the income statement.
Upon disposal or partial disposal of a foreign operation,
the balance of the foreign currency translation reserve
relating to the entity, or the part disposed of, is
transferred to the income statement and becomes part of
the gain or loss on sale.
2.4 Cash and cash equivalents
Cash includes cash at bank and on hand, bank
deposits, bills of exchange and commercial paper with
an original maturity date not greater than three
months.
Bank deposits are recorded at amounts to be received.
Bills of exchange and commercial paper are classified as
available-for-sale financial assets and are therefore
held at fair value. The carrying amount of these assets
approximates their fair value due to the short term to
maturity.
The statement of cash flow discloses cash net of
outstanding bank overdrafts where applicable.
2.5 Trade and other receivables
Telstra has elected to apply the option available
under AASB 1: First-time Adoption of Australian
Equivalents to International Financial Reporting
Standards (AASB 1) of adopting AASB 132: Financial
Instruments: Disclosure and Presentation (AASB 132) and
AASB 139: Financial Instruments: Recognition and
Measurement (AASB 139) from 1 July 2005. Outlined below
are the relevant accounting policies for trade and other
receivables applicable for the years ending 30 June 2006
and 30 June 2005.
Trade debtors and other receivables are initially
recorded at the fair value of the amounts to be received
and are subsequently measured at amortised cost.
An allowance for doubtful debts is raised based on a review of
outstanding amounts at balance date. Bad debts specifically
provided for in previous years are eliminated against the allowance
for doubtful debts. In all other cases, bad debts are written off as an
expense directly in the income statement.
2.6 Inventories
Our finished goods include goods available for sale, and material and
spare parts to be used in constructing and maintaining the
telecommunications network. We value inventories at the lower of
cost and net realisable value.
We allocate cost to the majority of inventory items on hand at
balance date using the weighted average cost basis. For the
remaining quantities on hand, actual cost is used where the item was
purchased for use in a particular asset or project, and the first in first
out basis is used for materials purchased for production of directories.
Net realisable value of items expected to be sold is the estimated
selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs incurred in marketing, selling and
distribution. It approximates fair value less costs to sell.
Net realisable value of items expected to be consumed, for example
used in the construction of another asset, is the net value expected to
be earned through future use.
2.7 Construction contracts
(a) Valuation
We record construction contracts in progress at cost (including any
profits recognised) less progress billings and any provision for
foreseeable losses.
Cost includes:
|
|
both variable and fixed costs directly related to specific contracts;
|
|
|
|
amounts which can be allocated to contract activity in general and
which can be allocated to specific contracts on a reasonable basis;
and |
|
|
|
costs expected to be incurred under penalty clauses, warranty
provisions and other variances. |
Where a significant loss is estimated to be made on completion, a
provision for foreseeable losses is brought to account and recorded
against the gross amount of construction work in progress.
10
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.7 Construction contracts (continued)
(b) Recognition of profit
Profit is recognised on an individual project basis using the percentage
of completion method. The percentage of completion is calculated
based on estimated costs of completion, refer to note 2.18(d) for
further details.
Profits are recognised when:
|
|
the stage of contract completion can be reliably determined; |
|
|
|
costs to date can be clearly identified; and |
|
|
|
total contract revenues to be received and costs to complete can be
reliably estimated. |
(c) Disclosure
The construction work in progress balance is recorded in current
inventories after deducting progress billings. Where progress billings
exceed the balance of construction work in progress, the net amount
is shown as a current liability within trade and other payables.
2.8 Assets classified as held for sale
Non current assets are classified as held for sale if the carrying amount
is to be recovered principally through a sale transaction, rather than
through continuing use. We only classify an asset as held for sale if it
is available for immediate sale in its present condition subject to only
usual and customary terms, and its sale is highly probable.
We record held for sale assets at the lower of the carrying amount and
fair value less costs to sell. An impairment loss is recognised for any
initial or subsequent write down of the assets to fair value less costs to
sell. We do not depreciate or amortise these assets while they are
classified as held for sale.
2.9 Investments
(a) Controlled entities
Investments in controlled entities are recorded at cost less
impairment of the investment value.
Where we hedge the value of our investment in an overseas controlled entity, the hedge is accounted for in accordance with note 2.26.
(b) Jointly controlled and associated entities
(i) Jointly controlled entities
A jointly controlled entity is a contractual arrangement (in the form of
an entity) whereby two or more parties take on an economic activity
which is governed by joint control. Joint control involves the
contractually agreed sharing of control over an entity where two or
more parties must consent to all major decisions. Our interests in
jointly controlled entities, including partnerships, are accounted for
using the equity method of accounting in the Telstra Group financial
statements and the cost method in the Telstra Entity financial
statements.
Under the equity method of accounting, we adjust the initial recorded
amount of the investment for our share of:
|
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profits or losses for the year after tax since the date of investment; |
|
|
|
reserve movements since the date of investment; |
|
|
|
unrealised profits or losses; |
|
|
|
dividends or distributions received; and |
|
|
|
deferred profit brought to account. |
Our share of all of these items, apart from dividends or distributions received and reserves, is recorded in the income statement.
Where the equity accounted amount of our investment in an entity
falls below zero, we suspend the equity method of accounting and
record the investment at zero. When this occurs, the equity method of
accounting does not recommence until our share of profits and
reserves exceeds the cumulative prior years share of losses and
reserve reductions.
Where we have long term assets that in substance form part of our
investment in equity accounted interests and the equity accounted
amount of investment falls below zero, we reduce the value of the
assets in proportion with our cumulative losses.
(ii) Associated entities
Where we hold an interest in the equity of an entity, generally of
between 20% and 50%, and are able to apply significant influence to
the decisions of the entity, that entity is an associated entity.
Associated entities are accounted for using the equity method of
accounting in the Telstra Group financial statements and the cost
method in the Telstra Entity financial statements.
11
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.9 Investments (continued)
(c) Jointly controlled assets
A jointly controlled asset involves the joint control of one or more
assets acquired and dedicated for the purpose of a joint venture. The
assets are used to obtain benefits for the venturers. Where the asset is
significant we record our share of the asset. We record expenses based
on our percentage ownership interest of the jointly controlled asset.
(d) Listed securities and investments in other corporations
We have elected to apply the exemption available under AASB 1 to
apply AASB 132 and AASB 139 from 1 July 2005. Accordingly, we have
applied previous AGAAP in the comparative information on financial
instruments within the scope of AASB 132 and AASB 139.
Our investments in listed securities and in other corporations are
classified as available-for-sale financial assets and as such are
measured at fair value at each reporting date.
Net fair values of our investments are calculated on the following
bases:
|
|
for listed securities traded in an organised financial market, we use
the current quoted market bid price at balance date; and |
|
|
|
for investments in unlisted entities whose securities are not traded
in an organised financial market, we establish fair value by using
valuation techniques, including reference to discounted cash flows
and fair values of recent arms length transactions involving the
same instruments or other instruments that are substantially the
same. |
We remeasure the fair value of our investments in listed securities and
other corporations at each reporting date. Any gains or losses are
recognised in equity until we dispose of the investment, or we
determine it to be impaired, at which time we transfer all cumulative
gains and losses to the income statement.
2.10 Impairment
(a) Non-financial assets
Our tangible and intangible assets (excluding inventories, assets
arising from construction contracts, deferred tax assets, defined
benefit assets and financial assets) are measured using the cost basis
and are written down to recoverable amount where their carrying
value exceeds recoverable amount.
Assets with an indefinite useful life are not subject to amortisation and
are tested on an annual basis for impairment, or where an indication
of impairment exists. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable.
The recoverable amount of an asset is the higher of its fair value less
costs to sell or its value in use. Value in use represents the present
value of the future amount expected to be recovered through the cash
inflows and outflows arising from the assets continued use and
subsequent disposal. We recognise any decrement in the carrying
value as an expense in the income statement in the reporting period in
which the impairment loss occurs.
In determining value in use, we apply management judgement in
establishing forecasts of future operating performance, as well as the
selection of growth rates, terminal rates and discount rates. These
judgements are applied based on our understanding of historical
information and expectations of future performance.
The expected net cash flows included in determining recoverable
amounts of our assets are discounted to present values using a market
determined, risk adjusted, discount rate. When determining an
appropriate discount rate, we use the weighted average cost of capital
(WACC) as an initial point of reference, adjusted for specific risks
associated with each different category of assets assessed.
For assets that do not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to
which that asset belongs. Our cash generating units (CGUs) are
determined according to the lowest level of aggregation for which an
active market exists and the assets involved create largely
independent cash inflows.
We apply management judgement to establish our CGUs. We have
determined that assets which form part of our ubiquitous
telecommunications network work together to generate net cash
flows. No one item of telecommunications equipment is of any value
without the other assets to which it is connected in order to achieve
the delivery of products and services. As a result, we have determined
that the ubiquitous telecommunications network is a single CGU. We
have referred to this CGU as the Telstra Entity CGU in our financial
report.
The Telstra Entity CGU excludes the hybrid fibre coaxial (HFC) cable
network, which we consider not to be integrated with the rest of our
telecommunications network.
12
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.10 Impairment (continued)
(b) Financial assets
The group has elected to apply the option available under AASB 1 of
adopting AASB 132 and AASB 139 from 1 July 2005. Outlined below are
the relevant accounting policies applicable for the years ending 30
June 2005 and 30 June 2006.
At each reporting date we assess whether there is objective evidence
to suggest that any of our financial assets are impaired.
For financial assets held at fair value, we consider the financial asset
to be impaired when there has been an extended period in which the
fair value of the financial asset has been below the acquisition cost
and the decline in fair value is not expected to be recovered. At this
time, all revaluation losses in relation to the impaired financial asset
that have been accumulated within equity are recognised in the
income statement.
For financial assets held at cost or amortised cost, we consider the
financial asset to be impaired when there is a difference between the
carrying value and the present value of estimated discounted future
cash flows. Any impairment losses are recognised immediately in the
income statement.
Impairment losses recognised in the income statement are not
reversed in relation to investment securities.
2.11 Property, plant and equipment
(a) Acquisition
Items of property, plant and equipment are recorded at cost and
depreciated as described in note 2.11(b). The cost of our constructed
property, plant and equipment includes:
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the cost of material and direct labour; |
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an appropriate proportion of direct and indirect overheads; and |
|
|
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where we have an obligation for removal of the asset or restoration
of the site, an estimate of the cost of restoration or removal if that
cost can be reliably estimated. |
Where settlement of any part of the cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of acquisition. The unwinding of this discount is
recorded within finance costs.
(b) Depreciation
Items of property, plant and equipment, including
buildings and leasehold property, but excluding freehold
land, are depreciated on a straight line basis to the
income statement over their estimated service lives. We
start depreciating assets when they are installed and
ready for use.
The service lives of our significant items of
property, plant and equipment are as follows:
|
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|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
|
Service life |
|
Service life |
Property, plant and equipment |
|
(years) |
|
(years) |
|
Buildings - building shell |
|
|
55 |
|
|
|
55 |
|
- general purpose |
|
|
8 - 40 |
|
|
|
8 - 40 |
|
- fitout |
|
|
10 - 20 |
|
|
|
10 - 20 |
|
|
|
|
|
|
|
|
|
|
Communication assets |
|
|
|
|
|
|
|
|
Buildings - building shell |
|
|
55 |
|
|
|
55 |
|
- network |
|
|
8 - 40 |
|
|
|
8 - 40 |
|
- fitout |
|
|
10 - 20 |
|
|
|
10 - 20 |
|
Customer premises equipment |
|
|
3 - 8 |
|
|
|
3 - 8 |
|
Transmission equipment |
|
|
2 - 25 |
|
|
|
3 - 25 |
|
Switching equipment |
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4 - 12 |
|
|
|
1 - 10 |
|
Mobile equipment |
|
|
2 - 10 |
|
|
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3 - 10 |
|
Cables |
|
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5 - 25 |
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|
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8 - 25 |
|
Ducts and pipes - main cables |
|
|
40 |
|
|
|
40 |
|
- distribution |
|
|
30 |
|
|
|
30 |
|
Other communications plant |
|
|
1 - 30 |
|
|
|
3 - 16 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Leasehold plant and equipment |
|
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3 - 15 |
|
|
|
3 - 15 |
|
Other plant, equipment and motor
vehicles |
|
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3 - 15 |
|
|
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3 - 15 |
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|
The service lives and residual value of our assets are
reviewed each year. We apply management judgment in
determining the service lives of our assets. This
assessment includes a comparison with international
trends for telecommunication companies, and in relation
to communication assets, includes a determination of
when the asset may be superseded technologically or made
obsolete.
13
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.11 Property, plant and equipment (continued)
We account for our assets individually where it is
practical and feasible and in line with commercial
practice. Where it is not practical and feasible, we
account for assets in groups. Group assets are
automatically removed from our financial statements on
reaching the group life. Therefore, any individual asset
may be physically retired before or after the group life
is attained. This is the case for certain communication
assets as we assess our technologies to be replaced by a
certain date.
As part of our review, service lives of our assets are
reassessed. Any reassessment in a particular year will
affect the depreciation expense (either increasing or
decreasing) through to the end of the reassessed useful
life for both that current year and future years. The
net effect of the reassessment for fiscal 2006 was an
increase in our depreciation expense of $66 million
(2005: $60 million decrease) for both the Telstra Group
and Telstra Entity. This reassessment includes the
adjustment arising from our transformation resulting from
the strategic review undertaken, refer to note 7(b) for
further information.
Our major repairs and maintenance expenses relate to
maintaining our exchange equipment and the customer
access network. We charge the cost of repairs and
maintenance, including the cost of replacing minor
items, which are not substantial improvements, to
operating expenses.
2.12 Leased plant and equipment
We account for leases in accordance with AASB 117:
Leases. We distinguish between finance leases, which
effectively transfer substantially all the risks and
benefits incidental to ownership of the leased asset from
the lessor to the lessee, from operating leases under
which the lessor effectively retains all such risks and
benefits.
Where we acquire non current assets via a finance lease,
the lower of the fair value of the asset and the present
value of future minimum lease payments is capitalised as
equipment under finance lease at the beginning of the
lease term. Capitalised lease assets are depreciated on a
straight line basis over the shorter of the lease term or
the expected useful life of the assets. A corresponding
liability is also established and each lease payment is
allocated between the liability and finance charges.
Operating lease payments are charged to the income
statement on a straight line basis over the term of the
lease.
Where we lease properties, costs of improvements to these
properties are capitalised as leasehold improvements and
amortised over the shorter of the useful life of the
improvements or the term of the lease.
2.13 Intangible assets
Intangible assets are assets that have value, but do
not have physical substance. In order to be recognised,
an intangible asset must be either separable or arise
from contractual or other legal rights.
(a) Goodwill
On the acquisition of investments in controlled entities,
jointly controlled and associated entities, when we pay
an amount greater than the fair value of the net
identifiable assets of the entity, this excess is
recognised as goodwill in the Telstra Group balance
sheet. We calculate the amount of goodwill as at the
date of purchasing our ownership interest in the entity.
When we purchase an entity that we will control, the
amount of goodwill is recorded in intangible assets.
When we acquire a jointly controlled or associated
entity, the goodwill amount is included as part of the
cost of the investment.
Goodwill is not amortised but is tested for impairment
in accordance with note 2.10 on an annual basis and when
an indication of impairment exists.
(b) Internally generated intangible assets
Research costs are recorded as an expense as incurred.
Development costs are capitalised if the project is
technically and commercially feasible and we have
sufficient resources to complete the development.
Software assets
We record direct costs associated with the development
of business software for internal use as software assets
if the development costs satisfy the criteria for
capitalisation described above.
Costs included in software assets developed for internal use are:
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external direct costs of materials and services consumed; and |
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payroll and direct payroll-related costs for employees
(including contractors) directly associated with the
project. |
Software assets developed for internal use have a
finite life and are amortised on a straight line basis
over their useful lives to us. Amortisation commences
once the software is ready for use.
14
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.13 Intangible assets (continued)
(c) Acquired intangible assets
We acquire other intangible assets either as part of a
business combination or through separate acquisition.
Intangible assets acquired in a business combination are
recorded at their fair value at the date of acquisition
and recognised separately from goodwill. On initial
acquisition, we apply management judgement to determine
the appropriate allocation of purchase consideration to
the assets being acquired, including goodwill and
identifiable intangible assets.
Intangible assets that are considered to have a finite
life are amortised on a straight line basis over the
period of expected benefit. Intangible assets that are
considered to have an indefinite life are not amortised
but tested for impairment in accordance with note 2.10 on
an annual basis, or where an indication of impairment
exists.
Our acquired intangible assets include
mastheads, patents, trademarks, licences,
brandnames and customer bases.
(d) Deferred expenditure
Deferred expenditure mainly includes costs incurred for
basic access installations and connections fees for in
place and new services, and direct incremental costs of
establishing a customer contract.
Significant items of expenditure are deferred to the
extent that they are recoverable from future revenue and
will contribute to our future earning capacity. Any
costs in excess of future revenue are recognised
immediately in the income statement.
We amortise deferred expenditure over the average
period in which the related benefits are expected to be
realised.
Handset subsidies are expensed as incurred. On
transition to A-IFRS we elected to expense handset
subsidies, which was a change from the previous policy
whereby the cost of the subsidy was deferred and written
off over the average contract term.
(e) Amortisation
The average amortisation periods of our identifiable
intangible assets are as follows:
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|
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|
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|
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|
Telstra Group |
|
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
|
Expected |
|
Expected |
|
|
benefit |
|
benefit |
Identifiable intangible assets |
|
(years) |
|
(years) |
|
Software assets |
|
|
6 |
|
|
|
6 |
|
Patent and trademarks |
|
|
19 |
|
|
|
19 |
|
Licences |
|
|
12 |
|
|
|
11 |
|
Brandnames |
|
|
19 |
|
|
|
20 |
|
Customer bases |
|
|
11 |
|
|
|
13 |
|
Deferred expenditure |
|
|
4 |
|
|
|
4 |
|
|
The service lives of our identifiable intangible assets
are reviewed each year. Any reassessment of service
lives in a particular year will affect the amortisation
expense (either increasing or decreasing) through to the
end of the reassessed useful life for both that current
year and future years. The net effect of the
reassessment for fiscal 2006 was an increase in our amortisation expense of $160
million (2005: $nil) for the Telstra Group and $145
million (2005: $nil) for the Telstra Entity. This
reassessment includes the adjustment arising from our
transformation resulting from the strategic review
undertaken, refer to note 7(b) for further information.
In relation to acquired intangible assets, we apply
management judgement to determine the amortisation period
based on the expected useful lives of the respective
assets. In some cases, the useful lives of certain
acquired intangible assets are supported by external
valuation advice on acquisition. In addition, we apply
management judgement to assess annually, the indefinite
useful life assumption applied to certain acquired
intangible assets.
2.14 Trade and other payables
Trade and other payables, including accruals, are
recorded when we are required to make future payments as
a result of a purchase of assets or services.
15
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.15 Borrowings
Our borrowings fall into two categories:
(a) Borrowings in a designated hedging relationship
Our offshore borrowings which are designated as hedged
items are subject to either fair value or cash flow
hedges. The method by which they are hedged determines
their accounting treatment.
Borrowings subject to fair value hedges are recognised
initially at fair value. The carrying amount of our
borrowings in fair value hedges (to hedge against changes
in value due to interest rate or currency movements) is
adjusted for fair value movements attributable to the
hedged risk. Fair value is calculated using valuation
techniques which utilise data from observable markets.
Assumptions are based on market conditions existing at
each balance date. The fair value is calculated as the
present value of the estimated future cash flows using an
appropriate market based yield curve which is
independently derived and representative of Telstras
cost of borrowing. These borrowings are remeasured each
reporting period and the gains or losses are recognised
in the income statement along with the associated gains
or losses on the hedging instrument.
Borrowings subject to cash flow hedges (to hedge against
currency movements) are recognised initially at fair
value based on the applicable spot price plus any
transaction costs that are directly attributable to the
issue of the borrowing. These borrowings are
subsequently carried at amortised cost, translated at
the applicable spot exchange rate at reporting date.
Any difference between the
final amount paid to discharge the borrowing and the
initial borrowing proceeds is recognised in the income
statement over the borrowing period using the effective
interest method. The effective interest method is a
method of calculating the amortised cost of a financial
liability and of allocating the interest expense over
the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash
payments through the expected life of the financial
liability, or, where appropriate, a shorter period.
Currency gains or losses on the borrowings are recognised
in the income statement, along with the associated gains
or losses on the hedging instrument, which have been
transferred from the cash flow hedging reserve to the
income statement.
(b) Borrowings not in a designated hedging relationship
Borrowings not in a designated hedging relationship
include commercial paper borrowings, Telstra Bonds,
loans from associates, unsecured promissory notes and
other borrowings.
All such instruments are initially recognised at fair
value plus any transaction costs that are directly
attributable to the issue of the instrument and are
subsequently measured at amortised cost. Any difference
between the final amount paid to discharge the borrowing
and the initial borrowing proceeds (including transaction
costs) is recognised in the income statement over the
borrowing period using the effective interest method.
Borrowings are included as non current liabilities except
for those with maturities less than twelve months from
the balance sheet date, which are classified as current
liabilities.
2.16 Provisions
Provisions are recognised when the group has:
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a present legal or constructive obligation to make a
future sacrifice of economic benefits as a result of past
transactions or events; |
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it is probable that a future
sacrifice of economic benefits will arise; and |
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a reliable estimate can be made of the amount of the
obligation. |
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at reporting date, taking into
account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash
flows.
(a) Employee benefits
We accrue liabilities for employee benefits to wages and
salaries, annual leave and other current employee
benefits at their nominal amounts. These are calculated
based on remuneration rates expected to be current at the
date of settlement and include related on costs.
Certain employees who have been employed by Telstra for
at least ten years are entitled to long service leave of
three months (or more depending on the actual length of
employment), which is included in our employee benefits
provision.
We accrue liabilities for other employee benefits not
expected to be paid or settled within 12 months of
balance date, including long service leave, at the
present values of future amounts expected to be
paid. This is based on projected increases in wage and
salary rates over an average of 10 years, experience of
employee departures and periods of service.
16
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.16 Provisions (continued)
We calculate present values using rates based
on government guaranteed securities with similar
due dates to our liabilities.
We apply management judgment in estimating the following
key assumptions used in the calculation of our long
service leave provision at reporting date:
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weighted average projected increases in
salaries; |
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weighted average discount rate; and |
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leave taking rate. |
Refer to note 19 for further details on the key
management judgements used in the calculation of our long
service leave provision.
(b) Workers compensation
We self insure our workers compensation liabilities. We
take up a provision for the present value of these
estimated liabilities, based on an actuarial review of
the liability. This review includes assessing actual
accidents and estimating claims incurred but not
reported. Present values are calculated using
appropriate rates based on the risks specific to the
liability with similar due dates.
Certain controlled entities do not self insure, but
pay annual premiums to third party insurance
companies for their workers compensation
liabilities.
(c) Restoration costs
We provide for costs of restoration or removal in
relation to our fixed assets when we have a legal or
constructive obligation. These costs include our
obligations relating to the dismantling, removal,
remediation, restoration and other expenditure
associated with our fixed assets or site fitouts.
Restoration provisions are initially recorded when a
reliable estimate of the costs to be incurred can be
determined, discounted to present value. Our estimates
are based upon a review of lease contracts, legal
requirements, historical information and expected future
costs. Any changes to these estimates are adjusted on a
progressive basis as required.
Where restoration costs are incurred due to the
acquisition, construction or development of a non current
asset, the provision is
raised and recorded at that time as part of the cost of
the asset where the cost is reliably measurable.
(d) Redundancy and restructuring costs
We recognise a provision for redundancy costs when a
detailed formal plan for the redundancies has been
developed and a valid expectation has been created that
the redundancies will be carried out with those employees
likely to be affected.
We recognise a provision for restructuring when a
detailed formal plan has been approved and we have
raised a valid expectation in those affected by the
restructuring that the restructuring will be carried
out.
2.17 Share capital
Issued and paid up capital is recognised at the
fair value of the consideration received by the
Company.
Any transaction costs arising on the issue of ordinary
shares are recognised directly in equity, net of tax,
as a reduction of the share proceeds received.
Where we undertake a share buy-back, contributed equity
is reduced in accordance with the structure of the
buy-back arrangement. Costs associated with the
buy-back, net of tax, are also deducted from contributed
equity. We also record the purchase of Telstra Entity
shares by our employee share plan trusts as a reduction
in share capital.
Share based remuneration associated with our employee
share plans is recognised as additional share capital.
Non-recourse loans provided to employees to participate
in these employee share plans are recorded as a reduction
in share capital.
Refer to note 2.25 for further details regarding our
accounting for employee share plans.
2.18 Revenue recognition
The underlying accounting principles of revenue
recognition are generally the same for both A-IFRS and
the United States Generally Accepted Accounting
Principles (USGAAP). As such we have applied the more
detailed guidance under USGAAP to the timing of revenue
recognition for both A-IFRS and USGAAP financial
statements where there is no conflict between the two.
Sales revenue
Our categories of sales revenue are recorded after
deducting sales returns, trade allowances, duties and
taxes.
(a) Rendering of services
Revenue from the provision of our telecommunications
services includes telephone calls and other services
and facilities provided, such as internet and data.
17
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.18 Revenue (continued)
We record revenue earned from:
|
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telephone calls on completion of the call; and |
|
|
|
other services generally at completion, or on a
straight line basis over the period of service provided,
unless another method better represents the stage of
completion. |
Installation and connection fee revenues are deferred and
recognised over the average estimated customer life.
Incremental costs directly related to these revenues are
also deferred and amortised over the customer contract
life. Also refer to note 2.13(d).
In relation to basic access installation and connection
revenue, we apply our management judgement to determine
the estimated customer contract life. Based on our
reviews of historical information and customer trends, we
have determined that our average estimated customer life
is 5 years (2005: 5 years). As a result, basic access
installation and connection revenue is recognised over
this period.
(b) Sale of goods
Our revenue from the sale of goods includes revenue from
the sale of customer equipment and similar goods. This
revenue is recorded on delivery of the goods sold.
Generally we record the full gross amount of sales
proceeds as revenue, however if we are acting as an agent
under a sales arrangement, we record the revenue on a net
basis, being the gross amount billed less the amount paid
to the supplier. We review the facts and circumstances
of each sales arrangement to determine if we are an agent
or principal under the sale arrangement.
(c) Rent of network facilities
We earn rent mainly from access to retail and wholesale
fixed and mobile networks and from the rent of dedicated
lines, customer equipment, property, plant and equipment
and other facilities. The revenue of providing access
to the network is recorded on an accrual basis over the
rental period.
(d) Construction contracts
We record construction revenue on a percentage of
contract completion basis. The percentage of
completion of contracts is calculated based on
estimated costs to complete the contract.
Our construction contracts are classified according to
their type. There are three types of construction
contracts, these being material intensive, labour
intensive and short duration. Revenue is recognised on a
percentage of completion basis using the appropriate
measures as follows:
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|
(actual costs / planned costs) x planned
revenue for material intensive projects; |
|
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|
(actual labour hours / planned labour hours) x planned
revenue for labour intensive projects; and |
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short duration projects are those that are expected to be
completed within a month and revenues and costs are
recognised on completion. |
(e) Advertising and directory services
Classified advertisements and display advertisements are
published on a daily, weekly and monthly basis for which
revenues are recognised at the time the advertisement is
published.
All of our Yellow Pages and White Pages directory
revenues are recognised on delivery of the published
directories using the delivery method. We consider our
directories delivered when they have been published and
delivered to customers premises. Revenue from online
directories is recognised over the life of service
agreements, which is on average one year. Voice
directory revenues are recognised at the time of
providing the service to customers.
(f) Royalties
Royalty revenue is recognised on an accrual basis in
accordance with the substance of the relevant agreements.
(g) Interest revenue
We record interest revenue on an accruals basis. For
financial assets, interest revenue is determined by the
effective yield on the instrument (total return).
Revenue arrangements with multiple deliverables
Where two or more revenue-generating activities or
deliverables are sold under a single arrangement, each
deliverable that is considered to be a separate unit of
accounting is accounted for separately. When the
deliverables in a multiple deliverable arrangement are
not considered to be separate units of accounting, the
arrangement is accounted for as a single unit.
18
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.18 Revenue (continued)
We allocate the consideration from the revenue
arrangement to its separate units based on the relative
fair values of each unit. If the fair value of the
delivered item is not available, then revenue is
allocated based on the difference between the total
arrangement consideration and the fair value of the
undelivered item. The revenue allocated to each unit is
then recognised in accordance with our revenue
recognition policies previously described above.
2.19 Advertising expenses
Costs for advertising products and services or
promoting our corporate image are expensed as incurred.
These costs are included in promotion and advertising
expenses within our other expenses category.
2.20 Borrowing costs
Borrowing costs are recognised as an expense
in our income statement when incurred.
2.21 Taxation
(a) Income taxes
Our income tax expense represents the sum of current tax
and deferred tax. Current tax is calculated on
accounting profit after allowing for non-taxable and
non-deductible items based on the amount expected to be
paid to taxation authorities on taxable profit for the
period. Deferred tax is calculated at the tax rates
that are expected to apply to the period when our asset
is realised or the liability is settled. Both our
current tax and deferred tax are calculated using tax
rates that have been enacted or substantively enacted at
reporting date.
We apply the balance sheet liability method for
calculating our deferred tax. Deferred tax is the
expected tax payable or recoverable on all taxable and
deductible temporary differences determined through
reference to the tax bases of assets and liabilities and
their carrying amount for financial reporting purposes as
at the reporting date.
We generally recognise deferred tax liabilities for
all taxable temporary differences, except to the
extent that the deferred tax liability arises from:
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the initial recognition of goodwill; or |
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the initial recognition of an asset or liability in a
transaction that is not a business combination and
affects neither our accounting profit or taxable income
at the time of the transaction. |
In respect of our investments in subsidiaries, associates
and jointly controlled entities, we recognise deferred
tax liabilities for all taxable temporary differences,
except where we are able to control the timing of our
temporary difference reversal and it is probable that the
temporary difference will not reverse in the foreseeable
future.
Subject to the exceptions described above, we generally
recognise deferred tax assets for all deductible
temporary differences and for the carry forward of unused
tax losses and tax credits. These tax assets are
recognised to the extent that it is probable that taxable
profit will be available against which the deductible
temporary differences, and the carry forward of unused
tax losses and tax credits can be utilised.
In respect of our investments in subsidiaries, associates
and jointly controlled entities, we recognise deferred
tax assets for all deductible temporary differences
provided it is probable that our temporary differences
will reverse in the future and taxable profit will be
available against which our temporary differences can be
utilised.
The carrying amount of our deferred tax assets is
reviewed at each reporting date. We reduce the carrying
amount to the extent that it is no longer probable that
sufficient taxable profit will be available to allow the
benefit of part or the entire deferred tax asset to be
utilised. At each reporting date, we subsequently
reassess our unrecognised deferred tax assets to
determine whether it has become probable that future
taxable profit will allow this deferred tax asset to be
recovered.
Our current and deferred tax is recognised as an expense
or revenue in the income statement, except when it
relates to items directly debited or credited to equity,
in which case our current and deferred tax is also
recognised directly in equity.
The Telstra Entity and its Australian resident wholly
owned entities elected to form a tax consolidated group
from 1 July 2002. The Telstra Entity, as the head entity
in the tax consolidated group, recognises in addition to
its transactions, the current tax liabilities and the
deferred tax assets arising from unused tax losses and
tax credits for all entities in the group. The Telstra
Entity and the entities in the tax consolidated group
account for their own current tax expense and deferred
tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a
separate taxpayer within the group.
19
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.21 Taxation (continued)
Under our tax funding arrangements, amounts
receivable recognised by the Telstra Entity for the
current tax payable assumed of our wholly owned entities
are booked as a current receivable. Amounts payable
recognised by the Telstra Entity for the current tax
receivable of our wholly owned entities are booked as a
current payable. Amounts relating to unused tax losses
and tax credits of the wholly owned entities and assumed
by the Telstra Entity are recorded as dividend revenue.
During fiscal 2005, no tax funding arrangement was in
place and as a result, these funding amounts were
recorded as equity contributions to or distributions from
our controlled entities.
We offset deferred tax assets and deferred tax
liabilities in the balance sheet where they relate to
income taxes levied by the same taxation authority and to
the extent that we intend to settle our current tax
assets and liabilities on a net basis. Our deferred tax
assets and deferred tax liabilities are netted within the
tax consolidation group, as these deferred tax balances
relate to the same taxation authority. We do not net
deferred tax balances between controlled entities, apart
from those within the tax consolidation group.
(b) Goods and Services Tax (GST) (including other value added taxes)
We record our revenue, expenses and assets net of any
applicable goods and services tax (GST), except where the
amount of GST
incurred is not recoverable from the Australian Taxation
Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the
asset or as part of the expense item.
Receivables and payables balances include GST where we
have either included GST in our price charged to
customers or a supplier has included GST in their price
charged to us. The net amount of GST due, but not paid,
to the ATO is included under payables.
2.22 Earnings per share
(a) Basic earnings per share
Basic earnings per share (EPS) is determined by dividing
profit for the year after income tax attributable to
members of the company, excluding any costs of servicing
equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the
period.
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the
profit attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding
during the period (adjusted for the effects of the
instruments in the Telstra Growthshare Trust and the
Telstra Employee Share Ownership Plans).
2.23 Insurance
We specifically carry the following types of insurance:
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property; |
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travel/personal accident; |
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third party liability; |
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directors and officers
liability; |
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company reimbursement; and |
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other insurance from time to time. |
For risks not covered by insurance, any losses are
charged to the income statement in the year in which
the loss is reported.
The Telstra Entity and certain controlled entities are
self insured for workers compensation.
2.24 Post-employment benefits
(a) Defined contribution plans
Our commitment to defined contribution plans is limited
to making contributions in accordance with our minimum
statutory requirements. We do not have any legal or
constructive obligation to pay further contributions if
the fund does not hold sufficient assets to pay all
employee benefits relating to current and past employee
services.
Contributions to defined contribution plans are recorded
as an expense in the income statement as the
contributions become payable. We recognise a liability
when we are required to make future payments as a result
of employee services provided.
(b) Defined benefit plans
We currently sponsor a number of post-employment benefit
plans. As these plans have elements of both defined
contribution and defined benefit, these hybrid plans are
treated as defined benefit plans in accordance with AASB
119: Employee Benefits. We recognise an
asset/(liability) for the net surplus/(deficit) recorded
in each of our post-employment defined benefit plans.
At reporting date, where the fair value of the plan
assets exceeds the present value of the defined benefit
obligations, the net surplus is recognised as an asset.
We recognise the asset as we have the ability to control
this surplus to generate future funds that are available
to us in the form of reductions in future contributions
or as a cash refund.
At reporting date, where the fair value of the plan
assets is less than the present value of the defined
benefit obligations, the net deficit would be recognised
as a liability.
20
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.24 Post-employment benefits (continued)
We use fair value to determine the value of the plan assets at reporting date. Fair value is
calculated by reference to the net market values of the plan assets.
Defined benefit obligations are based on the expected future payments required to settle the
obligations arising from our current and past employee services. This obligation is influenced by
many factors, including final salaries and employee turnover. We employ qualified actuaries to
calculate the present value of the defined benefit obligations. These obligations are measured net
of tax.
The actuaries use the projected unit credit method to determine the present value of the defined
benefit obligations of each plan. This method determines each year of service as giving rise to an
additional unit of benefit entitlement. Each unit is measured separately to calculate the final
obligation. The present value is determined by discounting the estimated future cash outflows
using rates based on government guaranteed securities with similar due dates to these expected cash
flows.
We recognise all our defined benefit costs in the income statement with the exception of actuarial
gains and losses that are recognised directly in retained profits. Components of defined benefit
costs include current and past service cost, interest cost and expected return on assets. Current
and past service cost represents the increase in the present value of the defined benefit
obligation resulting from our employees service in the current and prior periods respectively.
Interest cost represents the increase in the present value of the defined benefit obligation
resulting from the employee benefits being one period closer to settlement. Expected return on
assets represents movement in market value interest, dividends and other revenue items that is
expected to be derived from plan assets.
Actuarial gains and losses are based on an actuarial valuation of each defined benefit plan at
reporting date. Actuarial gains and losses represent the differences between previous actuarial
assumptions of future outcomes and the actual outcome, in addition to the effect of changes in
actuarial assumptions.
The actuaries apply judgment in estimating the following key assumptions used in the calculation of
our defined benefit assets at reporting date:
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discount rates; |
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salary inflation rate;
and |
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expected return on plan assets. |
The estimates applied in our calculation have a significant impact on the reported amount of our
defined benefit plan assets of $1,029 million (2005: $247 million). If the estimates prove to be
incorrect, the carrying value of our defined benefit assets may be materially impacted in the next
reporting period. Additional volatility may also potentially be recorded in retained profits to
reflect differences between actuarial assumptions of future outcomes applied at the current
reporting date and the actual outcome in the next annual reporting period.
Refer to note 28 for details on the key estimates used in the calculation of our defined benefit
assets.
2.25 Employee share plans
We own 100% of the equity of Telstra ESOP Trustee Pty Ltd, the corporate trustee for the
Telstra Employee Share Ownership Plan Trust (TESOP97) and Telstra Employee Share Ownership Plan
Trust II (TESOP99). We consolidate the results, position and cash flows of TESOP97 and TESOP99.
The Telstra Growthshare Trust (Growthshare) was established to allocate equity based instruments as
required. Current equity based instruments include options, restricted shares, performance rights,
deferred shares, incentive shares, directshares and ownshares. Options, performance rights, and
restricted shares are subject to performance hurdles. Deferred shares and incentive shares are
subject to a specified period of service.
We own 100% of the equity of Telstra Growthshare Pty Ltd, the corporate trustee for Growthshare.
We also include the results, position and cash flows of Growthshare.
We recognise an expense for all share-based remuneration determined with reference to the fair
value at grant date of the equity instruments issued. The fair value of our equity instruments is
calculated using a valuation technique consistent with the Black Scholes methodology which utilises
Monte Carlo simulations, to estimate the price of those equity instruments in an arms length
transaction between knowledgeable, willing parties. The fair value is charged against profit over
the relevant vesting periods, adjusted to reflect actual and expected levels of vesting.
Under the transitional exemptions of AASB 1, we have elected not to apply the requirements of AASB
2: Share-Based Payment (AASB 2) to equity instruments granted prior to 7 November 2002.
Directshare enables non-executive directors to acquire a minimum of 20% of their fees in Telstra
shares. Ownshare enables eligible employees to be provided part of their remuneration in Telstra
shares. Telstra purchases shares on market to meet the requirements of directshare and ownshare
and expenses these costs as part of the participants remuneration.
21
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.26 Derivative financial instruments
We use derivative financial instruments such as forward exchange contracts, cross currency
swaps and interest rate swaps to hedge risks associated with foreign currency and interest rate
fluctuations.
The use of hedging instruments is governed by the guidelines set by our Board of Directors.
(a) From 1 July 2004 to 30 June 2005
We have elected to apply the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1
July 2005. Accordingly, we have applied previous AGAAP in the comparative information on financial
instruments within the scope of AASB 132 and AASB 139. For further information on previous AGAAP
refer to the annual report for the year ended 30 June 2005.
(b) Adjustments on transition date: 1 July 2005
Under AASB 132/139, our accounting policy has changed to recognise our financial instruments in the
balance sheet and to record all derivatives at fair value. At the date of transition, changes in
the carrying amounts of derivatives are taken to retained profits or reserves, depending on the
hedge type. For further information concerning the adjustments on transition date reference should
be made to note 36.
(c) From 1 July 2005
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured to fair value. The method of recognising the resulting
remeasurement gain or loss depends on whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged. Where we hold derivative financial instruments
that are not designated as hedges, they are categorised as held for trading financial
instruments. All of our derivative financial instruments are stated at fair value.
The carrying value of our cross currency and interest rate swaps refers to the fair value of our
receivable or payable under the swap contract, recorded as a hedge receivable or hedge payable in
our balance sheet. We do not offset the hedge receivable or hedge payable with the underlying
financial asset or financial liability being hedged, as the transactions are generally with
different counterparties and are not generally settled on a net basis.
Where we have a legally recognised right to set off the financial asset and the financial
liability, and we intend to settle on a net basis or simultaneously, we record this position on a
net basis in our balance sheet. Where we enter into master netting arrangements relating to a
number of financial instruments, have a legal right of set off, and intend to do so, we also
include this position on a net basis in our balance sheet.
Our derivative instruments that are held to hedge exposures can be classified into three different
types, depending on the reason we are holding them fair value hedges, cash flow hedges and hedges
of net investment in foreign operations.
Hedge accounting can only be utilised where effectiveness tests are met on both a prospective and
retrospective basis. Ineffectiveness may result in significant volatility in the income statement.
In order for a derivative instrument to qualify for hedge accounting it must be formally designated
and documented as a hedge of a particular item or transaction, it must be expected to be highly
effective in
offsetting changes in cash flows or fair value of the hedged item, and for cash flow hedges of
forecast transactions, the forecast transaction must be highly probable.
We document at the inception of a transaction the relationship between hedging instruments and
hedged items, as well as our risk management objective and strategy for undertaking various hedge
transactions. We also document our assessment, both at hedge inception and on an ongoing basis, of
whether the hedging instruments that are used in hedging transactions have been, and will continue
to be, highly effective in offsetting changes in fair values or cash flows of hedged items.
(i) Fair value hedges
We use fair value hedges to mitigate the risk of changes in the fair value of our foreign currency
borrowings from foreign currency and interest rate fluctuations over the hedging period.
Where a fair value hedge qualifies for hedge accounting, gains or losses from remeasuring the fair
value of the hedge instrument are recognised in the income statement, together with gains and
losses in relation to the hedged item where those gains or losses relate to the risks intended to
be hedged. This will increase volatility of reported profits due to the inclusion of some
ineffectiveness arising from the application of hedge accounting.
22
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.26 Derivative financial instruments (continued)
(ii) Cash flow hedges
We use cash flow hedges to mitigate the risk of variability of future cash flows attributable to
foreign currency fluctuations over the hedging period. Cash flow hedges are used for our foreign
currency borrowings, and our ongoing business activities, predominantly where we have highly
probable purchase or settlement commitments in foreign currencies.
Where a cash flow hedge qualifies for hedge accounting, the effective portion of gains or losses on
remeasuring the fair value of the hedge instrument are recognised directly in equity in the cash
flow hedging reserve until such time as the hedged item affects profit or loss, then the gains or
losses are transferred to the income statement. However, in our hedges of forecast transactions,
when the forecast transaction that is hedged results in the recognition of a non-financial asset
(for example, inventory or fixed asset), the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of the initial cost or carrying amount of
the asset. Gains or losses on any portion of the hedge determined to be ineffective are recognised
immediately in the income statement. The application of hedge accounting will create some
volatility in equity reserve balances.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains
in equity and is recognised when the hedged item is ultimately recognised in the income statement.
If a forecast hedged transaction is no longer expected to occur, the cumulative gains or losses on
the hedging instrument that were reported in equity are transferred immediately to the income
statement.
(iii) Hedges of a net investment in a foreign operation
Our investments in foreign operations are exposed to foreign currency risk, which arises when we
translate the net assets of our foreign investments from their functional currency to Australian
dollars. We hedge our net investments to mitigate exposure to this risk by using forward foreign
currency contracts, cross currency swaps and/or commercial paper in the relevant currency of the
investment.
Gains and losses on remeasurement of our derivative instruments designated as hedges of foreign
investments are recognised in the foreign currency translation reserve in equity to the extent they
are considered to be effective.
The cumulative amount of the recognised gains or losses included in equity are transferred to the
income statement when the foreign operation is sold.
For all of our hedging instruments (fair value, cash flow or net investment), any gains or losses
on remeasuring to fair value any portion of the instrument not considered to be effective are
recognised directly in the income statement in the period in which they occur.
(iv) Derivatives that are not in a designated hedging relationship
For any held for trading derivative instruments, i.e. those which are not in a designated hedging
relationship, any gains or losses on remeasuring the instruments to fair value are recognised
directly in the income statement in the period in which they occur.
(v) Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at fair value through profit or loss.
23
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.27 Fair value estimation
The fair value of our derivatives and some financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure purposes.
Valuation techniques include where applicable, reference to prices quoted in active markets,
discounted cash flow analysis, fair value of recent arms length transactions involving the same
instruments or other instruments that are substantially the same, and option pricing models.
We calculate the fair value of our forward exchange contracts by reference to forward exchange
market rates for contracts with similar maturity profiles at the time of valuation.
The net fair values of our cross currency and interest rate swaps and other financial assets and
financial liabilities that are measured at fair value (apart from our listed investments) are
determined using valuation techniques which utilise data from observable markets. Assumptions are
based on market conditions existing at each balance date. The fair value is calculated as the
present value of the estimated future cash flows using an appropriate market based yield curve,
which is independently derived and representative of Telstras cost of borrowing. The net fair
values of our listed investments are determined by reference to prices quoted on the relevant stock
exchanges where the securities are traded.
Unless there is evidence to suggest otherwise, the nominal value of financial assets and financial
liabilities less any adjustments for impairment with a short term to maturity are considered to
approximate net fair value.
2.28 Financial assets
From 1 July 2004 to 30 June 2005
We have elected to apply the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1
July 2005. Accordingly, we have applied previous AGAAP in the comparative information on financial
instruments within the scope of AASB 132 and AASB 139. For further information on previous AGAAP
refer to the annual report for the year ended 30 June 2005.
(a) Adjustments on transition date: 1 July 2005
The nature of the main adjustments to ensure this information complies with AASB 132 and AASB 139
are that, with the exception of held-to-maturity investments and loans and receivables which are
measured at amortised cost (refer below), fair value is the measurement basis. Fair value is
inclusive of transaction costs. At the date of transition, adjustments to carrying amounts are
taken to retained profits or reserves. With the exception of those financial assets which are
designated in hedge relationships (refer to note 2.26), at the date of transition to AASB 132 and
AASB 139 there were no significant adjustments to carrying amounts. For further information
concerning the adjustments on transition date, reference should be made to note 36.
(b) From 1 July 2005
We classify our financial assets in the following categories. These are financial assets at fair
value through profit or loss, loans and receivables, held-to-maturity investments, and
available-for-sale financial assets. The classification depends on the purpose for which the
investments were acquired. We determine the classification at initial recognition and re-evaluate
this designation at each reporting date.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at
fair value through profit or loss. Derivatives are categorised as held for trading unless they are
designated as hedges. Assets in this category are classified as current assets if they are either
held for trading or are expected to be realised within twelve months of the balance date.
(ii) Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They arise when we provide money, goods or services directly
to a debtor with no intention of selling the receivable. They are included in current assets,
except for those with maturities greater than twelve months after the balance sheet date, which are
classified as non current assets. Loans and receivables are included in receivables in the balance
sheet.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturities where we have the positive intention and ability to hold to maturity.
24
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.28 Financial assets (continued)
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are
non-derivatives that are either designated in this category or not classified in any of the other
categories. They are included in non current assets unless management intends to dispose of the
investment within twelve months of the balance sheet date.
Available-for-sale financial assets and financial assets at fair value through profit and loss are
subsequently carried at fair value. Loans and receivables and held-to-maturity investments are
subsequently carried at amortised cost using the effective interest method less impairment. The
effective interest method is a method of calculating the amortised cost of a financial asset and of
allocating the interest expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial
asset, or, where appropriate, a shorter period.
In the event that we have financial assets at fair value through the profit or loss realised and
unrealised gains and losses arising from changes in the fair value are included in the income
statement in the period in which they arise. Unrealised gains and losses arising from changes in
the fair value of financial assets classified as available-for-sale are recognised in equity in the
available-for-sale investments reserve. When financial assets classified as available-for-sale are
sold or impaired, the accumulated fair value adjustments, previously recognised in equity, are
included in the income statement.
Purchases and sales of financial assets are recognised on settlement date the date on which we
receive or deliver an asset. Financial assets are initially recognised at fair value plus, in the
case of a financial asset not at fair value through profit and loss, transaction costs. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and we have transferred substantially all the risks and rewards of
ownership.
2.29 Financial instrument transaction costs
We have elected to apply the exemption available under AASB 1 to apply AASB 132 and AASB 139
from 1 July 2005. Accordingly, we have applied previous AGAAP in the comparative information on
financial instruments within the scope of AASB 132 and AASB 139. Under previous AGAAP, transaction
costs were excluded from the carrying value of our financial assets and financial liabilities
disclosed in the financial report. Under A-IFRS such costs are included in the carrying amounts.
At the date of transition to AASB 132 and AASB 139 the adjustment to carrying amounts was
immaterial.
25
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
3. Earnings per share
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Telstra Group |
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Year ended 30 June |
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2006 |
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2005 |
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¢ |
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¢ |
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Basic earnings per share |
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25.7 |
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34.7 |
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Diluted earnings per share |
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25.7 |
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34.6 |
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$m |
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$m |
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Earnings used in the calculation of basic and diluted earnings per share |
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Profit for the year |
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3,181 |
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4,309 |
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Number of shares |
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(millions) |
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Weighted average number of ordinary shares (a) |
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Weighted average number of ordinary shares used in the calculation of basic earnings per share (b) |
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12,366 |
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12,430 |
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Effect of dilutive employee share instruments (c) |
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35 |
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37 |
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Weighted average number of ordinary shares used in the calculation of diluted earnings per share |
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12,401 |
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12,467 |
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(a) |
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In order to underpin the equity instruments issued under the Growthshare plan, Growthshare
purchase shares on market. These shares are not considered to be outstanding for the purposes of
computing basic and diluted earnings per share. |
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(b) |
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During fiscal 2005, we completed an off-market share buy-back of 185,284,669 ordinary shares as
part of our capital management program. The ordinary shares were bought back at $4.05 per share,
comprising a fully franked dividend component of $2.55 per share and a capital component of $1.50
per share. The Commonwealth of Australia did not participate in the share buy-back. |
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|
Refer to note 21 for full details on our movement in issued ordinary shares, including further
discussion on our prior year share buy-back. |
|
(c) |
|
In fiscal 2006 and fiscal 2005, the following equity instruments are considered dilutive to
earnings per share: |
|
|
deferred share instruments issued under Telstra Growthshare Trust (Growthshare); |
|
|
|
incentive shares granted under the Growthshare short term incentive scheme; and |
|
|
|
share options issued under Telstra Employee Share Ownership Plan I (TESOP97). |
In fiscal 2006 and fiscal 2005, the following equity instruments are not considered dilutive to
earnings per share:
|
|
performance rights, restricted shares and options issued under Growthshare; and |
|
|
|
share options issued under Telstra Employee Share Ownership Plan II (TESOP99). |
Refer to note 31 for details regarding equity instruments issued under the Growthshare and TESOP
share plans.
26
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
4. Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous year final dividend paid |
|
|
1,739 |
|
|
|
1,639 |
|
|
|
1,739 |
|
|
|
1,639 |
|
Previous year special dividend paid with the final dividend |
|
|
746 |
|
|
|
|
|
|
|
746 |
|
|
|
|
|
Interim dividend paid |
|
|
1,739 |
|
|
|
1,739 |
|
|
|
1,739 |
|
|
|
1,739 |
|
Special dividend paid with the interim dividend |
|
|
746 |
|
|
|
746 |
|
|
|
746 |
|
|
|
746 |
|
|
|
|
|
|
|
Total dividends paid |
|
|
4,970 |
|
|
|
4,124 |
|
|
|
4,970 |
|
|
|
4,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per ordinary share paid |
|
|
¢ |
|
|
|
¢ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous year final dividend paid |
|
|
14.0 |
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
Previous year special dividend paid with the final dividend |
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend paid |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend paid with the interim dividend |
|
|
6.0 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends paid |
|
|
40.0 |
|
|
|
33.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our dividends paid are fully franked at a tax rate of 30%.
Dividends per ordinary share declared
Our dividends declared per share in respect of fiscal year as disclosed on the face of our income
statement is detailed below:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
¢ |
|
|
¢ |
|
|
|
|
Dividends declared per ordinary share |
|
|
|
|
|
|
|
|
Interim dividend |
|
|
14.0 |
|
|
|
14.0 |
|
Special dividend paid with the interim dividend |
|
|
6.0 |
|
|
|
6.0 |
|
Final dividend (a) |
|
|
14.0 |
|
|
|
14.0 |
|
Special dividend paid with the final dividend |
|
|
|
|
|
|
6.0 |
|
|
|
|
Total |
|
|
34.0 |
|
|
|
40.0 |
|
|
|
|
|
|
|
(a) |
|
As our final dividend for fiscal 2006 was not declared, determined or publicly recommended by
the Board as at 30 June 2006, no provision for dividend was raised prior to, or as at, that date in
the balance sheet. Our final dividend has been reported as an event subsequent to balance date and
the provision for dividend has been raised at the declaration date. Refer to note 34 for further
details. |
27
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
4. Dividends (continued)
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
The combined amount of exempting and franking credits available to us for the
next fiscal year are: |
|
|
|
|
|
|
|
|
Combined exempting and franking account balance (a) |
|
|
6 |
|
|
|
285 |
|
Franking credits that will arise from the payment
of income tax payable as at 30 June (b) |
|
|
400 |
|
|
|
519 |
|
Franking credits and exempting credits that we may be
prevented from distributing in the next fiscal year |
|
|
(24 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
382 |
|
|
|
780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Franking debits that will arise on the payment of dividends declared after 30
June (c) |
|
|
|
|
|
|
|
|
Final dividend |
|
|
745 |
|
|
|
745 |
|
Special dividend paid with the final dividend |
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
745 |
|
|
|
1,065 |
|
|
|
|
|
|
|
(a) |
|
Previously, the Telstra Entity and its Australian resident wholly owned entities elected to
form a tax consolidated group. As part of the election to enter tax consolidation, the tax
consolidated group is treated as a single entity for income tax purposes. On entry into tax
consolidation, the franking credits held in the franking accounts and exempting accounts of the
subsidiary members was transferred to the Telstra Entity. As a result, one franking account and
one exempting account is maintained by the Telstra Entity for the tax consolidated group. |
|
|
|
As at 30 June 2006, the Telstra Entity had a combined exempting and franking account balance of $6
million (2005: $285 million). This total combines the deficit in our franking account of $18
million (2005: surplus of $261 million) and a surplus of $24 million (2005: $24 million) in our
exempting account. |
|
|
|
The franking account balance represents the amount of tax paid by the entity
that is available for distribution to shareholders. As at 30 June 2006, our franking account
balance was in deficit. As a result, we are required to pay franking deficit tax of $18 million in
July 2006, which will eliminate the deficit in the franking account balance and be fully offset
against our fiscal 2006 income tax assessment. In relation to our exempting account, there are
statutory restrictions placed on the distribution of credits from this account. |
|
|
|
Additional franking
credits will arise when the Telstra Entity pays tax instalments during fiscal 2007, relating to the
fiscal 2006 and 2007 income tax years. Franking credits will be used when the Telstra Entity pays
its 2006 final ordinary dividend during fiscal 2007. |
|
(b) |
|
Franking credits that will arise from the payment of income tax are expressed at the 30% tax
rate on a tax paid basis. This balance represents the current tax liabilities as at 30 June 2006
for the tax consolidated group. |
|
(c) |
|
The franking debits that will arise when we pay our final ordinary dividend are expressed as
the amount of franking credits that will be attached to a fully franked distribution. |
We believe our
current balance of franking credits combined with the franking credits that will arise on tax
instalments expected to be paid during fiscal 2007, will be sufficient to cover the franking debits
arising from our final dividend. Refer to note 34 for further details in relation to our dividends
declared subsequent to year end.
28
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information
We report our segment information on the basis of business segments as our risks and returns
are affected predominantly by differences in the products and services we provide through those
segments.
Our
internal management reporting structure drives how our Company is organised and managed. This internal structure provides the initial basis for
determining our business segments.
Our business segments are predominantly distinguishable by the different type of customers we
deliver our key products and services to. Our customer facing business segments service different
customer types. Other reportable business segments are also aligned with our specific customer or
business needs. These segments provide operational support services or product support services to
our customer facing business segments, or service other telecommunication carriers. Our Other
segment consists of various business units that do not qualify as business segments in their own
right and which service a variety of customer or business needs.
The main adjustments from our internal management reporting structure to our reported business
segments are in relation to certain offshore operations. For internal management reporting
purposes, our TelstraClear group (TelstraClear) is included with Telstra Enterprise and Government,
our CSL New World Mobility group (CSL New World) is a business unit in its own right, and the
International Head Office group is included as part of Strategic Marketing. These offshore
operations are reported as part of a segment we have called Telstra International for segment
reporting purposes.
For the purposes of the applicable accounting standard, we consider that the risks and returns of
these offshore operations differ from those of our local operations and as a result we have grouped
these operations into the Telstra International business segment.
Business segments
During fiscal 2006, we created the following new business segments:
|
|
Telstra Business; |
|
|
|
Telstra Operations; and |
|
|
|
Strategic Marketing. |
The Telstra Business group has been drawn from the Telstra Consumer Marketing and Channels group
(formerly known as Telstra Consumer and Marketing), Telstra Country Wide and the Telstra Enterprise
and Government (formerly known as Telstra Business and Government) business units.
The Strategic Marketing group was drawn from various business units across Telstra comprising
mainly Telstra Consumer Marketing and Channels.
The Telstra Operations group combined Telstra Services (formerly known as Infrastructure Services),
Telstra Technology, Innovation and Products, and Operations Support, which moved from being
reported within our corporate areas.
Those business segments not impacted by the above restructures are substantially consistent with
their structure in the prior year. We have restated all our comparative information to reflect our
current reporting position as if all our new business segments and segment accounting policies
existed in fiscal 2005.
For segment reporting purposes, the Telstra Group is
organised into the following business segments:
Telstra Consumer Marketing and Channels (TC&C) is responsible for:
|
|
the provision of the full range of telecommunication products, services and communication
solutions to consumers; and |
|
|
|
leading the mass market channels including inbound and outbound call centres, Telstra Shops
and Telstra Dealers. |
Telstra Business (TB) is responsible for:
|
|
the provision of the full range of telecommunication products and services, communication
solutions, and information and communication technology services to small to medium enterprises. |
Telstra Enterprise and Government (TE&G) is responsible for:
|
|
the provision of the full range of telecommunication products and services, communication
solutions, and information and communication technology services to corporate and government
customers; and |
|
|
|
the provision of global communication solutions to multi-national corporations through our
interests in the United Kingdom, Asia and North America. |
Telstra Wholesale (TW) is responsible for:
|
|
the provision of a wide range of telecommunication products and services delivered over our
networks and associated support systems to: |
|
|
|
non-Telstra branded carriers, carriage service providers, Internet service providers, system
integrators and application service providers; and |
|
|
|
|
infrastructure owners and managers who acquire
infrastructure services. |
29
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
Sensis is responsible for:
|
|
the management and growth of the information, advertising and directories business, including
printed publications, directory assistance, and online products and services. |
Telstra International (TInt.) consists of the following offshore business operations:
|
|
CSL New World is responsible for our operations in Hong Kong that mainly generate revenues
from the mobiles market; |
|
|
|
International Head Office Group is responsible for our Asia-Pacific investments; and |
|
|
|
TelstraClear is our New Zealand subsidiary that provides integrated telecommunications
services to the New Zealand market. |
Telstra Operations (TO) is responsible for:
|
|
co-ordination and execution for our companys multi-year business improvement and
transformation program; |
|
|
|
leading the identification, analysis, validation, development and implementation of product,
technology and information technology strategies for both the network infrastructure and customer
solutions of our Company; |
|
|
|
overall planning, design, specification of standards, commissioning and decommissioning of our
communication networks; |
|
|
|
construction of infrastructure for our Companys fixed, mobile, Internet protocol (IP) and
data networks; |
|
|
|
operation and maintenance, including activation and restoration of these networks; |
|
|
|
supply and delivery of information technology solutions to support our products, services and
customer support function; |
|
|
|
the development and lifecycle management of products and services over the networks, as well
as application platforms and the online environment; and |
|
|
|
operational support functions for our Company, including procurement, billing, credit
management and property management. |
Telstra Country Wide (TCW) is responsible for:
|
|
the management and control of providing telecommunication products and services to consumer,
small business, enterprise and some government customers outside the mainland state capital cities,
in outer metropolitan areas, and in Tasmania and the Northern Territory. |
Telstra BigPond is responsible for:
|
|
the management and control of our retail Internet products, services and content, contact
centres, customer relations and associated functions, for broadband and narrowband delivery. |
Telstra Media is responsible for:
|
|
the management of our investment interest in the FOXTEL partnership; |
|
|
|
the development and management of the hybrid fibre coaxial (HFC) cable network; and |
|
|
|
investigation and development of an interactive PayTV (IPTV) service. |
Strategic Marketing is responsible for:
|
|
the co-ordination and delivery of marketing activities across our Company and market segments. |
Corporate areas include:
|
|
Legal Services provides legal services across the Company; |
|
|
|
Public Policy and Communications responsible for managing our relationships and positioning
with key groups such as our customers, the media, governments, community groups and staff. It also
has responsibility for regulatory positioning and negotiation; |
|
|
|
Finance and Administration encompasses the functions of business and finance services,
treasury, risk management and assurance, investor relations and the office of the company
secretary. It also includes the financial management of the majority of the Telstra Entity fixed
assets (including network assets) through the Asset Accounting Group; and |
|
|
|
Human Resources encompasses talent management, organisational development, human resource
operations, health, safety and environment, as well as workplace relations and remuneration. |
In our segment financial results, the Other segment consists of
various business units that do not qualify as reportable segments in
their own right. These include:
|
|
Telstra Country Wide; |
|
|
|
Telstra BigPond; |
|
|
|
Telstra Media; |
|
|
|
Strategic Marketing; and |
|
|
|
our corporate areas. |
30
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
Segment financial results
For segment reporting purposes, we have reallocated certain items between the respective business
segments pursuant to the definitions of segment revenues, segment expenses, segment assets and
segment liabilities contained in the applicable accounting standard, where a reasonable allocation
basis exists.
Where no reasonable allocation basis exists, we have not reallocated individual items to
alternative segments. For segment reporting purposes, these items are reported within the same
business segment as for internal management reporting. As a result, our segment revenues, segment
expenses, segment assets and segment liabilities do not reflect actual operating results achieved
for our business segments in certain circumstances.
The following narrative further explains our segment results for those individual items where it is
considered that no reasonable allocation basis exists:
|
|
Sales revenue associated with mobile handsets for TC&C, TB and TE&G are allocated totally to the
TC&C segment, with the exception of some products sold in relation to small to medium enterprises
which are allocated to TB. Ongoing prepaid and postpaid mobile revenues derived from our mobile
usage is recorded in TC&C, TB and TE&G depending on the type of customer serviced. In addition,
the majority of goods and services purchased associated with our mobile revenues are allocated to
the TC&C segment. As a result, the TC&C segment also holds segment assets and segment liabilities
related to those revenues and expenses recorded in TC&C; |
|
|
|
trade debtors in relation to the mobile repayment option on mobile handsets sold by our
dealers are allocated totally to TC&C; and |
|
|
|
revenue received in advance in relation to installation and connection fees is allocated totally
to TC&C. |
These allocations reflect managements accountability framework and internal reporting system and
accordingly no reasonable basis for reallocation to the respective business segments exist.
In addition, revenue derived from our BigPond Internet products and its related segment assets are
recorded in the customer facing business segments of TC&C, TB and TE&G. Certain distribution costs
in relation to these products are recognised in these three business segments. Telstra Operations
recognise certain expenses in relation to the installation and running of the broadband cable
network. The related segment assets are managed by the Asset Accounting Group. In accordance with
our application of the business segment definition in relation to customer type, we have not
reallocated these items to the Telstra Bigpond business segment.
Change in segment accounting policies
The following segment accounting policy changes occurred during fiscal 2006:
Interconnection revenue
In previous financial years, our segment accounting policy was to recognise our revenue relating to
interconnection entirely in our TW business segment. In fiscal 2006, some parts of the revenue
earned from interconnection were allocated to the TC&C, TB and TE&G business segments to match the
revenue recognised with the associated expense. As a result, revenue in TW decreased by $633
million and revenue increased in TC&C by $500 million, TB by $52 million and TE&G by $81 million in
fiscal 2005 to reflect this change in policy.
Segment assets and liabilities
Segment assets and segment liabilities form part of the operating activities of a segment and can
be allocated directly to that segment.
The Asset Accounting Group performs a company wide function in relation to the financial management
of certain assets. These assets are accounted for at the corporate level (aggregated in the
Other segment) and not allocated across segments.
The Other segment also includes balances that do not meet the definition of segment assets and
segment liabilities for our reportable business segments. As a result, borrowings and income tax
assets and liabilities were recorded as reconciling items within the Other segment.
Inter-segment transfers
We account for all transactions of entities within the Telstra Group, including international
transactions between Australian and non-Australian businesses, at market value. For segment
reporting purposes, transfer pricing is not used within the Company. As such the inter-segment
revenue line purely relates to intercompany revenue.
The Asset Accounting Group does not allocate depreciation expense related to the use of assets
owned at the corporate level to other business segments.
31
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TC&C |
|
|
TB |
|
|
TE&G |
|
|
TW |
|
|
Sensis |
|
|
TInt. |
|
|
TO |
|
|
Other (a) |
|
|
Eliminations |
|
|
Total |
|
Year ended 30 June 2006 |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Revenue from external customers |
|
|
8,897 |
|
|
|
3,053 |
|
|
|
4,607 |
|
|
|
2,607 |
|
|
|
1,826 |
|
|
|
1,450 |
|
|
|
226 |
|
|
|
106 |
|
|
|
|
|
|
|
22,772 |
|
Add inter-segment revenue |
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
292 |
|
|
|
10 |
|
|
|
31 |
|
|
|
83 |
|
|
|
7 |
|
|
|
(480 |
) |
|
|
|
|
|
|
|
Total segment revenue |
|
|
8,897 |
|
|
|
3,053 |
|
|
|
4,664 |
|
|
|
2,899 |
|
|
|
1,836 |
|
|
|
1,481 |
|
|
|
309 |
|
|
|
113 |
|
|
|
(480 |
) |
|
|
22,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result under A-IFRS |
|
|
5,721 |
|
|
|
2,412 |
|
|
|
2,702 |
|
|
|
2,693 |
|
|
|
865 |
|
|
|
86 |
|
|
|
(4,175 |
) |
|
|
(4,903 |
) |
|
|
29 |
|
|
|
5,430 |
|
Share of equity accounted net
(losses)/profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
12 |
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
5 |
|
Less net gain on sale of investments |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
Earnings before interest and income
tax expense (EBIT) segment result
under USGAAP |
|
|
5,721 |
|
|
|
2,412 |
|
|
|
2,706 |
|
|
|
2,693 |
|
|
|
864 |
|
|
|
156 |
|
|
|
(4,175 |
) |
|
|
(4,909 |
) |
|
|
29 |
|
|
|
5,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings has been calculated after
charging/(crediting) the following
non cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses |
|
|
140 |
|
|
|
10 |
|
|
|
8 |
|
|
|
|
|
|
|
13 |
|
|
|
11 |
|
|
|
143 |
|
|
|
26 |
|
|
|
|
|
|
|
351 |
|
Reversal of impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(22 |
) |
Depreciation and amortisation |
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
91 |
|
|
|
298 |
|
|
|
48 |
|
|
|
3,587 |
|
|
|
|
|
|
|
4,087 |
|
Other significant non cash expenses |
|
|
26 |
|
|
|
4 |
|
|
|
20 |
|
|
|
5 |
|
|
|
1 |
|
|
|
3 |
|
|
|
144 |
|
|
|
7 |
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current segment assets acquired
(excluding acquisition of
investments) |
|
|
11 |
|
|
|
|
|
|
|
89 |
|
|
|
23 |
|
|
|
96 |
|
|
|
224 |
|
|
|
4,032 |
|
|
|
5 |
|
|
|
|
|
|
|
4,480 |
|
|
|
|
|
|
|
As at 30 June 2006
Segment assets |
|
|
1,437 |
|
|
|
370 |
|
|
|
1,767 |
|
|
|
453 |
|
|
|
1,886 |
|
|
|
3,817 |
|
|
|
3,308 |
|
|
|
23,316 |
|
|
|
(179 |
) |
|
|
36,175 |
|
|
|
|
Segment assets include: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in jointly controlled
entities |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Investment in associated entities |
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
Segment liabilities |
|
|
1,260 |
|
|
|
165 |
|
|
|
618 |
|
|
|
241 |
|
|
|
673 |
|
|
|
615 |
|
|
|
2,534 |
|
|
|
17,414 |
|
|
|
(177 |
) |
|
|
23,343 |
|
|
|
|
|
|
|
(a) |
|
Revenue for the other segment relates primarily to our revenue earned by Telstra Media from our
share of FOXTEL cable subscriber revenue and for services provided to FOXTEL. The Asset Accounting
Group is the main contributor to the segment result for this segment, which is primarily
depreciation and amortisation charges. |
Segment assets for the Other segment includes the Telstra Entity fixed assets (including network
assets) managed through the centralised Asset Accounting Group. Segment liabilities includes
income tax liabilities and borrowings, which have been reallocated from the reportable business
segment in accordance with the applicable accounting standard.
32
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TC&C |
|
|
TB |
|
|
TE&G |
|
|
TW |
|
|
Sensis |
|
|
TInt. |
|
|
TO |
|
|
Other (a) |
|
|
Eliminations |
|
|
Total |
|
Year ended 30 June 2005 |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Revenue from external customers |
|
|
8,931 |
|
|
|
3,099 |
|
|
|
4,570 |
|
|
|
2,267 |
|
|
|
1,708 |
|
|
|
1,360 |
|
|
|
161 |
|
|
|
85 |
|
|
|
|
|
|
|
22,181 |
|
Add inter-segment revenue |
|
|
|
|
|
|
|
|
|
|
52 |
|
|
|
284 |
|
|
|
11 |
|
|
|
38 |
|
|
|
77 |
|
|
|
2 |
|
|
|
(464 |
) |
|
|
|
|
|
|
|
Total segment revenue |
|
|
8,931 |
|
|
|
3,099 |
|
|
|
4,622 |
|
|
|
2,551 |
|
|
|
1,719 |
|
|
|
1,398 |
|
|
|
238 |
|
|
|
87 |
|
|
|
(464 |
) |
|
|
22,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result under A-IFRS |
|
|
6,179 |
|
|
|
2,488 |
|
|
|
2,807 |
|
|
|
2,283 |
|
|
|
812 |
|
|
|
94 |
|
|
|
(3,371 |
) |
|
|
(4,345 |
) |
|
|
3 |
|
|
|
6,950 |
|
Share of equity accounted net
(losses)/profits |
|
|
3 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
(96 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(94 |
) |
Less net gain on sale of investments |
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
|
Earnings before interest and income
tax expense (EBIT) segment result
under USGAAP |
|
|
6,248 |
|
|
|
2,488 |
|
|
|
2,812 |
|
|
|
2,283 |
|
|
|
812 |
|
|
|
11 |
|
|
|
(3,371 |
) |
|
|
(4,351 |
) |
|
|
3 |
|
|
|
6,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings has been calculated after
charging/(crediting) the following
non cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses |
|
|
115 |
|
|
|
18 |
|
|
|
12 |
|
|
|
|
|
|
|
17 |
|
|
|
7 |
|
|
|
20 |
|
|
|
30 |
|
|
|
(29 |
) |
|
|
190 |
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
64 |
|
|
|
266 |
|
|
|
1 |
|
|
|
3,152 |
|
|
|
|
|
|
|
3,529 |
|
Other significant non cash expenses |
|
|
25 |
|
|
|
3 |
|
|
|
22 |
|
|
|
6 |
|
|
|
4 |
|
|
|
3 |
|
|
|
139 |
|
|
|
24 |
|
|
|
|
|
|
|
226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current segment assets acquired
(excluding acquisition of
investments) |
|
|
16 |
|
|
|
|
|
|
|
45 |
|
|
|
503 |
|
|
|
74 |
|
|
|
246 |
|
|
|
3,052 |
|
|
|
110 |
|
|
|
|
|
|
|
4,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2005
Segment assets |
|
|
1,448 |
|
|
|
343 |
|
|
|
1,635 |
|
|
|
356 |
|
|
|
1,836 |
|
|
|
3,641 |
|
|
|
2,750 |
|
|
|
23,702 |
|
|
|
(500 |
) |
|
|
35,211 |
|
|
|
|
Segment assets include: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in jointly controlled
entities |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
Investment in associated entities |
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
|
1,021 |
|
|
|
119 |
|
|
|
639 |
|
|
|
148 |
|
|
|
665 |
|
|
|
547 |
|
|
|
2,024 |
|
|
|
16,887 |
|
|
|
(497 |
) |
|
|
21,553 |
|
|
|
|
|
|
|
(a) |
|
Revenue for the other segment relates primarily to our revenue earned by Telstra Media from our
share of FOXTEL cable subscriber revenue and for services provided to FOXTEL. The Asset Accounting
Group is the main contributor to the segment result for this segment, which is primarily
depreciation and amortisation charges. |
Segment assets for the other segment includes the Telstra Entity fixed assets (including network
assets) managed through the centralised Asset Accounting Group. Segment liabilities excludes
income tax liabilities and borrowings, which are included as part of the other segment.
33
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
|
|
Reconciliation of segment results to Telstra Group position: |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
5,497 |
|
|
|
6,935 |
|
Finance income |
|
|
|
|
|
|
66 |
|
|
|
83 |
|
Finance costs |
|
|
|
|
|
|
(1,002 |
) |
|
|
(963 |
) |
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
4,561 |
|
|
|
6,055 |
|
Income tax expense |
|
|
|
|
|
|
(1,380 |
) |
|
|
(1,746 |
) |
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information about sales revenue from our products and services: |
|
|
|
|
|
|
|
|
|
|
|
|
PSTN products |
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
|
|
|
|
3,318 |
|
|
|
3,362 |
|
Local calls |
|
|
|
|
|
|
1,023 |
|
|
|
1,284 |
|
PSTN value added services |
|
|
|
|
|
|
246 |
|
|
|
250 |
|
National long distance calls |
|
|
|
|
|
|
913 |
|
|
|
1,013 |
|
Fixed to mobile |
|
|
|
|
|
|
1,491 |
|
|
|
1,566 |
|
International direct |
|
|
|
|
|
|
201 |
|
|
|
234 |
|
Fixed interconnection |
|
|
|
|
|
|
286 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,478 |
|
|
|
8,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services |
|
|
|
|
|
|
4,505 |
|
|
|
4,307 |
|
Mobile handsets |
|
|
|
|
|
|
467 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,972 |
|
|
|
4,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data and internet services |
|
|
|
|
|
|
|
|
|
|
|
|
Internet and IP solutions |
|
|
|
|
|
|
1,907 |
|
|
|
1,377 |
|
ISDN products |
|
|
|
|
|
|
807 |
|
|
|
890 |
|
Specialised data |
|
|
|
|
|
|
884 |
|
|
|
966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,598 |
|
|
|
3,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products and services |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and directories |
|
|
|
|
|
|
1,711 |
|
|
|
1,585 |
|
Customer premises equipment |
|
|
|
|
|
|
274 |
|
|
|
231 |
|
Payphones |
|
|
|
|
|
|
104 |
|
|
|
121 |
|
Intercarrier services |
|
|
|
|
|
|
351 |
|
|
|
290 |
|
Inbound calling products |
|
|
|
|
|
|
449 |
|
|
|
449 |
|
Solutions management |
|
|
|
|
|
|
989 |
|
|
|
931 |
|
Offshore controlled entities (a) |
|
|
|
|
|
|
1,745 |
|
|
|
1,611 |
|
Pay TV bundling |
|
|
|
|
|
|
320 |
|
|
|
263 |
|
Other sales and service |
|
|
|
|
|
|
759 |
|
|
|
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,702 |
|
|
|
6,222 |
|
|
|
|
|
|
|
|
Sales revenue |
|
|
|
|
|
|
22,750 |
|
|
|
22,161 |
|
|
|
|
|
|
|
|
Other revenue (excluding finance income) |
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
|
|
|
|
|
Total revenue (excluding finance income) |
|
|
6 |
|
|
|
22,772 |
|
|
|
22,181 |
|
|
|
|
|
|
|
|
34
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
Information about revenue from our products and services (continued): |
|
|
|
|
|
|
|
|
(a) Sales revenue from our offshore controlled entities is split between the following products and
services: |
|
|
|
|
|
|
|
|
International PSTN products |
|
|
446 |
|
|
|
484 |
|
International Mobiles |
|
|
849 |
|
|
|
751 |
|
International Data and internet services |
|
|
287 |
|
|
|
264 |
|
International Intercarrier services |
|
|
20 |
|
|
|
24 |
|
International Other |
|
|
143 |
|
|
|
88 |
|
|
|
|
|
|
|
1,745 |
|
|
|
1,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Information about our geographic operations (i) |
|
|
|
|
|
|
|
|
Segment revenue from external customers |
|
|
|
|
|
|
|
|
Australian customers |
|
|
21,014 |
|
|
|
20,556 |
|
International customers |
|
|
1,758 |
|
|
|
1,625 |
|
|
|
|
|
|
|
22,772 |
|
|
|
22,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of segment assets |
|
|
|
|
|
|
|
|
Australian customers |
|
|
31,966 |
|
|
|
31,245 |
|
International customers |
|
|
4,209 |
|
|
|
3,966 |
|
|
|
|
|
|
|
36,175 |
|
|
|
35,211 |
|
|
|
|
Non current segment assets acquired (excluding acquisition of investments) |
|
|
|
|
|
|
|
|
Located in Australia |
|
|
4,256 |
|
|
|
3,800 |
|
Located in international countries |
|
|
224 |
|
|
|
246 |
|
|
|
|
|
|
|
4,480 |
|
|
|
4,046 |
|
|
|
|
|
|
|
(i) |
|
Our geographical operations are split between our Australian and international operations. Our
international operations include the business of our international business segment (primarily
businesses in Hong Kong and New Zealand) and our international business that serves multi-national
customers in the TE&G segment. No individual geographical area forms a significant part of our
operations apart from our Australian operations. |
35
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
6. Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
Sales revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rendering of services |
|
|
|
|
|
|
12,427 |
|
|
|
12,522 |
|
|
|
10,427 |
|
|
|
10,783 |
|
Sale of goods |
|
|
|
|
|
|
808 |
|
|
|
691 |
|
|
|
536 |
|
|
|
430 |
|
Rent of network facilities |
|
|
|
|
|
|
7,653 |
|
|
|
7,233 |
|
|
|
7,655 |
|
|
|
7,233 |
|
Construction contracts |
|
|
|
|
|
|
151 |
|
|
|
130 |
|
|
|
174 |
|
|
|
136 |
|
Advertising and directory services |
|
|
|
|
|
|
1,711 |
|
|
|
1,585 |
|
|
|
464 |
|
|
|
377 |
|
Procurement (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
647 |
|
|
|
628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,750 |
|
|
|
22,161 |
|
|
|
19,903 |
|
|
|
19,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue (excluding finance income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
223 |
|
- jointly controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
224 |
|
Rent from property and motor vehicles |
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
22 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
582 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue (excluding finance income) |
|
|
|
|
|
|
22,772 |
|
|
|
22,181 |
|
|
|
20,485 |
|
|
|
19,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on disposal of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- property, plant and equipment |
|
|
|
|
|
|
23 |
|
|
|
9 |
|
|
|
20 |
|
|
|
10 |
|
- investments in controlled entities |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- investments in jointly controlled and associated entities |
|
|
|
|
|
|
58 |
|
|
|
16 |
|
|
|
59 |
|
|
|
26 |
|
- investments in listed securities and other investments |
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85 |
|
|
|
88 |
|
|
|
79 |
|
|
|
95 |
|
Other miscellaneous income (b) |
|
|
|
|
|
|
243 |
|
|
|
173 |
|
|
|
84 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
328 |
|
|
|
261 |
|
|
|
163 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
Total income (excluding finance income) |
|
|
|
|
|
|
23,100 |
|
|
|
22,442 |
|
|
|
20,648 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- interest on cash and cash equivalents |
|
|
|
|
|
|
66 |
|
|
|
83 |
|
|
|
60 |
|
|
|
78 |
|
- other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
83 |
|
|
|
63 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
|
|
|
|
23,166 |
|
|
|
22,525 |
|
|
|
20,711 |
|
|
|
20,065 |
|
|
|
|
|
|
|
|
|
|
|
36
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
6. Income (continued)
|
|
|
(a) |
|
The Telstra Entity receives procurement revenue from its controlled entity Sensis Pty Ltd
for the use of Yellow Pages® and White Pages® trademarks. Refer to note 33 for further details on
transactions involving our related parties. |
|
(b) |
|
Other miscellaneous income includes revenue recognised from subsidies received on the Higher
Bandwidth Incentive Scheme (HiBIS) and Broadband Connect Incentive Scheme. |
HiBiS, which has now concluded, and its replacement program, Broadband Connect, were established by
the Commonwealth to allow service providers to provide high bandwidth services to eligible
customers in the regional, rural and remote areas of Australia at prices broadly comparable to
those prices charged to customers in metropolitan areas.
As a service provider, we are able to claim a rebate from the Commonwealth for each registered
HiBIS or Broadband Connect service we provide to an eligible customer. The purpose of the
incentive payment is to cover the short fall of providing these services to eligible customers in
the regional, rural and remote areas of Australia at metropolitan prices. We recognise these
incentive payments as other income.
We have no significant unfulfilled conditions and other contingencies relating to our obligations
under the HiBIS and Broadband Connect programs.
37
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
|
|
(a) Profit before income tax expense (including items
disclosed in note 7(b)) has been calculated after
charging/(crediting) the following items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in our labour expenses are the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee redundancy (b) |
|
|
|
|
|
|
534 |
|
|
|
91 |
|
|
|
516 |
|
|
|
85 |
|
Share based payments |
|
|
21 |
|
|
|
15 |
|
|
|
10 |
|
|
|
15 |
|
|
|
10 |
|
Defined benefit plan expense |
|
|
28 |
|
|
|
185 |
|
|
|
203 |
|
|
|
182 |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods and services purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in our goods and services purchased are the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
1,421 |
|
|
|
1,150 |
|
|
|
1,087 |
|
|
|
882 |
|
Rental expense on managed services |
|
|
|
|
|
|
69 |
|
|
|
67 |
|
|
|
64 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- impairment in value of inventories (b) |
|
|
|
|
|
|
53 |
|
|
|
11 |
|
|
|
53 |
|
|
|
11 |
|
- impairment in value of trade and other receivables (b) |
|
|
|
|
|
|
161 |
|
|
|
150 |
|
|
|
138 |
|
|
|
131 |
|
- impairment in value of investments (b) (i) |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
245 |
|
|
|
27 |
|
- impairment in amounts owed by controlled entities (b) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
475 |
|
- impairment in amounts owed by jointly controlled entities |
|
|
33 |
|
|
|
2 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
- impairment in value of intangibles (b) (ii) |
|
|
|
|
|
|
66 |
|
|
|
1 |
|
|
|
64 |
|
|
|
|
|
- impairment in value of property, plant and equipment (b) (ii) |
|
|
|
|
|
|
69 |
|
|
|
17 |
|
|
|
69 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351 |
|
|
|
190 |
|
|
|
951 |
|
|
|
661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of impairment losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- reversal of impairment in value of trade and other receivables |
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
(22 |
) |
|
|
|
|
- reversal of impairment in value of investments (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
(334 |
) |
- reversal of impairment in amounts owed by controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
(37 |
) |
|
|
(349 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental expense on operating leases |
|
|
|
|
|
|
667 |
|
|
|
675 |
|
|
|
496 |
|
|
|
502 |
|
Net foreign currency translation losses/(gains) |
|
|
|
|
|
|
2 |
|
|
|
(40 |
) |
|
|
(50 |
) |
|
|
(5 |
) |
Remuneration of auditors |
|
|
8 |
|
|
|
8 |
|
|
|
7 |
|
|
|
6 |
|
|
|
6 |
|
Service contracts and other agreements |
|
|
|
|
|
|
1,836 |
|
|
|
1,556 |
|
|
|
1,796 |
|
|
|
1,521 |
|
Promotion and advertising |
|
|
|
|
|
|
356 |
|
|
|
330 |
|
|
|
285 |
|
|
|
253 |
|
General and administration |
|
|
|
|
|
|
723 |
|
|
|
739 |
|
|
|
542 |
|
|
|
564 |
|
Other operating expenses (b) |
|
|
|
|
|
|
506 |
|
|
|
358 |
|
|
|
573 |
|
|
|
325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,427 |
|
|
|
3,815 |
|
|
|
4,562 |
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
We have recognised impairment losses relating to the value of our investments in controlled
entities, jointly controlled and associated entities, and other entities based on the value in use
calculation. The impairment loss in the value of investment in controlled entities was eliminated
on consolidation of the Telstra Group. |
|
(ii) |
|
We have recognised impairment losses relating to project costs that were capitalised within
capitalised software forming part of intangible assets and property, plant and equipment. These
projects have subsequently been cancelled and the costs recognised in the income statement as an
impairment loss. In fiscal 2006, additional impairment losses were recognised reflecting
additional write offs due to our transformation, refer note 7(b) for details. |
38
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
(a) Profit before income tax expense (including items
disclosed in note 7(b)) has been calculated after
charging/(crediting) the following items (continued): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- general purpose buildings including leasehold improvements |
|
|
14 |
|
|
|
62 |
|
|
|
54 |
|
|
|
54 |
|
|
|
47 |
|
- communication assets including leasehold improvements |
|
|
14 |
|
|
|
2,953 |
|
|
|
2,615 |
|
|
|
2,786 |
|
|
|
2,508 |
|
- communication assets under finance lease |
|
|
14 |
|
|
|
67 |
|
|
|
75 |
|
|
|
67 |
|
|
|
75 |
|
- equipment under finance lease |
|
|
14 |
|
|
|
8 |
|
|
|
9 |
|
|
|
6 |
|
|
|
7 |
|
- other plant, equipment and motor vehicles |
|
|
14 |
|
|
|
93 |
|
|
|
123 |
|
|
|
45 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,183 |
|
|
|
2,876 |
|
|
|
2,958 |
|
|
|
2,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation of intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- patents and trademarks |
|
|
15 |
|
|
|
2 |
|
|
|
2 |
|
|
|
4 |
|
|
|
4 |
|
- licences |
|
|
15 |
|
|
|
58 |
|
|
|
37 |
|
|
|
18 |
|
|
|
18 |
|
- brandnames |
|
|
15 |
|
|
|
11 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
- customer bases |
|
|
15 |
|
|
|
98 |
|
|
|
86 |
|
|
|
13 |
|
|
|
15 |
|
- deferred expenditure |
|
|
|
|
|
|
9 |
|
|
|
8 |
|
|
|
35 |
|
|
|
10 |
|
- software assets (b) |
|
|
15 |
|
|
|
726 |
|
|
|
510 |
|
|
|
629 |
|
|
|
472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904 |
|
|
|
653 |
|
|
|
699 |
|
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,087 |
|
|
|
3,529 |
|
|
|
3,657 |
|
|
|
3,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- interest on bills of exchange and commercial paper |
|
|
|
|
|
|
65 |
|
|
|
35 |
|
|
|
65 |
|
|
|
35 |
|
- interest on Telstra bonds |
|
|
|
|
|
|
486 |
|
|
|
223 |
|
|
|
486 |
|
|
|
223 |
|
- interest on other loans |
|
|
|
|
|
|
242 |
|
|
|
497 |
|
|
|
242 |
|
|
|
497 |
|
- interest on derivative instruments |
|
|
|
|
|
|
169 |
|
|
|
164 |
|
|
|
169 |
|
|
|
164 |
|
- interest on finance leases |
|
|
|
|
|
|
6 |
|
|
|
7 |
|
|
|
2 |
|
|
|
3 |
|
- unwinding of discount on liabilities recognised at present value |
|
|
|
|
|
|
40 |
|
|
|
35 |
|
|
|
9 |
|
|
|
2 |
|
- gain in fair value hedge instruments |
|
|
|
|
|
|
(26 |
) |
|
|
|
|
|
|
(26 |
) |
|
|
|
|
- other |
|
|
|
|
|
|
20 |
|
|
|
2 |
|
|
|
38 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,002 |
|
|
|
963 |
|
|
|
985 |
|
|
|
943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
|
|
|
|
|
23 |
|
|
|
29 |
|
|
|
23 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
39
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations (continued)
(b) Income statement items requiring specific disclosure
The separate disclosure of the following material items is relevant in explaining our financial
performance.
Our profit for the year has been calculated after charging specific expense items from our
continuing operations as detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Redundancy and restructuring related costs (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- redundancy expense |
|
|
|
|
|
|
356 |
|
|
|
|
|
|
|
352 |
|
|
|
|
|
- restructuring expense |
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406 |
|
|
|
|
|
|
|
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods and services purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- restructuring expense |
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- restructuring expense |
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
105 |
|
|
|
|
|
- impairment in value of inventories |
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
- impairment in value of trade and other receivables |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
- impairment in value of intangibles |
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
61 |
|
|
|
|
|
- impairment in value of property, plant and equipment |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- accelerated amortisation of intangibles |
|
|
|
|
|
|
160 |
|
|
|
|
|
|
|
145 |
|
|
|
|
|
- accelerated depreciation of property, plant and equipment |
|
|
|
|
|
|
262 |
|
|
|
|
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
422 |
|
|
|
|
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,126 |
|
|
|
|
|
|
|
1,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- impairment in value of controlled entities (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205 |
|
|
|
|
|
- reversal of impairment in value of controlled entities (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(334 |
) |
- impairment in amounts owed by controlled entities (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
587 |
|
|
|
141 |
|
Total expense items |
|
|
|
|
|
|
1,126 |
|
|
|
|
|
|
|
1,694 |
|
|
|
141 |
|
Income tax benefit attributable to those items requiring specific disclosure |
|
|
|
|
|
|
(338 |
) |
|
|
|
|
|
|
(332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net items after income tax benefit |
|
|
|
|
|
|
788 |
|
|
|
|
|
|
|
1,362 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
On 15 November 2005, we announced the results from the strategic review that was initiated on 1
July 2005. We unveiled a strategy for improving our business by: |
|
|
introducing a company wide market based management system; |
|
|
|
the adoption of a one factory approach to managing operations; and |
|
|
|
delivering integrated services to our customers. |
We also announced several key decisions and commitments regarding our systems, processes and
products which will impact the future performance of the Company.
40
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations (continued)
For the year ended 30 June 2006, we have recorded a number of restructuring related expenses
associated with the implementation of the strategic review initiatives. The redundancy and
restructuring costs include the following:
|
|
redundancy costs associated with the reduction in our workforce, including those redundancies
that have been provided for (refer to note 19); |
|
|
|
the provision for restructuring costs associated with shutting down certain networks, platforms
and applications, property rationalisation, onerous lease costs and replacing customer equipment
(refer to note 19); |
|
|
|
the impairment of certain assets due to the decision to shut down certain networks and platforms
that are no longer considered recoverable. This also includes the decision to cancel certain
projects relating to the development of software and the construction of property, plant and
equipment; and |
|
|
|
the accelerated recognition of depreciation and amortisation of certain assets that, while
currently in use, will be decommissioned as part of our decision to shut down certain networks,
platforms and applications. |
A total provision of $427 million has been raised for redundancy and restructuring for the Telstra
Group as at 30 June 2006. This includes $395 million recorded in current and non current
provisions, $18 million recorded as a reduction in inventory and $14 million recorded as an
allowance for other receivables.
(ii) In fiscal 2006, the profit before income tax expense of the Telstra Entity included an expense
of $205 million in relation to the impairment of the value of three controlled entities. In fiscal
2005, the profit before income tax expense of the Telstra Entity included a $334 million net gain
in relation to the reversal of an impairment of the value of four controlled entities. These
balances are eliminated on consolidation for Telstra Group reporting purposes.
Each fiscal year, we review the value of our investment in controlled entities. As a result, we
have incurred an impairment loss (or a reversal of an impairment loss) by assessing the carrying
value of our controlled entity with its recoverable amount. We review our recoverable amount by
reference to its value in use. Refer to note 25 for further details regarding impairment.
(iii) The profit before income tax expense of the Telstra Entity included an impairment loss of
$382 million (2005: $475 million) relating to a movement in allowance for amounts owed by a
controlled entity. This balance was eliminated on consolidation for Telstra Group purposes. Refer
to note 25 for further details regarding impairment.
41
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
8. Remuneration of auditors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Audit fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Australian National Audit Office has charged the following amounts for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditing and reviewing the financial reports (i) |
|
|
|
|
|
|
4.981 |
|
|
|
5.038 |
|
|
|
4.431 |
|
|
|
4.404 |
|
Ernst and Young has charged the following amounts for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditing and reviewing the financial reports (ii) |
|
|
|
|
|
|
2.900 |
|
|
|
2.290 |
|
|
|
1.601 |
|
|
|
1.391 |
|
|
|
|
|
|
|
|
|
|
Total audit fees |
|
|
7 |
(a) |
|
|
7.881 |
|
|
|
7.328 |
|
|
|
6.032 |
|
|
|
5.795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to auditing and reviewing the financial reports, other services were
provided by Ernst and Young in their own right as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit related (iii) |
|
|
|
|
|
|
0.829 |
|
|
|
0.571 |
|
|
|
|
|
|
|
|
|
Tax (iv) |
|
|
|
|
|
|
0.118 |
|
|
|
0.423 |
|
|
|
|
|
|
|
|
|
Other services (v) |
|
|
|
|
|
|
0.331 |
|
|
|
0.703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other services |
|
|
|
|
|
|
1.278 |
|
|
|
1.697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit fees
|
|
|
(i) |
|
Our Australian statutory auditor is the Australian National Audit Office (ANAO). The audit
provided by the ANAO has been subcontracted to Ernst and Young (EY) since fiscal 2000. |
|
(ii) |
|
Audit fees charged by EY relate to audit services provided in completing our statutory and
regulatory filings other than those subcontracted directly from the ANAO. These services include
the audit and review of our offshore controlled entities, the regulatory audits and our USGAAP
audit. In addition, this category includes the audit of our other statutory filings such as the
filing we are required to make under Japanese law, and the annual report on Form 20-F to meet our
United States listing requirements. |
Other services
We have processes in place to maintain the independence of the external auditor, including the
level of expenditure on non audit services. Fees earned by EY for non audit work are capped at a
maximum of 1.0 times the total audit and audit related fees.
Non audit services are pre-approved by the Audit Committee provided they fall within a defined list
of services specified by the Audit Committee. Those non-audit services that are not listed have to
be specifically approved by the Audit Committee prior to the commencement of any engagement. In
addition, all non-audit services with a value over $100,000 must be separately approved by the
Audit Committee, even if the service is listed as a pre-approved service.
The provision of non-audit services by EY is monitored by the Audit Committee via bi-annual reports
to the Audit Committee. In addition, where engagements involve services from the defined list of
services, these are reported to the Audit Committee at the following meeting.
EY has specific internal processes in place to ensure auditor independence.
|
|
|
(iii) |
|
Audit related fees charged by EY relate to services that are reasonably related to the
performance of the audit or review of our financial statements, and other assurance engagements.
These services include our privacy audit, various accounting advice provided and additional audit
work arising on the acquisition of our newly acquired controlled entities. |
|
(iv) |
|
Tax fees charged by EY mainly relates to licence fee and technical services including training
and support services in relation to our tax return software. |
|
(v) |
|
Other services relate to all additional services performed by EY, other than those disclosed as
auditing and reviewing the financial report, audit related and tax. These services include
performance of system and security reviews, and various other reviews and non assurance services
across the Company. |
42
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
9. Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Major components of income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense |
|
|
1,730 |
|
|
|
1,740 |
|
|
|
1,860 |
|
|
|
1,907 |
|
Deferred tax resulting from the origination and reversal of temporary differences |
|
|
(386 |
) |
|
|
4 |
|
|
|
(411 |
) |
|
|
(28 |
) |
Under provision of tax in prior years |
|
|
36 |
|
|
|
2 |
|
|
|
33 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
1,380 |
|
|
|
1,746 |
|
|
|
1,482 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional income tax expense on profit differs from
actual income tax expense recorded as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
6,055 |
|
|
|
4,719 |
|
|
|
6,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional income tax expense on profit calculated at 30% (a): |
|
|
1,368 |
|
|
|
1,817 |
|
|
|
1,416 |
|
|
|
1,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Which is adjusted by the tax effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of different rates of tax on overseas income |
|
|
(19 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
Non assessable and non deductible items |
|
|
(5 |
) |
|
|
(62 |
) |
|
|
33 |
|
|
|
(40 |
) |
Under provision of tax in prior years |
|
|
36 |
|
|
|
2 |
|
|
|
33 |
|
|
|
3 |
|
|
|
|
|
|
Income tax expense on profit |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
1,482 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognised directly in equity during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax debited/(credited) directly in equity during the year |
|
|
291 |
|
|
|
(24 |
) |
|
|
289 |
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
(a) |
|
The Commonwealth statutory income tax rate for fiscal 2006 and fiscal 2005 was 30%. This tax
rate is the income tax rate applied to Australian resident companies pursuant to the Income Tax
Rates Act. |
43
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
9. Income taxes (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Deferred tax asset/(deferred tax liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax items recognised in income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
(1,872 |
) |
|
|
(1,918 |
) |
|
|
(1,911 |
) |
|
|
(2,019 |
) |
Intangible assets |
|
|
(356 |
) |
|
|
(474 |
) |
|
|
(175 |
) |
|
|
(280 |
) |
Provision for employee entitlements |
|
|
268 |
|
|
|
281 |
|
|
|
246 |
|
|
|
263 |
|
Revenue received in advance |
|
|
116 |
|
|
|
130 |
|
|
|
|
|
|
|
5 |
|
Provision for workers compensation |
|
|
65 |
|
|
|
64 |
|
|
|
62 |
|
|
|
62 |
|
Allowance for doubtful debts |
|
|
42 |
|
|
|
46 |
|
|
|
33 |
|
|
|
37 |
|
Defined benefit assets |
|
|
(45 |
) |
|
|
(98 |
) |
|
|
(43 |
) |
|
|
(97 |
) |
Trade and other payables |
|
|
57 |
|
|
|
38 |
|
|
|
54 |
|
|
|
36 |
|
Provision for redundancy |
|
|
56 |
|
|
|
|
|
|
|
55 |
|
|
|
|
|
Other provisions |
|
|
91 |
|
|
|
10 |
|
|
|
85 |
|
|
|
1 |
|
Income tax losses (a) |
|
|
106 |
|
|
|
69 |
|
|
|
|
|
|
|
4 |
|
Other |
|
|
36 |
|
|
|
26 |
|
|
|
27 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
(1,436 |
) |
|
|
(1,826 |
) |
|
|
(1,567 |
) |
|
|
(1,985 |
) |
|
|
|
|
|
Deferred tax items recognised in equity (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit assets |
|
|
(260 |
) |
|
|
24 |
|
|
|
(258 |
) |
|
|
24 |
|
Derivative financial instruments |
|
|
(7 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(267 |
) |
|
|
24 |
|
|
|
(265 |
) |
|
|
24 |
|
|
|
|
|
|
Net deferred tax liability |
|
|
(1,703 |
) |
|
|
(1,802 |
) |
|
|
(1,832 |
) |
|
|
(1,961 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our net deferred tax liability is split as follows (c): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets recognised in the balance sheet |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities recognised in the balance sheet |
|
|
(1,704 |
) |
|
|
(1,804 |
) |
|
|
(1,832 |
) |
|
|
(1,961 |
) |
|
|
|
|
|
|
|
|
(1,703 |
) |
|
|
(1,802 |
) |
|
|
(1,832 |
) |
|
|
(1,961 |
) |
|
|
|
|
|
|
|
|
(a) |
|
We have recognised a deferred tax asset for the unused tax losses of our offshore controlled
entities to the extent that it is probable that future taxable profit will be available against
which the unused tax losses can be utilised. We have prepared management budgets and forecasts in
line with our current knowledge of future events to support our view of sufficient future taxable
profits being available to offset our unused tax losses. |
|
(b) |
|
When the underlying transactions to which our deferred tax relates is recognised directly to
equity in accordance with applicable accounting standards, the temporary differences associated
with these adjustments are also recognised directly in equity. |
|
(c) |
|
We are able to offset deferred tax assets and deferred tax liabilities in the balance sheet
when they relate to income taxes levied by the same taxation authority and to the extent we intend
to settle our current tax assets and liabilities on a net basis. |
Our deferred tax assets and deferred tax liabilities are netted within the tax consolidation group,
as these deferred tax balances relate to income taxes levied by the Australian Taxation Office.
We do not net deferred tax balances between controlled entities, apart from those within the tax
consolidation group.
44
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
9. Income taxes (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Deferred tax assets not recognised in the balance sheet (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax losses |
|
|
185 |
|
|
|
161 |
|
|
|
|
|
|
|
|
|
Capital tax losses |
|
|
196 |
|
|
|
198 |
|
|
|
160 |
|
|
|
161 |
|
Deductible temporary differences |
|
|
353 |
|
|
|
334 |
|
|
|
192 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
734 |
|
|
|
693 |
|
|
|
352 |
|
|
|
260 |
|
|
|
|
|
|
|
|
|
(a) |
|
Our deferred tax assets not recognised in the balance sheet may be used in future years if the
following criteria are met: |
|
|
our controlled entities have sufficient future taxable profit to enable the income tax losses
and temporary differences to be offset against that taxable profit; |
|
|
|
the Telstra Entity and our controlled entities have sufficient future capital gains to be
offset against those capital losses; |
|
|
|
we continue to satisfy the conditions required by tax legislation to be able to use the tax
losses; and |
|
|
|
there are no future changes in tax legislation that will adversely affect us in using the
benefit of the tax losses. |
As at 30 June 2006, the deferred tax assets not recognised in our balance sheet are able to be
carried forward indefinitely for both our domestic and offshore operations, except in relation to
one offshore controlled entity that has income tax losses of $9 million (fiscal 2005: $13 million)
that will expire in fiscal 2027.
In the event of the further privatisation of our Company, certain income tax losses and capital tax
losses, not currently recognised as a deferred tax asset, may not be able to be utilised in the
future to offset income tax and capital tax gains for some offshore controlled entities and the tax
consolidated group. The ability to utilise income and capital losses in the future will depend on
various factors, including the number of shares the Commonwealth continues to hold, either directly
or indirectly.
Tax consolidation
The Telstra Entity and its Australian resident wholly owned entities previously elected to form a
tax consolidated group. As part of the election to enter tax consolidation, the tax consolidated
group is treated as a single entity for income tax purposes.
The Telstra Entity, as the head entity in the tax consolidated group, recognises, in addition to
its own transactions, the current tax liabilities and the deferred tax assets arising from unused
tax losses and tax credits for all entities in the group. However, the Telstra Entity and its
resident wholly owned entities account for their own current tax expense and deferred tax amounts.
Upon tax consolidation, the entities within the tax consolidated group entered into a tax sharing
agreement. The terms of this agreement specified the methods of allocating any tax liability in
the event of default by the Telstra Entity on its group payment obligations and the treatment where
a subsidiary member exits the group. The tax liability of the group otherwise remains with the
Telstra Entity for tax purposes.
During fiscal 2006, the entities within the tax
consolidated group entered into a tax funding
arrangement under which:
|
|
the Telstra Entity compensates its wholly owned controlled entities for any current tax
receivable assumed; |
|
|
|
the Telstra Entity compensates its wholly owned controlled entities for any deferred tax
assets relating to unused tax losses and tax credits; and |
|
|
|
wholly owned entities compensate the Telstra Entity for any current tax payable assumed. |
The funding amounts are based on the amounts recorded in the financial statements of the wholly
owned entities.
Amounts receivable of $40 million to the Telstra Entity and amounts payable from the Telstra Entity
of $194 million under the tax funding arrangements are due in the next financial year upon final
settlement of the current tax payable for the tax consolidated group. During fiscal 2005, no tax
funding arrangement was in place and as a result these funding amounts were recorded as equity
contributions to or distributions from our controlled entities.
45
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
10. Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and on hand |
|
|
238 |
|
|
|
225 |
|
|
|
87 |
|
|
|
83 |
|
Bank deposits, bills of exchange and commercial paper (a) |
|
|
451 |
|
|
|
1,323 |
|
|
|
387 |
|
|
|
1,285 |
|
|
|
|
|
|
|
|
|
689 |
|
|
|
1,548 |
|
|
|
474 |
|
|
|
1,368 |
|
|
|
|
|
|
|
|
|
(a) |
|
Bank deposits are held in the short term money market. The carrying amount of bank deposits,
bills of exchange and commercial paper approximates net fair value due to their short term to
maturity. |
46
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
11. Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade debtors (a) |
|
|
|
|
|
|
2,565 |
|
|
|
2,434 |
|
|
|
1,881 |
|
|
|
1,774 |
|
Allowance for doubtful debts |
|
|
|
|
|
|
(144 |
) |
|
|
(159 |
) |
|
|
(110 |
) |
|
|
(125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,421 |
|
|
|
2,275 |
|
|
|
1,771 |
|
|
|
1,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by controlled entities (other than trade debtors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
2,267 |
|
|
|
2,194 |
|
Allowance for amounts owed by controlled entities (other than trade debtors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
(1,851 |
) |
|
|
(1,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued revenue |
|
|
|
|
|
|
1,027 |
|
|
|
976 |
|
|
|
971 |
|
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables (b) |
|
|
|
|
|
|
262 |
|
|
|
298 |
|
|
|
195 |
|
|
|
235 |
|
Allowance for doubtful debts (b) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,280 |
|
|
|
1,274 |
|
|
|
1,157 |
|
|
|
1,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,701 |
|
|
|
3,549 |
|
|
|
3,344 |
|
|
|
3,538 |
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by controlled entities (other than trade debtors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by jointly controlled and associated entities (c) |
|
|
33 |
|
|
|
229 |
|
|
|
242 |
|
|
|
210 |
|
|
|
204 |
|
Allowance for amounts owed by jointly controlled and associated entities (c) |
|
|
33 |
|
|
|
(215 |
) |
|
|
(210 |
) |
|
|
(210 |
) |
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables (b) |
|
|
|
|
|
|
78 |
|
|
|
65 |
|
|
|
72 |
|
|
|
59 |
|
Allowance for doubtful debts (b) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73 |
|
|
|
65 |
|
|
|
67 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
97 |
|
|
|
127 |
|
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Our policy requires trade debtors to pay us in accordance with agreed payment terms. Depending
on the customer segment, our settlement terms are generally 14 to 30 days from date of invoice. All
credit and recovery risk associated with trade debtors has been provided for in the balance sheet. |
|
(b) |
|
Our other receivables relates mainly to customer deferred debt. Our customer deferred debt
allows eligible post paid customers the opportunity to repay the cost of their mobile handset and
approved accessories monthly over 12, 18 or 24 months. The loan is provided interest free to our
mobile postpaid customers. |
|
(c) |
|
In fiscal 2006, amounts owed by jointly controlled and associated entities relates mainly to
loans provided to Reach Ltd (Reach) of $210 million (2005: $204 million) and the 3GIS Partnership
(3GIS) of $14 million (2005: $32 million). An allowance for the total loan provided to Reach has
been recognised. Refer to note 33 for further details. |
47
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
12. Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finished goods recorded at net realisable value |
|
|
79 |
|
|
|
4 |
|
|
|
67 |
|
|
|
|
|
Finished goods recorded at cost |
|
|
123 |
|
|
|
197 |
|
|
|
91 |
|
|
|
167 |
|
|
|
|
|
|
Total finished goods |
|
|
202 |
|
|
|
201 |
|
|
|
158 |
|
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials and stores recorded at cost |
|
|
15 |
|
|
|
16 |
|
|
|
10 |
|
|
|
12 |
|
Construction contracts (a) |
|
|
7 |
|
|
|
15 |
|
|
|
7 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
224 |
|
|
|
232 |
|
|
|
175 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finished goods recorded at net realisable value |
|
|
15 |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
Finished goods recorded at cost |
|
|
5 |
|
|
|
15 |
|
|
|
5 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
20 |
|
|
|
15 |
|
|
|
20 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Construction contract disclosures are shown as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract costs incurred and recognised profits |
|
|
108 |
|
|
|
69 |
|
|
|
108 |
|
|
|
69 |
|
Progress billings |
|
|
(101 |
) |
|
|
(54 |
) |
|
|
(101 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
|
|
7 |
|
|
|
15 |
|
|
|
7 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances received for construction work in progress (included in trade and other
payables) |
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
48
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
13. Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Investments accounted for using the equity method |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in jointly controlled entities |
|
|
|
|
|
|
4 |
|
|
|
40 |
|
|
|
2 |
|
|
|
83 |
|
Allowance for impairment in value |
|
|
|
|
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
Carrying amount of investments in jointly controlled entities |
|
|
30 |
|
|
|
2 |
|
|
|
36 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in associated entities |
|
|
|
|
|
|
45 |
|
|
|
36 |
|
|
|
18 |
|
|
|
33 |
|
Allowance for impairment in value |
|
|
|
|
|
|
(24 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
Carrying amount of investments in associated entities |
|
|
30 |
|
|
|
21 |
|
|
|
12 |
|
|
|
18 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
|
48 |
|
|
|
18 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in controlled entities |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
13,062 |
|
|
|
12,975 |
|
Allowance for impairment in value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,109 |
) |
|
|
(6,839 |
) |
|
|
|
|
|
|
|
|
|
Total investments in controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,953 |
|
|
|
6,136 |
|
|
|
|
|
|
|
|
|
|
49
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Land and site improvements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
35 |
|
|
|
40 |
|
|
|
32 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings (including leasehold improvements) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
822 |
|
|
|
822 |
|
|
|
706 |
|
|
|
722 |
|
Accumulated depreciation/impairment |
|
|
(392 |
) |
|
|
(392 |
) |
|
|
(352 |
) |
|
|
(356 |
) |
|
|
|
|
|
|
|
|
430 |
|
|
|
430 |
|
|
|
354 |
|
|
|
366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication assets (including leasehold improvements) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
45,848 |
|
|
|
43,217 |
|
|
|
43,222 |
|
|
|
41,127 |
|
Accumulated depreciation/impairment |
|
|
(23,398 |
) |
|
|
(21,541 |
) |
|
|
(22,393 |
) |
|
|
(20,946 |
) |
|
|
|
|
|
|
|
|
22,450 |
|
|
|
21,676 |
|
|
|
20,829 |
|
|
|
20,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication assets under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
Accumulated depreciation/impairment |
|
|
(501 |
) |
|
|
(434 |
) |
|
|
(501 |
) |
|
|
(434 |
) |
|
|
|
|
|
|
|
|
357 |
|
|
|
424 |
|
|
|
357 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other plant, equipment and motor vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
1,068 |
|
|
|
1,011 |
|
|
|
692 |
|
|
|
753 |
|
Accumulated depreciation/impairment |
|
|
(740 |
) |
|
|
(710 |
) |
|
|
(519 |
) |
|
|
(554 |
) |
|
|
|
|
|
|
|
|
328 |
|
|
|
301 |
|
|
|
173 |
|
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
60 |
|
|
|
52 |
|
|
|
33 |
|
|
|
26 |
|
Accumulated depreciation/impairment |
|
|
(38 |
) |
|
|
(32 |
) |
|
|
(13 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
20 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
48,691 |
|
|
|
46,000 |
|
|
|
45,543 |
|
|
|
43,523 |
|
Accumulated depreciation |
|
|
(25,069 |
) |
|
|
(23,109 |
) |
|
|
(23,778 |
) |
|
|
(22,300 |
) |
|
|
|
|
|
|
|
|
23,622 |
|
|
|
22,891 |
|
|
|
21,765 |
|
|
|
21,223 |
|
|
|
|
|
|
50
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Land and site improvements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
40 |
|
|
|
43 |
|
|
|
37 |
|
|
|
42 |
|
- additions |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
3 |
|
- disposals |
|
|
|
|
|
|
(5 |
) |
|
|
(8 |
) |
|
|
(5 |
) |
|
|
(8 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
35 |
|
|
|
40 |
|
|
|
32 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings (including leasehold improvements) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
430 |
|
|
|
393 |
|
|
|
366 |
|
|
|
376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
822 |
|
|
|
733 |
|
|
|
722 |
|
|
|
689 |
|
- additions |
|
|
|
|
|
|
72 |
|
|
|
47 |
|
|
|
60 |
|
|
|
43 |
|
- disposals |
|
|
|
|
|
|
(104 |
) |
|
|
(16 |
) |
|
|
(98 |
) |
|
|
(15 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
10 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(4 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
26 |
|
|
|
9 |
|
|
|
22 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
822 |
|
|
|
822 |
|
|
|
706 |
|
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(392 |
) |
|
|
(340 |
) |
|
|
(356 |
) |
|
|
(313 |
) |
- disposals |
|
|
|
|
|
|
74 |
|
|
|
4 |
|
|
|
70 |
|
|
|
3 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(62 |
) |
|
|
(54 |
) |
|
|
(54 |
) |
|
|
(47 |
) |
- impairment losses |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(8 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(392 |
) |
|
|
(392 |
) |
|
|
(352 |
) |
|
|
(356 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
430 |
|
|
|
430 |
|
|
|
354 |
|
|
|
366 |
|
|
|
|
|
|
|
|
|
|
51
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Communication assets (including leasehold improvements) (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
21,676 |
|
|
|
21,093 |
|
|
|
20,181 |
|
|
|
20,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
43,217 |
|
|
|
40,575 |
|
|
|
41,127 |
|
|
|
39,093 |
|
- additions |
|
|
|
|
|
|
3,681 |
|
|
|
3,378 |
|
|
|
3,501 |
|
|
|
2,732 |
|
- disposals |
|
|
|
|
|
|
(1,416 |
) |
|
|
(740 |
) |
|
|
(1,432 |
) |
|
|
(740 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(105 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
50 |
|
|
|
41 |
|
|
|
26 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
45,848 |
|
|
|
43,217 |
|
|
|
43,222 |
|
|
|
41,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(21,541 |
) |
|
|
(19,482 |
) |
|
|
(20,946 |
) |
|
|
(18,998 |
) |
- disposals |
|
|
|
|
|
|
1,376 |
|
|
|
584 |
|
|
|
1,393 |
|
|
|
588 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
(265 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(2,953 |
) |
|
|
(2,615 |
) |
|
|
(2,786 |
) |
|
|
(2,508 |
) |
- impairment losses |
|
|
|
|
|
|
(37 |
) |
|
|
(14 |
) |
|
|
(37 |
) |
|
|
(14 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
41 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(19 |
) |
|
|
(22 |
) |
|
|
(17 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(23,398 |
) |
|
|
(21,541 |
) |
|
|
(22,393 |
) |
|
|
(20,946 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
22,450 |
|
|
|
21,676 |
|
|
|
20,829 |
|
|
|
20,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication assets under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
424 |
|
|
|
499 |
|
|
|
424 |
|
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening and closing cost (b) |
|
|
|
|
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(434 |
) |
|
|
(359 |
) |
|
|
(434 |
) |
|
|
(359 |
) |
- depreciation expense |
|
|
7 |
|
|
|
(67 |
) |
|
|
(75 |
) |
|
|
(67 |
) |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(501 |
) |
|
|
(434 |
) |
|
|
(501 |
) |
|
|
(434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
357 |
|
|
|
424 |
|
|
|
357 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes certain network land and buildings which are essential to
the operation of our communication assets. |
|
(b) |
|
During fiscal 2006 and fiscal 2005, there were no additions or
disposals to this class of asset. As a result, our opening and closing
cost has remained unchanged. |
52
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Other plant, equipment and motor vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
301 |
|
|
|
380 |
|
|
|
199 |
|
|
|
211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
1,011 |
|
|
|
1,335 |
|
|
|
753 |
|
|
|
1,004 |
|
- additions |
|
|
|
|
|
|
124 |
|
|
|
114 |
|
|
|
34 |
|
|
|
52 |
|
- disposals |
|
|
|
|
|
|
(111 |
) |
|
|
(301 |
) |
|
|
(96 |
) |
|
|
(295 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
48 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(8 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
4 |
|
|
|
(138 |
) |
|
|
1 |
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
1,068 |
|
|
|
1,011 |
|
|
|
692 |
|
|
|
753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(710 |
) |
|
|
(955 |
) |
|
|
(554 |
) |
|
|
(793 |
) |
- disposals |
|
|
|
|
|
|
98 |
|
|
|
287 |
|
|
|
85 |
|
|
|
281 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(93 |
) |
|
|
(123 |
) |
|
|
(45 |
) |
|
|
(50 |
) |
- impairment losses |
|
|
|
|
|
|
(26 |
) |
|
|
(3 |
) |
|
|
(26 |
) |
|
|
(3 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
6 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
22 |
|
|
|
75 |
|
|
|
21 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(740 |
) |
|
|
(710 |
) |
|
|
(519 |
) |
|
|
(554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
328 |
|
|
|
301 |
|
|
|
173 |
|
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
20 |
|
|
|
11 |
|
|
|
16 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
52 |
|
|
|
48 |
|
|
|
26 |
|
|
|
20 |
|
- additions |
|
|
|
|
|
|
9 |
|
|
|
13 |
|
|
|
9 |
|
|
|
11 |
|
- disposals |
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(5 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
60 |
|
|
|
52 |
|
|
|
33 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(32 |
) |
|
|
(37 |
) |
|
|
(10 |
) |
|
|
(10 |
) |
- disposals |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(8 |
) |
|
|
(9 |
) |
|
|
(6 |
) |
|
|
(7 |
) |
- other |
|
|
|
|
|
|
2 |
|
|
|
11 |
|
|
|
3 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(38 |
) |
|
|
(32 |
) |
|
|
(13 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
20 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
53
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
Work in progress
In fiscal 2006, the Telstra Group has property, plant and equipment under construction amounting to
$1,695 million (2005: $1,040 million). In fiscal 2006, the Telstra Entity has property, plant and
equipment under construction amounting to $1,596 million (2005: $945 million). As these assets are
not installed and ready for use, there is no depreciation being charged on these amounts.
Other
Details of our expenditure and lease commitments in relation to property, plant and equipment are
shown in note 26 to these financial statements.
In fiscal 2006, the Telstra Group has property, plant and equipment that was fully depreciated and
still in use with a cost of $1,767 million (2005: $2,224 million). In fiscal 2006, the Telstra
Entity has property, plant and equipment that was fully depreciated and still in use with a cost of
$1,412 million (2005: $1,905 million).
54
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Goodwill |
|
|
2,073 |
|
|
|
2,037 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally generated intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software assets developed for internal use |
|
|
3,188 |
|
|
|
3,622 |
|
|
|
2,651 |
|
|
|
3,173 |
|
Accumulated amortisation |
|
|
(1,406 |
) |
|
|
(1,652 |
) |
|
|
(1,171 |
) |
|
|
(1,499 |
) |
|
|
|
|
|
|
|
|
1,782 |
|
|
|
1,970 |
|
|
|
1,480 |
|
|
|
1,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mastheads |
|
|
447 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and trademarks |
|
|
34 |
|
|
|
34 |
|
|
|
20 |
|
|
|
20 |
|
Accumulated amortisation |
|
|
(8 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
26 |
|
|
|
28 |
|
|
|
9 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licences |
|
|
833 |
|
|
|
793 |
|
|
|
267 |
|
|
|
267 |
|
Accumulated amortisation |
|
|
(241 |
) |
|
|
(183 |
) |
|
|
(132 |
) |
|
|
(116 |
) |
|
|
|
|
|
|
|
|
592 |
|
|
|
610 |
|
|
|
135 |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brandnames |
|
|
235 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
Accumulated amortisation |
|
|
(53 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer bases |
|
|
846 |
|
|
|
749 |
|
|
|
70 |
|
|
|
70 |
|
Accumulated amortisation |
|
|
(407 |
) |
|
|
(305 |
) |
|
|
(64 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
439 |
|
|
|
444 |
|
|
|
6 |
|
|
|
19 |
|
|
|
|
|
|
Total acquired intangible assets |
|
|
1,686 |
|
|
|
1,702 |
|
|
|
150 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred expenditure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred expenditure |
|
|
1,589 |
|
|
|
1,272 |
|
|
|
1,841 |
|
|
|
1,533 |
|
Accumulated amortisation |
|
|
(1,007 |
) |
|
|
(652 |
) |
|
|
(1,022 |
) |
|
|
(655 |
) |
|
|
|
|
|
|
|
|
582 |
|
|
|
620 |
|
|
|
819 |
|
|
|
878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
9,245 |
|
|
|
9,169 |
|
|
|
4,865 |
|
|
|
5,079 |
|
Accumulated amortisation |
|
|
(3,122 |
) |
|
|
(2,840 |
) |
|
|
(2,400 |
) |
|
|
(2,328 |
) |
|
|
|
|
|
|
|
|
6,123 |
|
|
|
6,329 |
|
|
|
2,465 |
|
|
|
2,751 |
|
|
|
|
|
|
55
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening value |
|
|
|
|
|
|
2,037 |
|
|
|
1,790 |
|
|
|
16 |
|
|
|
16 |
|
- acquisitions through business combinations |
|
|
24 |
|
|
|
324 |
|
|
|
385 |
|
|
|
|
|
|
|
|
|
- disposals |
|
|
|
|
|
|
(312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
27 |
|
|
|
(138 |
) |
|
|
|
|
|
|
|
|
- impairment losses |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing value (a) |
|
|
|
|
|
|
2,073 |
|
|
|
2,037 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles internally generated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software assets developed for internal use (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
1,970 |
|
|
|
1,882 |
|
|
|
1,674 |
|
|
|
1,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
3,622 |
|
|
|
3,249 |
|
|
|
3,173 |
|
|
|
3,005 |
|
- additions |
|
|
|
|
|
|
602 |
|
|
|
552 |
|
|
|
498 |
|
|
|
470 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
1 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
- disposals |
|
|
|
|
|
|
(969 |
) |
|
|
(310 |
) |
|
|
(965 |
) |
|
|
(302 |
) |
- impairment losses (f) |
|
|
|
|
|
|
(65 |
) |
|
|
|
|
|
|
(64 |
) |
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
7 |
|
|
|
116 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
3,188 |
|
|
|
3,622 |
|
|
|
2,651 |
|
|
|
3,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(1,652 |
) |
|
|
(1,367 |
) |
|
|
(1,499 |
) |
|
|
(1,307 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(726 |
) |
|
|
(510 |
) |
|
|
(629 |
) |
|
|
(472 |
) |
- disposals |
|
|
|
|
|
|
969 |
|
|
|
310 |
|
|
|
965 |
|
|
|
302 |
|
- foreign currency exchange differences |
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(4 |
) |
|
|
(85 |
) |
|
|
(8 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(1,406 |
) |
|
|
(1,652 |
) |
|
|
(1,171 |
) |
|
|
(1,499 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
1,782 |
|
|
|
1,970 |
|
|
|
1,480 |
|
|
|
1,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mastheads |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
447 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
447 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
- impairment losses |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
447 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value (c) |
|
|
|
|
|
|
447 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Patents and trademarks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
28 |
|
|
|
3 |
|
|
|
13 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
34 |
|
|
|
7 |
|
|
|
20 |
|
|
|
20 |
|
- additions |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
34 |
|
|
|
34 |
|
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(6 |
) |
|
|
(4 |
) |
|
|
(7 |
) |
|
|
(3 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
- |
Closing accumulated amortisation |
|
|
|
|
|
|
(8 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
26 |
|
|
|
28 |
|
|
|
9 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
610 |
|
|
|
651 |
|
|
|
151 |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
793 |
|
|
|
801 |
|
|
|
267 |
|
|
|
267 |
|
- additions |
|
|
|
|
|
|
16 |
|
|
|
5 |
|
|
|
2 |
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
23 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
833 |
|
|
|
793 |
|
|
|
267 |
|
|
|
267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(183 |
) |
|
|
(150 |
) |
|
|
(116 |
) |
|
|
(98 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(58 |
) |
|
|
(37 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(241 |
) |
|
|
(183 |
) |
|
|
(132 |
) |
|
|
(116 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
592 |
|
|
|
610 |
|
|
|
135 |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
57
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Brandnames |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
173 |
|
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
215 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
21 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(1 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
235 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(42 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
- amortisation expense (e) |
|
|
7 |
|
|
|
(11 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(53 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
182 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer bases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
444 |
|
|
|
353 |
|
|
|
19 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
749 |
|
|
|
593 |
|
|
|
70 |
|
|
|
70 |
|
- additions |
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
76 |
|
|
|
191 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(9 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
846 |
|
|
|
749 |
|
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(305 |
) |
|
|
(240 |
) |
|
|
(51 |
) |
|
|
(36 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(98 |
) |
|
|
(86 |
) |
|
|
(13 |
) |
|
|
(15 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
(4 |
) |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(407 |
) |
|
|
(305 |
) |
|
|
(64 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
439 |
|
|
|
444 |
|
|
|
6 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
58
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Deferred expenditure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
620 |
|
|
|
636 |
|
|
|
878 |
|
|
|
593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
1,272 |
|
|
|
1,031 |
|
|
|
1,533 |
|
|
|
988 |
|
- additions (d) |
|
|
317 |
|
|
|
241 |
|
|
|
315 |
|
|
|
545 |
|
- other |
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
1,589 |
|
|
|
1,272 |
|
|
|
1,841 |
|
|
|
1,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
(652 |
) |
|
|
(395 |
) |
|
|
(655 |
) |
|
|
(395 |
) |
- amortisation expense (e) |
|
|
(355 |
) |
|
|
(257 |
) |
|
|
(367 |
) |
|
|
(260 |
) |
|
|
|
|
|
Closing accumulated amortisation |
|
|
(1,007 |
) |
|
|
(652 |
) |
|
|
(1,022 |
) |
|
|
(655 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
582 |
|
|
|
620 |
|
|
|
819 |
|
|
|
878 |
|
|
|
|
|
|
Details of our expenditure commitments in relation to our intangible assets are shown in note 26 to
our financial statements.
|
|
|
(a) |
|
We allocate goodwill to our relevant cash generating units (CGUs) for the purposes of
impairment testing. Refer to note 25 for further details. |
|
(b) |
|
In fiscal 2006, the Telstra Group had software assets under development amounting to $352
million (2005: $362 million). In fiscal 2006, the Telstra Entity had software assets under
development amounting to $296 million (2005: $301 million). As these assets were not installed and
ready for use there is no amortisation being charged on the amounts. |
|
(c) |
|
We do not currently amortise the cost of our mastheads as they have been assessed to have an
indefinite useful life. We do not expect there to be a foreseeable limit to the period over which
the mastheads are expected to generate net cash inflows and, based on industry experience and
current information, it is extremely rare for leading mastheads to become commercially or
technically obsolete. We believe we could dispose of the mastheads in the foreseeable future for an
amount not less than the current carrying value and that the acquirer could retain the strong
market position that the mastheads currently represent. |
|
(d) |
|
During fiscal 2005, we entered into an arrangement with our jointly controlled entity, Reach
Ltd (Reach), and our
co-shareholder PCCW, whereby Reachs international cable capacity was
allocated between us and PCCW under an indefeasible right of use (IRU) agreement, including
committed capital expenditure for the period until 2022. |
|
|
|
The IRU is amortised over the contract periods for the capacity on the various international cable
systems, which range from 5 to 22 years. The Telstra Entity has recorded the IRU within deferred
expenditure. For the Telstra Group, the IRU was deemed to be an extension of our investment in
Reach. The IRU has a carrying value of $nil in the consolidated financial statements due to the
recognition of equity accounted losses in Reach. |
|
(e) |
|
Amortisation expense is included in depreciation and amortisation expense in the income
statement, with the exception of items of deferred expenditure which are expensed to the relevant
line of the income statement. The majority of the deferred expenditure relates to the deferral of
basic access installation costs, which are amortised to goods and services purchased in the income
statement. |
|
(f) |
|
We have recognised impairment losses relating to project costs that were included in our
capitalised software and relate to our software work-in-progress. These projects have subsequently
been cancelled and the costs recognised in the income statement as an impairment loss. |
59
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
16. Derivative financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge receivable |
|
|
20 |
|
|
|
4 |
|
|
|
20 |
|
|
|
4 |
|
Forward contract asset |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
4 |
|
|
|
21 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge receivable |
|
|
222 |
|
|
|
|
|
|
|
222 |
|
|
|
|
|
Interest rate swap asset |
|
|
169 |
|
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
391 |
|
|
|
|
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
Refer to note 35 for details on the financial risk management of our
derivative financial instruments.
The transitional rules for first time adoption of A-IFRS required that we restate our comparative
financial report using A-IFRS, except for AASB
132: Financial Instruments: Disclosure and Presentation and AASB 139: Financial Instruments:
Recognition and Measurement, where
comparative information was not required to be restated. Accordingly, we have applied previous
AGAAP in the comparative information.
60
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
17. Trade and other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
|
|
|
|
As at 30 June |
|
As at 30 June |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade creditors (a) |
|
|
|
|
|
|
738 |
|
|
|
649 |
|
|
|
586 |
|
|
|
480 |
|
Accrued expenses |
|
|
|
|
|
|
1,338 |
|
|
|
1,044 |
|
|
|
1,081 |
|
|
|
815 |
|
Accrued capital expenditure |
|
|
|
|
|
|
844 |
|
|
|
289 |
|
|
|
772 |
|
|
|
210 |
|
Accrued interest |
|
|
|
|
|
|
258 |
|
|
|
227 |
|
|
|
258 |
|
|
|
227 |
|
Deferred cash settlement for acquisitions (b) |
|
|
|
|
|
|
123 |
|
|
|
316 |
|
|
|
|
|
|
|
|
|
Other creditors (a) |
|
|
|
|
|
|
269 |
|
|
|
282 |
|
|
|
171 |
|
|
|
219 |
|
Amounts owed to controlled entities (other than trade creditors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,570 |
|
|
|
2,807 |
|
|
|
3,065 |
|
|
|
1,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred cash settlement for acquisitions (b) |
|
|
|
|
|
|
127 |
|
|
|
187 |
|
|
|
|
|
|
|
|
|
Other creditors |
|
|
|
|
|
|
70 |
|
|
|
63 |
|
|
|
65 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
250 |
|
|
|
65 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Trade creditors and other creditors are non interest bearing liabilities. We generally process
trade creditor payments once they have reached 30 days from the date of invoice for electronic
funds transfer payments, or 30 days from the end of the month of invoice for other payments. |
|
(b) |
|
Included in our deferred cash settlement for acquisitions are our remaining obligations for the
purchase of the third generation radio access network assets from Hutchison 3G Australia Pty Ltd. |
During fiscal 2005, we purchased these assets for an amount of $450 million, payable over two
years. We recognised this payable at its present value in our balance sheet of $403 million and are
releasing the associated financing cost over the period of the
payable in the income statement. For
fiscal 2006, this release of finance costs amounted to $19 million (2005: $28 million).
61
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
18. Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
|
|
|
|
As at 30 June |
|
As at 30 June |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft (a) |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
110 |
|
|
|
|
|
Bills of exchange and commercial paper (b) |
|
|
|
|
|
|
1,457 |
|
|
|
449 |
|
|
|
1,457 |
|
|
|
449 |
|
Loans from wholly owned controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,568 |
|
|
|
463 |
|
|
|
2,975 |
|
|
|
2,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds (c) |
|
|
|
|
|
|
|
|
|
|
516 |
|
|
|
|
|
|
|
516 |
|
Other loans (d) |
|
|
|
|
|
|
394 |
|
|
|
523 |
|
|
|
394 |
|
|
|
523 |
|
Finance leases |
|
|
26 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401 |
|
|
|
1,044 |
|
|
|
399 |
|
|
|
1,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,969 |
|
|
|
1,507 |
|
|
|
3,374 |
|
|
|
3,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds (c) |
|
|
|
|
|
|
2,613 |
|
|
|
2,605 |
|
|
|
2,613 |
|
|
|
2,605 |
|
Other loans (d) |
|
|
|
|
|
|
8,748 |
|
|
|
8,289 |
|
|
|
8,748 |
|
|
|
8,289 |
|
Finance leases |
|
|
26 |
|
|
|
48 |
|
|
|
47 |
|
|
|
15 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,409 |
|
|
|
10,941 |
|
|
|
11,376 |
|
|
|
10,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft (a) |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
110 |
|
|
|
|
|
Bills of exchange and commercial paper (b) |
|
|
|
|
|
|
1,457 |
|
|
|
449 |
|
|
|
1,457 |
|
|
|
449 |
|
Loans from wholly owned controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,568 |
|
|
|
463 |
|
|
|
2,975 |
|
|
|
2,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt (including current portion) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds (c) |
|
|
|
|
|
|
2,613 |
|
|
|
3,121 |
|
|
|
2,613 |
|
|
|
3,121 |
|
Other loans (d) |
|
|
|
|
|
|
9,142 |
|
|
|
8,812 |
|
|
|
9,142 |
|
|
|
8,812 |
|
Finance leases |
|
|
26 |
|
|
|
55 |
|
|
|
52 |
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,810 |
|
|
|
11,985 |
|
|
|
11,775 |
|
|
|
11,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,378 |
|
|
|
12,448 |
|
|
|
14,750 |
|
|
|
14,799 |
|
|
|
|
|
|
|
|
|
|
62
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
18. Borrowings (continued)
Our long term debt is repayable over years ending 30 June as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
Due in the year ending 30 June |
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
after 2011 |
|
|
Total |
|
Telstra bonds |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Coupon interest rate
up to 6.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
35 |
|
up to 8.0% |
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
|
|
|
|
|
1,510 |
|
|
|
2,510 |
|
up to 10.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
28 |
|
up to 12.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
44 |
|
up to 16.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
|
|
|
|
|
1,649 |
|
|
|
2,649 |
|
|
|
|
|
|
|
|
Unamortised discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans (d) |
|
|
394 |
|
|
|
1,373 |
|
|
|
81 |
|
|
|
815 |
|
|
|
2,642 |
|
|
|
3,837 |
|
|
|
9,142 |
|
|
|
|
|
|
|
|
Unamortised discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
13 |
|
|
|
12 |
|
|
|
10 |
|
|
|
8 |
|
|
|
5 |
|
|
|
52 |
|
|
|
100 |
|
|
|
|
|
|
|
|
Future finance charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long term debt payable |
|
|
407 |
|
|
|
1,385 |
|
|
|
591 |
|
|
|
1,323 |
|
|
|
2,647 |
|
|
|
5,538 |
|
|
|
11,891 |
|
|
|
|
|
|
|
|
Unamortised discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets pledged as security
Our 50% owned pay television joint venture FOXTEL previously entered into a $550 million bank
facility arrangement to fund its full digital conversion and launch of new digital services. The
use of this facility is subject to certain conditions being met and full repayment is due on 30
September 2008.
As part of this arrangement, our controlled entity Telstra Media Pty Ltd as a FOXTEL partner, and
FOXTEL itself, have pledged their respective assets as collateral in favour of the banks. The
carrying value of the assets pledged in Telstra Media Pty Ltd as at 30 June 2006 was $nil (2005:
$nil). Refer to note 27 for details of an equity contribution deed entered as part of this
agreement.
On 31 July 2006, FOXTEL entered into a $600 million syndicated secured term loan facility to fund
the refinancing of the above facility Refer to note 34 for further details.
Our borrowings are unsecured, except for finance leases which are secured, as the rights to the
leased asset transfer to the lessor in the event of a default by us.
(a) Bank overdraft
As at 30 June 2006, we had a bank overdraft of $nil (2005: $14 million). Our bank overdraft in
fiscal 2005 related to a controlled entity. This bank overdraft was unsecured, with interest being
charged daily, net of the controlled entitys offsetting position of cash in bank and any
outstanding loans.
(b) Bills of exchange and commercial paper
We have issued bills of exchange and commercial paper of $1,457 million (2005: $449 million) to
financial institutions
with an original maturity of less than 180 days. At 30 June 2006, all $1,457 million (2005: $449
million) of the commercial paper matures in less than three months.
(c) Telstra bonds
Telstra bonds currently on issue relate to wholesale investors and mature up until the year 2020.
During fiscal 2006, $508 million (2005: $273 million) of Telstra bonds matured.
63
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
18. Borrowings (continued)
(d) Other loans
Details of our other loans, including currency of
borrowing, interest rates and maturity dates, are
presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group - Other loans details |
|
A$ amount |
|
Interest rates |
|
Maturity dates |
|
|
As at 30 June |
|
Year ended 30 June |
|
As at 30 June |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
A$m |
|
A$m |
|
% |
|
% |
|
|
|
|
|
|
|
Australian dollar loans
|
|
|
245 |
|
|
|
247 |
|
|
5.93 |
|
5.93 |
|
November 2007
|
|
November 2007 |
US dollar loans
|
|
|
1,028 |
|
|
|
1,306 |
|
|
5.22 to 6.47
|
|
3.49 to 6.50
|
|
between April 2008
and Dec 2015
|
|
between Nov 2005
and April 2012 |
Euro eurobond loan
|
|
|
6,336 |
|
|
|
5,893 |
|
|
3.14 to 6.49
|
|
3.00 to 6.38
|
|
between Dec 2006
and July 2015
|
|
between Dec 2006
and July 2015 |
Swiss franc eurobond loan
|
|
|
326 |
|
|
|
304 |
|
|
2.61 |
|
2.50 |
|
April 2013
|
|
April 2013 |
Japanese yen loans
|
|
|
472 |
|
|
|
333 |
|
|
0.44 to 2.51
|
|
0.31 to 1.89
|
|
between July 2007
and June 2016
|
|
between July 2007
and Nov 2014 |
Singapore dollar loans
|
|
|
84 |
|
|
|
78 |
|
|
3.80 |
|
3.80 |
|
March 2008
|
|
March 2008 |
New Zealand dollar loans
|
|
|
164 |
|
|
|
183 |
|
|
7.03 to 7.19
|
|
6.99 to 7.15
|
|
between Nov 2011
and Nov 2014
|
|
between Nov 2011
and Nov 2014 |
British pound sterling loans
|
|
|
487 |
|
|
|
468 |
|
|
6.23 |
|
6.13 |
|
August 2014
|
|
August 2014 |
|
|
|
Total other loans including
current portion
|
|
|
9,142 |
|
|
|
8,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) Financing arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
As at 30 June |
|
As at 30 June |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
We have access to the following lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit standby arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured committed cash standby facilities which are subject to annual review |
|
|
902 |
|
|
|
892 |
|
|
|
894 |
|
|
|
887 |
|
Amount of credit unused |
|
|
900 |
|
|
|
891 |
|
|
|
894 |
|
|
|
887 |
|
|
|
|
|
|
We have commercial paper facilities in place with financial institutions under which we may issue
up to $14,651 million (2005: $13,842 million). As at 30 June 2006, we had drawn down $1,457 million
(2005: $449 million) of these commercial paper facilities. These facilities are not committed or
underwritten and we have no guaranteed access to the funds.
Generally, our facilities are available unless we default on any terms applicable under the
relevant agreements or become insolvent.
64
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
19. Provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
As at 30 June |
|
As at 30 June |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefits (a) |
|
|
319 |
|
|
|
336 |
|
|
|
272 |
|
|
|
288 |
|
Workers compensation |
|
|
32 |
|
|
|
32 |
|
|
|
31 |
|
|
|
31 |
|
Provision for restructuring |
|
|
81 |
|
|
|
|
|
|
|
81 |
|
|
|
|
|
Provision for redundancies (a) |
|
|
158 |
|
|
|
|
|
|
|
155 |
|
|
|
|
|
Other provisions |
|
|
147 |
|
|
|
53 |
|
|
|
140 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
737 |
|
|
|
421 |
|
|
|
679 |
|
|
|
356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefits (a) |
|
|
573 |
|
|
|
610 |
|
|
|
548 |
|
|
|
588 |
|
Workers compensation |
|
|
184 |
|
|
|
182 |
|
|
|
177 |
|
|
|
175 |
|
Provision for restructuring |
|
|
128 |
|
|
|
|
|
|
|
128 |
|
|
|
|
|
Provision for redundancies (a) |
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
Other provisions |
|
|
61 |
|
|
|
102 |
|
|
|
43 |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
974 |
|
|
|
894 |
|
|
|
924 |
|
|
|
837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Aggregate employee benefits and related on-costs liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current provision for employee benefits |
|
|
319 |
|
|
|
336 |
|
|
|
272 |
|
|
|
288 |
|
Non current provision for employee benefits |
|
|
573 |
|
|
|
610 |
|
|
|
548 |
|
|
|
588 |
|
Current provision for redundancies |
|
|
158 |
|
|
|
|
|
|
|
155 |
|
|
|
|
|
Non current provision for redundancies |
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
Accrued labour and on-costs (i) |
|
|
317 |
|
|
|
237 |
|
|
|
303 |
|
|
|
225 |
|
|
|
|
|
|
|
|
|
1,395 |
|
|
|
1,183 |
|
|
|
1,306 |
|
|
|
1,101 |
|
|
|
|
|
|
|
|
|
(i) |
|
Accrued labour and related on-costs are included within our current trade and other payables
(refer to note 17). |
Provision for employee benefits consist of amounts for annual leave and long service leave accrued
by employees.
Non current employee benefits for long service leave are measured at their present value. The
following assumptions were adopted in measuring this amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
As at 30 June |
|
As at 30 June |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
Weighted average projected increase in salaries, wages and associated on-costs |
|
|
4.2 |
% |
|
|
4.0 |
% |
|
|
4.3 |
% |
|
|
4.0 |
% |
Weighted average discount rates |
|
|
5.4 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
Leave taking rates |
|
|
13.2 |
% |
|
|
13.3 |
% |
|
|
13.3 |
% |
|
|
13.3 |
% |
65
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
19. Provisions (continued)
(b) Information about our provisions, other than provision for employee benefits
Workers compensation
We self insure for our workers compensation liabilities. We provide for our obligations through an
assessment of accidents and estimated claims incurred. The provision is based on a semi-annual
actuarial review of our workers compensation liability. Actual compensation paid may vary where
accidents and claims incurred vary from those estimated. The timing of these payments may vary,
however the average time payments are expected for is 11 years (2005: 12 years).
Certain controlled entities do not self insure, but pay annual premiums to third party insurance
companies for their workers compensation.
Provision for redundancy and restructuring
The provision for redundancy and restructuring relates to our transformation project that was
announced on 15 November 2005. A provision has only been raised for those redundancy and
restructuring costs where a detailed formal plan has been approved and we have raised a valid
expectation in those affected that the plan will be carried out. Only those costs that are not
associated with the ongoing activities of the Company have been included. The costs included in the
redundancy and restructuring provision are based on current estimates of the likely amounts to be
incurred and include:
|
|
an estimate of the termination benefits that affected employees will be entitled to; |
|
|
|
costs associated with shutting down certain networks, platforms and applications; |
|
|
|
property rationalisation and other onerous lease costs; and |
|
|
|
costs of replacing customer equipment in order to meet our current service obligations. |
A total provision of $427 million has been raised for redundancy and restructuring for the Telstra
Group as at 30 June 2006. This includes $18 million for the additional impairment of inventory and
a $14 million allowance for other receivables. Refer to note 7(b) for further details.
The execution of these detailed formal plans, for which a restructuring and redundancy provision
has been raised, is expected to be completed by fiscal 2011 for the restructuring provision, and
fiscal 2008 for the redundancy provision.
Other
Other provisions include provision for Reach Ltds committed capital expenditure, provision for
restoration costs, and other general provisions.
66
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
19. Provisions (continued)
(c) Movement in provisions, other than employee benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
Year ended 30 June |
|
Year ended 30 June |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Workers compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
214 |
|
|
|
216 |
|
|
|
206 |
|
|
|
207 |
|
- additional provisions |
|
|
24 |
|
|
|
22 |
|
|
|
23 |
|
|
|
22 |
|
- amount used |
|
|
(32 |
) |
|
|
(32 |
) |
|
|
(31 |
) |
|
|
(31 |
) |
- unwinding of discount on liabilities recognised at present value |
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
- effect of any change in the discount rate |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
|
|
|
Closing balance |
|
|
216 |
|
|
|
214 |
|
|
|
208 |
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
- additional provisions |
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
- reversal of amounts unused |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
Closing balance |
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redundancy provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- additional provisions |
|
|
186 |
|
|
|
|
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
186 |
|
|
|
|
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
155 |
|
|
|
46 |
|
|
|
111 |
|
|
|
24 |
|
- additional provisions |
|
|
113 |
|
|
|
125 |
|
|
|
113 |
|
|
|
93 |
|
- amount used |
|
|
(51 |
) |
|
|
(12 |
) |
|
|
(38 |
) |
|
|
(5 |
) |
- reversal of amounts unused |
|
|
(17 |
) |
|
|
(10 |
) |
|
|
(16 |
) |
|
|
(3 |
) |
- unwinding of discount on liabilities recognised at present value |
|
|
9 |
|
|
|
2 |
|
|
|
9 |
|
|
|
2 |
|
- foreign currency exchange differences |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
1 |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
208 |
|
|
|
155 |
|
|
|
183 |
|
|
|
111 |
|
|
|
|
|
|
67
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
20. Derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
As at 30 June |
|
As at 30 June |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge payable |
|
|
6 |
|
|
|
11 |
|
|
|
6 |
|
|
|
11 |
|
Forward contract liability |
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
11 |
|
|
|
12 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge payable |
|
|
612 |
|
|
|
864 |
|
|
|
612 |
|
|
|
864 |
|
Interest rate swap payable |
|
|
156 |
|
|
|
|
|
|
|
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
768 |
|
|
|
864 |
|
|
|
768 |
|
|
|
864 |
|
|
|
|
|
|
Refer to note 35 for details on the financial risk management of our
derivative financial instruments.
The transitional rules for first time adoption of A-IFRS required that we restate our comparative
financial report using A-IFRS, except for AASB
132: Financial Instruments: Disclosure and Presentation and AASB 139: Financial Instruments:
Recognition and Measurement, where
comparative information was not required to be restated. Accordingly, we have applied previous
AGAAP in the comparative information.
68
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
21. Share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
As at 30 June |
|
As at 30 June |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Contributed equity |
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
Share loan to employees |
|
|
(130 |
) |
|
|
(154 |
) |
|
|
(130 |
) |
|
|
(154 |
) |
Shares held by employee share plan trusts |
|
|
(99 |
) |
|
|
(113 |
) |
|
|
(99 |
) |
|
|
(113 |
) |
Net services received under employee share plans |
|
|
5 |
|
|
|
10 |
|
|
|
5 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
|
|
|
Contributed equity
Our contributed equity represents our authorised fully paid ordinary shares. Each of our fully paid
ordinary shares carries the right to one vote at a meeting of the company. Holders of our shares
also have right to receive dividends as declared, and to participate in the proceeds from sale of
all surplus assets in proportion to the total shares issued in the event of the company winding up.
The movement in the number of our authorised fully paid ordinary shares is:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Year ended 30 June |
|
|
2006 |
|
|
2005 |
|
|
|
Number of |
|
|
Number of |
|
|
|
shares |
|
|
shares |
|
|
|
|
Opening balance |
|
|
12,443,074,357 |
|
|
|
12,628,359,026 |
|
Shares bought back (i) |
|
|
|
|
|
|
(185,284,669 |
) |
|
|
|
Closing balance |
|
|
12,443,074,357 |
|
|
|
12,443,074,357 |
|
|
|
|
|
|
|
(i) |
|
On 15 November 2004, we completed an off-market share buy-back of 185,284,669 ordinary shares
as part of our capital management program. The ordinary shares were bought back at $4.05 per share,
comprising a fully franked dividend component of $2.55 per share and a capital component of $1.50
per share. The Commonwealth of Australia did not participate in the share buy-back. |
The shares bought back were subsequently cancelled, reducing the number of fully paid ordinary
shares on issue. In total, 1.47% of our total issued ordinary shares, or 3.0% of our non
Commonwealth owned ordinary shares, were bought back.
The cost of the share buy-back comprised a purchase consideration of $750 million and associated
transaction costs of $6 million.
In accordance with the substance of the buy-back, shareholders equity decreased as follows:
|
|
|
|
|
|
|
Year ended |
|
|
|
30 June |
|
|
|
2005 |
|
|
|
$m |
|
Contributed equity |
|
|
280 |
|
Retained profits |
|
|
476 |
|
|
|
|
|
|
|
|
756 |
|
|
|
|
|
Share loan to employees
The share loan to employees account represents the outstanding balance of the non recourse loans
provided to our employees under the Telstra Employee Share Ownership Plans (TESOP 97 and TESOP 99).
Shares held by employee share plan trusts
The shares held by employee share plan trusts account represents the value of shares held by the
Telstra Growthshare Trust (Growthshare) in Telstra Corporation Limited. The purchase of these
shares has been fully funded by Telstra Corporation Limited. As at 30 June 2006 the number of
shares totalled 17,931,918 (2005: 20,216,091).
Net services received under employee share plans
The net services received under employee share plans account is used to record the cumulative value
of our incentive shares, options, restricted shares, performance rights and deferred shares issued
under Growthshare. Contributions by Telstra Corporation Limited to Growthshare are also included in
this account. These contributions are used by the Trust to purchase Telstra shares on market to
underpin the issue of our equity instruments.
69
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
21. Share capital (continued)
Movements in our share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
5,793 |
|
|
|
6,073 |
|
|
|
5,793 |
|
|
|
6,073 |
|
- share buy-back |
|
|
|
|
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share loan to employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
(154 |
) |
|
|
(174 |
) |
|
|
(154 |
) |
|
|
(174 |
) |
- amounts repaid on share loans provided to employees |
|
|
|
|
|
|
24 |
|
|
|
20 |
|
|
|
24 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
(130 |
) |
|
|
(154 |
) |
|
|
(130 |
) |
|
|
(154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares held by employee share plan trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
(113 |
) |
|
|
(117 |
) |
|
|
(113 |
) |
|
|
(117 |
) |
- additional shares purchased |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
- shares issued to employees under employee share plans |
|
|
|
|
|
|
20 |
|
|
|
4 |
|
|
|
20 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
(99 |
) |
|
|
(113 |
) |
|
|
(99 |
) |
|
|
(113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net services received under employee share plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
10 |
|
|
|
4 |
|
|
|
10 |
|
|
|
4 |
|
- share based payments |
|
|
7 |
|
|
|
15 |
|
|
|
10 |
|
|
|
15 |
|
|
|
10 |
|
- shares issued to employees under employee share plans |
|
|
|
|
|
|
(20 |
) |
|
|
(4 |
) |
|
|
(20 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
5 |
|
|
|
10 |
|
|
|
5 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
|
|
|
|
|
|
|
70
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
22. Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Foreign currency translation reserve |
|
|
(210 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
14 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
Consolidation fair value reserve |
|
|
32 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
General reserve |
|
|
4 |
|
|
|
4 |
|
|
|
194 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
(160 |
) |
|
|
(153 |
) |
|
|
210 |
|
|
|
194 |
|
|
|
|
|
|
Foreign currency translation reserve
The foreign currency translation reserve is used to
record exchange differences arising from the conversion
of the financial statements into Australian dollars.
This reserve is also used to record our percentage share
of exchange differences arising from equity accounting
our non-Australian investments in jointly controlled
entities and associated entities. The foreign currency
translation reserve applicable to jointly controlled and
associated entities is shown in note 30.
Cash flow hedging reserve
The cash flow hedging reserve represents, where a hedge
qualifies for hedge accounting, the effective portion of
gains or losses on remeasuring the fair value of the
hedge instrument until such time as the hedged item
affects the income statement. At this time the gains or
losses are transferred to the income statement.
The transitional rules for first time adoption of A-IFRS
required that we restate our comparative financial report
using A-IFRS, except for AASB 132: Financial
Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement,
where comparative information was not required to be
restated. Accordingly, we have applied previous AGAAP
in the comparative information.
Consolidation fair value reserve
The consolidation fair value reserve represents our
share of the fair value adjustments to TelstraClear
Limited net assets upon acquisition of a controlling
interest. The reserve balance is amortised over the
useful life of the underlying revalued assets.
General reserve
The general reserve represents other items we have taken
directly to equity.
71
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
22. Reserves (continued)
Movements in our reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- reserves recognised on equity accounting our interest in jointly controlled
and associated entities |
|
|
|
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
- adjustment on translation of financial statements of non-Australian
controlled entities |
|
|
|
|
|
|
(36 |
) |
|
|
(193 |
) |
|
|
|
|
|
|
|
|
- transfer of foreign currency translation reserve on sale of jointly controlled entity |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- reduction on dilution of ownership of Telstra CSL Limited |
|
|
24 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
(210 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- adjustment to opening balance on adoption of new accounting standard (i) |
|
|
|
|
|
|
79 |
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted opening balance |
|
|
|
|
|
|
79 |
|
|
|
|
|
|
|
82 |
|
|
|
|
|
- net hedging gains recognised directly in equity |
|
|
|
|
|
|
327 |
|
|
|
|
|
|
|
327 |
|
|
|
|
|
- net hedging gains removed from equity and included in profit for the year |
|
|
|
|
|
|
(420 |
) |
|
|
|
|
|
|
(421 |
) |
|
|
|
|
- income tax on cash flow hedging reserve |
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation fair value reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
38 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
- transfers to retained profits |
|
|
23 |
|
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
32 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
4 |
|
|
|
5 |
|
|
|
194 |
|
|
|
194 |
|
- reserves recognised on equity accounting our interest in jointly
controlled and
associated entities |
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
- transfer of reserve on sale of associates |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
194 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(160 |
) |
|
|
(153 |
) |
|
|
210 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Adjustment on adoption of AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement from
1 July 2005. Refer to note 36 for further details. |
72
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
23. Retained profits and minority interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Retained profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
8,273 |
|
|
|
8,618 |
|
|
|
7,413 |
|
|
|
7,558 |
|
- adjustment to opening balance on adoption of new accounting standard (i) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted opening balance |
|
|
|
|
|
|
8,268 |
|
|
|
8,618 |
|
|
|
7,408 |
|
|
|
7,558 |
|
- profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
- actuarial gain/(loss) on our defined benefit plans |
|
|
|
|
|
|
958 |
|
|
|
(90 |
) |
|
|
945 |
|
|
|
(85 |
) |
- income tax on our actuarial gain on our defined benefit plans |
|
|
|
|
|
|
(284 |
) |
|
|
24 |
|
|
|
(284 |
) |
|
|
24 |
|
- dividends paid |
|
|
4 |
|
|
|
(4,970 |
) |
|
|
(4,124 |
) |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
- share buy-back |
|
|
21 |
|
|
|
|
|
|
|
(476 |
) |
|
|
|
|
|
|
(476 |
) |
- transfers from consolidation fair value reserve |
|
|
22 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
- transfer of reserve on sale of associates |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
- dilution gain recognised on CSL New World Mobility Group merger (ii) |
|
|
24 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
7,177 |
|
|
|
8,273 |
|
|
|
6,336 |
|
|
|
7,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
- increase in minority interests due to acquisitions |
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
246 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Adjustment on adoption of AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement from
1 July 2005. Refer to note 36 for further details. |
|
(ii) |
|
Dilution gain represents net gain recognised on the
merger of the Telstra CSL Group and New World Mobility
Group. Refer to note 24 for details. |
73
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
(a) Reconciliation of profit to net cash provided by operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
Add/(subtract) the following transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
|
|
7 |
|
|
|
4,087 |
|
|
|
3,034 |
|
|
|
3,529 |
|
|
|
3,657 |
|
|
|
3,206 |
|
Finance income |
|
|
6 |
|
|
|
(66 |
) |
|
|
(49 |
) |
|
|
(83 |
) |
|
|
(63 |
) |
|
|
(101 |
) |
Finance costs |
|
|
7 |
|
|
|
1,002 |
|
|
|
744 |
|
|
|
963 |
|
|
|
985 |
|
|
|
943 |
|
Dividend revenue |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(560 |
) |
|
|
(224 |
) |
Share based payments |
|
|
7 |
|
|
|
15 |
|
|
|
11 |
|
|
|
10 |
|
|
|
15 |
|
|
|
10 |
|
Defined benefit expense |
|
|
7 |
|
|
|
185 |
|
|
|
137 |
|
|
|
203 |
|
|
|
182 |
|
|
|
201 |
|
Net gain on disposal of property, plant and equipment |
|
|
6 |
|
|
|
(23 |
) |
|
|
(17 |
) |
|
|
(9 |
) |
|
|
(20 |
) |
|
|
(10 |
) |
Net gain on disposal of controlled entities |
|
|
6 |
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on disposal of other investments |
|
|
6 |
|
|
|
(58 |
) |
|
|
(43 |
) |
|
|
(79 |
) |
|
|
(59 |
) |
|
|
(85 |
) |
Share of net (gain)/loss from jointly controlled and associated
entities |
|
|
30 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
Impairment losses (excluding inventories, trade and other
receivables) |
|
|
7 |
|
|
|
137 |
|
|
|
102 |
|
|
|
29 |
|
|
|
760 |
|
|
|
519 |
|
Reversal of impairment losses (excluding trade and other
receivables) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
(349 |
) |
Decrease in non cash receivable from related entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(361 |
) |
Foreign exchange differences |
|
|
|
|
|
|
28 |
|
|
|
21 |
|
|
|
(25 |
) |
|
|
(46 |
) |
|
|
4 |
|
Other |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
(52 |
) |
|
|
9 |
|
|
|
(20 |
) |
Movements in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(net of acquisitions of controlled entity balances) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/decrease in trade and other receivables |
|
|
|
|
|
|
(140 |
) |
|
|
(104 |
) |
|
|
43 |
|
|
|
(204 |
) |
|
|
62 |
|
(Increase)/decrease in inventories |
|
|
|
|
|
|
10 |
|
|
|
7 |
|
|
|
9 |
|
|
|
14 |
|
|
|
7 |
|
(Increase)/decrease in prepayments and other assets |
|
|
|
|
|
|
30 |
|
|
|
22 |
|
|
|
(23 |
) |
|
|
20 |
|
|
|
(26 |
) |
Increase/(decrease) in trade and other payables |
|
|
|
|
|
|
243 |
|
|
|
180 |
|
|
|
(8 |
) |
|
|
517 |
|
|
|
25 |
|
Increase/(decrease) in revenue received in advance |
|
|
|
|
|
|
55 |
|
|
|
41 |
|
|
|
(13 |
) |
|
|
23 |
|
|
|
10 |
|
Increase/(decrease) in net taxes payable |
|
|
|
|
|
|
(502 |
) |
|
|
(373 |
) |
|
|
32 |
|
|
|
(537 |
) |
|
|
193 |
|
Increase/(decrease) in provisions |
|
|
|
|
|
|
383 |
|
|
|
285 |
|
|
|
31 |
|
|
|
396 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
8,562 |
|
|
|
6,356 |
|
|
|
8,960 |
|
|
|
8,311 |
|
|
|
8,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Reconciliation of cash balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the year as shown in the statement of
cash flows agrees to the net amount of the following
items in the notes to the financial statements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
10 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,548 |
|
|
|
474 |
|
|
|
1,368 |
|
Bank overdraft |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
689 |
|
|
|
511 |
|
|
|
1,534 |
|
|
|
474 |
|
|
|
1,368 |
|
|
|
|
|
|
|
|
|
|
74
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(c) Goods and Services Tax (GST)
Our receipts from trade and other receivables includes
estimated GST of $2,223 million (2005: $2,121 million)
collected by us as agent for the ATO. Our payments of
accounts payable and to employees include estimated GST
payments made by us for goods and services obtained in
undertaking both operating and investing activities. GST
paid associated with operating activities amounted to
$941 million (2005: $784 million) and GST paid relating
to investing activities amounted to $159 million (2005:
$243 million).
(d) Significant financing and investing
activities that involve components of non cash
Acquisition of 3G assets
During fiscal 2005, we acquired a 50% interest in
Hutchison 3G Australia Pty Ltds existing third
generation (3G) radio access network amounting to $403
million at acquisition date. As at 30 June 2006, we have
paid an additional $312 million (2005: $22 million) to
our joint venture partner for the acquisition of these
assets as the purchase price is being paid in
instalments. The balance outstanding as at 30 June 2006
was settled on 3 July 2006 and is reflected in our trade
and other payables. Refer to note 17 for further
information.
(e) Acquisitions
CSL New World Mobility Group
We merged our 100% owned Hong Kong mobile operations
(Telstra CSL Group) with the Hong Kong mobile operations
of New World PCS Holdings Limited and its controlled
entities (New World Mobility Group) to form the CSL New
World Mobility Group.
Under the merger agreement, Telstra CSL Limited (Telstra
CSL) issued new shares to New World Mobility Holdings
Limited in return for 100% of the issued capital of the
New World Mobility Group and $44 million in cash. The
share issue diluted Telstras ownership in the merged
group to 76.4%. The effect on the Telstra Group of the
merger is detailed below:
|
|
|
|
|
|
|
|
|
|
|
New World Mobility Group |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Consideration for acquisition
|
|
|
|
|
|
|
|
|
Fair value of Telstra CSL shares issued |
|
|
577 |
|
|
|
|
|
Cash received on acquisition |
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
|
|
Assets/(liabilities) at acquisition date |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
21 |
|
|
|
21 |
|
Inventories |
|
|
4 |
|
|
|
4 |
|
Property, plant and equipment |
|
|
174 |
|
|
|
174 |
|
Intangible assets |
|
|
109 |
|
|
|
|
|
Other assets |
|
|
14 |
|
|
|
14 |
|
Deferred tax assets |
|
|
21 |
|
|
|
29 |
|
Trade and other payables |
|
|
(97 |
) |
|
|
(75 |
) |
|
|
|
Net identifiable assets acquired |
|
|
246 |
|
|
|
167 |
|
Goodwill on acquisition |
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from acquisition date until
30 June 2006 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
75
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(e) Acquisitions (continued)
CSL New World Mobility Group (continued)
The net impact of the merger on the Telstra Group
results at the date of merger are detailed below.
|
|
|
|
|
|
|
Year ended |
|
|
|
30 June |
|
|
|
2006 |
|
|
|
$m |
|
Net increase in Telstra Group net assets |
|
|
|
|
Inflow of cash on acquisition (net of transaction costs) |
|
|
42 |
|
New World Mobility Group net identifiable assets
acquired |
|
|
246 |
|
Goodwill on acquisition of New World Mobility Group |
|
|
287 |
|
Reduction of Telstra CSL goodwill on dilution |
|
|
(308 |
) |
|
|
|
|
|
|
|
267 |
|
Represented by the following movements in equity |
|
|
|
|
Minority interest recognised |
|
|
(230 |
) |
Reduction in foreign currency translation reserve on
dilution |
|
|
(19 |
) |
|
|
|
|
Dilution gain recognised as a result of merger |
|
|
18 |
|
|
|
|
|
The CSL New World Mobility Group is a provider of mobile
telecommunication products and services which operates
primarily in Hong Kong. Refer to note 29 for further
details on the acquisition.
Other fiscal 2006 acquisitions
During fiscal 2006, we have also acquired several other
entities. These entities are not individually
significant and have been aggregated as Other in the
below table.
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
Consideration for acquisitions |
|
|
|
|
|
|
|
|
Cash consideration for acquisitions |
|
|
31 |
|
|
|
|
|
Costs of acquisitions |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of deferred consideration
for prior years acquisition |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outflow of cash on acquisition |
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
|
|
Assets/(liabilities) at acquisition date |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
5 |
|
|
|
5 |
|
Property, plant and equipment |
|
|
2 |
|
|
|
2 |
|
Intangible assets goodwill |
|
|
26 |
|
|
|
26 |
|
Intangible assets other |
|
|
12 |
|
|
|
|
|
Provisions |
|
|
(3 |
) |
|
|
(3 |
) |
Deferred tax liabilities |
|
|
(4 |
) |
|
|
|
|
Other liabilities |
|
|
|
|
|
|
(2 |
) |
|
|
|
Net assets |
|
|
38 |
|
|
|
28 |
|
Adjustment to reflect minority
interests acquired |
|
|
(14 |
) |
|
|
|
|
Adjustment upon increase in
ownership interest from associated
entity to controlled |
|
|
(2 |
) |
|
|
|
|
Goodwill on acquisition |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from acquisition date until 30
June 2006 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our other acquisitions include:
|
|
100% of the issued share capital of the Converged
Networks Group; |
|
|
|
additional 25% interest in the issued
share capital of Invizage Pty Ltd giving us 100%
ownership of this entity; |
|
|
|
additional 40% interest in
the issued share capital of Enhanced Processing
Technologies Inc giving us 100% ownership of this entity;
and |
|
|
|
additional 24.7% interest in the issued share
capital of Adstream (Aust) Pty Ltd and its controlled
entities giving us a controlling 58% interest. |
These entities are not individually significant and
have been aggregated as Other. Refer to note 29 for
further details on our acquisitions.
76
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(e) Acquisitions (continued)
Fiscal 2005 acquisitions
During fiscal 2005, we completed the following
significant acquisitions:
|
|
100% of the issued share capital of KAZ Group
Limited and its controlled entities (KAZ
Group); and |
|
|
100% of the issued share capital of PSINet UK
Limited and its controlled entities (PSINet
Group). |
We also acquired several other entities during fiscal
2005. These entities were not individually significant
and have been aggregated as Other in the below table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KAZ Group (i) |
|
|
PSINet Group (ii) |
|
|
Other (iii) |
|
|
Total |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Consideration for acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration for acquisition |
|
|
333 |
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
565 |
|
|
|
|
|
Deferred cash consideration |
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
Costs of acquisition |
|
|
7 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
340 |
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash balances acquired |
|
|
(4 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
Payments of deferred consideration for
prior years acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
Consideration deferred |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outflow of cash on acquisition |
|
|
336 |
|
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
Fair value |
|
|
value |
|
|
Fair value |
|
|
value |
|
|
Fair value |
|
|
value |
|
Assets/(liabilities) at acquisition date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
4 |
|
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
|
|
2 |
|
|
|
2 |
|
|
|
12 |
|
|
|
12 |
|
Trade and other receivables |
|
|
75 |
|
|
|
75 |
|
|
|
18 |
|
|
|
18 |
|
|
|
24 |
|
|
|
24 |
|
|
|
117 |
|
|
|
117 |
|
Inventories |
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
11 |
|
|
|
17 |
|
|
|
17 |
|
Property, plant and equipment |
|
|
22 |
|
|
|
21 |
|
|
|
47 |
|
|
|
47 |
|
|
|
6 |
|
|
|
6 |
|
|
|
75 |
|
|
|
74 |
|
Intangible assets |
|
|
123 |
|
|
|
15 |
|
|
|
42 |
|
|
|
|
|
|
|
89 |
|
|
|
14 |
|
|
|
254 |
|
|
|
29 |
|
Other assets |
|
|
3 |
|
|
|
3 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
13 |
|
|
|
13 |
|
Deferred tax assets |
|
|
13 |
|
|
|
13 |
|
|
|
1 |
|
|
|
1 |
|
|
|
7 |
|
|
|
7 |
|
|
|
21 |
|
|
|
21 |
|
Trade and other payables |
|
|
(54 |
) |
|
|
(54 |
) |
|
|
(23 |
) |
|
|
(23 |
) |
|
|
(22 |
) |
|
|
(22 |
) |
|
|
(99 |
) |
|
|
(99 |
) |
Provisions |
|
|
(52 |
) |
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(57 |
) |
|
|
(57 |
) |
Borrowings |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(35 |
) |
|
|
(35 |
) |
|
|
(10 |
) |
|
|
(10 |
) |
|
|
(48 |
) |
|
|
(48 |
) |
Deferred tax liabilities |
|
|
(33 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
(64 |
) |
|
|
(1 |
) |
Current tax liabilities |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
2 |
|
|
|
2 |
|
Other liabilities |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(13 |
) |
|
|
(13 |
) |
|
|
(36 |
) |
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
Net assets |
|
|
102 |
|
|
|
26 |
|
|
|
29 |
|
|
|
1 |
|
|
|
76 |
|
|
|
17 |
|
|
|
207 |
|
|
|
44 |
|
Adjustment upon increase in
ownership interest from associated
entity to controlled entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
Goodwill on acquisition |
|
|
238 |
|
|
|
|
|
|
|
95 |
|
|
|
|
|
|
|
52 |
|
|
|
|
|
|
|
385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
340 |
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) from acquisition date
until
30 June 2005 |
|
|
11 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(e) Acquisitions (continued)
(i) |
|
The KAZ Group is a provider of business process outsourcing,
systems integration, consulting, applications
development and information technology management
services. It operates primarily in Australia, but also
conducts business in the United States and Asia. |
(ii) |
|
The PSINet Group is a provider of e-business
infrastructure solutions and corporate internet
protocol based communication services. |
(iii) |
|
During fiscal 2005, we acquired the following entities: |
|
|
100% of the issued share capital of ESA Holding Pty Ltd and its controlled entity
Damovo (Australia) Pty Ltd, and of Damovo HK
Limited (now known as Telstra Business Systems); |
|
|
100% of the issued share capital of Universal Publishers Pty Ltd; |
|
|
100% of the issued share capital of Chief Entertainment Pty Ltd; |
|
|
100% of the issued share capital of Sytec Resources and its controlled entities; and |
|
|
additional 10% interest in the issued share capital of 1300 Australia Pty Ltd giving
us a 60% controlling interest. |
These entities are not individually significant
and have been aggregated as Other per the
previous table.
Other information relating to our acquisitions
We have recognised goodwill of $324 million (2005: $385
million) on acquisition of our controlled entities. The
following factors contributed to the recognition of
goodwill:
|
|
forecast revenues and profitability of the acquired entities; |
|
|
cost synergies expected by combining our current operations with the acquired entities; and |
|
|
strategic benefits to the operations of the Telstra Group. |
We have identified and measured any significant
intangible assets separately from goodwill on
acquisition of our controlled entities.
If our acquisitions during fiscal 2006 had occurred on 1
July 2005, our adjusted consolidated income and
consolidated profit for the year ended 30 June 2005 for
the Telstra Group would have been $23,350 million and
$3,174 million respectively.
If our acquisitions during fiscal 2005 had occurred on 1
July 2004, our adjusted consolidated income and
consolidated profit for the year ended 30 June 2005 for
the Telstra Group would have been $22,515 million and
$4,303 million respectively.
78
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
25. Impairment
Cash generating units
For the purposes of undertaking our impairment testing,
we identify cash generating units (CGUs). Our CGUs are
determined according to the smallest group of assets that
generate cash inflows that are largely independent of the
cash inflows from other assets or groups of assets.
The carrying amount of our goodwill and intangible
assets with an indefinite useful life are allocated
across the following CGUs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles with indefinite |
|
|
|
Goodwill |
|
|
useful lives |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
CGUs |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Telstra CSL Group |
|
|
970 |
|
|
|
1,228 |
|
|
|
|
|
|
|
|
|
New World Mobility Group |
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Kaz Group |
|
|
270 |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
TelstraClear Group |
|
|
137 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
United Kingdom Group |
|
|
113 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
Sensis Group (a) |
|
|
36 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
Trading Post Group |
|
|
179 |
|
|
|
178 |
|
|
|
447 |
|
|
|
447 |
|
Universal Publishers |
|
|
15 |
|
|
|
15 |
|
|
|
8 |
|
|
|
8 |
|
Adstream Group |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Business Systems |
|
|
30 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
Other |
|
|
17 |
|
|
|
18 |
|
|
|
8 |
|
|
|
7 |
|
|
|
|
|
|
|
2,073 |
|
|
|
2,037 |
|
|
|
463 |
|
|
|
462 |
|
|
|
|
(a) |
|
Our assessment of the Sensis CGU excludes the
Trading Post Group, Universal Publishers and the
Adstream Group that form part of the Sensis reportable
segment. |
In addition to the above CGUs, we have two further
significant CGUs that are assessed for impairment. These
two CGUs are:
|
|
the Telstra Entity CGU, excluding the HFC
network; and |
|
|
|
the CGU comprising the HFC
network. |
The Telstra Entity CGU consists of our ubiquitous
telecommunications infrastructure network in Australia,
excluding the HFC network that we consider not to be
integrated with the rest of our telecommunications
network. Assets that form part of the ubiquitous
telecommunications network are considered to be working
together to generate our net cash flows. No one item of
telecommunications equipment is of any value without the
other assets to which it is connected in order to
achieve delivery of our products and services.
79
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
25. Impairment (continued)
Impairment testing
Our impairment testing compares the carrying value of an
individual asset or CGU with its recoverable amount as
determined using a value in use calculation.
Our assumptions for determining the recoverable amount
of each CGU are based on past experience and our
expectations for the future. Our cash flow projections
are based on five year management approved forecasts.
These forecasts use management estimates to determine
income, expenses, capital expenditure and cash flows for
each CGU.
We have used the following key assumptions in
determining the recoverable amount of our CGUs to which
goodwill or indefinite life intangible assets has been
allocated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
Terminal value |
|
|
|
(b) |
|
|
growth rate (c) |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
Telstra CSL Group |
|
|
11.1 |
|
|
|
14.5 |
|
|
|
2.0 |
|
|
|
5.0 |
|
New World Mobility Group |
|
|
12.5 |
|
|
|
|
|
|
|
2.0 |
|
|
|
|
|
Kaz Group |
|
|
16.6 |
|
|
|
16.7 |
|
|
|
3.0 |
|
|
|
3.0 |
|
TelstraClear Group |
|
|
18.0 |
|
|
|
18.0 |
|
|
|
3.0 |
|
|
|
3.0 |
|
United Kingdom Group |
|
|
14.9 |
|
|
|
15.0 |
|
|
|
3.0 |
|
|
|
3.0 |
|
Sensis Group (a) |
|
|
13.7 |
|
|
|
13.7 |
|
|
|
3.0 |
|
|
|
3.0 |
|
Trading Post Group |
|
|
15.3 |
|
|
|
14.3 |
|
|
|
2.5 |
|
|
|
2.5 |
|
Universal Publishers |
|
|
14.3 |
|
|
|
14.3 |
|
|
|
2.5 |
|
|
|
2.5 |
|
Adstream Group |
|
|
18.6 |
|
|
|
|
|
|
|
2.5 |
|
|
|
|
|
Telstra Business Systems |
|
|
15.0 |
|
|
|
17.1 |
|
|
|
2.5 |
|
|
|
2.5 |
|
(a) |
|
Our assessment of the Sensis CGU excludes the
Trading Post Group, Universal Publishers and the
Adstream Group that form part of the Sensis reportable
segment. |
(b) |
|
Discount rate represents the pre tax discount rate
applied to the cash flow projections. The discount rate
reflects the market determined, risk adjusted, discount
rate which was adjusted for specific risks relating to
the CGU and the countries in which they operate. |
(c) |
|
Terminal value growth rate represents the growth
rate applied to extrapolate our cash flows beyond the
five year forecast period. These growth rates are based
on our expectation of the CGUs long term performance in
their respective markets. |
80
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
26. Expenditure commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
(a) Capital expenditure commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditure commitments contracted for at balance date but not
recorded in the financial statements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property plant and equipment commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
665 |
|
|
|
529 |
|
|
|
634 |
|
|
|
482 |
|
Within 1-2 years |
|
|
62 |
|
|
|
15 |
|
|
|
60 |
|
|
|
15 |
|
Within 2-3 years |
|
|
32 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
Within 3-4 years |
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
Within 4-5 years |
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
After 5 years |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
776 |
|
|
|
544 |
|
|
|
743 |
|
|
|
497 |
|
|
|
|
|
|
Commitments relating to our intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
159 |
|
|
|
38 |
|
|
|
124 |
|
|
|
|
|
Within 1-2 years |
|
|
130 |
|
|
|
26 |
|
|
|
105 |
|
|
|
|
|
Within 2-3 years |
|
|
16 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
305 |
|
|
|
64 |
|
|
|
245 |
|
|
|
|
|
|
|
|
|
|
(b) Operating lease commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future lease payments for non-cancellable operating leases not recorded in the
financial statements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
424 |
|
|
|
380 |
|
|
|
260 |
|
|
|
232 |
|
Within 1-2 years |
|
|
290 |
|
|
|
260 |
|
|
|
170 |
|
|
|
154 |
|
Within 2-3 years |
|
|
201 |
|
|
|
209 |
|
|
|
108 |
|
|
|
117 |
|
Within 3-4 years |
|
|
139 |
|
|
|
149 |
|
|
|
60 |
|
|
|
64 |
|
Within 4-5 years |
|
|
118 |
|
|
|
128 |
|
|
|
47 |
|
|
|
49 |
|
After 5 years |
|
|
358 |
|
|
|
397 |
|
|
|
152 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
1,530 |
|
|
|
1,523 |
|
|
|
797 |
|
|
|
770 |
|
|
|
|
|
|
In addition, in fiscal 2006 the Telstra Group had total
future commitments under cancellable operating leases of
$356 million (2005: $343 million). In fiscal 2006, the
Telstra Entity has total future commitments under
cancellable operating leases of $354 million (2005: $338
million).
Description of our operating leases
We have operating leases for the following types of assets:
|
|
rental of land and buildings; |
|
|
rental of motor vehicles, caravan huts and trailers, and mechanical aids; and |
|
|
rental of personal computers, laptops, printers and other related equipment that are
used in non communications plant activities. |
The average lease term is:
|
|
7 years for land and buildings; |
|
|
2 years for motor vehicles, 4 years for light commercial vehicles and 7 to 12 years
for trucks and mechanical aids; and |
|
|
3 years for personal computers and related equipment. |
The majority of our operating leases relate to land and
buildings. We have several subleases with total minimum
lease payments of $59 million (2005: $75 million) for
the Telstra Group and $43 million (2005: $54 million)
for the Telstra Entity. Our property operating leases
generally contain escalation clauses, which are fixed
increases generally between 3% and 5%, or increases
subject to the consumer price index. We do not have any
significant purchase options.
Contingent rental payments exist for motor vehicles and
are not significant compared with total rental payments
made. These are based on unfair wear and tear, excess
kilometres travelled, additional fittings and no
financial loss to be suffered by the leasing company
from changes to the original agreements. Our motor
vehicles and related equipment must also remain in
Australia.
A number of our operating leases are considered onerous
due to our transformation project and as such, have
been provided for in our financial statements. Refer to
note 19 for details.
81
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
26. Expenditure commitments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
(c) Finance lease commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
|
|
|
|
13 |
|
|
|
12 |
|
|
|
7 |
|
|
|
5 |
|
Within 1-2 years |
|
|
|
|
|
|
12 |
|
|
|
10 |
|
|
|
6 |
|
|
|
5 |
|
Within 2-3 years |
|
|
|
|
|
|
10 |
|
|
|
10 |
|
|
|
6 |
|
|
|
5 |
|
Within 3-4 years |
|
|
|
|
|
|
8 |
|
|
|
8 |
|
|
|
3 |
|
|
|
5 |
|
Within 4-5 years |
|
|
|
|
|
|
5 |
|
|
|
5 |
|
|
|
1 |
|
|
|
1 |
|
After 5 years |
|
|
|
|
|
|
52 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
|
|
|
|
|
100 |
|
|
|
99 |
|
|
|
23 |
|
|
|
21 |
|
Future finance charges on finance leases |
|
|
|
|
|
|
(45 |
) |
|
|
(47 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
Present value of net future minimum lease payments |
|
|
|
|
|
|
55 |
|
|
|
52 |
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded as current borrowings |
|
|
18 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
|
|
4 |
|
Recorded as non current borrowings |
|
|
18 |
|
|
|
48 |
|
|
|
47 |
|
|
|
15 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
Total finance lease liabilities |
|
|
18 |
|
|
|
55 |
|
|
|
52 |
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
Description of our finance leases
We have finance leases for the following types of assets:
|
|
property leases in our controlled entity, Telstra (PSINet) Limited; |
|
|
computer mainframes, computer processing equipment and other related equipment. |
The average lease term is:
|
|
24 years for the property leases with a
remaining weighted average life of 17 years;
and |
|
|
5 years for computer mainframe and associated equipment. |
Interest rates for our finance leases are:
property leases interest rate of 10.5%; and
computer mainframe, computer processing equipment
and associated equipment weighted average interest
rate of 7.6%.
In addition to the above finance lease commitments, we
previously entered into US finance leases for
communications exchange equipment with various entities
denominated in US dollars. We have prepaid all lease
rentals due under the terms of these leases and have no
additional payment obligations.
These entities lease the communications equipment from
the ultimate lessor and then sublease the equipment to
us. We have
guaranteed that the lease payments will be paid by these
entities to the ultimate lessor as scheduled over the
lease terms (refer to note 27 for further information).
We hold an early buyout option that we could exercise in
fiscal 2011 and fiscal 2013, otherwise the relevant
lease period ends during fiscal 2015 and fiscal 2016.
Refer to note 14 for further details on communication
assets and equipment that are held under finance lease.
82
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
26. Expenditure commitments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
(d) Other commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenditure commitments, other than commitments dealt
with in (a), (b) and (c) above, which have not been recorded in
the financial statements are: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
481 |
|
|
|
600 |
|
|
|
317 |
|
|
|
411 |
|
Within 1-2 years |
|
|
236 |
|
|
|
301 |
|
|
|
118 |
|
|
|
127 |
|
Within 2-3 years |
|
|
176 |
|
|
|
213 |
|
|
|
79 |
|
|
|
64 |
|
Within 3-4 years |
|
|
215 |
|
|
|
160 |
|
|
|
46 |
|
|
|
40 |
|
Within 4-5 years |
|
|
111 |
|
|
|
111 |
|
|
|
16 |
|
|
|
18 |
|
After 5 years |
|
|
1,162 |
|
|
|
1,195 |
|
|
|
5 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
2,381 |
|
|
|
2,580 |
|
|
|
581 |
|
|
|
666 |
|
|
|
|
|
|
Our other expenditure commitments include contracts for printing,
engineering and operational support services, information
technology services and building maintenance. In addition, other
commitments also include commitments relating to our investment
in FOXTEL.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments relating to our investment in FOXTEL (i): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
144 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
Within 1-2 years |
|
|
113 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
Within 2-3 years |
|
|
93 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
Within 3-4 years |
|
|
95 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
Within 4-5 years |
|
|
92 |
|
|
|
93 |
|
|
|
|
|
|
|
|
|
After 5 years |
|
|
1,140 |
|
|
|
1,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,677 |
|
|
|
1,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Our jointly controlled entity, FOXTEL, has other
commitments amounting to approximately $3,354 million
(2005: $3,642 million). The majority of our 50% share of
these commitments relate to minimum subscriber guarantees
(MSG) for pay television programming agreements. These
agreements are for periods of between 1 and 25 years and
are based on current prices and costs under agreements
entered into between the FOXTEL Partnership and various
other parties. These minimum subscriber payments
fluctuate in accordance with price escalation/reduction
formulas contained in the agreements, as well as foreign
currency movements. In addition to our MSG, FOXTEL has
other commitments including obligations for satellite
transponder costs and digital set top box units. |
83
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
27. Contingent liabilities and contingent assets
We have no significant contingent assets as at 30
June 2006. The details and maximum amounts (where
reasonable estimates can be made) are set out below for
our contingent liabilities.
Telstra Entity
Common law claims
Certain common law claims by employees and third parties
are yet to be resolved. As at 30 June 2006, management
believes that the resolution of these contingencies will
not have a significant effect on the Telstra Entitys
financial position, results of operations or cash flows.
The maximum amount of these contingent liabilities
cannot be reasonably estimated.
Included in our common law claims are the following litigation cases:
(a) In November 2002, Seven Network Limited and C7 Pty
Limited (Seven) commenced litigation against us and
various other parties (the respondents) in relation to
the contracts and arrangements between us and some of
those other parties relating to the right to broadcast
Australian Football League and National Rugby League,
the contract between FOXTEL and us for the provision of
HFC cable services (the Broadband Co-operation
Agreement) and other matters.
Seven seeks damages and other relief, including that
some of these contracts and arrangements are void. Seven
also seeks orders which would, in effect, require a
significant restructure of the subscription
television/sports rights markets in Australia. Expert
reports filed by Seven were at one time used to suggest
that Seven sought total damages of around $1.1 billion.
However, some significant components of this expert
evidence have since been ruled inadmissible by the trial
judge and many of the facts on which Sevens loss claim
is based are contested. In addition to denying liability
at all, the respondents have filed expert reports to the
effect that, even if liability were found to exist,
damages should be assessed at a very significantly
lesser amount. If Seven obtained any order damages or
for legal costs affecting Telstra, the liability arising
from that order may subsequently be apportioned between
the relevant respondents, with Telstra bearing only a
portion of the total liability.
The matter is proceeding before the courts, with final
oral submissions scheduled to commence in September
2006. In light of the progress of this case to date,
Telstra considers that it is unlikely to have any
material effect on our overall business or financial
position.
(b) In January 2006, a shareholder commenced a
representative proceeding in the Federal Court against
Telstra. The statement of claim alleges that Telstra
breached the Corporations Act and the Australian Stock
Exchange (ASX) Listing Rules by failing to disclose:
|
|
that Telstras senior management had formed an opinion
that there had been past deficiencies in operating
expenditure and capital
expenditure on telecommunications infrastructure; |
|
|
|
that
Telstra had forecast a long term decline in PSTN
revenues; and |
|
|
|
that Telstra had communicated these
matters to the Government. |
The claim seeks orders for compensation for the class of
shareholders who bought shares between the time that
these matters became known to Telstra and the time at
which they were disclosed to the market. The proceeding
is at an early stage and is unlikely to have any
material effect on our overall business or financial
position. Telstra will vigorously defend the claim.
(c) In December 2005, we increased our prices for line
access provided to our competitors to prices closer to
our average costs of providing that access. The ACCC
appears to allege that these increases left insufficient
margin for our competitors in respect of a lower spend
segment of the retail market. The ACCC somehow considers
that our conduct has or is likely to have the effect of
substantially lessening competition across the retail
market and therefore that we are in breach of the
competition rule. On 12 April 2006, the ACCC issued a
competition notice against us to this effect.
The ACCC has yet to commence enforcement proceedings
against us but the maximum potential penalties which had
accrued as at 30 June 2006 exceeded $200 million and are
accruing at $3 million per day. Optus has issued
proceedings in the Federal Court which, in part, rely on
the competition notice and seek damages, a refund and an
injunction preventing us from charging the increased
prices and recovering our costs. Telstra will vigorously
defend the Optus proceedings and any enforcement
proceedings which may be brought by the ACCC.
Telstra has challenged the validity of the ACCCs
decision to issue the competition notice (and the
preceding consultation notice) in the Federal Court on
administrative law grounds. Amongst other things, we
allege that the competition notice (and the preceding
consultation notice) should be set aside for uncertainty
and that the ACCC did not accord us procedural fairness
by failing to properly consult with us prior to the
issue of the competition notice. The ACCC argues that it
does not owe us any duty of procedural fairness or
natural justice when issuing competition notices.
84
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
27. Contingent liabilities and contingent assets (continued)
Telstra Entity (continued)
Indemnities, performance guarantees and financial support
We have provided the following indemnities, performance
guarantees and financial support through the Telstra
Entity as follows:
|
|
Indemnities to financial institutions to support bank guarantees to the value of $347
million (2005: $329 million) in respect of the performance of contracts. |
|
|
Indemnities to financial institutions in respect of the obligations of our controlled
entities. The maximum amount of our contingent liabilities for this purpose was $311
million (2005: $282 million). |
|
|
Financial support for certain controlled entities to the amount necessary to enable
those entities to meet their
obligations as and when they fall due. The financial support is subject to conditions
including individual monetary limits totalling $150 million (2005: $69 million) and a
requirement that the entity remains our controlled entity. |
|
|
Guarantees of the performance of jointly controlled entities under contractual
agreements to a maximum amount of $69 million (2005: $126 million). |
|
|
Guarantees over the performance of third parties under defeasance arrangements,
whereby lease payments are made on our behalf by the third parties over the remaining
terms of the finance leases. The lease payments over the remaining expected term of the
leases amount to $843 million (US$626 million) (2005: $850 million (US$650 million)). We
hold an early buyout option that we could exercise in fiscal 2011 and fiscal 2013,
otherwise the relevant lease period ends during fiscal 2015 and fiscal 2016. Refer to note
26 for further details on the above finance leases. |
|
|
During fiscal 1998, we resolved to provide IBM Global Services Australia Limited
(IBMGSA) with guarantees issued on a several basis up to $210 million as a shareholder of
IBMGSA. We issued a guarantee of $68 million on behalf of IBMGSA during fiscal 2000.
During fiscal 2004, we sold our shareholding in this entity. The $68 million guarantee is
provided to support service contracts entered into by IBMGSA and third parties, and was
made with IBMGSA bankers, or directly to IBMGSA customers. As at 30 June 2006, this
guarantee has still been provided and $142 million (2005: $142 million) of the $210 million
guarantee facility remains unused. |
|
|
|
Upon sale of our shareholding in IBMGSA and under the deed of indemnity between
shareholders, our liability under these performance guarantees has been indemnified for all
guarantees that were in place at the time of sale. Therefore, the overall net exposure to
any loss associated with a claim has effectively been offset. |
Controlled entities
Indemnities provided by our controlled entities
In fiscal 2006 and fiscal 2005, our controlled entities
had no significant outstanding indemnities in respect of
obligations to financial institutions and corporations.
Other
FOXTEL minimum subscriber guarantees and other obligations
The Telstra Entity and its partners, News Corporation
Limited and Publishing and Broadcasting Limited, and
Telstra Media Pty Ltd and its partner, Sky Cable Pty
Ltd, have entered into agreements relating to pay
television programming with various parties and other
miscellaneous contracts. Our commitments under these
agreements relate mainly to minimum subscriber
guarantees (MSG) (refer to note 26 for details of MSG
commitments).
As we are subject to joint and several liability in
relation to certain agreements entered into by the
FOXTEL partnership, we would be contingently liable if
our partners in this relationship failed to meet any of
their obligations. As a result, our contingent
liabilities arising from FOXTELs MSG and other
agreements are $1,531 million (2005: $1,689 million).
FOXTEL Equity Contribution Deed (ECD)
FOXTEL previously entered into a $550 million bank
facility arrangement to fund its full digital conversion
and launch of new digital services. As part of this
arrangement, we and FOXTELs other ultimate
shareholders, News Corporation Limited and Publishing
and Broadcasting Limited, entered into an ECD. Under the
ECD, FOXTEL is required to call on a maximum of $200
million in equity contributions in certain specified
circumstances as necessary to avoid default of a
financial covenant. These equity contributions are based
on ownership interests and, as a result, our
maximum contingent liability is $100 million.
We have no joint or several liability relating to our
partners contributions under the ECD. On 31 July 2006,
FOXTEL entered into a $600 million syndicated secured
term loan facility. As a result, the ECD has
subsequently been terminated. Refer to note 34 for
further details.
85
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
27. Contingent liabilities and contingent assets (continued)
Other (continued)
3GIS Partnership
During fiscal 2005, Telstra OnAir Holdings Pty Ltd and
its partner, Hutchison 3G Australia Pty Ltd entered
into agreements relating to the occupation of premises
to provide 3GSM radio access network services.
As we are subject to joint and several liability in
relation to agreements entered into by the 3GIS
partnership, we would be contingently liable if our
partners in this relationship failed to meet any of
their obligations. As a result, our contingent
liabilities arising from the above agreements are $154
million (2005: $132 million).
Reach working capital facility
We, together with our co-shareholder PCCW Limited
(PCCW), previously bought a loan facility owed to a
banking syndicate by Reach Finance Ltd, a subsidiary of
our 50% owned joint venture Reach Ltd (Reach). As part
of this arrangement, the shareholders also agreed to
provide a US$50 million working capital facility to
Reach. Under the facility Reach is entitled to request
from Telstra a maximum of US$25 million to assist in
meeting ongoing operational requirements. Drawdowns
under this facility must be repaid at the end of each
interest period as agreed between the parties and the
loan must be fully repaid by 31 December 2007. The
applicable interest rate is LIBOR plus 2.5%. As at 30
June 2006, Reach had not made any drawdown under this
facility.
We have no joint or several liability relating to PCCWs
US$25 million share of the working capital facility.
ASIC deed of cross guarantee
A list of the companies that are part of our deed of
cross guarantee appear in note 29. Each of these
companies (except Telstra Finance Limited) guarantees
the payment in full of the debts of the other named
companies in the event of their winding up. Refer to
note 29 for further information.
86
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits
The employee superannuation schemes that we
participate in or sponsor exist to provide benefits for
our employees and their dependants after finishing
employment with us. It is our policy to contribute to
the schemes at rates specified in the governing rules
for defined contribution schemes, or at rates determined
by the actuaries for defined benefit schemes.
The defined contribution divisions receive fixed
contributions and our legal or constructive obligation
is limited to these contributions.
The present value of our defined benefit obligations for
our defined benefit plans are calculated by an actuary
using the projected unit credit method. This method
determines each year of service as giving rise to an
additional unit of benefit entitlement and measures each
unit separately to calculate the final obligation.
Details of our plans are set out below.
Telstra Superannuation Scheme (Telstra Super)
On 1 July 1990, Telstra Super was established and the
majority of Telstra staff who were previously members of
the Commonwealth Superannuation Scheme (CSS) transferred
into Telstra Super. The Commonwealth has responsibility
for past, present and future liabilities in respect of
former and current Telstra employees who remain in the
CSS. As a result, we have no current ongoing obligations
for these CSS members, other than associated
administration fees.
The Telstra Entity and some of our Australian
controlled entities participate in Telstra Super.
Telstra Super has both defined benefit and defined
contribution divisions. The defined benefit divisions
of Telstra Super are closed to new members.
Our defined benefit divisions provide benefits based
on years of service and final average salary. Post
employment benefits do not include payments for
medical costs.
The funding policy adopted in respect of the defined
benefit divisions is directed at ensuring that benefits
accruing to members and beneficiaries are fully funded
as the benefits fall due. The benefits received by
members of each defined benefit division take into
account factors such as the employees length of
service, final average salary, employer and employee
contributions.
An actuarial investigation of this scheme is carried out
at least every three years.
HK CSL Retirement Scheme
Our controlled entity, Hong Kong CSL Limited (HK CSL),
participates in a superannuation scheme known as the HK
CSL Retirement Scheme. This scheme was established under
the Occupational Retirement Schemes Ordinance (ORSO) and
is administered by an independent trustee. The scheme
has three defined benefit sections and one defined
contribution section.
The benefits received by members of the defined benefit schemes
are based on the employees remuneration and length of service.
Actuarial investigations are undertaken annually for this scheme.
Other defined contribution schemes
A number of our subsidiaries also participate in defined
contribution schemes which receive employer and employee
contributions based on a percentage of the employees
salaries. Telstra Group made contribution to these
schemes of $32 million for fiscal 2006.
87
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
We use the following measurement dates for our
defined benefit plans:
|
|
|
|
|
|
|
Measurement |
|
|
|
date |
|
Telstra Super |
|
30 June |
HK CSL Retirement Scheme |
|
31 May |
The fair value of the defined benefit plan assets and the
present value of the defined benefit obligations as at
the reporting date is determined by our actuary. The
details of the defined benefit divisions are set out
below:
(a) Net defined benefit plan asset
Our net defined benefit plan asset recognised in the
balance sheet is determined as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Fair value of defined benefit plan assets |
|
|
4,553 |
|
|
|
4,518 |
|
|
|
4,459 |
|
|
|
4,439 |
|
Present value of the defined benefit obligation |
|
|
3,675 |
|
|
|
4,308 |
|
|
|
3,605 |
|
|
|
4,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net defined benefit asset before adjustment for contributions tax |
|
|
878 |
|
|
|
210 |
|
|
|
853 |
|
|
|
205 |
|
Adjustment for contributions tax |
|
|
151 |
|
|
|
37 |
|
|
|
151 |
|
|
|
37 |
|
|
|
|
|
|
Net defined benefit asset in the balance sheet at 30 June (i) |
|
|
1,029 |
|
|
|
247 |
|
|
|
1,004 |
|
|
|
242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate actuarial gain included in defined benefit plan assets |
|
|
480 |
|
|
|
155 |
|
|
|
474 |
|
|
|
152 |
|
Aggregate actuarial gain/(loss) included in the defined benefit obligation |
|
|
340 |
|
|
|
(233 |
) |
|
|
329 |
|
|
|
(225 |
) |
|
|
|
|
|
Net actuarial gain/(loss) |
|
|
820 |
|
|
|
(78 |
) |
|
|
803 |
|
|
|
(73 |
) |
|
|
|
|
|
|
|
|
(i) |
|
At 30 June the fair value of defined benefit plan
assets exceeds the present value of defined benefit
obligations resulting in a net surplus. We recognise the
net surplus as an asset as we have the ability to control
this surplus to generate future funds that are available
to us in the form of reductions in future contributions,
or as a cash refund.
The asset recognised does not exceed the present value of
any economic benefits available in the form of refunds
from the plan or reductions in future contributions to
the plan. |
88
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(b) Amounts recognised in the income statement and in equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
The components of defined benefit plan expense recognised in the income
statement are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
227 |
|
|
|
214 |
|
|
|
220 |
|
|
|
210 |
|
Interest cost |
|
|
205 |
|
|
|
205 |
|
|
|
202 |
|
|
|
202 |
|
Expected return on plan assets |
|
|
(322 |
) |
|
|
(317 |
) |
|
|
(316 |
) |
|
|
(312 |
) |
Member contributions |
|
|
(40 |
) |
|
|
(20 |
) |
|
|
(39 |
) |
|
|
(20 |
) |
Curtailment gain |
|
|
(17 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
|
|
Plan expenses after tax |
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
Notional transfer of funds for defined contribution benefits |
|
|
89 |
|
|
|
75 |
|
|
|
89 |
|
|
|
75 |
|
Adjustment for contributions tax |
|
|
28 |
|
|
|
30 |
|
|
|
28 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
185 |
|
|
|
203 |
|
|
|
182 |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The movements in our defined benefit plan asset recognised directly in equity
in the statement of recognised income and expense are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gains)/losses on our defined benefit plans |
|
|
(820 |
) |
|
|
78 |
|
|
|
(803 |
) |
|
|
73 |
|
Adjustment to contributions tax |
|
|
(142 |
) |
|
|
12 |
|
|
|
(142 |
) |
|
|
12 |
|
|
|
|
|
|
|
|
|
(962 |
) |
|
|
90 |
|
|
|
(945 |
) |
|
|
85 |
|
|
|
|
|
|
89
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(c) Plan assets
Our weighted average asset allocation by major asset
category as a percentage of the fair value of total plan
assets as at 30 June are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super |
|
|
HK CSL Retirement Scheme |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Target |
|
|
Actual |
|
|
Target |
|
|
Actual |
|
|
Target |
|
|
Actual |
|
|
Target |
|
|
Actual |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
Asset allocations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments |
|
|
68 |
|
|
|
69 |
|
|
|
67 |
|
|
|
62 |
|
|
|
60 |
|
|
|
61 |
|
|
|
60 |
|
|
|
64 |
|
Debt instruments |
|
|
12 |
|
|
|
10 |
|
|
|
10 |
|
|
|
14 |
|
|
|
35 |
|
|
|
32 |
|
|
|
35 |
|
|
|
30 |
|
Property |
|
|
15 |
|
|
|
16 |
|
|
|
18 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
11 |
|
|
|
5 |
|
|
|
7 |
|
|
|
5 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
Our defined benefit plans investment strategy is to
control the level of risk by investing in a broad range
of quality investments, and using a range of Australian
and International investment managers who specialise in
cash, fixed interest, shares and property. We constantly
review our investments and adjust our investment strategy
in order to maximise returns within this controlled risk
profile and take advantage of perceived market
inefficiencies.
Investment goals are to earn the best possible returns
within the appropriate strategic level of risk, and
maintain the financial viability of the funds by ensuring
plan assets exceed benefit obligations.
Derivatives are used to limit exposure to market
fluctuations and are used within appropriate control
environments for direct and externally managed
investments. Derivatives are not used for speculative
purposes.
90
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(d) Reconciliation of change in fair value of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Fair value of defined benefit plan assets at beginning of year |
|
|
4,518 |
|
|
|
4,294 |
|
|
|
4,439 |
|
|
|
4,224 |
|
Expected return on plan assets |
|
|
322 |
|
|
|
317 |
|
|
|
316 |
|
|
|
312 |
|
Employer contributions |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Member contributions |
|
|
46 |
|
|
|
24 |
|
|
|
46 |
|
|
|
24 |
|
Notional transfer of funds for defined contribution benefits |
|
|
(89 |
) |
|
|
(75 |
) |
|
|
(89 |
) |
|
|
(75 |
) |
Benefits paid (i) |
|
|
(715 |
) |
|
|
(185 |
) |
|
|
(712 |
) |
|
|
(182 |
) |
Actuarial gains |
|
|
480 |
|
|
|
155 |
|
|
|
474 |
|
|
|
152 |
|
Plan expenses after tax |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
Foreign currency exchange rate changes |
|
|
3 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of defined benefit plan assets at end of year |
|
|
4,553 |
|
|
|
4,518 |
|
|
|
4,459 |
|
|
|
4,439 |
|
|
|
|
|
|
Our actual return on defined benefit plan assets was
16.2% (2005: 12.5%) for Telstra Super and 12.5% (2005:
6.8%) for HK CSL Retirement Scheme.
(e) Reconciliation of change in present value of
wholly funded defined benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Present value of defined benefit obligation at beginning of year |
|
|
4,308 |
|
|
|
3,837 |
|
|
|
4,234 |
|
|
|
3,775 |
|
Current service cost |
|
|
227 |
|
|
|
214 |
|
|
|
220 |
|
|
|
210 |
|
Interest cost |
|
|
205 |
|
|
|
205 |
|
|
|
202 |
|
|
|
202 |
|
Member contributions |
|
|
7 |
|
|
|
4 |
|
|
|
7 |
|
|
|
4 |
|
Benefits paid (i) |
|
|
(715 |
) |
|
|
(185 |
) |
|
|
(712 |
) |
|
|
(182 |
) |
Actuarial (gains)/losses |
|
|
(340 |
) |
|
|
233 |
|
|
|
(329 |
) |
|
|
225 |
|
Curtailment gain |
|
|
(17 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
Present value of wholly funded defined benefit obligation at end of year |
|
|
3,675 |
|
|
|
4,308 |
|
|
|
3,605 |
|
|
|
4,234 |
|
|
|
|
|
|
(i) Benefits paid includes $640 million (2005: $116
million) of entitlements (to exiting defined
benefit members) which have been retained in Telstra
Super but transferred to the defined contribution
scheme.
The following benefit payments, which reflect
expected future service, are expected to be paid.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 - |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2016 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Expected benefit
payments |
|
|
197 |
|
|
|
204 |
|
|
|
215 |
|
|
|
237 |
|
|
|
257 |
|
|
|
1,712 |
|
|
|
|
91
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(f) Principal actuarial assumptions
We used the following major assumptions to determine
our defined benefit plan expense for the year ended 30
June:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super |
|
|
HK CSL Retirement Scheme |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
Discount rate (i) |
|
|
4.7 |
|
|
|
5.1 |
|
|
|
3.7 |
|
|
|
3.8 |
|
Expected rate of return on plan assets (ii) |
|
|
7.5 |
|
|
|
7.5 |
|
|
|
6.8 |
|
|
|
6.8 |
|
Expected rate of increase in future salaries |
|
|
4.0 |
|
|
|
4.0 |
|
|
|
2.5 |
|
|
|
2.5 |
|
We used the following major assumptions to determine our defined
benefit obligations at 30 June:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super |
|
|
HK CSL Retirement Scheme |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
Discount rate (i) |
|
|
5.1 |
|
|
|
4.7 |
|
|
|
5.0 |
|
|
|
3.8 |
|
Expected rate of increase in future salaries (ii) |
|
|
3.0 |
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
|
(i) |
|
The present value of our defined benefit obligations
is determined by discounting the estimated future cash
outflows using a discount rate based on government
guaranteed securities with similar due dates to these
expected cash flows. |
For Telstra Super we have used the 10-year Australian
government bond rate as it has the closest term that one
could get from the Australian bond market to match the
term of the defined benefit obligations. We have not
made any adjustment to reflect the difference between
the term of the bonds and the estimated term of
liabilities due to the observation that the current
government bond yield curve is reasonably flat implying
that the yields from government bonds with a term less
than 10 years are expected to be very similar to the
extrapolated bond yields with a term of 12 to 13 years.
Based on industry practice in Australia, we have
adjusted the discount rate for Telstra Super to take
into account future investment tax of the fund which is
considered part of the ultimate cost to settle the
obligation.
Similarly, for the HK CSL Retirement Scheme we have used
the 10 year Hong Kong exchange fund yields as it has the
closest term that one could get from the Hong Kong
market to match the term of the defined benefit
obligations.
The discount rate used in calculating the defined
benefit obligation at 30 June 2006 was 5.1% p.a. after
the adjustment to take into account future investment
tax. Holding all other assumptions constant, the effect
of a one percentage point decline in the discount rate
assumption would be an increase in the 2007 defined
benefit plan expense of approximately $69 million and an
increase in the defined benefit obligation at 30 June
2006 of approximately $334 million.
(ii) |
|
The expected rate of return on assets has been
based on historical and future expectations of returns
for each of the major categories of asset classes over
the subsequent 10 year period, or longer. Estimates are
based on a combination of factors including the current
market outlook for interest rates, inflation, earnings
growth and currency strength. To determine the aggregate
return, the expected future return of each asset class
is weighted according to the strategic asset allocation
of total plan assets. |
Our assumption for the expected long-term rate of return
on assets is 7% for 2007. As a sensitivity measure,
holding all other assumptions constant, the effect of a
one percentage point decline in the return on assets
assumption would be an increase in our fiscal 2007
defined benefit plan expense of approximately $44
million.
92
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(g) Employer contributions
Telstra Super
In accordance with our funding deed with the trustee of
Telstra Super, we are required to make future employer payments
to Telstra Super in relation to the defined benefit plan
as may be required. Our contributions to Telstra Super
will recommence when the vested benefits index (VBI) -
the ratio of defined benefit plan assets to defined
benefit members vested benefits falls to 103%. Our
actuary is satisfied that contributions to maintain the
VBI at this rate will maintain the financial position of
Telstra Super at a satisfactory level. The VBI of the
defined benefit divisions is 115% as at 30 June 2006 (30
June 2005: 111%).
As at 30 June 2003, K OSullivan FIAA completed an
actuarial investigation of Telstra Super. The next
actuarial investigation of Telstra Super is due to be
completed by 30 June 2007 based on the schemes
financial position as at 30 June 2006.
The actuarial investigation of Telstra Super reported
that a surplus continued to exist. In accordance with
the recommendations within the actuarial investigation,
we were not expected to, and did not make employer
contributions to the Telstra Super defined benefit
divisions for the financial year ended 30 June 2006 and
30 June 2005. The current contribution holiday includes
the contributions otherwise payable to the accumulation
divisions of Telstra Super. The continuance of the
holiday is however dependent on the performance of the
fund and we are monitoring the situation on a monthly
basis in light of current market performance.
Telstra Entitys contribution to the defined
contribution divisions of Telstra Super were
insignificant for fiscal 2006 and fiscal 2005. Based on
the latest actuarial investigation, we do not expect to
make any contributions to Telstra Super during fiscal
2007.
HK CSL Retirement Scheme
The contributions payable to the defined benefit
divisions are determined by the actuary using the
attained age normal funding actuarial valuation
method.
Employer contributions made to the HK CSL Retirement
Scheme for the financial year ended 30 June 2006 were $3
million (2005: $3 million). We expect to contribute $3
million (2005: $3 million) to our HK CSL Retirement
Scheme in fiscal 2007.
Annual actuarial investigations are currently
undertaken for this scheme by Watson Wyatt Hong Kong
Limited.
93
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(h) Net financial position of plan
The financial position of the defined benefit divisions
of Telstra Super and the HK CSL Retirement Scheme is
shown as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net scheme assets |
|
|
Accrued benefits |
|
|
Net surplus (i) |
|
|
Vested benefits |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Telstra Super (ii) |
|
|
4,459 |
|
|
|
4,439 |
|
|
|
3,079 |
|
|
|
3,281 |
|
|
|
1,380 |
|
|
|
1,158 |
|
|
|
3,853 |
|
|
|
3,995 |
|
HK CSL Retirement Scheme (iii) |
|
|
94 |
|
|
|
79 |
|
|
|
74 |
|
|
|
74 |
|
|
|
20 |
|
|
|
5 |
|
|
|
68 |
|
|
|
63 |
|
|
|
|
|
|
|
4,553 |
|
|
|
4,518 |
|
|
|
3,153 |
|
|
|
3,355 |
|
|
|
1,400 |
|
|
|
1,163 |
|
|
|
3,921 |
|
|
|
4,058 |
|
|
|
|
|
|
|
(i) |
|
In accordance with AAS 25: Financial Reporting by
Superannuation Plans the plans net surplus is
determined as the difference between the present value
of the accrued benefits and the net market value of plan
assets. |
|
(ii) |
|
Amounts for Telstra Super have been taken from the
audited financial report of the scheme as at 30 June
2006 and 30 June 2005. The scheme assets are stated at
net market values. |
|
(iii) |
|
Amounts for the defined benefit divisions of the HK
CSL Retirement Scheme have been taken from the actuarial
valuation of the scheme as at 30 June 2006 and 30 June
2005. The scheme assets are stated at net market values. |
The estimated period over which the benefits of our
members will be returned is 11 years for Telstra Super
(2005: 12 years) and 14.5 years for the HK CSL
Retirement Scheme (2005: 14.7 years).
The net surplus under AAS 25 of $1,400 million (30 June
2005: $1,163 million) differs from the net defined
benefit asset of $1,029 million (30 June 2005: $247
million) recognised in the balance sheet due to different
measurement rules in the relevant accounting standards
AAS 25 and AASB 119: Employee Benefits. Both standards
require present value discounting of future benefits,
however AAS 25 requires the use of a discount rate equal
to an expected asset return whereas AASB 119 requires an
after-tax bond yield.
94
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities
The ultimate parent entity of the Telstra Group is
the Commonwealth Government of Australia. Below is a list
of our investments in controlled entities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
|
Parent entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Corporation Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications Equipment Finance Pty Ltd * (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Finance Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Corporate Services Pty Limited * (a) |
|
Australia |
|
|
7 |
|
|
|
7 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Transport Communications Australia Pty Ltd * |
|
Australia |
|
|
4 |
|
|
|
4 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra ESOP Trustee Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Growthshare Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Media Pty Limited * |
|
Australia |
|
|
393 |
|
|
|
380 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Multimedia Pty Limited (a) |
|
Australia |
|
|
2,678 |
|
|
|
2,678 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra International Limited (a) |
|
Australia |
|
|
2 |
|
|
|
84 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra New Wave Pty Ltd * (a) |
|
Australia |
|
|
1 |
|
|
|
1 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Hypertokens Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Hypermax Holdings Pty Ltd * |
|
Australia |
|
|
8 |
|
|
|
8 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Chief Entertainment Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Data & Text Mining Technologies Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Lyrebird Technologies Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra OnAir Infrastructure Holdings Pty Ltd * (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
Telstra 3G Spectrum Holdings Pty Ltd * |
|
Australia |
|
|
302 |
|
|
|
302 |
|
|
|
100.0 |
|
|
|
100.0 |
|
1300 Australia Pty Ltd * |
|
Australia |
|
|
5 |
|
|
|
5 |
|
|
|
60.0 |
|
|
|
60.0 |
|
Telstra OnAir Holdings Pty Ltd * |
|
Australia |
|
|
478 |
|
|
|
302 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Converged Networks Pty Ltd * (h) |
|
Australia |
|
|
1 |
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Telstra Payment Solutions Pty Limited (formerly Keycorp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solutions Limited) * (c) (h) |
|
Australia |
|
|
56 |
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
ESA Holding Pty Ltd * (j) |
|
Australia |
|
|
|
|
|
|
16 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Business Systems Pty Ltd * |
|
Australia |
|
|
69 |
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Communications Limited (a) |
|
Australia |
|
|
29 |
|
|
|
29 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telecom Australia (Saudi) Company Limited (d) (e) (f) (g) |
|
Saudi Arabia |
|
|
|
|
|
|
|
|
|
|
50.0 |
|
|
|
50.0 |
|
Telstra Rewards Pty Ltd * |
|
Australia |
|
|
14 |
|
|
|
14 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Visa Card Trust (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Qantas Telstra Card Trust (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Visa Business Card Trust (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Media Holdings Pty Limited (a) |
|
Australia |
|
|
30 |
|
|
|
30 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Enterprise Services Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Pay TV Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Communications Network Holdings Pty Ltd * (h) |
|
Australia |
|
|
4 |
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Advanced Digital Communications (WA) Pty Ltd * (h) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Western Communications Solutions Pty Ltd * (h) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Adstream (Aust) Pty Ltd (i) |
|
Australia |
|
|
23 |
|
|
|
|
|
|
|
58.0 |
|
|
|
|
|
Adstream Ltd (g) (i) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Quickcut (Aust) Pty Ltd (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
|
(continued over page) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
|
Controlled entities (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Holdings Pty Ltd (a) |
|
Australia |
|
|
7,176 |
|
|
|
7,176 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Beijing Australia Telecommunications Technical |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Services Company Limited (e) (g) |
|
China |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Holdings (Bermuda) No. 2 Limited (g) |
|
Bermuda |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CSL New World Mobility Limited (formerly Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSL Limited) (c) (g) (h) |
|
Bermuda |
|
|
|
|
|
|
|
|
|
|
76.4 |
|
|
|
100.0 |
|
Bestclass Holdings Ltd (g) |
|
British Virgin Islands |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Hong Kong CSL Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Integrated Business Systems Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
One2Free Personalcom Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CSL Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
New World PCS Holdings Limited (g) (h) |
|
Cayman Islands |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
New World 3G Limited (g) (h) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
New World PCS Limited (g) (h) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
New World Mobility Limited (g) (h) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Telstra Holdings (Bermuda) No 1 Limited (g) |
|
Bermuda |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra International HK Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Damovo HK Ltd (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Japan Retail K.K. (g) |
|
Japan |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Singapore Pte Ltd (g) |
|
Singapore |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Global Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
PT Telstra Nusantara (g) |
|
Indonesia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Europe Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra (Cable Telecom) Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra (PSINet) Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra (CTE) Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Cable Telecommunication Ltd (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
PSINet Datacentre UK Ltd (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Inteligen Communications Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Jersey Limited (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
PSINet Hosting Centre Ltd (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Cordoba Holdings Ltd (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
London Hosting Centre Ltd (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Inc. (g) |
|
United States |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra India (Private) Limited (g) |
|
India |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra New Zealand Holdings Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
TelstraClear Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
TelstraSaturn Holdings Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
|
(continued over page) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
|
Controlled entities (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sytec Resources Ltd (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sytec Resources (Australia) Pty Ltd * (g) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
DMZ Global Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
DMZ Global (Australia) Pty Ltd * (g) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CLEAR Communications Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Network Design and Construction Limited (a) |
|
Australia |
|
|
20 |
|
|
|
177 |
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Global Holdings Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Telecommunications India Private Limited (g) |
|
India |
|
|
|
|
|
|
|
|
|
|
98.0 |
|
|
|
98.0 |
|
PT NDC Indonesia (d) (g) |
|
Indonesia |
|
|
|
|
|
|
|
|
|
|
95.0 |
|
|
|
95.0 |
|
NDC Global Philippines, Inc (d) (e) (g) |
|
Philippines |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Global Services (Thailand) Limited (d) (g) |
|
Thailand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.0 |
|
NDC Global Holdings (Thailand) Limited (d) (g) |
|
Thailand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.0 |
|
NDC Global Services (Thailand) Limited (d) (g) |
|
Thailand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51.0 |
|
NDC Global Services Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Telecommunications India Private Limited (g) |
|
India |
|
|
|
|
|
|
|
|
|
|
2.0 |
|
|
|
2.0 |
|
Telstra Services Solutions Holdings Limited (a) |
|
Australia |
|
|
911 |
|
|
|
911 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra CB.net Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra CB.Com Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra CB.fs Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra eBusiness Services Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Australasian Insurance Systems Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
TRC Computer Systems Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
DBA Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Brokerlink Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
81.3 |
|
|
|
81.3 |
|
DBA Computer Systems Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Brokerlink Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
18.7 |
|
|
|
18.7 |
|
Unilink Group Pty Ltd * (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
KAZ Group Pty Limited (a) (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Computer Services (SEA) Pte Limited (d) (g) |
|
Singapore |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Computer Services (HK) Ltd (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
75.0 |
|
|
|
75.0 |
|
Enhanced Processing Technologies Inc (g) (i) |
|
United States |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Australian Administration Services Pty Ltd |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
AAS Superannuation Services Pty Limited |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Business Services Australia Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Business Services Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Software Solutions Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Atune Financial Solutions Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Technology Services Pty Ltd |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
IOCORE Asia Pacific Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Techsouth Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Technology Services Australia Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Fundi Software Pty Ltd * (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
(continued over page) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
|
Controlled entities (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensis Pty Ltd (a) (j) |
|
Australia |
|
|
851 |
|
|
|
851 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Platefood Limited (h) (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
61.0 |
|
|
|
|
|
Just Listed Pty Limited * (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CitySearch Australia Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CitySearch Canberra Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Group Pty Limited (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
0.0 |
|
|
|
33.0 |
|
Trading Post (Australia) Holdings Pty Ltd (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Group Pty Limited (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
67.0 |
|
The Melbourne Trading Post Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
The National Trading Post Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Australian Retirement Publications
Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Collectormania Australia Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
The Personal Trading Post Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Auto Trader Australia Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
WA Auto Trader Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sydney Buy & Sell Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sydney Auto Trader Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Ad Mag SA & NSW Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Ad Mag AGI Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post (AW) Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Warranty Direct (Australia) Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post (TCA) Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Research Resources Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Queensland Trading Post Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Marketing (Qld) Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post on the Net Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Australia Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Appraised Staff Agency Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Tradernet Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Classifieds Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post On Line Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sensis Holdings Pty Ltd * (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Invizage Pty Ltd * (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
75.0 |
|
PC S.O.S. Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Universal Publishers Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sensis (Victoria) Pty Ltd * (h) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Total investment in consolidated entities |
|
|
|
|
13,062 |
|
|
|
12,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# |
|
The amounts recorded are before any provision for
reduction in value. |
|
* |
|
These entities are Australian small proprietary
limited companies, which are not required to prepare
and lodge individual audited financial reports with the
Australian Securities and Investment Commission. |
98
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(a) ASIC deed of cross guarantee
On 31 May 2006 and 28 June 2006, the Telstra Entity and
certain of its controlled entities entered into two
revocation deeds, the combined effect of which is to
revoke the deed of cross guarantee
dated 4 June 1996 (1996 Deed) in its entirety. In
accordance with the terms of the 1996 Deed, revocation
of the deed does not take effect until the date which is
6 months after lodgement of the relevant revocation deed
with the Australian Securities and Investment Commission
(ASIC).
A new deed of cross guarantee was entered into on 28
June 2006 (New Deed), pursuant to an ASIC Order dated 22
June 2006 (ASIC Order). The New Deed was entered into
between the parties to the revocation deed dated 28 June
2006 and a number of additional controlled entities of
the Telstra Entity. The New Deed took effect immediately
upon lodgement with ASIC on 30 June 2006.
The following companies have entered into the 1996 Deed
and/or the New Deed:
|
|
Telstra Corporation Limited (i) (ii); |
|
|
Telstra Corporate Services Pty Limited (i) (ii); |
|
|
Telstra Multimedia Pty Limited (i) (ii); |
|
|
Telstra International Limited (i) (ii); |
|
|
Telstra Communications Limited (i) (ii); |
|
|
Telstra Media Holdings Pty Limited (i); |
|
|
Telstra Enterprise Services Pty Limited (i); |
|
|
Telstra Pay TV Pty Ltd (i); |
|
|
Telstra Holdings Pty Ltd (i) (ii); |
|
|
Network Design and Construction Limited (i) (ii); |
|
|
NDC Global Holdings Pty Limited (i) (ii); |
|
|
NDC Global Services Pty Limited (i) (ii); |
|
|
Telstra Services Solutions Holdings Limited (i) (ii); |
|
|
Telstra eBusiness Services Pty Limited (i) (ii); |
|
|
Australasian Insurance Systems Pty Ltd (i); |
|
|
TRC Computer Systems Pty Ltd (i); |
|
|
Brokerlink Pty Ltd (i); |
|
|
DBA Computer Systems Pty Ltd (i); |
|
|
KAZ Group Limited (ii); |
|
|
KAZ Business Services Pty Ltd (ii); |
|
|
KAZ Software Solutions Pty Ltd (ii); |
|
|
Atune Financial Services Pty Ltd (ii); |
|
|
Sensis Pty Ltd (i) (ii); |
|
|
Trading Post (Australia) Holdings Pty Ltd (i) (ii); |
|
|
Trading Post Group Pty Limited (i) (ii); |
|
|
The Melbourne Trading Post Pty Ltd (i) (ii); |
|
|
The National Trading Post Pty Ltd (i) (ii); |
|
|
Collectormania Australia Pty Ltd (i) (ii); |
|
|
Australian Retirement Publications Pty Limited (i); |
|
|
The Personal Trading Post Pty Limited (i) (ii); |
|
|
Auto Trader Australia Pty Ltd (i) (ii); |
|
|
WA Auto Trader Pty Ltd (i) (ii); |
|
|
|
Just Listed Pty Limited (i) (ii); |
|
|
|
Trading Post (TCA) Pty Ltd (i) (ii); |
|
|
|
Trading Post Australia Pty Limited (i) (ii); and |
|
|
|
Universal Publishers Pty Limited (ii). |
(i) Companies which form the 1996 Deed
(ii) Companies which form the New Deed
Telstra Finance Limited is trustee under both the 1996
Deed and the New Deed, however is not a group entity
under either deed.
In respect of both the 1996 Deed and the New Deed, the
relevant group entities under the deed:
|
|
form a closed group and extended closed group as defined in the ASIC Class Order
98/1418 (Class Order) and the ASIC Order; |
|
|
do not have to prepare and lodge audited financial reports under the Corporations Act
2001. This does not apply to Telstra Corporation Limited; and |
|
|
guarantee the payment in full of the debts of the other parties to the deed in the
event of their winding up. |
The following companies ceased to be party to the 1996
Deed due to a revocation deed as at 11 September 2005:
|
|
Telstra New Wave Pty Ltd; |
|
|
Telstra CB.net Limited; |
|
|
Telstra CB.Com Limited; and |
(b) ASIC deed of cross guarantee financial information
The consolidated assets and liabilities of the closed
group and extended closed group is presented according
to both the Class Order and the ASIC Order as follows.
This excludes Telstra Finance Limited. All significant
transactions between members of the closed group have
been eliminated.
99
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(b) ASIC deed of cross guarantee financial information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed group balance sheet |
|
New Deed |
|
|
1996 Deed |
|
|
|
As at 30 |
|
|
As at 30 June |
|
|
|
June |
|
|
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
479 |
|
|
|
501 |
|
|
|
1,421 |
|
Trade and other receivables |
|
|
3,377 |
|
|
|
3,533 |
|
|
|
3,553 |
|
Inventories |
|
|
182 |
|
|
|
175 |
|
|
|
191 |
|
Derivative financial assets |
|
|
22 |
|
|
|
22 |
|
|
|
4 |
|
Prepayments |
|
|
190 |
|
|
|
202 |
|
|
|
217 |
|
|
|
|
|
|
|
Total current assets |
|
|
4,250 |
|
|
|
4,433 |
|
|
|
5,386 |
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
876 |
|
|
|
870 |
|
|
|
884 |
|
Inventories |
|
|
19 |
|
|
|
19 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
22 |
|
|
|
21 |
|
|
|
46 |
|
Investments other |
|
|
3,348 |
|
|
|
3,421 |
|
|
|
3,244 |
|
Property, plant and equipment |
|
|
21,792 |
|
|
|
21,785 |
|
|
|
21,190 |
|
Intangibles |
|
|
3,491 |
|
|
|
3,389 |
|
|
|
3,655 |
|
Derivative financial assets |
|
|
392 |
|
|
|
392 |
|
|
|
|
|
Defined benefit assets |
|
|
1,004 |
|
|
|
1,004 |
|
|
|
241 |
|
|
|
|
|
|
|
Total non current assets |
|
|
30,944 |
|
|
|
30,901 |
|
|
|
29,275 |
|
|
|
|
|
|
|
Total assets |
|
|
35,194 |
|
|
|
35,334 |
|
|
|
34,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
2,991 |
|
|
|
2,973 |
|
|
|
2,041 |
|
Borrowings |
|
|
2,531 |
|
|
|
2,323 |
|
|
|
2,159 |
|
Current tax liabilities |
|
|
400 |
|
|
|
400 |
|
|
|
518 |
|
Provisions |
|
|
708 |
|
|
|
697 |
|
|
|
378 |
|
Derivative financial liabilities |
|
|
13 |
|
|
|
13 |
|
|
|
11 |
|
Revenue received in advance |
|
|
1,089 |
|
|
|
1,089 |
|
|
|
1,090 |
|
|
|
|
|
|
|
Total current liabilities |
|
|
7,732 |
|
|
|
7,495 |
|
|
|
6,197 |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
65 |
|
|
|
65 |
|
|
|
62 |
|
Borrowings |
|
|
11,376 |
|
|
|
11,376 |
|
|
|
10,907 |
|
Deferred tax liabilities |
|
|
1,582 |
|
|
|
1,589 |
|
|
|
1,664 |
|
Provisions |
|
|
951 |
|
|
|
945 |
|
|
|
855 |
|
Derivative financial liabilities |
|
|
768 |
|
|
|
768 |
|
|
|
864 |
|
Revenue received in advance |
|
|
401 |
|
|
|
400 |
|
|
|
387 |
|
|
|
|
|
|
|
Total non current liabilities |
|
|
15,143 |
|
|
|
15,143 |
|
|
|
14,739 |
|
|
|
|
|
|
|
Total liabilities |
|
|
22,875 |
|
|
|
22,638 |
|
|
|
20,936 |
|
|
|
|
|
|
|
Net assets |
|
|
12,319 |
|
|
|
12,696 |
|
|
|
13,725 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
5,569 |
|
|
|
5,569 |
|
|
|
5,536 |
|
Reserves |
|
|
18 |
|
|
|
18 |
|
|
|
12 |
|
Retained profits |
|
|
6,732 |
|
|
|
7,109 |
|
|
|
8,177 |
|
|
|
|
|
|
|
Equity available to the closed group |
|
|
12,319 |
|
|
|
12,696 |
|
|
|
13,725 |
|
|
|
|
|
|
|
100
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(b) ASIC deed of cross guarantee financial information (continued)
The consolidated profit for the year of the closed group
and extended closed group is presented according to both
the Class Order and the ASIC Order as follows. This
excludes Telstra Finance Limited. All significant
transactions between members of the closed group have
been eliminated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed group income statement and retained profits reconciliation |
|
|
|
|
|
New Deed |
|
|
1996 Deed |
|
|
|
|
|
|
|
Year ended |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
|
|
|
|
20,323 |
|
|
|
20,594 |
|
|
|
20,173 |
|
Other income |
|
|
|
|
|
|
304 |
|
|
|
318 |
|
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,627 |
|
|
|
20,912 |
|
|
|
20,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
3,843 |
|
|
|
3,796 |
|
|
|
3,387 |
|
Goods and services purchased |
|
|
|
|
|
|
3,372 |
|
|
|
3,652 |
|
|
|
3,266 |
|
Other expenses |
|
|
|
|
|
|
4,317 |
|
|
|
4,349 |
|
|
|
3,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,532 |
|
|
|
11,797 |
|
|
|
10,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled and associated entities |
|
|
|
|
|
|
(10 |
) |
|
|
(12 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,522 |
|
|
|
11,785 |
|
|
|
10,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation
(EBITDA) |
|
|
|
|
|
|
9,105 |
|
|
|
9,127 |
|
|
|
10,139 |
|
Depreciation and amortisation |
|
|
|
|
|
|
3,721 |
|
|
|
3,717 |
|
|
|
3,228 |
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
5,384 |
|
|
|
5,410 |
|
|
|
6,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
120 |
|
|
|
120 |
|
|
|
156 |
|
Finance costs |
|
|
|
|
|
|
978 |
|
|
|
975 |
|
|
|
936 |
|
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
858 |
|
|
|
855 |
|
|
|
780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
4,526 |
|
|
|
4,555 |
|
|
|
6,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
1,380 |
|
|
|
1,378 |
|
|
|
1,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year available to the closed group |
|
|
|
|
|
|
3,146 |
|
|
|
3,177 |
|
|
|
4,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained profits at the beginning of the financial year available to the
closed group |
|
|
|
|
|
|
7,894 |
|
|
|
8,177 |
|
|
|
8,467 |
|
Actuarial gain/(loss) on our defined benefit plans (net of tax effect) |
|
|
|
|
|
|
661 |
|
|
|
661 |
|
|
|
(61 |
) |
Share buy-back |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
(476 |
) |
Transfer out of closed group |
|
|
|
|
|
|
|
|
|
|
64 |
|
|
|
|
|
Transfers to retained profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
Total available for distribution |
|
|
|
|
|
|
11,701 |
|
|
|
12,079 |
|
|
|
12,301 |
|
Dividends paid |
|
|
|
|
|
|
4,969 |
|
|
|
4,970 |
|
|
|
4,124 |
|
|
|
|
|
|
|
|
|
|
|
Retained profits at the end of the financial year available to the closed group |
|
|
|
|
|
|
6,732 |
|
|
|
7,109 |
|
|
|
8,177 |
|
|
|
|
|
|
|
|
|
|
|
101
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(c) Change of company names
|
|
Keycorp Solutions Limited changed its name to
Telstra Payment Solutions Limited on 2 September
2005. |
|
|
|
Furthermore, the status of this controlled entity
changed from a public to a private company on 18 May
2006 to be named Telstra Payment Solutions Pty
Limited. |
|
|
|
On 31 March 2006, Telstra CSL Limited changed
its name to CSL New World Mobility Limited. |
(d) Liquidations
As at 30 June 2006, the following controlled entities
were in voluntary liquidation:
|
|
Telecom Australia (Saudi) Company Limited; |
|
|
|
NDC Global Philippines, Inc; |
|
|
|
PT NDC Indonesia; |
|
|
|
Qantas Telstra Card Trust; |
|
|
|
Telstra Visa Business Card Trust; |
|
|
|
Telstra Visa Card Trust; and |
|
|
|
KAZ Computer Services (SEA) Pte Limited. |
The following companies were liquidated or deregistered during fiscal 2006:
|
|
NDC Global Services (Thailand) Limited; |
|
|
|
NDC Global Holdings (Thailand) Limited; |
|
|
|
Telecommunications Equipment Finance Pty Ltd; |
|
|
|
Telstra OnAir Infrastructure Holdings Pty Ltd; and |
|
|
|
Unilink Group Pty Ltd. |
(e) Controlled entities with different balance dates
The following companies have balance dates that
differ from our balance date of 30 June for fiscal
2006:
|
|
Telecom Australia (Saudi) Company Limited 31 December; |
|
|
|
Beijing Australia Telecommunications Technical Consulting Services Company Limited 31 December; and |
|
|
|
NDC Global Philippines, Inc 31 December. |
Financial reports prepared as at 30 June are used for
consolidation purposes.
(f) Controlled entities in which our equity ownership is
less than or equal to 50%
We own 50% of the issued capital of Telecom Australia
(Saudi) Company Limited. We can exercise control over the
Board of Directors of this entity in perpetuity, and
therefore we have consolidated the financial results,
position and cash flows of this entity into our group
financial report.
(g) Controlled entities not individually audited by the
Australian National Audit Office
Companies not audited by the Australian National Audit
Office, our Australian statutory auditor.
102
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(h) New incorporations and investments
|
|
On 11 August 2005, we established a new entity
named Platefood Limited to facilitate a new
investment for nominal consideration. |
|
|
|
On 25 August 2005, we established a new entity
named Sensis (Victoria) Pty Ltd to facilitate a
new investment for nominal consideration. |
|
|
|
On 1 July 2005, we acquired 100% of the issued
capital of Keycorp Solutions Limited for a total
consideration of $56 million including acquisition
costs. Subsequent to acquisition, the entity was
renamed to Telstra Payment Solutions Pty Limited. |
|
|
|
On 31 March 2006, we acquired 100% of the issued
capital of the Converged Networks Group for a total
consideration of $5 million including acquisition
costs. Converged Networks Group included the
following controlled entities: |
|
|
|
Converged Networks Pty Ltd; |
|
|
|
|
Communications Network Holdings Pty Ltd; |
|
|
|
Advanced Digital Communications (WA) Pty
Ltd; and |
|
|
|
|
Western Communications Solutions Pty Ltd. |
Converged Networks Group is a provider of voice
and data networks which operates primarily in
Western Australia.
|
|
On 31 March 2006, we merged our 100% owned Hong
Kong mobile operations (Telstra CSL Group) with the
Hong Kong mobile operations of New World PCS
Holdings Limited and its controlled entities (New
World Mobility Group) to form the CSL New World
Mobility Group. |
|
|
|
Under the merger agreement, Telstra CSL Limited issued
new shares to New World Mobility Holdings Limited in
return for 100% of the issued capital of the New World
Mobility Group and $42 million in net proceeds (net of
acquisition costs). The fair value of the Telstra CSL
Limited shares issued amounted to $577 million and
diluted our ownership in the merged group to 76.4%. Our
merger with the New World Mobility Group included the
acquisition of the following controlled entities: |
|
|
|
New World PCS Holdings Limited; |
|
|
|
|
New World 3G Limited; |
|
|
|
|
New World PCS Limited; and |
|
|
|
New World Mobility Limited. |
The CSL New World Mobility Group is a provider
of mobile telecommunication products and
services which operates primarily in Hong Kong.
(i) Other acquisitions
|
|
On 1 July 2005, our controlled entity Sensis
Holdings Pty Ltd acquired a further 25% of the
issued share capital of Invizage Pty Ltd for a
total cash consideration of $5 million including
acquisition costs. |
|
|
|
Invizage Pty Ltd is a provider of information
technology services for small and medium Australian
organisations. |
|
|
|
On 22 December 2005, our controlled entity Kaz
Group Pty Limited acquired a further 40% of the
issued share capital of Enhanced Processing
Technologies Inc for nominal consideration, giving
us ownership of the entity. Prior to this date,
Enhanced Processing Technologies was classified as a
jointly controlled entity. |
|
|
|
Enhanced Processing Technologies Inc is a provider of
cheque processing technology and services which
operates primarily in the United States. |
|
|
|
On 1 February 2006, we acquired a further 24.7% of
the issued capital of Adstream (Aust) Pty Ltd and
its controlled entities (Adstream Group) for a total
consideration of $21 million including acquisition
costs, giving us a controlling interest of 58%.
Prior to this date, Adstream (Aust) Pty Ltd was
classified as a jointly controlled entity. Our
acquisition of the Adstream Group included the
following controlled entities: |
|
|
|
Adstream Ltd; and |
|
|
|
|
Quickcut (Aust) Pty Ltd. |
The Adstream Group is a provider of on-line services to
advertisers that streamlines client approval and
distribution of electronic advertising to media
outlets.
(j) Sales and disposals
|
|
On 31 August 2005, Trading Post Group Pty Limited
(TPG) sold its investment in Just Listed Pty Ltd
to Sensis Pty Ltd (Sensis). |
|
|
|
In addition, Sensis sold its 33% interest in TPG
to Trading Post (Australia) Holdings Pty Ltd on 31
August 2005. |
|
|
|
These controlled entities are all within the Telstra Group. |
|
|
|
On 1 May 2006, our controlled entity KAZ Group
Pty Limited divested its interest in Fundi
Software Pty Ltd in a management buy-out for a
total consideration of $4 million. |
|
|
|
On 26 June 2006, ESA Holding Pty Ltd sold its
investment in Telstra Business Systems Pty Ltd to
the Telstra Entity. |
103
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities
Our investments in jointly controlled and associated
entities are listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Ownership |
|
|
Telstra Groups carrying |
|
|
Telstra Entitys carrying |
|
Name of Entity |
|
activities |
|
interest |
|
|
amount of investment (*) |
|
|
amount of investment (*) |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
% |
|
|
% |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Partnerships (h) (i) |
|
Pay television |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Services Pty Limited (h) |
|
Customer service |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Management Pty Limited |
|
Management services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Cable Television Pty Ltd (a) (h) |
|
Pay television |
|
|
80.0 |
|
|
|
80.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reach Ltd (incorporated in
Bermuda) (e) (h) |
|
International connectivity services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xantic B.V. (incorporated in The
Netherlands) (b) |
|
Global satellite communications |
|
|
|
|
|
|
35.0 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
30 |
|
TNAS Limited (incorporated in New Zealand)
(e) (h) |
|
Toll free number portability in New Zealand |
|
|
33.3 |
|
|
|
33.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Solutions Pty Ltd (h)
|
|
Financial advice and education services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HelpYouPay Systems Pty Ltd (b) |
|
Debt management services |
|
|
|
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HelpYouPay Pty Ltd (b) |
|
Debt management services |
|
|
|
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced Processing Technologies Pty Ltd (a) |
|
Business process outsourcing |
|
|
60.0 |
|
|
|
60.0 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced Processing Technologies Inc
(incorporated in United States) (c) |
|
Software sales |
|
|
|
|
|
|
60.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adstream (Aust) Pty Ltd (c) |
|
Digital advertising and asset management |
|
|
|
|
|
|
33.3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
3GIS Pty Ltd (e) |
|
Management services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3GIS Partnership (e) |
|
3G network services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge Mobile Pte Ltd (incorporated in
Singapore) |
|
Regional roaming provider |
|
|
12.5 |
|
|
|
12.5 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
m.Net Corporation Limited (d) |
|
Mobile phone content provider |
|
|
26.4 |
|
|
|
39.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
36 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia-Japan Cable Holdings Limited
(incorporated in Bermuda) (d) (e) (h) |
|
Network cable provider |
|
|
46.9 |
|
|
|
39.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super Pty Ltd (a) (h) |
|
Superannuation trustee |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keycorp Limited (d) |
|
Electronic transactions solutions |
|
|
47.6 |
|
|
|
47.8 |
|
|
|
18 |
|
|
|
8 |
|
|
|
18 |
|
|
|
8 |
|
Telstra Foundation Ltd (a) |
|
Charitable trustee organisation |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LinkMe Pty Ltd |
|
Internet recruitment provider |
|
|
40.0 |
|
|
|
40.0 |
|
|
|
3 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
12 |
|
|
|
18 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unless noted at (e), all investments have a balance date
of 30 June and are incorporated in Australia. Our voting
power is the same as our ownership interest unless
otherwise noted.
|
|
|
(i) |
|
This includes both the FOXTEL Partnership and
the FOXTEL Television Partnership. |
|
(*) |
|
The Telstra Group carrying amounts are calculated
using the equity method of accounting. The Telstra
Entitys carrying amounts are at cost less any
accumulated impairment loss. |
104
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(a) Associated entities and jointly controlled
entities in which we own more than 50% equity
|
|
We own 80% of the equity of FOXTEL Cable Television
Pty Ltd. This entity is disclosed as a jointly
controlled entity as the outside equity shareholders
have participating rights that prevent us from
dominating the decision making of the Board of
Directors. Effective voting power is restricted to 50% and we
have joint control.
|
|
|
|
We own 100% of the equity of Telstra Super Pty Ltd,
the trustee for the Telstra Superannuation Scheme
(Telstra Super). We do not consolidate Telstra Super
Pty Ltd as we do not control the Board of Directors.
We have equal representation with employee
representatives on the Board. Our voting power is
limited to 44%, which is equivalent to our
representation on the Board. The entity is therefore
classified as an associated entity as we have
significant influence over it. |
|
|
|
We own 100% of the equity of Telstra Foundation Ltd
(TFL). TFL is limited by guarantee (guaranteed to
$100) with Telstra Corporation Limited being the
sole member. We did not contribute any equity to TFL
on incorporation. TFL is the trustee of the Telstra
Community Development Fund and manager of the
Telstra Kids Fund. We do not consolidate TFL as we
do not control the Board. However, due to our Board
representation we significantly influence this
entity. Our voting power is limited to 43%, which is
equivalent to our representation on the Board. |
|
|
|
We own 60% of the equity of Enhanced Processing
Technologies Pty Ltd. This entity is subject to
joint control based on the shareholders agreement,
under which mutual consent of the shareholders is
required in determining the financial and operating
policies of the entity. As a result, it has been
classified as a jointly controlled entity. |
(b) Sale of investments
|
|
On 30 July 2005, we completed the sale of our 50%
shareholding in HelpYouPay Pty Ltd. The revenue on
sale of the investment was not considered
significant. |
|
|
|
On 30 July 2005, we completed the sale of our 50%
shareholding in HelpYouPay Systems Pty Ltd. The
revenue on sale of the investment was not considered
significant. |
|
|
|
On 16 February 2006, we completed the sale of our
35% shareholding in Xantic B.V. for $89 million
(US$67 million). During fiscal 2006, we received $18
million (US$13 million) as a result of a capital
return by Xantic B.V. |
(c) Investments no longer equity accounted
|
|
On 22 December 2005, we acquired the remaining
40% shareholding in Enhanced Processing
Technologies Inc giving us ownership of the
entity. Prior to this date Enhanced Processing
Technologies Inc was a jointly controlled entity
and was equity accounted. Refer to note 29 for
further details. |
|
|
|
On 1 February 2006, we acquired an additional 24.7%
shareholding in Adstream (Aust) Pty Ltd giving us a
controlling interest. Prior to this date Adstream
(Aust) Pty Ltd was a jointly controlled entity and
was equity accounted. Refer to note 29 for further
details. |
(d) Other changes in jointly controlled and associated entities
|
|
On 1 July 2005, we acquired an intangible asset
from our associated entity Keycorp Limited (Keycorp)
for $55 million. We reduced the value of the
intangible asset recognised and increased our
investment in Keycorp to the extent to which this
transaction is unrealised outside the Telstra Group.
This resulted in a $26 million increase in the
carrying value of our investment. Under the terms of
the transaction Keycorp also returned capital to its
shareholders, our share amounting to $16 million.
Refer to (g) for details on our movements in the
consolidated equity amount of our associated
entities. |
|
|
|
In addition, our investment in Keycorp decreased from
47.8% to 47.6% on 29 August 2005. The decrease was due
to a dilution in our shareholding. |
|
|
|
On 10 August 2005, our investment in m.Net
Corporation Limited decreased from 39.5% to 26.4%.
The decrease was due to a dilution in our
shareholding. |
|
|
|
On 16 November 2005, our investment in
Australia-Japan Cable Holdings Limited increased
from 39.9% to 46.9%. The increase was due to another
investor forfeiting their interest in the
investment. |
105
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(e) Jointly controlled and associated entities with
different balance dates
The following jointly controlled and associated entities
have different balance dates to our balance date of 30
June for fiscal 2006:
|
|
Reach Ltd 31 December; |
|
|
|
TNAS Limited 31 March; |
|
|
|
3GIS Pty Ltd 31 December; |
|
|
|
3GIS Partnership 31 December; and |
|
|
|
Australia-Japan Cable Holdings Limited 31 December. |
Financial reports prepared as at 30 June are used for
equity accounting purposes. Our ownership interest in
jointly controlled and associated entities with different
balance dates is the same at that balance date as 30 June
unless otherwise noted.
(f) Share of jointly controlled and associated entities
net (profits)/ losses
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Net (profit)/loss from jointly controlled and
associated entities has been contributed by
the following entities: |
|
|
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
- FOXTEL Partnerships |
|
|
5 |
|
|
|
5 |
|
- Stellar Call Centres Pty Ltd |
|
|
|
|
|
|
(3 |
) |
- Xantic B.V |
|
|
(12 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
(3 |
) |
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
- Keycorp Limited |
|
|
1 |
|
|
|
(5 |
) |
- LinkMe Pty Ltd |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
(8 |
) |
|
|
|
Net (profit)/loss from jointly controlled
entities has been adjusted by the following: |
|
|
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
- Reach Ltd (i) |
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
(5 |
) |
|
|
94 |
|
|
|
|
|
|
|
(i) |
|
In fiscal 2005, previously unrecognised equity
accounted losses in Reach Ltd (Reach) were recognised due
to our commitment to fund 50% of Reachs committed
capital expenditure, which was accounted for as an
investment in Reach. Refer to note 36 for further
details. |
106
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(g) Other disclosures for jointly controlled and associated entities
The movements in the consolidated equity accounted amount
of our jointly controlled and associated entities are
summarised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled |
|
|
|
|
|
|
|
|
|
|
entities |
|
|
Associated entities |
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
|
|
|
|
30 June |
|
|
30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$ m |
|
|
$m |
|
|
|
|
|
|
Carrying amount of investments at beginning of year |
|
|
|
|
|
|
36 |
|
|
|
40 |
|
|
|
12 |
|
|
|
|
|
Additional investments made during the year |
|
|
|
|
|
|
5 |
|
|
|
14 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
54 |
|
|
|
12 |
|
|
|
3 |
|
Share of profits/(losses) before income tax expense |
|
|
|
|
|
|
6 |
|
|
|
2 |
|
|
|
(3 |
) |
|
|
12 |
|
Share of income tax expense |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
1 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Share of profits/(losses) for the year after income tax expense |
|
|
|
|
|
|
6 |
|
|
|
1 |
|
|
|
(2 |
) |
|
|
5 |
|
Amortisation of unrealised inter-entity profits after income tax |
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of profits/(losses) for the year |
|
|
|
|
|
|
7 |
|
|
|
3 |
|
|
|
(2 |
) |
|
|
5 |
|
Dividends and distributions received |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Share of reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Share of foreign currency translation reserve and movements due to exchange rate
translations |
|
|
|
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
Sale, transfers and reductions of investments during the year |
|
|
|
|
|
|
(47 |
) |
|
|
(16 |
) |
|
|
(15 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of investments before reduction to recoverable amount |
|
|
|
|
|
|
2 |
|
|
|
38 |
|
|
|
21 |
|
|
|
12 |
|
Impairment losses recognised in the income statement during the year |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of investments at end of year |
|
|
13 |
|
|
|
2 |
|
|
|
36 |
|
|
|
21 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of contingent liabilities of jointly controlled and associated
entities we are not directly liable for these |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of capital commitments contracted for by our jointly controlled
and associated entities we are not directly liable for these (i) |
|
|
|
|
|
|
11 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of other expenditure commitments contracted for by our jointly
controlled and associated entities (other than the supply of inventories) we are not
directly liable for these (i) |
|
|
|
|
|
|
40 |
|
|
|
52 |
|
|
|
2 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
The commitments and guarantees of our jointly
controlled entities for which we are directly liable are
included within note 26 and note 27 respectively. |
107
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(g) Other disclosures for jointly controlled and
associated entities (continued)
Summarised presentation of all of our jointly
controlled and associated entities assets,
liabilities, revenue and expense items (including
jointly controlled and associated entities where
equity accounting has been suspended):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled |
|
|
|
|
|
|
entities |
|
|
Associated entities |
|
|
|
Telstra Group |
|
|
Telstra Group |
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
30 June |
|
|
30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Current assets |
|
|
556 |
|
|
|
695 |
|
|
|
73 |
|
|
|
131 |
|
Non current assets |
|
|
811 |
|
|
|
909 |
|
|
|
346 |
|
|
|
354 |
|
|
|
|
|
|
Total assets |
|
|
1,367 |
|
|
|
1,604 |
|
|
|
419 |
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
950 |
|
|
|
1,521 |
|
|
|
58 |
|
|
|
88 |
|
Non current liabilities |
|
|
927 |
|
|
|
579 |
|
|
|
536 |
|
|
|
502 |
|
|
|
|
|
|
Total liabilities |
|
|
1,877 |
|
|
|
2,100 |
|
|
|
594 |
|
|
|
590 |
|
|
|
|
|
|
Net assets |
|
|
(510 |
) |
|
|
(496 |
) |
|
|
(175 |
) |
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
2,152 |
|
|
|
2,335 |
|
|
|
150 |
|
|
|
174 |
|
Total expenses |
|
|
2,067 |
|
|
|
2,140 |
|
|
|
180 |
|
|
|
211 |
|
|
|
|
|
|
Profit/(loss) before income tax expense |
|
|
85 |
|
|
|
195 |
|
|
|
(30 |
) |
|
|
(37 |
) |
Income tax expense |
|
|
3 |
|
|
|
8 |
|
|
|
4 |
|
|
|
6 |
|
|
|
|
|
|
Profit/(loss) for the year |
|
|
82 |
|
|
|
187 |
|
|
|
(34 |
) |
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarised presentation of our share of all our jointly controlled and associated
entities revenue and expense items (including jointly controlled entities where
equity accounting has been suspended): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
1,369 |
|
|
|
1,377 |
|
|
|
71 |
|
|
|
81 |
|
Total expenses |
|
|
1,326 |
|
|
|
1,280 |
|
|
|
85 |
|
|
|
96 |
|
|
|
|
|
|
Profit/(loss) before income tax expense |
|
|
43 |
|
|
|
97 |
|
|
|
(14 |
) |
|
|
(15 |
) |
Income tax expense |
|
|
2 |
|
|
|
5 |
|
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
Profit/(loss) for the year |
|
|
41 |
|
|
|
92 |
|
|
|
(16 |
) |
|
|
(18 |
) |
|
|
|
|
|
108
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(h) Suspension of equity accounting
Our unrecognised share of (profits)/losses for the period
and cumulatively, for our entities where equity
accounting has ceased and the investment is recorded at
zero due to losses made by these entities and/or
reductions in the equity accounted carrying amount, is
shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
Period |
|
|
Cumulative |
|
|
Period |
|
|
Cumulative |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Partnerships |
|
|
(1 |
) |
|
|
117 |
|
|
|
80 |
|
|
|
118 |
|
Reach Ltd |
|
|
(34 |
) |
|
|
575 |
|
|
|
(206 |
) |
|
|
609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia-Japan Cable
Holdings Limited |
|
|
36 |
|
|
|
143 |
|
|
|
14 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
835 |
|
|
|
(112 |
) |
|
|
834 |
|
|
|
|
|
|
Equity accounting has also been suspended for the
following jointly controlled and associated entities:
|
|
Customer Services Pty Limited; |
|
|
|
FOXTEL Cable Television Pty Ltd; |
|
|
|
TNAS Limited; |
|
|
|
Money Solutions Pty Ltd; and |
|
|
|
Telstra Super Pty Ltd. |
There are no significant unrecognised profits/losses in these entities.
109
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans
The Company has a number of employee share plans
that are available for directors, executives and
employees, these include:
|
|
the Telstra Employee Share Ownership Plans
(TESOP99 and TESOP97); and |
|
|
|
those conducted
through the Telstra Growthshare Trust. |
The nature of each plan, details of plan holdings,
movements in holdings, and other relevant
information is disclosed below:
(a) TESOP99 and TESOP97
As part of the Commonwealths sale of its shareholding
in fiscal 2000 and fiscal 1998 we offered eligible
employees the opportunity to buy ordinary shares of
Telstra. These share plans were:
|
|
the Telstra Employee Share Ownership Plan II
(TESOP99); and |
|
|
|
the Telstra Employee Share
Ownership Plan (TESOP97). |
Participating employees are entitled to receive
dividends and voting rights in the shares. Telstra ESOP
Trustee Pty Ltd is the trustee for TESOP99 and TESOP97
and holds the shares on behalf of participants. This
company is 100% owned by Telstra.
Generally, employees were offered interest free loans by
the Telstra Entity to acquire certain shares and in some
cases became entitled to certain extra shares and loyalty
shares as a result of participating in the plans. All
shares acquired under the plans were transferred from the
Commonwealth either to the employees or to the trustee
for the benefit of the employees.
While a participant remains an employee of the Telstra
Entity, a company in which Telstra owns greater than 50%
equity, or the company which was their employer when the
shares were acquired, there is no date by which the
employee has to repay the loan. The loan may, however,
be repaid in full at any time by the employee using his
or her own funds.
The loan shares, extra shares and in the case of
TESOP99, the loyalty shares, were subject to a
restriction on the sale of the shares or transfer to the
employee for three years, or until the relevant
employment ceased. This restriction period has now been
fulfilled under each plan.
If a participating employee leaves the Telstra Entity, a
company in which Telstra owns greater than 50% equity, or
the company which was their employer when the shares were
acquired, to acquire the relevant shares the employee
must repay their loan within two months of leaving. This
is the case except where the restriction period has ended
because of the employees death or disablement (in this
case the loan must be repaid within 12 months).
If the employee does not repay the loan when required,
the trustee can sell the shares. The sale proceeds must
then be used to pay the costs of the sale and any amount
outstanding on the loan, after which the balance will be
paid to the employee. The Telstra Entitys recourse under
the loan is limited to the amount recoverable through the
sale of the employees shares.
110
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(a) TESOP99 and TESOP97 (continued)
The following information details the number of
outstanding equity instruments and loan balances relevant
to the TESOP99 and TESOP97 plans:
|
|
|
|
|
|
|
|
|
|
|
Employee share plans |
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
Market price of Telstra shares |
|
$3.68 per share |
|
|
$5.06 per share |
|
Employee share loan balance |
|
$130 million |
|
|
$154 million |
|
|
|
|
|
|
|
|
|
|
TESOP99 |
|
|
|
|
|
|
|
|
Remaining number of loan shares |
|
|
14,387,400 |
|
|
|
14,535,900 |
|
|
|
|
|
|
|
|
|
|
TESOP97 |
|
|
|
|
|
|
|
|
Remaining number of loan shares |
|
|
32,573,300 |
|
|
|
36,674,100 |
|
Remaining number of extra shares |
|
|
8,143,325 |
|
|
|
9,168,525 |
|
The fair value of these shares as at 30 June 2006 based
on the market value of Telstra shares at balance date
amounts to $203 million (2005: $306 million).
The Telstra ESOP Trustee continues to hold the loan
shares where the employee has ceased employment and
elected not to repay the loan, until the share price is
sufficient to recover the loan amount and associated
costs. The Trustee will then sell the shares. As at 30
June 2006, there were 6,418,300 shares held for this
purpose (2005: 5,603,100).
The movements in the number of instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
TESOP97 |
|
|
TESOP99 |
|
|
|
number |
|
|
number |
|
Equity instruments outstanding as
at 30 June 2004 |
|
|
48,327,000 |
|
|
|
14,622,000 |
|
Exercised |
|
|
(2,484,375 |
) |
|
|
(86,100 |
) |
|
|
|
Equity instruments outstanding as
at 30 June 2005 |
|
|
45,842,625 |
|
|
|
14,535,900 |
|
Exercised |
|
|
(5,126,000 |
) |
|
|
(148,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments outstanding as
at 30 June 2006 |
|
|
40,716,625 |
|
|
|
14,387,400 |
|
|
|
|
The weighted average loan still to be repaid for the
TESOP97 equity instrument is $1.04 (2005: $1.33), and
TESOP99 equity instrument is $6.13 (2005: $6.42).
The weighted average share price at the date of the
transfers of Telstra shares relating to the exercise of
these instruments was $3.95 for TESOP 99 (2005: $4.77)
and $3.96 for TESOP 97 (2005: $4.77) based on the
closing market price on those dates. The total proceeds
received on exercise of TESOP99 was $5 million (2005: $4
million) and TESOP97 was $19 million (2005: $15
million).
111
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust
The Telstra Growthshare Trust commenced in fiscal 2000. Under the trust, Telstra operates a number
of different short and long term incentive equity plans whereby the following equity based
instruments may be allocated:
|
|
incentive shares; |
|
|
|
sign-on bonus shares; |
|
|
|
performance rights; |
|
|
|
deferred shares; |
|
|
|
restricted shares; and |
|
|
|
options. |
In addition, the following share plans are operated for our non executive directors and certain
eligible employees:
|
|
directshares; and |
|
|
|
ownshares. |
The trustee for the trust is Telstra Growthshare Pty Ltd. This company is 100% owned by Telstra.
Funding is provided to the Telstra Growthshare Trust to purchase Telstra shares on the market to underpin the equity instruments
issued.
In fiscal 2006, we recorded an expense of $15 million for our share based payments (2005: $10
million). As at 30 June 2006, we had a total expense yet to be recognised of $25 million (2005: $17
million), which is expected to be recognised over a weighted average of 2 years (2005: 2 years).
Our election not to apply AASB 2: Share based payment (AASB 2) to equity instruments granted
prior to 7 November 2002, as permitted under AASB 1: First-time Adoption of Australian Equivalents
to International Financial Reporting Standards (AASB 1), has reduced the expense we have recorded,
as well as the total expense we are yet to recognise. Refer to note 36(a) for further details.
Short term incentive equity plan
Incentive shares
In fiscal 2006, the Board allocated the executives half of their short term incentive payments as
rights to acquire Telstra shares. These incentive shares vest in equal parts over a period of one,
two and three years on the anniversary of their allocation date, subject to the executives
continued employment with any entity that forms part of the Telstra Group. The executive can
exercise their vested incentive shares at a cost of $1 in total for all of the incentive shares
exercised on a particular day.
Once the vested incentive shares are exercised, Telstra shares will be transferred to the
executive. Until this time, the executive cannot use the incentive shares (or vested incentive
shares) to vote or receive dividends. Any dividends paid by the Company prior to exercise will
increase the number of incentive shares allocated to the executive. The Board has decided not to
continue the short term incentive share plan and the short term incentive payment for fiscal 2006
will be delivered in cash.
Incentive shares movements during the year
The following incentive shares were granted during fiscal 2006:
|
|
|
|
|
Effective commencement date of instruments |
|
19 August 2005 |
Number of incentive shares issued |
|
|
1,986,435 |
Market price of Telstra shares on grant date |
|
|
$4.77 |
Exercise
date 1 year incentive shares |
|
19 August 2006 |
Exercise
date 2 year incentive shares |
|
19 August 2007 |
Exercise
date 3 year incentive shares |
|
19 August 2008 |
Expiration date |
|
2 years from each exercise date |
During fiscal 2006, 53,467 incentive shares were forfeited due to resignation, and 97,382 incentive
shares were exercised as a result of those executives being made redundant. As a result of the
above movements, 1,835,586 incentive shares were outstanding as at 30 June 2006. There were no
incentive shares that were exercisable at 30 June 2006.
The fair value of the August 2005 allocation of incentive shares was $4.77. This was calculated
using a Black Scholes option pricing model. The following weighted average assumptions were used in
determining the valuation:
|
|
|
|
|
|
|
Growthshare |
|
|
incentive shares |
|
|
August 2005 |
|
Risk free
rate 1 year incentive shares |
|
|
5.12 |
% |
Risk free
rate 2 year incentive shares |
|
|
5.06 |
% |
Risk free
rate 3 year incentive shares |
|
|
5.06 |
% |
Expected stock volatility |
|
|
15 |
% |
Long term incentive equity plans
(i) Nature of share plans
The purpose of the long term incentive plans is to align key executives rewards with shareholders
interests, and reward performance improvement whilst supporting business plans and corporate
strategies. These plans are administered through the Telstra
Growthshare Trust. The Board determines who is invited to participate in the share plans.
112
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
Long term incentive equity plans
(i) Nature of share plans (continued)
Allocations have been made over a number of years in the form of performance rights, restricted
shares and options under our long term incentive plan, and deferred shares under our deferred
remuneration plan. Instruments issued represent a right to acquire a share in Telstra. Generally,
the performance rights, restricted shares and options may only be exercised to acquire Telstra
shares if a performance hurdle is satisfied in the performance period and in the case of options,
the exercise price is paid by the executive. Deferred shares may only be exercised when a
prescribed period of service has been completed.
Performance rights
We have seven types of performance rights on issue. These are:
|
|
total shareholder return (TSR) performance rights are based on Telstras total shareholder
return; |
|
|
|
earnings per share (EPS) performance rights are based on the growth of earnings per share
in the year of allocation and two subsequent years; |
|
|
|
operating expense growth (OEG) performance rights are based on a reduction in Telstras operating expenses; |
|
|
|
revenue growth (RG) performance rights are based on increases in Telstras revenue; |
|
|
|
network transformation (NT) performance rights are based on completion of certain elements
in Telstras network transformation program; |
|
|
|
information technology transformation (ITT) performance rights -are based on a reduction in
the number of business support systems (BSS) and operational support systems (OSS) systems
used by companies in the Telstra Group; and |
|
|
|
return on investment (ROI) performance rights are based on an increase in the earnings
before interest and tax for Telstra relative to the average investment. |
For all types of performance rights, an executive is not entitled to Telstra shares before the
performance rights allocated under Telstra Growthshare become vested performance rights and are
therefore exercisable. If the performance hurdle is satisfied during the performance period, a
specified number of performance rights as determined in accordance with the trust deed and terms of
issue, will become vested performance rights. The vested performance rights can then be exercised
at any time before the expiry date, otherwise they will lapse. Once the vested performance rights
are exercised, Telstra shares will be transferred to the executive. Until this time, the executive
cannot use the performance rights (or vested performance rights) to vote or receive dividends.
Telstra shares will be transferred to the executive on exercise of vested performance rights. The
executive may exercise the performance rights at a cost of $1 in total for all of the performance
rights exercised on a particular day.
Deferred shares
The executives were previously provided part of their annual fixed remuneration in the form of
rights to Telstra shares that vest upon completing certain employment requirements. Generally, if
an executive continues to be employed by an entity that forms part of the Telstra Group three years
after the commencement date of the instrument, the deferred share will become a vested deferred
share.
Vested deferred shares must be exercised before the expiry date, otherwise they will lapse. Once
exercised, Telstra shares will be transferred to the executive. Until this time, the executive can
not use the deferred shares or vested deferred shares to vote or receive dividends. The executive
may exercise the deferred shares at a cost of $1 in total for all of the deferred shares exercised
on a particular day.
Restricted shares
The executive is not entitled to Telstra shares before the restricted shares allocated under the
trust are exercised. If the performance hurdle is satisfied in the performance period, the
restricted shares will vest and may be exercised at any time before the expiry date, otherwise they
will lapse. Once the restricted shares have vested, they become restricted trust shares, which will
generally be held by the trustee for the executive for a certain period. Once converted into
restricted trust shares, the executive has an interest in Telstra shares and is entitled to
dividends, other distributions, and voting rights.
Restricted trust shares are held by the Trustee until the earlier of:
|
|
the period determined in accordance with the trust deed; |
|
|
|
the executive finishes employment with Telstra; or |
|
|
|
a date nominated by the Board. |
The executive may exercise restricted shares at a cost of $1 in total for all of the restricted
shares exercised on a particular day.
113
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(i) Nature of the share plans (continued)
Options
An executive is not entitled to Telstra shares before the options allocated under Telstra
Growthshare initially vest, and then are exercised. This means that the executive cannot use
options to vote or receive dividends. If the performance hurdle is satisfied in the performance
period, options may be exercised at any time before the expiry date otherwise they will lapse.
Details of the performance hurdle for options is detailed below.
Once the options are exercised and the option price paid, Telstra shares will be transferred to the
executive.
(ii) Performance hurdles
Performance hurdles for instruments issued in fiscal 2006
TSR performance rights
For allocations of TSR performance rights issued in fiscal 2006, the applicable performance hurdle
is based on the market value of Telstra shares and the value of accumulated dividends paid to
Telstra shareholders. TSR performance rights vest if Telstras total shareholder return exceeds
certain targets over the performance period, which is the five years to 30 June 2010. If the total
shareholder return is:
|
|
equal to the minimum target then 50% of the allocation becomes exercisable (except for the CEO,
who will receive 75% of the allocated performance rights); |
|
|
|
between the maximum and minimum targets then the number of exercisable TSR performance rights is
scaled proportionately between 50% and 100% (with the exception of the CEO whose number of
performance rights is scaled proportionately between 75% and 100%); |
|
|
|
equal to or greater than the maximum target then 100% of the TSR performance rights will become
exercisable; or |
|
|
|
is less than the minimum target all TSR performance rights will lapse. |
OEG, RG, NT and ITT performance rights
For allocations of the OEG, RG, NT and ITT performance rights issued in fiscal 2006, the
performance hurdles for the initial performance period are:
|
|
if the minimum target is achieved in the initial performance period,
(1 July 2005 to 30 June 2008) then 50% of the allocation of
performance rights will become exercisable (except for the CEO, who
will receive 75% of the allocated performance rights); |
|
|
|
if the result achieved is between the maximum and minimum targets,
then the number of exercisable performance rights is scaled
proportionately between 50% and 100% (with the exception of the CEO
whose number of performance rights is scaled proportionately between
75% and 100%); |
|
|
|
if the maximum target is achieved then 100% of the
performance rights will become exercisable; or |
|
|
|
if the minimum target
is not achieved 25% of the performance rights allocated to the initial
performance period will lapse. |
Of the performance rights that have not become exercisable in the initial performance period, 75%
will be added to the subsequent performance period allocation. The performance targets for the
subsequent performance period (1 July 2005
to 30 June 2010) are:
|
|
if the minimum target is met, 50% of the allocation will become exercisable (except for the
CEO, who will receive 75% of the allocated performance rights); |
|
|
|
if the result achieved is between the maximum and minimum targets, then the number of exercisable
performance rights is scaled proportionately between 50% and 100% (with the exception of the CEO
whose number of performance rights is scaled proportionately between 75% and 100%); or |
|
|
|
if the maximum target is achieved then all of the performance rights will become exercisable. |
If the minimum target is not met in the subsequent performance period, all performance rights will
lapse.
ROI performance rights
For the allocation of ROI performance rights issued in fiscal 2006, if the return on investment is:
|
|
equal to the minimum target then 50% of the allocation will become exercisable (except for
the CEO, who will receive 75% of the allocated performance rights); |
|
|
|
between the maximum and minimum targets, the number of exercisable ROI performance rights is
scaled proportionately between 50% and 100% (with the exception of the CEO whose number of
performance rights is scaled proportionately between 75% and 100%); |
|
|
|
greater than the maximum target then 100% of the ROI performance rights will become exercisable; or |
|
|
|
is less than the minimum target 25% of the allocated ROI performance rights will lapse. |
If the ROI performance rights have not become exercisable in this period, 75% of these performance
rights will be added to the allocation of TSR performance rights for measurement against the TSR
performance hurdle. If this TSR performance hurdle is not achieved, all ROI performance rights will
lapse.
114
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(ii) Performance hurdles (continued)
Performance hurdle for instruments issued between 30 June 2001 and 30 June 2005
EPS performance rights
The number of EPS performance rights that become vested EPS performance rights, and therefore
become exercisable, is based on the following:
|
|
if the cumulative growth in EPS from 1 July 2004 to 30 June 2007 is equal to 15.7% then 50% of
the allocation becomes exercisable; |
|
|
|
if the cumulative growth in EPS is greater than 15.7% and less than 33.1% then the number of
exercisable performance rights is scaled proportionately between 50% and 100%; |
|
|
|
if the cumulative growth in EPS exceeds 33.1% then 100% of the EPS performance rights will
become exercisable; or |
|
|
|
if Telstra does not achieve cumulative growth in EPS of 15.7%, all EPS performance rights
will lapse. |
TSR performance rights and options
For allocations of TSR performance rights made between 30 June 2001 and 30 June 2005, and options
issued during fiscal 2002, the applicable performance hurdle is based on comparing Telstras total
shareholder return (TSR) with the TSRs of the companies in the S&P/ASX 200 (Industrial) Index (peer
group) within the performance period.
The companies in the peer group are anchored at the effective date of allocation, and this same
peer group of companies are then tracked during the performance period. At the end of each quarter
during the performance period, the 30 day average TSR is calculated for Telstra and the companies
in the peer group for each trading day during that quarter.
Both the number of TSR performance rights and the number of options potentially exercisable are
based on the following.
If in the first quarter of the performance period, Telstras percentile ranking is the 50th
percentile or above then:
|
|
the number of TSR performance rights and options that become exercisable for that quarter is
scaled proportionately from the 50th percentile (at which 50% of the allocation becomes
exercisable) to the 75th percentile (at which 100% of the allocation becomes exercisable); and |
|
|
|
in subsequent quarters, the number that become exercisable is based on the same proportionate
scale, but is reduced by the number of performance rights or options that have previously become
exercisable. The percentile ranking achieved needs to be above that achieved in previous quarters
for additional performance rights and options to become exercisable. |
If in the first quarter of the performance period, the percentile ranking is less than the 50th
percentile then:
|
|
half of the allocation will lapse; and |
|
|
|
in subsequent quarters, the remaining 50% of the options or performance rights will become
exercisable if the ranking is the 50th percentile or above for that quarter. |
If Telstra does not achieve or exceed the 50th percentile ranking in any quarter of the performance
period, all TSR performance rights and options will lapse.
Performance hurdle for instruments issued prior to 30 June 2001
For all allocations prior to 30 June 2001, which include restricted shares and options, the
applicable performance hurdle was that the average Telstra Accumulation Index must exceed the
average S&P/ ASX 200 (Industrial) Index (replacing the superseded All Industrials Accumulation
Index) for thirty consecutive days within the performance period. If the performance hurdle is
satisfied for these allocations, all of the relevant options or restricted shares would become
exercisable (i.e. they do not become exercisable on a proportionate basis).
115
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(ii) Performance hurdles (continued)
The following outlines the targets to be achieved for
the fiscal 2006 allocation of performance rights to
become exercisable:
|
|
|
|
|
|
|
|
|
|
|
3 Year performance rights |
|
5 Year performance rights |
|
|
Initial performance period |
|
Subsequent performance period |
|
|
Minimum target |
|
Maximum target |
|
Minimum target |
|
Maximum target |
|
TSR performance rights
|
|
N/A
|
|
N/A
|
|
(a)
|
|
(a) |
|
|
|
OEG performance rights
|
|
2.2% operating
expense growth
|
|
1.2% operating
expense growth
|
|
1.1% operating
expense growth
|
|
0.0% operating
expense growth |
|
|
|
RG performance rights
|
|
2.0% revenue growth
|
|
2.5% revenue growth
|
|
2.0% revenue growth
|
|
2.5%revenue growth |
|
|
|
|
|
|
|
|
|
Multi Service Edge, Soft
|
|
Multi Service Edge, Soft |
|
|
|
|
|
|
Switch Platform, Fibre
|
|
Switch Platform, Fibre |
NT performance rights
|
|
IP Core and Ethernet
complete by 30 June
2008
|
|
IP Core and Ethernet
complete by 31
December 2007
|
|
to the Node and
Wireless NGN complete
by 30 June 2010
|
|
to the Node and
Wireless NGN complete
by 31 December 2009 |
|
|
|
ITT performance rights
|
|
350 OSS and BSS
systems
|
|
250 OSS and BSS
systems
|
|
250 OSS and BSS
systems
|
|
200 OSS and BSS
systems |
|
|
|
ROI performance rights
|
|
23.5% return on
investment
|
|
24.5% return on
investment
|
|
N/A
|
|
N/A |
|
|
|
(a) |
|
The applicable performance hurdle is based on the
market value of Telstra shares and the value of
accumulated dividends paid to Telstra shareholders. This
has been set by the Board. |
116
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iii) Instruments outstanding at the beginning of fiscal 2006
The following performance rights, deferred shares, restricted shares and options were outstanding
at the start of fiscal 2006, but were yet to vest with executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise date |
|
|
instruments |
|
Commencement |
|
Performance |
|
Exercise |
|
(once performance |
|
|
outstanding |
|
date |
|
hurdle period |
|
price |
|
hurdle met) |
|
|
|
|
|
|
|
|
|
|
from |
|
to |
|
|
|
|
|
anytime before: |
|
Growthshare 2001 - Sept 2000 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
2,413,900 |
|
|
8 Sept 2000 |
|
8 Sept 2003 |
|
8 Sept 2005 |
|
$ |
6.28 |
|
8 Sept 2010 |
Restricted shares |
|
|
500,600 |
|
|
8 Sept 2000 |
|
8 Sept 2003 |
|
8 Sept 2005 |
|
$ |
1 per parcel exercised |
|
8 Sept 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2001 - March 2001 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
150,000 |
|
|
16 March 2001 |
|
16 March 2004 |
|
16 March 2006 |
|
$ |
6.55 |
|
16 March 2011 |
Restricted shares |
|
|
40,000 |
|
|
16 March 2001 |
|
16 March 2004 |
|
16 March 2006 |
|
$ |
1 per parcel exercised |
|
16 March 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2002 - Sept 2001 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
13,325,153 |
|
|
6 Sept 2001 |
|
6 Sept 2004 |
|
6 Sept 2006 |
|
$ |
4.90 |
|
6 Sept 2011 |
TSR Performance rights |
|
|
1,273,782 |
|
|
6 Sept 2001 |
|
6 Sept 2004 |
|
6 Sept 2006 |
|
$ |
1 per parcel exercised |
|
8 Dec 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2002 - March 2002 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
1,602,000 |
|
|
14 March 2002 |
|
14 March 2005 |
|
14 March 2007 |
|
$ |
5.63 |
|
14 March 2012 |
TSR Performance rights |
|
|
136,000 |
|
|
14 March 2002 |
|
14 March 2005 |
|
14 March 2007 |
|
$ |
1 per parcel exercised |
|
14 June 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2003 - Sept 2002 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
1,774,023 |
|
|
5 Sept 2002 |
|
|
N/A |
|
|
|
|
|
|
$ |
1 per parcel exercised |
|
5 Sept 2007 |
TSR Performance rights |
|
|
3,687,224 |
|
|
5 Sept 2002 |
|
5 Sept 2005 |
|
5 Sept 2007 |
|
$ |
1 per parcel exercised |
|
5 Dec 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2003 - March 2003 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
18,600 |
|
|
7 March 2003 |
|
|
N/A |
|
|
|
|
|
|
$ |
1 per parcel exercised |
|
7 March 2008 |
TSR Performance rights |
|
|
37,200 |
|
|
7 March 2003 |
|
7 March 2006 |
|
7 March 2008 |
|
$ |
1 per parcel exercised |
|
7 June 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2004 - Sept 2003 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
2,025,008 |
|
|
5 Sept 2003 |
|
|
N/A |
|
|
|
|
|
|
$1 per parcel exercised |
|
5 Sept 2008 |
TSR Performance rights |
|
|
4,099,546 |
|
|
5 Sept 2003 |
|
5 Sept 2006 |
|
5 Sept 2008 |
|
$1 per parcel exercised |
|
5 Dec 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2004 - February 2004 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
18,350 |
|
|
20 Feb 2004 |
|
|
N/A |
|
|
|
|
|
|
$1 per parcel exercised |
|
20 Feb 2009 |
TSR Performance rights |
|
|
36,700 |
|
|
20 Feb 2004 |
|
20 Feb 2007 |
|
20 Feb 2009 |
|
$1 per parcel exercised |
|
20 May 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2005 - August 2004 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR Performance rights |
|
|
2,424,714 |
|
|
20 Aug 2004 |
|
20 Aug 2007 |
|
20 Aug 2009 |
|
$1 per parcel exercised |
|
20 Nov 2009 |
EPS Performance rights |
|
|
2,424,714 |
|
|
20 Aug 2004 |
|
1 July 2004 |
|
30 June 2007 |
|
$1 per parcel exercised |
|
20 Nov 2009 |
As deferred shares are allocated as annual fixed remuneration, there is no performance hurdle.
Generally, deferred shares will become vested deferred shares after a specified service period.
117
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iv) Instruments granted during the financial year
The following performance rights were granted in
February 2006 in relation to the 2005 long term
incentive plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR |
|
|
OEG |
|
|
RG |
|
|
NT |
|
|
ITT |
|
|
ROI |
|
|
|
performance |
|
|
performance |
|
|
performance |
|
|
performance |
|
|
performance |
|
|
performance |
|
|
|
rights |
|
|
rights |
|
|
rights |
|
|
rights |
|
|
rights |
|
|
rights |
|
|
Number of executives who
were allocated
performance rights |
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
Effective commencement
date of instruments |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance hurdle period
i.e. over what
time period executives
have to satisfy the
performance hurdle for the
instruments to vest |
|
1 July 2005 to 30 June 2010 |
|
1 July 2005 to 30 June 2008 |
|
1 July 2005 to 30 June 2008 |
|
1 July 2005 to 30 June 2008 |
|
1 July 2005 to 30 June 2008 |
|
1 July 2005 to 30 June 2008 |
|
Subsequent performance |
|
|
|
|
|
1 July 2005 to |
|
1 July 2005 to |
|
1 July 2005 to |
|
1 July 2005 to |
|
|
|
|
hurdle period |
|
|
N/A |
|
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
|
N/A |
|
|
Number of performance
rights issued |
|
|
571,943 |
|
|
|
1,143,886 |
|
|
|
1,143,886 |
|
|
|
857,914 |
|
|
|
857,914 |
|
|
|
1,143,886 |
|
|
|
|
Exercise price (once the
performance rights
become exercisable) |
|
$1per parcel of instruments exercised |
|
$1per parcel of instruments exercised |
|
$1per parcel of instruments exercised |
|
$1per parcel of instruments exercised |
|
$1per parcel of instruments exercised |
|
$1per parcel of instruments exercised |
|
|
|
Market price of Telstra
shares on
commencement date |
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
|
|
Fair value (per instrument) |
|
$ |
0.66 |
|
|
$ |
3.18 |
|
|
$ |
3.18 |
|
|
$ |
3.18 |
|
|
$ |
3.18 |
|
|
$ |
3.37 |
|
|
Exercise date (once the
instruments become
exercisable) |
|
any time before 19 Aug 2012 |
|
any time before 19 Aug 2012 |
|
any time before 19 Aug 2012 |
|
any time before 19 Aug 2012 |
|
any time before 19 Aug 2012 |
|
any time before 19 Aug 2012 |
|
The following performance rights were granted in August 2004:
|
|
|
|
|
|
|
|
|
|
|
TSR performance |
|
|
EPS performance |
|
|
|
rights |
|
|
rights |
|
|
Number of executives who were allocated
performance rights |
|
|
178 |
|
|
178 |
Effective commencement date of performance
rights |
|
20 Aug 2004 |
|
20 Aug 2004 |
Performance hurdle period i.e. over what time
period executives have to satisfy the
performance
hurdle for the instruments to vest |
|
20 Aug 2007 to 20 Aug 2009 |
|
1 Jul 2004 to 30 Jun 2007 |
|
Number of performance rights issued |
|
|
2,473,000 |
|
|
2,473,000 |
|
|
Exercise price (once the instruments become
exercisable) |
$ |
1per parcel of instruments exercised |
$ |
1per parcel of instruments exercised |
|
|
|
Market price of Telstra shares on commencement
date |
$ |
|
4.89 |
$ |
|
4.89 |
|
|
|
Fair value (per instrument) |
$ |
|
2.63 |
$ |
|
4.18 |
|
Exercise date (once the instruments become
exercisable) |
|
any time before 20 Nov 2009 |
|
any time before 20 Nov 2009 |
|
118
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iv) Instruments granted during the financial year (continued)
The fair value was calculated using a valuation technique
that is consistent with the Black Scholes methodology and
utilises Monte Carlo simulations. The following weighted
average assumptions were used in determining the
valuation:
|
|
|
|
|
|
|
|
|
|
|
Growthshare |
|
|
performance rights |
|
|
Feb 2006 |
|
Aug 2004 |
|
Share price |
|
$ |
3.87 |
|
|
$ |
4.89 |
|
Risk free rate |
|
|
5.20 |
% |
|
|
5.39 |
% |
Dividend yield |
|
|
6.0 |
% |
|
|
5.5 |
% |
Expected stock volatility |
|
|
19 |
% |
|
|
13.1 |
% |
Expected life performance rights |
|
date the instruments become exercisable |
|
|
5.25 years |
|
Expected rate of achievement of TSR
performance hurdles |
|
|
15 |
% |
|
|
62 |
% |
|
|
|
The expected stock volatility is a measure of the amount
by which the price is expected to fluctuate during a
period. This was based on historical daily and weekly
closing share prices.
As the RG, OEG, NTT, IT and ROI performance rights are
not based on market conditions, no adjustment for the
expected achievement of the performance hurdles was made
in the valuation.
119
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(v) Instruments which have been forfeited during the financial year
The following instruments issued to participating employees have been forfeited during the
financial year due to cessation of employment:
|
|
|
|
|
|
|
|
|
|
|
Instruments forfeited |
|
|
during year ended 30 June |
Allocation |
|
2006 |
|
2005 |
|
Options |
|
|
|
|
|
|
|
|
September 2000 |
|
|
|
|
|
|
419,447 |
|
September 2001 |
|
|
888,153 |
|
|
|
1,631,444 |
|
March 2002 |
|
|
|
|
|
|
80,000 |
|
|
|
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
September 2000 |
|
|
|
|
|
|
86,608 |
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
|
|
|
|
|
|
September 2002 |
|
|
41,292 |
|
|
|
105,856 |
|
March 2003 |
|
|
506 |
|
|
|
3,500 |
|
September 2003 |
|
|
94,713 |
|
|
|
116,595 |
|
|
|
|
|
|
|
|
|
|
TSR Performance rights |
|
|
|
|
|
|
|
|
September 2001 |
|
|
5,500 |
|
|
|
158,762 |
|
March 2002 |
|
|
|
|
|
|
6,800 |
|
September 2002 |
|
|
180,281 |
|
|
|
223,096 |
|
March 2003 |
|
|
1,012 |
|
|
|
7,000 |
|
September 2003 |
|
|
272,118 |
|
|
|
244,648 |
|
August 2004 |
|
|
198,314 |
|
|
|
48,286 |
|
February 2006 |
|
|
4,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS Performance rights |
|
|
|
|
|
|
|
|
August 2004 |
|
|
198,314 |
|
|
|
48,286 |
|
|
OEG Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
9,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RG Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
9,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
6,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITT Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
6,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROI Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
9,225 |
|
|
|
|
|
(vi) Instruments exercised during the financial year
In fiscal 2006, there were 2,000 (2005: nil) options that were exercised from the September 2001
allocation at the exercise price of $4.90. The total proceeds received on exercise of these options
was $9,800 (2005: nil). The share price at the date of the transfers of Telstra shares relating to
these options was $4.81 (2005: nil).
There were 1,241,282 (2005: nil) performance rights exercised from the September 2001 allocation.
These instruments were exercised at various dates throughout the year. The weighted average share
price at the date of the transfers of Telstra shares relating to the exercise of these instruments
was $4.69 (2005: nil) based on the closing market price on those dates.
There was also 1,516,003 deferred shares (2005: 49,834) that were exercised from the September 2002
allocation, 2,094 (2005: nil) deferred shares from the March 2003 and 500,054 deferred shares
(2005: 27,486) that were exercised from the September 2003 allocation. These instruments were
exercised at various dates throughout the year. The weighted average share price at the date of the
transfers of Telstra shares relating to the exercise of these instruments was $4.43 (2005: $4.87)
based on the closing market price on those dates.
The total proceeds received on exercise of our options, deferred shares and performance rights was
$10,027 (2005: $8), which includes $9,800 from the exercise of our September 2001 allocation of
options.
120
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(vii) Instruments which have expired during the financial year
The following instruments issued to participating
employees have expired due to the performance hurdle
not being met:
|
|
|
|
|
|
|
|
|
|
|
Instruments expired |
|
|
during year ended 30 June |
Allocation |
|
2006 |
|
2005 |
|
Options |
|
|
|
|
|
|
|
|
September 1999 |
|
|
|
|
|
|
1,395,000 |
|
September 2000 |
|
|
2,413,900 |
|
|
|
|
|
March 2001 |
|
|
150,000 |
|
|
|
|
|
September 2001 |
|
|
|
|
|
|
16,846,680 |
|
March 2002 |
|
|
801,000 |
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
September 1999 |
|
|
|
|
|
|
236,500 |
|
September 2000 |
|
|
500,600 |
|
|
|
|
|
March 2001 |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR Performance rights |
|
|
|
|
|
|
|
|
September 2001 |
|
|
|
|
|
|
1,607,066 |
|
March 2002 |
|
|
68,000 |
|
|
|
|
|
September 2002 |
|
|
1,865,832 |
|
|
|
|
|
(viii) Instruments outstanding at the end of fiscal 2006
After movements in our share plans during the
financial year, the following instruments remain
outstanding as at 30 June 2006:
|
|
|
|
|
|
|
Number |
|
|
outstanding |
|
|
As at 30 June 2006 |
|
Growthshare 2002 - Sept 2001 allocation |
|
|
|
|
|
Options |
|
|
12,435,000 |
|
TSR Performance rights |
|
|
27,000 |
|
|
|
|
|
|
Growthshare 2002 - March 2002 allocation |
|
|
|
|
|
Options |
|
|
801,000 |
|
TSR Performance rights |
|
|
68,000 |
|
|
|
|
|
|
Growthshare 2003 - Sept 2002 allocation |
|
|
|
|
|
Deferred shares |
|
|
216,728 |
|
TSR Performance rights |
|
|
1,641,111 |
|
|
|
|
|
|
Growthshare 2003 - March 2003 allocation |
|
|
|
|
|
Deferred shares |
|
|
16,000 |
|
TSR Performance rights |
|
|
36,188 |
|
|
|
|
|
|
Growthshare 2004 - Sept 2003 allocation |
|
|
|
|
|
Deferred shares |
|
|
1,430,241 |
|
TSR Performance rights |
|
|
3,827,428 |
|
|
|
|
|
|
Growthshare 2004 - February 2004 allocation |
|
|
|
|
|
Deferred shares |
|
|
18,350 |
|
TSR Performance rights |
|
|
36,700 |
|
|
|
|
|
|
Growthshare 2005 - August 2004 allocation |
|
|
|
|
|
TSR Performance Rights |
|
|
2,226,400 |
|
EPS Performance Rights |
|
|
2,226,400 |
|
|
|
|
|
|
Growthshare 2006 - February 2006 allocation |
|
|
|
|
|
TSR Performance Rights |
|
|
567,331 |
|
OEG Performance Rights |
|
|
1,134,661 |
|
RG Performance Rights |
|
|
1,134,661 |
|
NT Performance Rights |
|
|
850,996 |
|
ITT Performance Rights |
|
|
850,996 |
|
ROI Performance Rights |
|
|
1,134,661 |
|
Only the September 2001 allocation of options and TSR
performance rights, and the September 2002 allocation of
deferred shares have become vested instruments, however,
they are yet to be exercised.
121
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra
Growthshare Trust (continued)
(ix) Summary of movements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive shares (i) |
|
Options |
|
Restricted shares |
|
Deferred shares |
|
Performance rights (ii) |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
Number |
|
value |
|
Number |
|
value |
|
Number |
|
value |
|
Number |
|
value |
|
Number |
|
value |
|
Equity instruments outstanding
as at 30 June 2004 |
|
|
|
|
|
|
|
|
|
|
37,863,624 |
|
|
$ |
1.18 |
|
|
|
863,708 |
|
|
$ |
4.18 |
|
|
|
4,139,252 |
|
|
$ |
4.34 |
|
|
|
11,517,824 |
|
|
$ |
2.98 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,946,000 |
|
|
$ |
3.41 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
(2,130,891 |
) |
|
$ |
1.22 |
|
|
|
(86,608 |
) |
|
$ |
3.62 |
|
|
|
(225,951 |
) |
|
$ |
4.34 |
|
|
|
(736,878 |
) |
|
$ |
3.04 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,320 |
) |
|
$ |
4.37 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
|
|
|
|
|
|
|
|
(18,241,680 |
) |
|
$ |
1.15 |
|
|
|
(236,500 |
) |
|
$ |
5.64 |
|
|
|
|
|
|
|
|
|
|
|
(1,607,066 |
) |
|
$ |
2.86 |
|
|
|
|
Equity instruments outstanding
as at 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
17,491,053 |
|
|
$ |
1.20 |
|
|
|
540,600 |
|
|
$ |
3.63 |
|
|
|
3,835,981 |
|
|
$ |
4.34 |
|
|
|
14,119,880 |
|
|
$ |
3.14 |
|
Granted |
|
|
1,986,435 |
|
|
$ |
4.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,719,429 |
|
|
$ |
2.97 |
|
Forfeited |
|
|
(150,849 |
) |
|
$ |
4.77 |
|
|
|
(888,153 |
) |
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
(136,511 |
) |
|
$ |
4.32 |
|
|
|
(901,662 |
) |
|
$ |
3.19 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
(2,000 |
) |
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
(2,018,151 |
) |
|
$ |
4.38 |
|
|
|
(1,241,282 |
) |
|
$ |
2.86 |
|
Expired |
|
|
|
|
|
|
|
|
|
|
(3,364,900 |
) |
|
$ |
1.49 |
|
|
|
(540,600 |
) |
|
$ |
3.63 |
|
|
|
|
|
|
|
|
|
|
|
(1,933,832 |
) |
|
$ |
2.99 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments outstanding
as at 30 June 2006 |
|
|
1,835,586 |
|
|
$ |
4.77 |
|
|
|
13,236,000 |
|
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
1,681,319 |
|
|
$ |
4.30 |
|
|
|
15,762,533 |
|
|
$ |
3.12 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments exercisable
as at 30 June 2006 |
|
|
105,899 |
|
|
$ |
4.77 |
|
|
|
12,435,000 |
|
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
216,728 |
|
|
$ |
4.41 |
|
|
|
27,000 |
|
|
$ |
2.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
The incentive shares exercisable relate to those executives that have been made
redundant and are then consequently entitled to the incentive shares. |
|
(ii) |
|
Performance rights include TSR, EPS, OEG, RG, NT, ITT and ROI performance
rights. |
122
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
Telstra directshare and ownshare
(i) Nature of Telstra directshare and ownshare
Telstra directshare
Non-executive directors are required to sacrifice a
minimum of 20% of their fees toward the acquisition of
restricted Telstra shares, known as directshares. Shares
are acquired by the trustee from time to time and
allocated to the participating directors on a 6 monthly
basis, on dates determined by the trustee at its
discretion. Although the trustee holds the shares in
trust, the participant retains the beneficial interest in
the shares (dividends, voting rights, bonuses and rights
issues) until they are transferred at expiration of the
restriction period.
The restriction period continues:
|
|
for five years from the date of allocation of the shares; |
|
|
|
until the participating director is no longer a
director of, or is no longer employed by, a company in
the Telstra Group; or |
|
|
|
until the Board of Telstra
determines that an event has occurred. |
At the end of the restriction period, the directshares
will be transferred to the participating director. The
participating director is not able to deal in the shares
until this transfer has taken place.
The expense associated with shares allocated under
this plan is included in the disclosure for
directors remuneration.
Telstra ownshare
Certain eligible employees may be provided part of their
remuneration in Telstra shares. Those employees indicate
a preference to be provided Telstra shares as part of
their remuneration. Shares are acquired by the trustee
from time to time and allocated to these employees at the
time their application is accepted. Although the trustee
holds the shares in trust, the participant retains the
beneficial interest in the shares (dividends, voting
rights, bonuses or rights issues) until they are
transferred at expiration of the restriction period.
The restriction period continues:
|
|
for three years or five years depending on the
elections available to the participant at the time of
allocation; |
|
|
|
until the participant ceases employment
with the Telstra Group; or |
|
|
|
until the Board of Telstra
determines that an event has occurred. |
At the end of the restriction period, the ownshares will
be transferred
to the participant. The participant is not able to deal
in the shares until this transfer has taken place.
(ii) Instruments outstanding at the beginning of fiscal 2006
The following directshares and ownshares were
outstanding at the start of fiscal 2006 but were held by
the trustee for the benefit of the relevant directors or
employees pending expiration of the restriction period:
|
|
|
|
|
|
|
Number of |
|
|
|
instruments |
|
Directshares |
|
outstanding |
|
|
15 September 2000 allocation |
|
|
4,364 |
|
19 March 2001 allocation |
|
|
7,439 |
|
14 September 2001 allocation |
|
|
9,463 |
|
14 March 2002 allocation |
|
|
11,857 |
|
5 September 2002 allocation |
|
|
12,937 |
|
7 March 2003 allocation |
|
|
29,922 |
|
5 September 2003 allocation |
|
|
23,132 |
|
20 February 2004 allocation |
|
|
26,369 |
|
20 August 2005 allocation |
|
|
7,567 |
|
19 February 2005 allocation |
|
|
26,013 |
|
|
|
|
|
|
|
|
159,063 |
|
|
|
|
|
|
|
|
|
|
Ownshares |
|
|
|
|
15 September 2000 allocation |
|
|
49,928 |
|
14 September 2001 allocation |
|
|
47,202 |
|
5 September 2002 allocation |
|
|
471,135 |
|
28 October 2002 allocation |
|
|
138,232 |
|
5 September 2003 allocation |
|
|
333,587 |
|
31 October 2003 allocation |
|
|
207,140 |
|
20 August 2004 allocation |
|
|
318,074 |
|
29 October 2004 allocation |
|
|
247,168 |
|
|
|
|
|
|
|
|
1,812,466 |
|
|
|
|
|
123
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iii) Instruments granted during the financial year
The following directshares were granted in August and
February of fiscal 2006 and fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directshare Equity Plan |
|
|
Aug 2005 |
|
Feb 2006 |
|
Aug 2004 |
|
Feb 2005 |
|
|
|
Number of eligible non-executive directors |
|
|
6 |
|
|
|
6 |
|
|
|
8 |
|
|
|
8 |
|
Number of participants in the plan |
|
|
6 |
|
|
|
6 |
|
|
|
8 |
|
|
|
8 |
|
Grant date of shares |
|
19 August 2005 |
|
17 February 2006 |
|
20 August 2004 |
|
19 February 2005 |
|
|
|
Number of shares allocated |
|
|
20,699 |
|
|
|
31,286 |
|
|
|
7,567 |
|
|
|
26,013 |
|
Fair value of shares allocated |
|
$ |
4.78 per share |
|
$ |
4.05 per share |
|
$ |
4.89 per share |
|
$ |
5.29 per share |
Total fair value of shares allocated |
|
$ |
98,941 |
|
|
$ |
126,708 |
|
|
$ |
37,003 |
|
|
$ |
137,609 |
|
|
|
|
The following ownshares were granted in August and October of fiscal 2006 and fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownshare Equity Plan |
|
|
Aug 2005 |
|
Oct 2005 |
|
Aug 2004 |
|
Oct 2004 |
|
|
|
Number of eligible participants |
|
|
9,612 |
|
|
|
17,559 |
|
|
|
8,975 |
|
|
|
16,062 |
|
Number of participants in the plan |
|
|
414 |
|
|
|
151 |
|
|
|
311 |
|
|
|
173 |
|
Grant date of shares |
|
19 August 2005 |
|
28 October 2005 |
|
20 August 2004 |
|
29 October 2004 |
|
|
|
Number of shares allocated |
|
|
506,420 |
|
|
|
270,415 |
|
|
|
348,240 |
|
|
|
250,386 |
|
Fair value of shares allocated |
|
$ |
4.78 per share |
|
$ |
4.18 per share |
|
$ |
4.89 per share |
|
$ |
4.67 per share |
Total fair value of shares allocated |
|
$ |
2,420,688 |
|
|
$ |
1,130,335 |
|
|
$ |
1,702,894 |
|
|
$ |
1,169,303 |
|
|
|
|
On an allocation of directshares and ownshares, the
participants in the plans are not required to make any
payment to the Telstra Entity. The August allocation of
ownshares relates to employees short term incentive
payments and the October allocation relates to shares
acquired through salary sacrifice by employees.
The fair value of the instruments issued is determined by
the remuneration foregone by the participant. The number
of directshares or ownshares allocated is based on the
weighted average price of a Telstra share in the week
ending on the day before allocation date, in conjunction
with the remuneration foregone.
124
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iv) Instruments exercised during the financial year
Directshares and ownshares are not required to be
exercised. The fully paid shares held by the Telstra
Growthshare Trust relating to these instruments are
merely transferred to the participants at the completion
of the restriction period.
The following fully paid shares have been distributed
from the Telstra Growthshare Trust at various dates
throughout fiscal 2006 to directors and executives under
the directshare and ownshare plans respectively:
|
|
|
|
|
|
|
|
|
|
|
No. of shares |
|
|
|
|
distributed |
|
Fair value |
Directshares |
|
|
45,060 |
|
|
$ |
189,415 |
|
Ownshares |
|
|
901,607 |
|
|
$ |
3,763,870 |
|
The following fully paid shares relating to the same
plans were distributed during fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
No. of shares |
|
|
|
|
distributed |
|
Fair value |
Directshares |
|
|
13,644 |
|
|
$ |
68,629 |
|
Ownshares |
|
|
425,950 |
|
|
$ |
2,033,620 |
|
The fair value of directshares and ownshares distributed
is determined through reference to the closing market
price of a Telstra share on the date of transfer.
(v) Instruments outstanding at the end of fiscal 2006
|
|
|
|
|
|
|
No. of instruments |
|
|
|
outstanding as at |
|
Directshares |
|
30 June 2006 |
|
|
14 September 2001 allocation |
|
|
5,616 |
|
14 March 2002 allocation |
|
|
8,348 |
|
5 September 2002 allocation |
|
|
8,933 |
|
7 March 2003 allocation |
|
|
23,879 |
|
5 September 2003 allocation |
|
|
18,488 |
|
20 February 2004 allocation |
|
|
21,380 |
|
20 August 2005 allocation |
|
|
6,223 |
|
19 February 2005 allocation |
|
|
21,136 |
|
19 August 2005 allocation |
|
|
20,699 |
|
17 February 2006 allocation |
|
|
31,286 |
|
|
|
|
|
|
|
|
165,988 |
|
|
|
|
|
|
|
|
|
|
|
|
No. of instruments |
|
|
|
outstanding as at |
|
Ownshares |
|
30 June 2006 |
|
|
14 September 2001 allocation |
|
|
32,395 |
|
5 September 2003 allocation |
|
|
293,764 |
|
31 October 2003 allocation |
|
|
165,932 |
|
20 August 2004 allocation |
|
|
282,031 |
|
29 October 2004 allocation |
|
|
194,084 |
|
19 August 2005 allocation |
|
|
474,237 |
|
28 October 2005 allocation |
|
|
245,251 |
|
|
|
|
|
|
|
|
1,687,694 |
|
|
|
|
|
Sign-on bonus shares
Certain eligible employees may be provided sign-on bonus
shares upon commencing employment at Telstra. These
shares are held in trust, although the participant
retains the beneficial interest in the shares
(dividends, voting rights, bonuses or rights issues)
until they are transferred at expiration of the
restriction period.
The restriction period continues:
|
|
until a date determined by the chief executive officer; or |
|
|
|
until the Board of Telstra determines that an event has occurred. |
At the end of the restriction period, the sign-on bonus
shares will be transferred to the participating
employee. The employee is not able to deal in the shares
until this transfer has taken place.
There were 67,694 (2005: nil) sign-on bonus shares issued
in fiscal 2006 to one employee (2005: nil) on 30 March
2006. The fair value of the shares allocated was $3.69
with a total fair value allocated of $249,791. These
shares were still outstanding at 30 June 2006.
The fair value of the sign-on bonus shares is based on
the weighted average price of a Telstra share in the week
ending on the day before allocation date.
125
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation
Our key management personnel (KMP) have authority
and responsibility for planning, directing and
controlling the activities of the Telstra Group. Our KMP
consist of:
|
|
the directors of the Telstra Entity; and |
|
|
|
certain executives in the Chief Executive Officers
(CEOs) senior leadership team, referred to as a
senior executive in this report. |
Directors
During fiscal 2006 and fiscal 2005, the directors of
the Telstra Entity were:
|
|
|
Name |
|
Position |
Current directors |
|
|
Donald G McGauchie
|
|
Chairman, Non Executive Director, appointed Chairman 20 July 2004 |
Solomon D Trujillo
|
|
Chief Executive Officer and Executive Director, appointed 1 July 2005 |
Belinda J Hutchinson
|
|
Non Executive Director, |
Catherine B Livingstone
|
|
Non Executive Director, |
Charles Macek
|
|
Non Executive Director, |
John W Stocker
|
|
Non Executive Director, |
Peter Willcox
|
|
Non Executive Director, appointed 17 May 2006 |
John Zeglis
|
|
Non Executive Director, appointed 17 May 2006 |
|
|
|
Former directors |
|
|
John T Ralph
|
|
Deputy Chairman, Non Executive Director, retired 11 August 2005 |
Zygmunt E Switkowski
|
|
Chief Executive Officer and Executive Director, resigned 1 July 2005 |
Samuel H Chisholm
|
|
Non Executive Director, resigned 28 October 2004 |
Anthony J Clark
|
|
Non Executive Director, retired 11 August 2005 |
John E Fletcher
|
|
Non Executive Director, resigned 30 June 2006 |
Senior executives
On 1 July 2005, Mr Solomon Trujillo was appointed CEO and
Executive Director. Subsequent to Mr Trujillos
appointment, we reassessed our KMP in light of the new
organisational structure. The senior executives that
qualified as KMP for the current year were:
|
|
|
Name |
|
Position |
Fiscal 2006 senior
executives |
|
|
Bruce Akhurst
|
|
Chief Executive Officer, Sensis |
Kate McKenzie
|
|
Group Managing Director, Telstra Wholesale, appointed 16 January 2006 |
David Moffatt
|
|
Group Managing Director, Telstra Consumer Marketing and Channels |
Deena Shiff
|
|
Group Managing Director, Telstra Business, appointed 30 January 2006;
previously Group Managing Director
Telstra Wholesale from 1 January 2005 to 30 January 2006 |
John Stanhope
|
|
Chief Financial Officer and Group Managing Director, Finance and Administration |
David Thodey
|
|
Group Managing Director, Telstra Enterprise and Government |
Gregory Winn
|
|
Group Managing Director, Telstra Operations, appointed 11 August 2005 |
126
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
Senior executives (continued)
During fiscal 2005, the senior executives that formed
part of our KMP were:
|
|
|
Name |
|
Position |
Fiscal 2005 senior
executives |
|
|
Bruce Akhurst
|
|
Chief Executive Officer, Sensis, appointed 1 January 2005; previously Group General
Council and Group
Managing Director, Telstra Wholesale, Telstra Broadband and Media until 31 December 2004 |
Douglas Campbell
|
|
Group Managing Director, Telstra Country Wide, retired 31 December 2005 |
David Moffatt
|
|
Group Managing Director, Telstra Consumer and Marketing |
Ted Pretty
|
|
Group Managing Director, Telstra Technology, Innovation and Products, ceased 19 August 2005 |
Michael Rocca
|
|
Group Managing Director, Infrastructure Services |
Bill Scales
|
|
Group Managing Director, Regulatory, Corporate and Human Relations, retired 12 August 2005 |
Deena Shiff
|
|
Group Managing Director, Telstra Wholesale appointed 1 January 2005 |
John Stanhope
|
|
Chief Financial Officer and Group Managing Director, Finance and Administration |
David Thodey
|
|
Group Managing Director, Telstra Enterprise and Government |
Certain senior executives classified as KMP in the
prior year
have either resigned, retired or are no longer
considered KMP for the purposes of the applicable
accounting standard in fiscal 2006.
KMP aggregate compensation
During fiscal 2006 and fiscal 2005, the aggregate
compensation provided to our KMP was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Short term employee benefits |
|
|
21,841,244 |
|
|
|
16,183,799 |
|
|
|
21,841,244 |
|
|
|
16,183,799 |
|
Post employment benefits |
|
|
2,029,681 |
|
|
|
1,468,559 |
|
|
|
2,029,681 |
|
|
|
1,468,559 |
|
Other long term benefits |
|
|
245,279 |
|
|
|
272,833 |
|
|
|
245,279 |
|
|
|
272,833 |
|
Termination benefits |
|
|
4,027,495 |
|
|
|
|
|
|
|
4,027,495 |
|
|
|
|
|
Equity settled share based payments |
|
|
4,907,315 |
|
|
|
9,249,062 |
|
|
|
4,907,315 |
|
|
|
9,249,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,051,014 |
|
|
|
27,174,253 |
|
|
|
33,051,014 |
|
|
|
27,174,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The compensation for each individual KMP with additional
details regarding the category of compensation is
provided on the following pages.
127
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation
During fiscal 2006, the compensation provided to each individual KMP was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term employee benefits |
|
|
Post employment |
|
|
Other long |
|
|
Termin- |
|
|
Equity settled share based payments |
|
|
Total |
|
|
|
|
Salary & |
|
|
Short term |
|
|
Non- |
|
|
|
|
|
|
Superan- |
|
|
Retirement |
|
|
term |
|
|
ation |
|
|
Short term |
|
|
|
|
|
|
Deferred |
|
|
Other |
|
|
|
|
Year ended |
|
fees |
|
|
incentives |
|
|
monetary |
|
|
Other |
|
|
nuation |
|
|
benefits |
|
|
benefits |
|
|
benefits |
|
|
incentives |
|
|
Directshare |
|
|
shares |
|
|
equity |
|
|
|
|
30 June 2006 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D McGauchie |
|
|
312,236 |
|
|
|
|
|
|
|
3,078 |
|
|
|
|
|
|
|
12,158 |
|
|
|
60,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,099 |
|
|
|
|
|
|
|
|
|
|
|
468,665 |
|
J Ralph (a) (e) |
|
|
17,474 |
|
|
|
|
|
|
|
380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
480,402 |
|
S Trujillo (b) (c) |
|
|
2,987,861 |
|
|
|
2,581,200 |
|
|
|
|
|
|
|
1,745,011 |
|
|
|
1,012,139 |
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309,305 |
|
|
|
8,710,516 |
|
Z Switkowski (a)
(d) |
|
|
5,451 |
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
3,151,526 |
|
|
|
|
|
|
|
|
|
|
|
491,049 |
|
|
|
4,516 |
|
|
|
3,652,858 |
|
A Clark (a) (e) |
|
|
9,015 |
|
|
|
|
|
|
|
458 |
|
|
|
|
|
|
|
970 |
|
|
|
|
|
|
|
|
|
|
|
278,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289,289 |
|
J Fletcher (a) (e) |
|
|
94,209 |
|
|
|
|
|
|
|
2,775 |
|
|
|
|
|
|
|
8,056 |
|
|
|
|
|
|
|
|
|
|
|
134,575 |
|
|
|
|
|
|
|
26,422 |
|
|
|
|
|
|
|
|
|
|
|
266,037 |
|
B Hutchinson |
|
|
100,611 |
|
|
|
|
|
|
|
2,288 |
|
|
|
|
|
|
|
18,551 |
|
|
|
11,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,740 |
|
|
|
|
|
|
|
|
|
|
|
163,133 |
|
C Livingstone |
|
|
113,063 |
|
|
|
|
|
|
|
2,288 |
|
|
|
|
|
|
|
10,998 |
|
|
|
11,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,015 |
|
|
|
|
|
|
|
|
|
|
|
169,213 |
|
C Macek |
|
|
123,032 |
|
|
|
|
|
|
|
2,748 |
|
|
|
|
|
|
|
11,227 |
|
|
|
12,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,565 |
|
|
|
|
|
|
|
|
|
|
|
182,671 |
|
J Stocker |
|
|
110,817 |
|
|
|
|
|
|
|
2,288 |
|
|
|
|
|
|
|
39,006 |
|
|
|
13,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,390 |
|
|
|
|
|
|
|
|
|
|
|
202,527 |
|
P Willcox (b) |
|
|
11,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
|
|
|
|
|
|
|
|
16,176 |
|
J Zeglis (b) |
|
|
12,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
|
|
|
|
|
|
|
|
16,176 |
|
|
|
|
|
|
|
3,898,582 |
|
|
|
2,581,200 |
|
|
|
16,338 |
|
|
|
1,745,011 |
|
|
|
1,114,455 |
|
|
|
109,011 |
|
|
|
75,000 |
|
|
|
4,027,495 |
|
|
|
|
|
|
|
245,701 |
|
|
|
491,049 |
|
|
|
313,821 |
|
|
|
14,617,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B Akhurst |
|
|
984,974 |
|
|
|
1,519,035 |
|
|
|
11,740 |
|
|
|
|
|
|
|
188,026 |
|
|
|
|
|
|
|
29,325 |
|
|
|
|
|
|
|
276,443 |
|
|
|
|
|
|
|
115,592 |
|
|
|
650,036 |
|
|
|
3,775,171 |
|
K McKenzie (b) |
|
|
223,280 |
|
|
|
180,950 |
|
|
|
|
|
|
|
|
|
|
|
20,787 |
|
|
|
|
|
|
|
6,026 |
|
|
|
|
|
|
|
22,067 |
|
|
|
|
|
|
|
|
|
|
|
30,871 |
|
|
|
483,981 |
|
D Moffatt |
|
|
876,970 |
|
|
|
1,019,991 |
|
|
|
18,138 |
|
|
|
|
|
|
|
316,030 |
|
|
|
|
|
|
|
29,825 |
|
|
|
|
|
|
|
131,095 |
|
|
|
|
|
|
|
129,101 |
|
|
|
779,461 |
|
|
|
3,300,611 |
|
D Shiff |
|
|
645,857 |
|
|
|
768,951 |
|
|
|
6,062 |
|
|
|
|
|
|
|
116,643 |
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
155,829 |
|
|
|
|
|
|
|
37,438 |
|
|
|
214,391 |
|
|
|
1,965,171 |
|
J Stanhope |
|
|
919,499 |
|
|
|
655,412 |
|
|
|
9,668 |
|
|
|
|
|
|
|
101,001 |
|
|
|
|
|
|
|
25,825 |
|
|
|
|
|
|
|
126,792 |
|
|
|
|
|
|
|
76,968 |
|
|
|
335,804 |
|
|
|
2,250,969 |
|
D Thodey |
|
|
1,031,086 |
|
|
|
926,798 |
|
|
|
8,248 |
|
|
|
|
|
|
|
52,914 |
|
|
|
|
|
|
|
27,100 |
|
|
|
|
|
|
|
108,869 |
|
|
|
|
|
|
|
105,198 |
|
|
|
560,789 |
|
|
|
2,821,002 |
|
G Winn (b) (f) |
|
|
1,280,944 |
|
|
|
1,408,918 |
|
|
|
1,685 |
|
|
|
1,101,907 |
|
|
|
10,814 |
|
|
|
|
|
|
|
32,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,836,446 |
|
|
|
|
|
|
|
5,962,610 |
|
|
|
6,480,055 |
|
|
|
55,541 |
|
|
|
1,101,907 |
|
|
|
806,215 |
|
|
|
|
|
|
|
170,279 |
|
|
|
|
|
|
|
821,095 |
|
|
|
|
|
|
|
464,297 |
|
|
|
2,571,352 |
|
|
|
18,433,351 |
|
|
|
|
|
|
|
9,861,192 |
|
|
|
9,061,255 |
|
|
|
71,879 |
|
|
|
2,846,918 |
|
|
|
1,920,670 |
|
|
|
109,011 |
|
|
|
245,279 |
|
|
|
4,027,495 |
|
|
|
821,095 |
|
|
|
245,701 |
|
|
|
955,346 |
|
|
|
2,885,173 |
|
|
|
33,051,014 |
|
|
|
|
128
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation (continued)
(a) These personnel retired or resigned from their
position during fiscal 2006. After the date of retirement
or resignation, these personnel were not considered to be
KMP. As a result, the disclosed compensation includes
only compensation during their period of services as a
KMP.
(b) These personnel were appointed to the position during
fiscal 2006. Prior to the date of appointment, these
personnel were not considered to be KMP. As a result, the
disclosed compensation includes only compensation from
the date of appointment.
(c) On commencement of employment, Mr Trujillo received
a one-off sign-on bonus of $1,000,000. This bonus was
subsequently transferred to superannuation during fiscal
2006.
In addition, Mr Trujillo received a sign-on incentive in
the amount of 50% of his maximum potential benefit under
the short term incentive plan ($1,500,000), which has
been included in short term incentives. The amount of the
sign-on incentive was deducted from his potential short
term incentive for the first year of employment.
Other compensation for Mr Trujillo relates to
compensation provided for tax equalisation, travel,
accommodation and certain relocation costs.
(d) Dr Switkowski ceased employment with the Company
effective 1 July 2005. As a result, Dr Switkowskis
compensation includes one day of benefits, together with
his termination benefits and equity settled share based
payments.
Termination benefits relate to entitlements under Dr
Switkowskis employment contract, equal to 12 months
fixed remuneration, in addition to accrued annual leave
and long service leave entitlements. Fixed remuneration
comprises salary, superannuation and the value of salary
sacrificed items.
Other equity compensation represents one day of expense
for various instruments, including options, performance
rights and restricted shares. These instruments are
subject to performance hurdles and may become exercisable
in future reporting periods. Refer note 33 for further
details on Dr. Switkowskis holdings of equity
instruments upon leaving the Company.
Upon ceasing employment, the deferred shares previously
allocated to Dr Switkowski vested and became immediately
exercisable. As such, the unamortised amount of
compensation was immediately recognised.
(e) Termination benefits paid during fiscal 2006 are to
directors that resigned or retired during the year.
Termination benefits represent
the payment of retirement benefits that accumulated
during the period of employment.
(f) Other compensation for Mr Winn comprises a one-off
sign-on bonus of $500,000 and compensation provided for
tax equalisation, travel, accommodation and certain
relocation costs.
129
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation (continued)
During fiscal 2005, the compensation provided to each individual KMP was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term employee benefits |
|
|
Post employment |
|
|
Other long |
|
|
Equity settled share based payments |
|
|
Total |
|
|
|
|
|
|
|
Short term |
|
|
Non- |
|
|
|
|
|
|
Superan- |
|
|
Retirement |
|
|
term |
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
|
Year ended |
|
Salary & fees |
|
|
incentives |
|
|
monetary |
|
|
Other |
|
|
nuation |
|
|
benefits |
|
|
benefits |
|
|
Directshare |
|
|
shares |
|
|
Other equity |
|
|
|
|
30 June 2005 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D McGauchie |
|
|
225,503 |
|
|
|
|
|
|
|
2,317 |
|
|
|
2,837 |
|
|
|
11,484 |
|
|
|
195,396 |
|
|
|
|
|
|
|
60,054 |
|
|
|
|
|
|
|
|
|
|
|
497,591 |
|
J Ralph |
|
|
142,957 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
|
|
|
|
79,940 |
|
|
|
|
|
|
|
19,305 |
|
|
|
|
|
|
|
|
|
|
|
244,455 |
|
Z Switkowski |
|
|
1,830,900 |
|
|
|
1,961,000 |
|
|
|
24,357 |
|
|
|
|
|
|
|
101,850 |
|
|
|
|
|
|
|
52,300 |
|
|
|
|
|
|
|
725,912 |
|
|
|
2,045,313 |
|
|
|
6,741,632 |
|
S Chisholm (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Clark |
|
|
75,706 |
|
|
|
|
|
|
|
2,753 |
|
|
|
|
|
|
|
8,493 |
|
|
|
48,811 |
|
|
|
|
|
|
|
13,114 |
|
|
|
|
|
|
|
|
|
|
|
148,877 |
|
J Fletcher |
|
|
43,795 |
|
|
|
|
|
|
|
3,015 |
|
|
|
|
|
|
|
6,705 |
|
|
|
35,603 |
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
129,118 |
|
B Hutchinson |
|
|
70,065 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
6,692 |
|
|
|
32,004 |
|
|
|
|
|
|
|
19,189 |
|
|
|
|
|
|
|
|
|
|
|
130,203 |
|
C Livingstone |
|
|
77,764 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
8,537 |
|
|
|
46,216 |
|
|
|
|
|
|
|
21,575 |
|
|
|
|
|
|
|
|
|
|
|
156,345 |
|
C Macek |
|
|
79,584 |
|
|
|
|
|
|
|
2,057 |
|
|
|
|
|
|
|
8,717 |
|
|
|
40,160 |
|
|
|
|
|
|
|
22,075 |
|
|
|
|
|
|
|
|
|
|
|
152,593 |
|
J Stocker |
|
|
71,975 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
6,478 |
|
|
|
73,130 |
|
|
|
|
|
|
|
52,173 |
|
|
|
|
|
|
|
|
|
|
|
206,009 |
|
|
|
|
|
|
|
2,618,249 |
|
|
|
1,961,000 |
|
|
|
43,511 |
|
|
|
2,837 |
|
|
|
158,956 |
|
|
|
551,260 |
|
|
|
52,300 |
|
|
|
247,485 |
|
|
|
725,912 |
|
|
|
2,045,313 |
|
|
|
8,406,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B Akhurst |
|
|
927,664 |
|
|
|
523,600 |
|
|
|
11,893 |
|
|
|
|
|
|
|
177,086 |
|
|
|
|
|
|
|
29,325 |
|
|
|
|
|
|
|
196,141 |
|
|
|
732,594 |
|
|
|
2,598,303 |
|
D Campbell |
|
|
941,394 |
|
|
|
310,600 |
|
|
|
10,149 |
|
|
|
|
|
|
|
88,356 |
|
|
|
|
|
|
|
26,825 |
|
|
|
|
|
|
|
196,141 |
|
|
|
732,354 |
|
|
|
2,305,819 |
|
D Moffatt (c) |
|
|
1,133,165 |
|
|
|
248,300 |
|
|
|
18,781 |
|
|
|
400,000 |
|
|
|
11,585 |
|
|
|
|
|
|
|
29,825 |
|
|
|
|
|
|
|
220,968 |
|
|
|
801,183 |
|
|
|
2,863,807 |
|
T Pretty (c) |
|
|
1,120,581 |
|
|
|
540,500 |
|
|
|
22,370 |
|
|
|
260,000 |
|
|
|
24,169 |
|
|
|
|
|
|
|
29,825 |
|
|
|
|
|
|
|
224,936 |
|
|
|
789,217 |
|
|
|
3,011,598 |
|
M Rocca |
|
|
735,791 |
|
|
|
416,600 |
|
|
|
9,817 |
|
|
|
|
|
|
|
140,459 |
|
|
|
|
|
|
|
23,375 |
|
|
|
|
|
|
|
145,754 |
|
|
|
401,479 |
|
|
|
1,873,275 |
|
B Scales |
|
|
681,167 |
|
|
|
428,700 |
|
|
|
9,635 |
|
|
|
|
|
|
|
117,583 |
|
|
|
|
|
|
|
21,625 |
|
|
|
|
|
|
|
121,946 |
|
|
|
326,788 |
|
|
|
1,707,444 |
|
D Shiff (b) |
|
|
277,321 |
|
|
|
295,150 |
|
|
|
1,326 |
|
|
|
|
|
|
|
47,680 |
|
|
|
|
|
|
|
8,058 |
|
|
|
|
|
|
|
30,641 |
|
|
|
102,562 |
|
|
|
762,738 |
|
J Stanhope |
|
|
800,685 |
|
|
|
240,150 |
|
|
|
11,398 |
|
|
|
|
|
|
|
99,065 |
|
|
|
|
|
|
|
24,575 |
|
|
|
|
|
|
|
105,628 |
|
|
|
365,338 |
|
|
|
1,646,839 |
|
D Thodey |
|
|
966,890 |
|
|
|
206,200 |
|
|
|
8,375 |
|
|
|
|
|
|
|
52,360 |
|
|
|
|
|
|
|
27,100 |
|
|
|
|
|
|
|
176,235 |
|
|
|
560,447 |
|
|
|
1,997,607 |
|
|
|
|
|
|
|
7,584,658 |
|
|
|
3,209,800 |
|
|
|
103,744 |
|
|
|
660,000 |
|
|
|
758,343 |
|
|
|
|
|
|
|
220,533 |
|
|
|
|
|
|
|
1,418,390 |
|
|
|
4,811,962 |
|
|
|
18,767,430 |
|
|
|
|
|
|
|
10,202,907 |
|
|
|
5,170,800 |
|
|
|
147,255 |
|
|
|
662,837 |
|
|
|
917,299 |
|
|
|
551,260 |
|
|
|
272,833 |
|
|
|
247,485 |
|
|
|
2,144,302 |
|
|
|
6,857,275 |
|
|
|
27,174,253 |
|
|
|
|
130
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation (continued)
(a) During fiscal 2005, Mr Chisholm declined to
receive fees for his Board duties to Telstra. Mr
Chisholm resigned during fiscal 2005.
(b) Ms Shiff was appointed to the position of Group
Managing Director during fiscal 2005. Prior to the date
of appointment, Ms Shiff was not considered to be a KMP.
As a result, the disclosed compensation includes only
compensation from the date of appointment.
(c) Relates to annual contract payments made to certain
executives for continued service with Telstra or as part
of their employment contract. These payments were
determined at the executives initial entry into their
contract for employment with the Company.
Principles of compensation
Our directors are remunerated in accordance with the
constitution, which provides for the aggregate limit for
directors fees to be set and varied only by approval of
a resolution at the annual general meeting of
shareholders. Our constitution provides that the
allocation of fees to directors within the pool limit
shall be determined by the Board.
In order to maintain the directors independence and
impartiality, the compensation of the non-executive
directors is not linked to the performance of the
Company, except through their participation in
Directshares. Our directors must sacrifice at least 20%
of their fees into Telstra shares to align their
interests with those of our shareholders, refer to note
31 for further details on Directshares.
The Telstra Entity has a Remuneration Committee, which
is a committee of Board members responsible for
reviewing and recommending to the Board the compensation
arrangements for the CEO and executives, which includes
the senior executives defined as KMP.
Our compensation structure includes both fixed
remuneration and performance incentives designed to
complement each other and support the execution of our
business strategy in both the short and long term. Fixed
compensation comprised salary, superannuation and the
value of salary sacrificed items.
We reward our senior executives for performance through
a combination of short term incentives (STI) and long
term incentives (LTI). The STI rewards the CEO and
executives for meeting or exceeding specific key annual
business and individual performance measures. Measures
and targeted achievement levels are reviewed each year
to reflect changes in the business priorities for the
forthcoming year.
The STI in relation to fiscal 2006 will be delivered in
cash. The STI
in relation to fiscal 2005 was allocated half in cash and
half in rights to Telstra shares, called incentive
shares. The cash portion of the fiscal 2005 STI was
included in short term employee benefits during fiscal
2005 and the incentive shares component was included in
equity settled share based payments during fiscal 2006 to
represent when the instruments were granted.
The incentive shares vest equally over a period of one,
two and three years on the anniversary of their
allocation date, subject to the executives continued
employment with any entity that forms part of the Telstra
Group. The first third granted will vest on 19 August
2006.
In fiscal 2005, Mr Scales and Dr Switkowski were the only
senior executives that received their STI in cash, as
they ceased employment with the Company prior to the
allocation of the equity component.
The LTI is intended to support our business strategy by
aligning executive compensation with key performance
measures and targets that support our transformation. On
an annual basis, we invite selected executives who
contribute significantly to sustained improvement in
shareholder value to participate in an equity based LTI
plan, administered through Growthshare. LTI equity
instruments issued through the trust can only be
exercised to obtain normal ordinary shares between
certain time periods and if specific long term Company
performance hurdles have been achieved.
During fiscal 2006 and fiscal 2005, our executives
received performance rights which will vest in future
reporting periods depending upon the companys
achievement of the relevant performance measures. The
performance rights have been recorded in other equity in
the KMP individual compensation tables.
During fiscal 2005, our deferred share program was
discontinued. As the deferred shares will continue to
vest over the relevant performance periods, a portion of
the value of the deferred shares will continue to be
allocated to the executives compensation until all
deferred shares have vested or lapsed. This treatment is
consistent with our other equity plans which have been
discontinued, such as our option plan and restricted
share plan. The deferred shares have been recorded as
deferred remuneration in the KMP individual compensation
tables.
For further details of our LTI plans, including detailed
explanation of performance hurdles and allocations,
refer to note 31.
We recognise an expense for all share-based compensation
determined with reference to the fair value at grant date
of the equity instruments issued. The fair value is
reflected in the KMPs compensation over the relevant
vesting periods, adjusted to reflect actual and expected
levels of vesting. Refer to note 2.25 for details on our
accounting policy for equity settled share based
payments.
131
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
Individual contracts for services
There are no individual contracts for service with our
non-executive directors other than retirement benefits
classified as post employment benefits. Only directors
appointed prior to 30 June 2002 are eligible to receive
retirement benefits upon leaving office.
Our individual senior executives are employed under
contracts without a fixed duration, except Mr Winn who
was appointed on a two year fixed duration contract.
Where both parties mutually agree, Mr Winns contract can
be extended for a further one year.
Where Telstra terminates an executives employment
prior to the expiration of their employment contract
for reasons other than for misconduct, the senior
executive is entitled to between 1 and 6 months notice
depending on their respective contract conditions.
Alternatively, the individual is entitled to payment in
lieu of notice and between 6 and 12 months pay
depending on their respective contract conditions. Both
elements are calculated on fixed remuneration at the
time of termination.
We have included detailed disclosures in relation to the
principles of compensation and individual contracts for
services in the Remuneration Report, which forms part of
the Directors Report for the year ended 30 June 2006.
In accordance with the Corporations Amendment
Regulations 2006 (No.4), 2001, please refer to the
Remuneration Report for detailed commentary.
132
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures
Transactions involving our controlled entities
Our transactions with our controlled entities recorded
in the income statement and balance sheet are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
|
|
|
|
|
30 June |
|
|
30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Income from controlled entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of goods and services (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092 |
|
|
|
1,072 |
|
Finance income (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
5 |
|
Dividend revenue (b) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses to controlled entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of goods and services (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 |
|
|
|
362 |
|
Finance costs (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment in amounts owed by controlled entities (c) |
|
|
7 |
(a) |
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
475 |
|
Reversal of impairment in amounts owed by controlled entities (c) |
|
|
7 |
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts receivable at 30 June from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities (a) (d) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
2,267 |
|
|
|
2,194 |
|
Allowance for amounts owed by controlled entities (c) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
(1,851 |
) |
|
|
(1,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities (a) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts payable at 30 June to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities payables (a) (d) |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
5 |
|
Controlled entities loans (e) |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,605 |
|
|
|
2,405 |
|
|
|
|
|
|
|
|
|
|
(a) The Telstra Entity sold and purchased goods and
services and received and paid interest to its
controlled entities. These transactions are in the
ordinary course of business and are on normal commercial
terms and conditions.
The Telstra Entity and certain Australian controlled
entities have entered into a deed of cross guarantee.
Under this deed, each company (except Telstra Finance
Limited) guarantees the payment in full of the debts of
the other named companies in the event of their winding
up. Refer to note 29 for further details regarding our
closed group.
Details of our individual significant transactions
involving our controlled entities during fiscal
2006 are detailed as follows:
|
|
the Telstra Entity received procurement fees from its
controlled
entity Sensis Pty Ltd for the use of Yellow Pages® and
White Pages® trademarks amounting to $647 million (2005:
$628 million). As at 30 June 2006, the Telstra Entity
recorded revenue received in advance amounting to $332
million (2005: $344 million) for the use of these
trademarks; |
|
|
|
the Telstra Entity paid management fees to its
controlled entity Sensis Pty Ltd amounting to $218
million (2005: $211 million) for undertaking agency and
contract management services for the national directory
service; and |
|
|
|
the Telstra Entity received income from its controlled
entity Telstra Multimedia Pty Ltd amounting to $292
million (2005: $284 million) for access to ducts that
store the national hybrid fibre coaxial (HFC) cable
network. |
133
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
Transactions involving our controlled entities (continued)
(b) The Telstra Entity recorded dividend revenue
during fiscal 2006 from the following controlled
entities:
|
|
Network Design and Construction Limited of $200
million (2005: $nil); and |
|
|
|
Telstra International Limited of $360 million (2005: $nil). |
During fiscal 2005, the Telstra Entity recognised tax
consolidation distributions from certain wholly owned
Australian entities amounting to $223 million in relation
to tax losses incurred by these entities that were able
to be utilised by the Telstra Entity. This was on the
basis that no tax funding arrangement was in place
between the entities within the tax consolidated group.
Refer to note 9 for further details on tax consolidation.
(c) The profit before income tax expense of the Telstra
Entity included an impairment loss of $382 million (2005:
$475 million) relating to a movement in allowance for
amounts owed by a controlled entity. Refer to note 25 for
further details regarding impairment.
(d) The Telstra Entity and its Australian controlled
entities have formed a tax consolidated group, which is
treated as a single entity for income tax purposes.
During fiscal 2006, the entities within the tax
consolidated group entered into a tax funding
arrangement. The amounts receivable or amounts payable to
the Telstra Entity under this arrangements are due in the
next financial year upon final settlement of the current
tax payable for the tax consolidated group. During fiscal
2005, no tax funding arrangement was in place and as a
result, these funding amounts were recorded in our
investment in controlled entities. Refer to note 9 for
further details on tax consolidation.
(e) The Telstra Entity operates a current account with
some of its
Australian controlled entities, being an internal group
bank account used to settle transactions with its
controlled entities or between two controlled entities.
Cash deposit balances in the current account owed to our
controlled entities are recorded as loans. All loan
balances with our controlled entities are unsecured, with
settlement required in cash. Refer to note 18 for further
discussion on our borrowings.
Transactions involving our parent entity
The Commonwealth of Australia is the ultimate parent and
controlling entity of the Telstra Group. Telstra
Corporation Limited is the parent entity in the Telstra
Group comprising the Telstra Entity and its controlled
entities.
We supply telecommunications services to, and acquire
other services from, the Commonwealth of Australia, its
Departments of State, trading and other agencies. These
transactions are made within normal customer/supplier
relationships on terms and conditions no more favourable
than those available to other customers or suppliers.
There are no exclusive rights to supply any of these
services.
Services provided to any one governmental department or
agency or the combination of all of these services in
total, do not represent a significant component of our
operating revenues. For these reasons, the financial
report does not disclose transactions relating to the
purchase and sale of goods and services from or to the
Commonwealth of Australia, its Departments of State,
trading and other agencies.
134
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
Transactions involving our jointly controlled
and associated entities
Our transactions with our jointly controlled and
associated entities recorded in the income statement
and balance sheet are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
|
|
|
|
|
30 June |
|
|
30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
$m |
|
$m |
|
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from jointly controlled and associated entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of goods and services (a) |
|
|
|
|
|
|
177 |
|
|
|
165 |
|
|
|
83 |
|
|
|
97 |
|
Finance income (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
Dividend revenue |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses to jointly controlled and associated entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of goods and services (a) |
|
|
|
|
|
|
510 |
|
|
|
533 |
|
|
|
245 |
|
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
Impairment of receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment in amounts owed by jointly controlled entities |
|
|
7 |
(a) |
|
|
2 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts receivable at 30 June from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled and associated entities trade debtors (a) |
|
|
|
|
|
|
32 |
|
|
|
16 |
|
|
|
22 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled and associated entities loans (b) |
|
|
11 |
|
|
|
229 |
|
|
|
242 |
|
|
|
210 |
|
|
|
204 |
|
Allowance for amounts owed by jointly controlled and
associated entities (b) |
|
|
11 |
|
|
|
(215 |
) |
|
|
(210 |
) |
|
|
(210 |
) |
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts payable at 30 June to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled and associated entities payables (a) |
|
|
|
|
|
|
62 |
|
|
|
21 |
|
|
|
59 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
(a) We sold and purchased goods and services, and
received interest from our jointly controlled and
associated entities. These transactions are in the
ordinary course of business and are on normal commercial
terms and conditions.
Details of our individual significant transactions
involving our jointly controlled and associated entities
during fiscal 2006 are detailed as follows:
|
|
we purchased pay television services amounting to $250
million (2005: $218 million) from our jointly controlled
entity FOXTEL. The purchases were to enable the resale of
FOXTEL services, including pay television content, to our
existing customers as part of our ongoing product
bundling initiatives. In addition, we made sales for our
cost recoveries from FOXTEL of $77 million (2005: $55
million); and |
|
|
purchases were made by the Telstra Group of $198
million (2005: $226 million) and Telstra Entity of $192
million (2005: $192 million) from our jointly controlled
entity Reach Ltd (Reach) in line with market prices.
These were for both the purchase of, and
entitlement to, capacity and connectivity services. Sales
were made for international inbound call termination
services, construction and consultancy by the Telstra
Group of $61 million (2005: $71 million) and the Telstra
Entity of $52 million (2005: $62 million) to Reach. |
135
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
Transactions involving our jointly controlled
and associated entities (continued)
(b) Loans provided to jointly controlled and associated
entities relates mainly to loans provided to Reach Ltd
(Reach) of $210 million (2005: $204 million) and the 3GIS
Partnership (3GIS) of $14 million (2005: $32 million).
Previously, the Telstra Entity and co-shareholder PCCW
Limited (PCCW) bought out a loan facility owed to a
banking syndicate by Reach Finance Ltd, a controlled
entity of our 50% jointly controlled entity Reach. Our
share of the acquisition cost of the loan was US$155.5
million, which was recognised as a receivable at the date
of the transaction. During fiscal 2005, we restructured
our arrangements with Reach. As a result, the terms of
maturity were altered such that the facility is now an
interest free loan and repayable on or after 31 December
2010 upon the giving of 6 months notice by both PCCW and
us. We have provided for the non-recoverability of the
loan as we do not consider that Reach is in a position to
be able to repay the loan amount in the medium term.
During fiscal 2005, we formed the jointly controlled
entity 3GIS, together with Hutchison 3G Australia Pty Ltd
(H3GA), to jointly own and operate H3GAs existing 3G
radio access network and fund future network development.
We provided interest free funding to 3GIS for operational
expenditure purposes. As a result, we have recognised our
share of the loan outstanding by 3GIS amounting to $14
million (2005: $32 million).
Transactions involving other related entities
Post-employment benefits
As at 30 June 2006, Telstra Super owned 12,881,343
(2005: 13,280,885) shares in Telstra Corporation Limited
at a cost of $56 million (2005: $67 million) and a market
value of $47 million (2005: $67 million). In fiscal 2006,
we paid dividends to Telstra Super of $4 million (2005:
$5 million). We own 100% of the equity of Telstra Super
Pty Ltd, the trustee for Telstra Super.
Telstra Super also holds bonds issued by Telstra
Corporation Limited. As at 30 June 2006, Telstra Super
holds bonds with a cost of $9 million (2005: $13 million)
and a market value of $9 million (2005: $12 million).
All purchases and sales of Telstra shares and bonds by
Telstra Super are determined by the trustee and/or its
investment managers on behalf of the members of Telstra
Super.
Key management personnel (KMP)
Our KMP consists of the Telstra Entity non executive
directors and certain senior executives who form part of
the chief executive officers senior leadership team. Our
KMP have authority and responsibility for planning,
directing and controlling the activities of
the Telstra Group.
Compensation to our KMP
The compensation of each individual director and senior
executive defined as a KMP including our compensation
policy are discussed in note 32.
Other transactions with our KMP and their related entities
Our KMP have telecommunications services transactions
with the Telstra Group, which are not significant and
are both trivial and domestic in nature. The KMP
related entities also have telecommunications services
with us on normal commercial terms and conditions.
Our KMP are provided with telecommunications and other
services and equipment to assist them in performing their
duties. From time to time, we also make products and
services available to our KMP without charge to enable
them to familiarise themselves with our products,
services and recent technological developments. To the
extent it is considered that this provides a benefit to a
KMP, it is included in their compensation. Refer note 32
for compensation details.
136
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in shares of Telstra Entity
During fiscal 2006, our KMP and their related
entities held share capital of the Telstra Entity
directly, indirectly or beneficially as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares |
|
|
|
|
|
Equity |
|
Shares acquired |
|
Total shares |
|
|
|
|
held at |
|
Directshare |
|
instruments |
|
or disposed of |
|
held at |
|
Shares that are |
|
|
30 June 2005 |
|
allocation (a) |
|
exercised |
|
by other means |
|
30 June 2006 (b) held nominally |
|
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald G McGauchie |
|
|
41,445 |
|
|
|
16,196 |
|
|
|
|
|
|
|
|
|
|
|
57,641 |
|
|
|
55,775 |
|
John T Ralph (b) |
|
|
105,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,641 |
|
|
|
104,641 |
|
Solomon D Trujillo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski (b) |
|
|
155,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,810 |
|
|
|
109,010 |
|
Anthony J Clark (b) |
|
|
83,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,026 |
|
|
|
73,026 |
|
John E Fletcher (b) |
|
|
52,934 |
|
|
|
9,870 |
|
|
|
|
|
|
|
|
|
|
|
62,804 |
|
|
|
61,567 |
|
Belinda J Hutchinson |
|
|
67,107 |
|
|
|
5,870 |
|
|
|
|
|
|
|
1,801 |
|
|
|
74,778 |
|
|
|
35,866 |
|
Catherine B Livingstone |
|
|
39,734 |
|
|
|
6,104 |
|
|
|
|
|
|
|
10,000 |
|
|
|
55,838 |
|
|
|
44,201 |
|
Charles Macek |
|
|
44,005 |
|
|
|
6,571 |
|
|
|
|
|
|
|
|
|
|
|
50,576 |
|
|
|
50,576 |
|
John W Stocker |
|
|
109,657 |
|
|
|
7,374 |
|
|
|
|
|
|
|
|
|
|
|
117,031 |
|
|
|
114,078 |
|
Peter Willcox |
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
10,000 |
|
John Zeglis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
709,359 |
|
|
|
51,985 |
|
|
|
|
|
|
|
11,801 |
|
|
|
773,145 |
|
|
|
658,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
62,491 |
|
|
|
|
|
|
|
125,900 |
|
|
|
(150,532 |
) |
|
|
37,859 |
|
|
|
32,979 |
|
Kate McKenzie |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
3,700 |
|
|
|
|
|
|
|
147,300 |
|
|
|
|
|
|
|
151,000 |
|
|
|
3,100 |
|
Deena Shiff |
|
|
14,480 |
|
|
|
|
|
|
|
36,800 |
|
|
|
(36,800 |
) |
|
|
14,480 |
|
|
|
8,800 |
|
John Stanhope |
|
|
10,940 |
|
|
|
|
|
|
|
46,800 |
|
|
|
3,441 |
|
|
|
61,181 |
|
|
|
3,960 |
|
David Thodey |
|
|
18,262 |
|
|
|
|
|
|
|
51,000 |
|
|
|
(5,000 |
) |
|
|
64,262 |
|
|
|
800 |
|
Gregory Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,873 |
|
|
|
|
|
|
|
407,800 |
|
|
|
(188,891 |
) |
|
|
328,782 |
|
|
|
49,639 |
|
|
|
|
|
|
|
819,232 |
|
|
|
51,985 |
|
|
|
407,800 |
|
|
|
(177,090 |
) |
|
|
1,101,927 |
|
|
|
708,379 |
|
|
|
|
Total shareholdings include shares held by our KMP and
their related entities. Unless related to our employee
share plans, shares acquired or disposed by our KMP
during fiscal 2006 were on an arms length basis at
market price.
(a) Shares provided to directors under directshare are
subject to a restriction period. The participating
directors are not able to deal in the shares until the
end of the restriction period, refer to note 31 for
further details.
(b) During fiscal 2006, certain directors resigned or
retired from office. For these KMP, the number of shares
represent those held at the date of leaving office.
137
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in shares of Telstra Entity (continued)
During fiscal 2005, our KMP and their related
entities held share capital of the Telstra Entity
directly, indirectly or beneficially as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares acquired or |
|
|
|
|
|
|
Total shares held |
|
Directshare |
|
disposed of by |
|
Total shares held |
|
Shares that are |
|
|
at 30 June 2004 |
|
allocation (a) |
|
other means |
|
at 30 June 2005 |
|
held nominally |
|
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
|
|
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald G McGauchie |
|
|
34,328 |
|
|
|
7,117 |
|
|
|
|
|
|
|
41,445 |
|
|
|
41,445 |
|
John T Ralph |
|
|
101,943 |
|
|
|
3,698 |
|
|
|
|
|
|
|
105,641 |
|
|
|
104,641 |
|
Zygmunt E Switkowski |
|
|
155,810 |
|
|
|
|
|
|
|
|
|
|
|
155,810 |
|
|
|
109,010 |
|
Anthony J Clark |
|
|
89,196 |
|
|
|
2,523 |
|
|
|
(8,693 |
) |
|
|
83,026 |
|
|
|
73,026 |
|
John E Fletcher |
|
|
48,060 |
|
|
|
4,874 |
|
|
|
|
|
|
|
52,934 |
|
|
|
52,934 |
|
Belinda J Hutchinson |
|
|
64,948 |
|
|
|
2,159 |
|
|
|
|
|
|
|
67,107 |
|
|
|
29,996 |
|
Catherine B Livingstone |
|
|
37,191 |
|
|
|
2,543 |
|
|
|
|
|
|
|
39,734 |
|
|
|
29,334 |
|
Charles Macek |
|
|
41,462 |
|
|
|
2,543 |
|
|
|
|
|
|
|
44,005 |
|
|
|
44,005 |
|
John W Stocker |
|
|
101,534 |
|
|
|
8,123 |
|
|
|
|
|
|
|
109,657 |
|
|
|
108,857 |
|
|
|
|
|
|
|
674,472 |
|
|
|
33,580 |
|
|
|
(8,693 |
) |
|
|
699,359 |
|
|
|
593,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
62,491 |
|
|
|
|
|
|
|
|
|
|
|
62,491 |
|
|
|
54,711 |
|
Douglas Campbell |
|
|
37,200 |
|
|
|
|
|
|
|
|
|
|
|
37,200 |
|
|
|
27,500 |
|
David Moffatt |
|
|
3,700 |
|
|
|
|
|
|
|
|
|
|
|
3,700 |
|
|
|
3,100 |
|
Ted Pretty |
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
2,400 |
|
|
|
2,400 |
|
Michael Rocca |
|
|
12,000 |
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
Bill Scales |
|
|
9,916 |
|
|
|
|
|
|
|
|
|
|
|
9,916 |
|
|
|
1,400 |
|
Deena Shiff |
|
|
14,480 |
|
|
|
|
|
|
|
|
|
|
|
14,480 |
|
|
|
8,800 |
|
John Stanhope |
|
|
10,940 |
|
|
|
|
|
|
|
|
|
|
|
10,940 |
|
|
|
3,960 |
|
David Thodey |
|
|
18,262 |
|
|
|
|
|
|
|
|
|
|
|
18,262 |
|
|
|
5,800 |
|
|
|
|
|
|
|
171,389 |
|
|
|
|
|
|
|
|
|
|
|
171,389 |
|
|
|
107,671 |
|
|
|
|
|
|
|
845,861 |
|
|
|
33,580 |
|
|
|
(8,693 |
) |
|
|
870,748 |
|
|
|
700,919 |
|
|
|
|
Total shareholdings include shares held by the KMP and
their related entities. Unless related to our employee
share plans, shares acquired or disposed by our KMP
during fiscal 2005 were on an arms length basis at
market price.
(a) Shares provided to directors under directshare are
subject to a restriction period. The participating
directors are not able to deal in the shares until the
end of the restriction period, refer to note 31 for
further details.
138
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments of Telstra Entity
The following details the balances and changes in
instruments issued for our KMP and their related entities
during fiscal 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
|
|
Total held |
|
Granted |
|
Exercised |
|
|
|
|
|
Total held |
|
exercisable |
|
|
|
|
at 30 June |
|
during the |
|
during the |
|
Other |
|
at 30 June |
|
at 30 June |
|
Vested during |
Instrument type |
|
2005 |
|
year |
|
year |
|
changes (a) |
|
2006 (b) |
|
2006 |
|
the year |
director/senior executive |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
Performance rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solomon D Trujillo |
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
473,600 |
|
|
|
147,240 |
|
|
|
(59,000 |
) |
|
|
(66,900 |
) |
|
|
494,940 |
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
|
36,000 |
|
|
|
55,576 |
|
|
|
|
|
|
|
|
|
|
|
91,576 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
521,600 |
|
|
|
149,750 |
|
|
|
(71,000 |
) |
|
|
(76,300 |
) |
|
|
524,050 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
151,600 |
|
|
|
100,420 |
|
|
|
(17,000 |
) |
|
|
(19,800 |
) |
|
|
215,220 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
290,000 |
|
|
|
129,666 |
|
|
|
(23,000 |
) |
|
|
(23,800 |
) |
|
|
372,866 |
|
|
|
|
|
|
|
|
|
David Thodey |
|
|
427,200 |
|
|
|
136,068 |
|
|
|
(51,000 |
) |
|
|
(59,000 |
) |
|
|
453,268 |
|
|
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
(39,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
(40,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
(14,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
805,000 |
|
|
|
|
|
|
|
|
|
|
|
(188,000 |
) |
|
|
617,000 |
|
|
|
617,000 |
|
|
|
|
|
David Moffatt |
|
|
890,000 |
|
|
|
|
|
|
|
|
|
|
|
(150,000 |
) |
|
|
740,000 |
|
|
|
740,000 |
|
|
|
|
|
Deena Shiff |
|
|
202,200 |
|
|
|
|
|
|
|
|
|
|
|
(24,200 |
) |
|
|
178,000 |
|
|
|
178,000 |
|
|
|
|
|
John Stanhope |
|
|
310,000 |
|
|
|
|
|
|
|
|
|
|
|
(69,000 |
) |
|
|
241,000 |
|
|
|
241,000 |
|
|
|
|
|
David Thodey |
|
|
534,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
534,000 |
|
|
|
534,000 |
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
|
|
|
|
109,540 |
|
|
|
|
|
|
|
11,427 |
|
|
|
120,967 |
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
|
|
|
|
|
17,119 |
|
|
|
|
|
|
|
1,786 |
|
|
|
18,905 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
|
|
|
|
51,946 |
|
|
|
|
|
|
|
5,419 |
|
|
|
57,365 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
|
|
|
|
61,747 |
|
|
|
|
|
|
|
6,441 |
|
|
|
68,188 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
|
|
|
|
50,241 |
|
|
|
|
|
|
|
5,241 |
|
|
|
55,482 |
|
|
|
|
|
|
|
|
|
David Thodey |
|
|
|
|
|
|
43,139 |
|
|
|
|
|
|
|
4,500 |
|
|
|
47,639 |
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
135,300 |
|
|
|
|
|
|
|
(66,900 |
) |
|
|
|
|
|
|
68,400 |
|
|
|
|
|
|
|
66,900 |
|
David Moffatt |
|
|
152,400 |
|
|
|
|
|
|
|
(76,300 |
) |
|
|
|
|
|
|
76,100 |
|
|
|
|
|
|
|
76,300 |
|
Deena Shiff |
|
|
42,300 |
|
|
|
|
|
|
|
(19,800 |
) |
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
19,800 |
|
John Stanhope |
|
|
73,200 |
|
|
|
|
|
|
|
(23,800 |
) |
|
|
|
|
|
|
49,400 |
|
|
|
|
|
|
|
23,800 |
|
David Thodey |
|
|
121,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,600 |
|
|
|
59,000 |
|
|
|
59,000 |
|
TESOP97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
TESOP99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
139
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments of Telstra Entity (continued)
(a) During fiscal 2006, other changes for our
performance rights, restricted shares and options are a
result of instruments expiring due to the specified
performance hurdles not being achieved.
Other changes for incentive shares relate to additional
incentive shares provided to our senior executives. Any
dividends paid by the Company prior to the exercise of
their incentives shares will increase the number of
Telstra shares allocated to the senior executive when
the vested incentive shares are exercised.
(b) For those KMP that have resigned or retired during
fiscal 2006, the number of equity instruments represent
those instruments held at the date of leaving office.
Equity instruments held by the former chief executive officer
Dr Switkowski ceased employment with the Company
effective 1 July 2005. The number of equity instruments
held by
Dr Switkowski at the date of leaving office were:
|
|
|
|
|
|
|
|
|
Holding as at 1 July |
|
|
|
|
2005 |
|
|
|
|
Number |
Performance rights |
|
|
|
1,643,600 |
|
Restricted shares |
|
|
|
96,000 |
|
Options |
|
|
|
1,810,000 |
|
Deferred shares |
|
|
|
500,700 |
|
TESOP97 |
|
|
|
2,500 |
|
TESOP99 |
|
|
|
400 |
|
Upon ceasing employment, the deferred shares allocated to
Dr Switkowski vested and became immediately exercisable,
and as such were included in fiscal 2006 compensation. In
addition, the TESOP97 shares were exercised during fiscal
2006.
Other equity instruments held by Dr Switkowski were not
exercised. These equity instruments are subject to
performance hurdles and may become exercisable during
future reporting periods.
140
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments of Telstra Entity (continued)
The following table details the balances and changes in
equity instruments issued under our employee share plans
for our KMP and their related entities during fiscal
2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
|
|
Total held |
|
Granted during |
|
Other |
|
Total held |
|
exercisable at |
|
Vested during |
Instrument type |
|
at 30 June 2004 |
|
the year |
|
changes (a) |
|
at 30 June 2005 |
|
30 June 2005 |
|
the year |
director/senior executive |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Performance rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
1,259,400 |
|
|
|
513,200 |
|
|
|
(129,000 |
) |
|
|
1,643,600 |
|
|
|
129,000 |
|
|
|
129,000 |
|
Bruce Akhurst |
|
|
388,600 |
|
|
|
144,000 |
|
|
|
(59,000 |
) |
|
|
473,600 |
|
|
|
59,000 |
|
|
|
59,000 |
|
Douglas Campbell |
|
|
388,600 |
|
|
|
131,600 |
|
|
|
(59,000 |
) |
|
|
461,200 |
|
|
|
59,000 |
|
|
|
59,000 |
|
David Moffatt |
|
|
446,200 |
|
|
|
146,400 |
|
|
|
(71,000 |
) |
|
|
521,600 |
|
|
|
71,000 |
|
|
|
71,000 |
|
Ted Pretty |
|
|
446,200 |
|
|
|
146,400 |
|
|
|
|
|
|
|
592,600 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
251,200 |
|
|
|
115,000 |
|
|
|
(25,000 |
) |
|
|
341,200 |
|
|
|
25,000 |
|
|
|
25,000 |
|
Bill Scales |
|
|
210,400 |
|
|
|
106,400 |
|
|
|
(21,000 |
) |
|
|
295,800 |
|
|
|
21,000 |
|
|
|
21,000 |
|
Deena Shiff |
|
|
118,600 |
|
|
|
50,000 |
|
|
|
(17,000 |
) |
|
|
151,600 |
|
|
|
17,000 |
|
|
|
17,000 |
|
John Stanhope |
|
|
192,400 |
|
|
|
120,600 |
|
|
|
(23,000 |
) |
|
|
290,000 |
|
|
|
23,000 |
|
|
|
23,000 |
|
David Thodey |
|
|
345,200 |
|
|
|
133,000 |
|
|
|
(51,000 |
) |
|
|
427,200 |
|
|
|
51,000 |
|
|
|
51,000 |
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
146,000 |
|
|
|
|
|
|
|
(50,000 |
) |
|
|
96,000 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
60,000 |
|
|
|
|
|
|
|
(21,000 |
) |
|
|
39,000 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
68,000 |
|
|
|
|
|
|
|
(26,000 |
) |
|
|
42,000 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
Ted Pretty |
|
|
21,000 |
|
|
|
|
|
|
|
(21,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
22,000 |
|
|
|
|
|
|
|
(9,000 |
) |
|
|
13,000 |
|
|
|
|
|
|
|
|
|
Bill Scales |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
25,000 |
|
|
|
|
|
|
|
(11,000 |
) |
|
|
14,000 |
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
3,456,000 |
|
|
|
|
|
|
|
(1,646,000 |
) |
|
|
1,810,000 |
|
|
|
1,346,000 |
|
|
|
1,346,000 |
|
Bruce Akhurst |
|
|
1,542,000 |
|
|
|
|
|
|
|
(737,000 |
) |
|
|
805,000 |
|
|
|
617,000 |
|
|
|
617,000 |
|
Douglas Campbell |
|
|
1,597,000 |
|
|
|
|
|
|
|
(777,000 |
) |
|
|
820,000 |
|
|
|
617,000 |
|
|
|
617,000 |
|
David Moffatt |
|
|
1,630,000 |
|
|
|
|
|
|
|
(740,000 |
) |
|
|
890,000 |
|
|
|
740,000 |
|
|
|
740,000 |
|
Ted Pretty |
|
|
1,722,000 |
|
|
|
|
|
|
|
(120,000 |
) |
|
|
1,602,000 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
640,000 |
|
|
|
|
|
|
|
(315,000 |
) |
|
|
325,000 |
|
|
|
262,000 |
|
|
|
262,000 |
|
Bill Scales |
|
|
465,000 |
|
|
|
|
|
|
|
(220,000 |
) |
|
|
245,000 |
|
|
|
220,000 |
|
|
|
220,000 |
|
Deena Shiff |
|
|
380,200 |
|
|
|
|
|
|
|
(178,000 |
) |
|
|
202,200 |
|
|
|
178,000 |
|
|
|
178,000 |
|
John Stanhope |
|
|
616,000 |
|
|
|
|
|
|
|
(306,000 |
) |
|
|
310,000 |
|
|
|
241,000 |
|
|
|
241,000 |
|
David Thodey |
|
|
1,068,000 |
|
|
|
|
|
|
|
(534,000 |
) |
|
|
534,000 |
|
|
|
534,000 |
|
|
|
534,000 |
|
Deferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
500,700 |
|
|
|
|
|
|
|
|
|
|
|
500,700 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
135,300 |
|
|
|
|
|
|
|
|
|
|
|
135,300 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
135,300 |
|
|
|
|
|
|
|
|
|
|
|
135,300 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
152,400 |
|
|
|
|
|
|
|
|
|
|
|
152,400 |
|
|
|
|
|
|
|
|
|
Ted Petty |
|
|
155,100 |
|
|
|
|
|
|
|
|
|
|
|
155,100 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
100,600 |
|
|
|
|
|
|
|
|
|
|
|
100,600 |
|
|
|
|
|
|
|
|
|
Bill Scales |
|
|
84,200 |
|
|
|
|
|
|
|
|
|
|
|
84,200 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
42,300 |
|
|
|
|
|
|
|
|
|
|
|
42,300 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
73,200 |
|
|
|
|
|
|
|
|
|
|
|
73,200 |
|
|
|
|
|
|
|
|
|
David Thodey |
|
|
121,600 |
|
|
|
|
|
|
|
|
|
|
|
121,600 |
|
|
|
|
|
|
|
|
|
141
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments issued from
Growthshare (continued)
The following table details the balances and changes in
equity instruments issued from Growthshare for our KMP
and their related entities during fiscal 2005
(continued).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
|
|
Total held |
|
Granted during |
|
Other |
|
Total held |
|
exercisable at |
|
Vested during |
Instrument type |
|
at 30 June 2004 |
|
the year |
|
changes (a) |
|
at 30 June 2005 |
|
30 June 2005 |
|
the year |
director/senior executive |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
TESOP97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
TESOP99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Other changes have arisen in fiscal 2005 as a result
of instruments lapsing due to the specified performance
hurdles not being achieved. |
142
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
34. Events after balance date
We are not aware of any matter or circumstance that
has occurred since 30 June 2006 that, in our opinion,
has significantly affected or may significantly affect
in future years:
|
|
our operations; |
|
|
|
the results of those operations; or |
|
|
|
the state of our affairs; |
other than:
Dividend declaration
On 10 August 2006, the directors of Telstra Corporation
Limited declared a fully franked final dividend of 14
cents per ordinary share. The record date for the final
dividend will be 25 August 2006 with payment being made
on 22 September 2006. Shares will trade excluding the
entitlement to the dividend on 21 August 2006.
A provision for dividend payable has been raised as at
the date of declaration, amounting to $1,739 million.
The final dividend will be fully franked at a tax rate
of 30%. The financial effect of the dividend declaration
was not brought to account as at 30 June
2006.
There are no income tax consequences for the Telstra
Group and Telstra Entity resulting from the declaration
and payment of the final ordinary dividend, except for
$745 million franking debits arising from the payment of
this dividend that will be adjusted in our franking
account balance.
FOXTEL loan facility
On 31 July 2006, our 50% owned pay television joint
venture FOXTEL entered into a new $600 million
syndicated secured term loan facility to fund the
refinancing of previous loan facilities (including the
$550 million syndicated facility), and to enable it to
meet future cash flow and expenditure requirements.
The equity contribution deed (ECD) entered into by us
and FOXTELs other ultimate shareholders, News
Corporation Limited and Publishing and Broadcasting
Limited has been terminated.
Under this arrangement, recourse to our controlled
entity Telstra Media Pty Ltd, as a FOXTEL partner, is
limited to the assets of the FOXTEL Partnerships.
143
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management
Financial risk factors
We undertake transactions in a range of financial
instruments including:
|
|
cash assets; |
|
|
|
receivables; |
|
|
|
payables; |
|
|
|
deposits; |
|
|
|
bills of exchange and commercial paper; |
|
|
|
listed investments and investments in other corporations; |
|
|
|
various forms of borrowings, including medium term notes, commercial paper, bank
loans and private placements; and |
|
|
|
derivatives. |
Our activities result in exposure to a number of
financial risks, including market risk (interest rate
risk, foreign currency risk and other price risk),
credit risk, operational risk and liquidity risk.
Our overall risk management program seeks to mitigate
these risks and reduce volatility on our financial
performance. Risk management is carried out centrally by
our Treasury department, which is part of our Finance
and Administration business unit, under policies
approved by the Board of Directors. The Board provides
written principles for overall risk management, as well
as written policies covering specific areas, such as
foreign exchange risk, interest rate risk, credit risk,
use of derivative financial instruments and
non-derivative financial instruments, and the investment
of excess liquidity.
We enter into derivative transactions in accordance with
Board approved policies to manage our exposure to market
risks and volatility of financial outcomes that arise as
part of our normal business operations. These derivative
instruments create an obligation or right that
effectively transfers one or more of the risks
associated with an underlying financial instrument,
asset or obligation. Derivative instruments that we use
to hedge risks such as interest rate and foreign
currency movements include:
|
|
cross currency swaps; |
|
|
|
interest rate swaps; and |
|
|
|
forward foreign currency contracts. |
We do not speculatively trade in derivative instruments.
Our derivative transactions are entered into to hedge
the risks relating to underlying physical positions
arising from our business activities.
Comparatives
We have elected to apply the exemption available under
AASB 1: First-time Adoption of Australian Equivalents
to International Financial Reporting Standards (AASB 1)
to apply AASB132: Financial Instruments: Disclosure and
Presentation and AASB 139: Financial Instruments:
Recognition and Measurement from 1 July 2005.
Accordingly, we have changed our accounting policies for
financial instruments from 1 July 2005. We have elected
to early adopt AASB 7: Financial Instruments:
Disclosures from 1 July 2005. AASB 7 supersedes the
disclosure requirements, but not the presentation
requirements of AASB 132. The early adoption of AASB 7
did not require comparative information for fiscal 2005
to be restated and disclosed.
Risks and mitigation
The risks associated with our main financial
instruments and our policies for minimising these
risks are detailed below.
(a) Market risk
Market risk is the risk that the fair value or future
cash flows of our financial instruments will fluctuate
because of changes in market prices. Components of
market risk to which we are exposed are discussed
below.
(i) Interest rate risk
Interest rate risk refers to the risk that the value of
a financial instrument or cash flows associated with the
instrument will fluctuate due to changes in market
interest rates.
Interest rate risk arises from interest bearing
financial assets and liabilities that we use.
Non-derivative interest-bearing assets are predominantly
short term liquid assets. Our interest rate liability
risk arises primarily from long term foreign debt issued
at fixed rates which exposes us to fair value interest
rate risk. Our borrowings which have a variable interest
rate attached give rise to cash flow interest rate risk.
144
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(i) Interest rate risk (continued)
Our debt is sourced from a number of financial markets
covering domestic and offshore, short term and long term
funding. The majority of our debt consists of foreign
currency denominated borrowings. We manage our debt in
accordance with targeted currency, interest rate,
liquidity, and debt portfolio maturity profiles.
Specifically, we manage interest rate risk on our net
debt portfolio by:
|
|
controlling the proportion of fixed to variable rate positions in accordance with target levels; |
|
|
|
ensuring access to diverse sources of funding; |
|
|
|
reducing risks of refinancing by establishing and managing in accordance with target
maturity profiles; and |
|
|
|
undertaking hedging activities through the use of derivative instruments. |
We manage the interest rate exposure on our net debt
portfolio to adjust the ratio of fixed interest debt to
variable interest debt to our target rates, as required
by our debt management policy. Where the actual interest
rate profile on the physical debt profile differs
substantially from our desired target, we use
derivatives, principally interest rate swaps, to adjust
towards the target net debt profile. Under the interest
rate swaps we agree with other parties to exchange, at
specified intervals (mainly quarterly), the difference
between fixed contract rates and floating rate interest
amounts calculated by reference to the agreed notional
principal amounts.
We hedge interest rate and currency risk on most of our
foreign currency borrowings by entering into cross
currency principal swaps and interest rate swaps when
required, which have the economic effect of converting
foreign currency borrowings to Australian dollar
borrowings.
The Derivative financial instruments and hedging
activities contained in this note provides
further information.
The exposure to interest rate changes and the
contractual repricing timeframes at 30 June 2006 on our
floating rate financial instruments, which do not have
offsetting risk positions, are shown
in Table A below. These instruments also include cross
currency swaps used to hedge our net foreign
investments.
Table A
|
|
|
|
|
|
|
|
|
|
|
Contractual repricing dates |
|
|
|
Notional / Principal |
|
|
|
amounts |
|
|
|
6 months or less |
|
|
|
Telstra |
|
|
Telstra |
|
|
|
Group |
|
|
Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
Floating rate instruments |
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
Cash at bank |
|
|
181 |
|
|
|
32 |
|
Bills of exchange and commercial paper |
|
|
451 |
|
|
|
387 |
|
Cross currency swaps |
|
|
511 |
|
|
|
511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper |
|
|
1,457 |
|
|
|
1,457 |
|
Interest rate swaps |
|
|
450 |
|
|
|
450 |
|
Cross currency swaps |
|
|
5,246 |
|
|
|
5,246 |
|
Bank loans |
|
|
111 |
|
|
|
110 |
|
|
|
|
|
|
|
|
145
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(i) Interest rate risk (continued)
Interest rates on our fixed and floating rate financial
instruments which do not have offsetting risk positions
are shown in Table B below. Foreign interest rate
positions on our foreign cross currency and foreign
interest rate swaps and on the majority of our foreign
borrowings are fully offset, resulting in a nil net
foreign interest position.
Accordingly, apart from some foreign borrowings and
cross currency swaps which are used to hedge our net
foreign investments, only the Australian interest rate
positions are included in the table below.
Table B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
As at 30 June 2006 |
|
As at 30 June 2006 |
|
|
|
|
|
|
Interest rate range |
|
|
|
|
|
Interest rate range |
|
|
Average |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
rate (a) |
|
From |
|
To |
|
rate (a) |
|
From |
|
To |
Note |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
|
Australian dollar interest rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
6.47 |
|
|
|
5.60 |
|
|
|
7.66 |
|
|
|
6.47 |
|
|
|
5.60 |
|
|
|
7.66 |
|
Cross currency swaps |
|
|
6.69 |
|
|
|
6.25 |
|
|
|
7.05 |
|
|
|
6.69 |
|
|
|
6.25 |
|
|
|
7.05 |
|
Telstra bonds |
|
|
7.21 |
|
|
|
6.48 |
|
|
|
12.60 |
|
|
|
7.21 |
|
|
|
6.48 |
|
|
|
12.60 |
|
Finance lease liabilities |
|
|
9.33 |
|
|
|
7.56 |
|
|
|
10.50 |
|
|
|
7.56 |
|
|
|
7.56 |
|
|
|
7.56 |
|
Deferred cash settlements |
|
|
12.40 |
|
|
|
12.00 |
|
|
|
12.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
5.87 |
|
|
|
5.75 |
|
|
|
5.93 |
|
|
|
5.87 |
|
|
|
5.75 |
|
|
|
5.93 |
|
Cross currency swaps |
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper |
|
|
5.68 |
|
|
|
5.65 |
|
|
|
5.73 |
|
|
|
5.68 |
|
|
|
5.65 |
|
|
|
5.73 |
|
Interest rate swaps |
|
|
6.21 |
|
|
|
5.34 |
|
|
|
7.71 |
|
|
|
6.21 |
|
|
|
5.34 |
|
|
|
7.71 |
|
Cross currency swaps |
|
|
6.67 |
|
|
|
5.88 |
|
|
|
7.49 |
|
|
|
6.67 |
|
|
|
5.88 |
|
|
|
7.49 |
|
Bank loans |
|
|
5.82 |
|
|
|
5.80 |
|
|
|
5.85 |
|
|
|
5.82 |
|
|
|
5.80 |
|
|
|
5.85 |
|
Foreign currency interest rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans (c) |
|
|
7.11 |
|
|
|
7.03 |
|
|
|
7.19 |
|
|
|
7.11 |
|
|
|
7.03 |
|
|
|
7.19 |
|
Floating rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper (c) |
|
|
7.48 |
|
|
|
7.44 |
|
|
|
7.54 |
|
|
|
7.48 |
|
|
|
7.44 |
|
|
|
7.54 |
|
Cross currency swaps Hong Kong dollar (c) |
|
|
4.61 |
|
|
|
4.60 |
|
|
|
4.62 |
|
|
|
4.61 |
|
|
|
4.60 |
|
|
|
4.62 |
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank |
|
|
5.00 |
|
|
|
0.16 |
|
|
|
7.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The average rate is calculated as the weighted
average (based on principal/notional value) effective
interest rate. |
|
(b) |
|
The effective yield (effective interest rate) on
our net debt at 30 June 2006 was 6.85% for the Telstra
Group and 6.51% for the Telstra Entity. |
|
(c) |
|
Used to hedged our net foreign investments. |
146
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(i) Interest rate risk (continued)
Sensitivity analysis
Table C shows the effect on profit and equity after tax
as at 30 June 2006 if interest rates at that date had
been 10 per cent higher or lower with all other
variables held constant, taking into account all
underlying exposures and related hedges. Concurrent
movements in interest rates and parallel shifts in the
yield curves is assumed.
Also included in Table C is the effect on finance costs
on our floating rate instruments if interest rates had
been 10 per cent higher or lower during the year.
A sensitivity of 10 per cent has been selected as this
is considered reasonable given the current level of both
short term and long term Australian dollar interest
rates. A 10 per cent sensitivity would move short term
interest rates from around 6.25% to 6.875% representing
a 62.5 basis points shift. This would represent two to
three rate increases which is reasonably possible in the
current environment with the bias coming from the
Reserve Bank of Australia and confirmed by market
expectations that interest rates in Australia are more
likely to move up than down in the coming period.
It should be noted that the results reflect the net
impact on a hedged basis which will be primarily
reflecting the Australian dollar floating or Australian
dollar fixed position from the cross currency and
interest rate swap hedges and therefore it is the
movement in the Australian dollar interest rates which
is the important assumption in this sensitivity
analysis.
The impact of the sensitivity analysis on finance costs
is due to two factors, the impact on interest expense
being incurred on our net floating rate Australian
dollar positions during the year and the ineffectiveness
resulting from the change in fair value of both our
derivatives and borrowings which are designated in a
fair value hedge. These two factors offset each other as
the ineffective component results in a gain and the
increase in finance costs results in an increase in
expense. The net impact on net profit is relatively
small reflecting the hedge strategy adopted by Telstra
in terms of repricing risk.
Table C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
|
Equity (Cash |
|
|
|
|
|
|
|
|
|
|
Equity (Cash |
|
|
|
|
|
|
|
|
|
|
|
flow hedging |
|
|
|
|
|
|
Profit before |
|
|
flow hedging |
|
|
|
Finance costs |
|
|
Net profit |
|
|
reserve) |
|
|
Finance costs |
|
|
income tax |
|
|
reserve) |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
If interest rates were 10 per cent higher with all other
variables held constant increase/(decrease) |
|
|
8 |
|
|
|
(8 |
) |
|
|
29 |
|
|
|
8 |
|
|
|
(8 |
) |
|
|
29 |
|
If interest rates were 10 per cent lower with all other
variables held constant increase/(decrease) |
|
|
(8 |
) |
|
|
8 |
|
|
|
(29 |
) |
|
|
(8 |
) |
|
|
8 |
|
|
|
(29 |
) |
(ii) Foreign currency risk
Foreign currency risk refers to the risk that the value
of a financial commitment, recognised asset or liability
will fluctuate due to changes in foreign currency rates.
Our foreign currency exchange risk arises primarily from:
|
|
borrowings denominated in foreign currencies; |
|
|
|
firm commitments or highly probable forecast
transactions for receipts and payments settled in
foreign currencies or with prices dependent on foreign
currencies; and |
|
|
|
net investments in foreign operations. |
We are exposed to foreign exchange risk from
various currency exposures, primarily with respect
to:
|
|
United States dollars; |
|
|
|
British pounds sterling; |
|
|
|
New Zealand dollars; |
|
|
|
Euro; |
|
|
|
Swiss francs; |
|
|
|
Hong Kong dollars; |
|
|
|
Japanese yen; |
|
|
|
Swedish krona; and |
|
|
|
Singapore dollar. |
147
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(ii) Foreign currency risk (continued)
Our economic foreign currency risk is assessed for each
individual currency and for each hedge type, calculated
by aggregating the net exposure for that currency for
that hedge type.
We minimise our exposure to foreign currency risk by
initially seeking contracts effectively denominated in
Australian dollars where possible and economically
favourable to do so. Where this is not possible we
manage our exposure as follows.
Foreign exchange risk that arises from firm commitments
or highly probable transactions are managed principally
through the use of forward foreign currency derivatives.
We hedge a proportion of these transactions (such as
international telecommunications traffic transactions
settled in foreign currencies) in each currency in
accordance with our risk management policy.
Cash flow foreign currency risk arises primarily from
foreign currency overseas borrowings. We hedge this risk
on the major part of our foreign currency denominated
borrowings by effectively converting them to Australian
dollar borrowings by entering into cross currency swaps
at inception to maturity. A relatively small proportion
of our foreign currency borrowings are not swapped into
Australian dollars where they are used as hedges for
foreign exchange exposure such as translation foreign
exchange risk from our offshore business investments.
Foreign currency risk also arises on translation of the
net assets of our non-Australian controlled entities
which have a different functional currency. The foreign
currency gains or losses arising from this risk are
recorded through the foreign currency translation
reserve. We manage this translation foreign exchange
risk with forward foreign currency contracts, cross
currency swaps and/or borrowings denominated in the
currency of the entity concerned.
Where a subsidiary hedges foreign exchange transactions
it designates hedging instruments with the Treasury
department as fair value hedges or cash flow hedges as
appropriate. External foreign
exchange contracts are designated at the group level as
hedges of foreign exchange risk on specific assets,
liabilities or future transactions.
Also refer to Derivative financial instruments and
hedging activities contained in this note.
Sensitivity analysis
The following Table D shows the effect on profit and
equity after tax as at 30 June 2006 from a 10 percent
adverse/favourable movement in exchange rates at that
date on a total portfolio basis with all other variables
held constant, taking into account all underlying
exposures and related hedges.
Adverse versus favourable movements are determined
relative to the underlying exposure. An adverse movement
in exchange rates implies an increase in our foreign
currency risk exposure and a worsening of our financial
position. A favourable movement in exchange rates
implies a reduction in our foreign currency risk
exposure and an improvement of our financial position.
A sensitivity of 10 per cent has been selected as this
is considered reasonable given the current level of
exchange rates and the volatility observed both on an
historical basis and market expectations for future
movement. Looking at the Australian dollar exchange rate
against the United States dollar, the year end rate of
0.74235 would generate a 10 per cent adverse position of
0.6681 and a favourable position of 0.8166. This range
is considered reasonable given the historic ranges that
have been observed, for example over the last five
years, the Australian dollar exchange rate against the
US dollar has traded in the range 0.7985 to 0.4848.
Our foreign currency risk exposure from recognised
assets and liabilities arises primarily from our long
term borrowings denominated in foreign currencies. There
is no significant impact on profit from foreign currency
movements associated with these borrowings as they are
effectively hedged.
The net gain in the cash flow hedge reserve reflects the
result of exchange rate movements on the derivatives
held in our cash flow hedges which will be released to
the income statement in the future as the underlying
hedged items affect profit.
For the Telstra Group, our foreign currency translation
risk associated with our foreign investments results in
some volatility to the foreign currency translation
reserve. The impact on the foreign currency translation
reserve relates to the hedging of our net investments in
New Zealand dollars and Hong Kong dollars where the
notional amount hedged equates to approximately 40%. The
net loss of $211 million in the foreign currency
translation reserve takes into account the related
hedges and represents the impact of the unhedged
portion. For the Telstra Entity there is a gain of $78
million resulting from the hedging instruments used to
hedge our net foreign investments. This amount is
transferred to the foreign currency translation reserve
in the Telstra Group.
148
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Sensitivity analysis
Table D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
(foreign |
|
|
Equity |
|
|
|
|
|
|
(foreign |
|
|
Equity |
|
|
|
currency |
|
|
(cash flow |
|
|
|
|
|
|
currency |
|
|
(cash flow |
|
|
|
translation |
|
|
hedging |
|
|
|
|
|
|
translation |
|
|
hedging |
|
|
|
reserve) |
|
|
reserve) |
|
|
Net profit |
|
|
reserve) |
|
|
reserve) |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
If there was a 10% adverse movement in exchange rates with all
other variables held constant increase/(decrease) |
|
|
(211 |
) |
|
|
43 |
|
|
|
78 |
|
|
|
|
|
|
|
41 |
|
If there was a 10% favourable movement in exchange rates with all
other variables held constant increase/(decrease) |
|
|
211 |
|
|
|
(43 |
) |
|
|
(78 |
) |
|
|
|
|
|
|
(41 |
) |
(b) Credit risk
Credit risk is the risk that a contracting entity will
not complete its obligations under a financial
instrument and cause us to make a financial loss. We
have exposure to credit risk on all financial assets
included in our balance sheet. To help manage this risk:
|
|
we have a policy for establishing credit limits for the entities we deal with; |
|
|
|
we may require collateral where appropriate; and |
|
|
|
we manage exposure to individual entities we either transact with or enter into
derivative contracts with (through a system of credit limits). |
The major concentrations of credit risk for the Telstra
Group and the Telstra Entity arise from our transactions
in money market instruments, forward foreign currency
contracts, cross currency and interest rate swaps. For
credit purposes, there is only a credit risk where the
contracting entity is liable to pay us in the event of a
closeout. We have policies that limit the amount of
credit exposure to any financial institution. Derivative
counterparties and cash transactions are limited to
financial institutions that meet minimum credit rating
criteria in accordance with our policy requirements.
One of the methods that we use to manage the risk
relating to these instruments is to monitor our exposure
by country of financial institution. When reviewing
concentrations of risk, we adjust for the period to
maturity of relevant instruments in our portfolio to
accurately consider our exposure at a point in time. On
this basis, our credit risk exposure on financial assets
outstanding at balance date (which includes a time based
volatility allowance (VAR)) by country of financial
institution is included in Table E below.
Table E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Credit risk concentrations (VAR based) |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
% |
|
|
$m |
|
|
% |
|
|
$m |
|
|
|
|
|
|
Australia |
|
|
34.6 |
|
|
|
1,983 |
|
|
|
35.1 |
|
|
|
1,983 |
|
United States |
|
|
32.5 |
|
|
|
1,858 |
|
|
|
32.9 |
|
|
|
1,858 |
|
Japan |
|
|
3.9 |
|
|
|
223 |
|
|
|
3.9 |
|
|
|
223 |
|
Europe |
|
|
14.1 |
|
|
|
807 |
|
|
|
14.3 |
|
|
|
807 |
|
United Kingdom |
|
|
4.0 |
|
|
|
229 |
|
|
|
4.1 |
|
|
|
229 |
|
Canada |
|
|
2.3 |
|
|
|
133 |
|
|
|
2.4 |
|
|
|
133 |
|
Switzerland |
|
|
7.1 |
|
|
|
409 |
|
|
|
7.2 |
|
|
|
409 |
|
Hong Kong |
|
|
1.0 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
New Zealand |
|
|
0.5 |
|
|
|
26 |
|
|
|
0.1 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
5,727 |
|
|
|
100.0 |
|
|
|
5,651 |
|
|
|
|
|
|
Our maximum exposure to credit risk based on the
recorded amounts of our financial assets reported at 30
June 2006, net of any applicable provisions for loss,
amounts to $4,889 million for the Telstra Group and
$4,357 million for the Telstra Entity. For the Telstra
Group this comprises current financial assets of $4,411
million (Telstra Entity: $3,839 million) and non current
financial assets of $478 million (Telstra Entity: $518
million). Details of our financial assets are shown in
Table G. Where entities have a right of set-off and
intend to settle on a net basis under master netting
arrangements, this set-off has been recognised in the
financial statements on a net basis.
We do not have any other significant operating
exposure to any individual contracting entity.
We may also be subject to credit risk for transactions
which are not included in the balance sheet, such as
when we provide a guarantee for another party. Details
of our contingent liabilities and contingent assets are
available at note 27.
149
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(c) Liquidity risk
Liquidity risk includes the risk that, as a result of
our operational liquidity requirements:
|
|
we will not have sufficient funds to settle a transaction on the due date; |
|
|
|
we will be forced to sell financial assets at a value which is less than what they are worth; or |
|
|
|
we may be unable to settle or recover a financial asset at all. |
To help reduce these risks we:
|
|
have a liquidity policy which targets a minimum and average level of cash and cash
equivalents to be maintained; |
|
|
|
have readily accessible standby facilities and other funding arrangements in place; |
|
|
|
generally use instruments that are tradeable in highly liquid markets; and |
|
|
|
have a liquidity portfolio structure that requires surplus funds to be invested
within various bands of liquid instruments ranging from ultra liquid, highly liquid and
liquid instruments. |
150
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(c) Liquidity risk (continued)
The contractual maturity of our fixed and floating rate
financial liabilities and derivatives at 30 June 2006
are shown in Table F below.
Table F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Contractual maturity |
|
|
Contractual maturity |
|
|
|
(nominal cash flows) |
|
|
(nominal cash flows) |
|
|
|
Less than |
|
|
1 to 2 |
|
|
2 to 5 |
|
|
over |
|
|
Less than |
|
|
1 to 2 |
|
|
2 to 5 |
|
|
over 5 |
|
|
|
1 year |
|
|
years |
|
|
years |
|
|
5 years |
|
|
1 year |
|
|
years |
|
|
years |
|
|
years |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Derivative financial assets and
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps pay fixed (i) |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
Interest rate swaps pay variable (i) |
|
|
2 |
|
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
2 |
|
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
Cross currency swaps AUD leg (fixed) (ii) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(54 |
) |
|
|
(316 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(54 |
) |
|
|
(316 |
) |
Cross currency swaps AUD leg
(variable) (ii) |
|
|
(837 |
) |
|
|
(1,648 |
) |
|
|
(3,716 |
) |
|
|
(3,153 |
) |
|
|
(837 |
) |
|
|
(1,648 |
) |
|
|
(3,716 |
) |
|
|
(3,153 |
) |
Forward foreign currency contracts (ii) |
|
|
(779 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(779 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps receive fixed (i) |
|
|
61 |
|
|
|
39 |
|
|
|
97 |
|
|
|
56 |
|
|
|
61 |
|
|
|
39 |
|
|
|
97 |
|
|
|
56 |
|
Interest rate swaps receive variable (i) |
|
|
1 |
|
|
|
2 |
|
|
|
7 |
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
7 |
|
|
|
|
|
Cross currency swaps foreign leg (fixed)
(ii) |
|
|
53 |
|
|
|
1,072 |
|
|
|
69 |
|
|
|
166 |
|
|
|
53 |
|
|
|
1,072 |
|
|
|
69 |
|
|
|
166 |
|
Cross currency swaps foreign leg
(variable) (ii) |
|
|
647 |
|
|
|
359 |
|
|
|
3,351 |
|
|
|
2,724 |
|
|
|
647 |
|
|
|
359 |
|
|
|
3,351 |
|
|
|
2,724 |
|
Forward foreign currency contracts (ii) |
|
|
773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-derivative financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds |
|
|
(184 |
) |
|
|
(184 |
) |
|
|
(1,428 |
) |
|
|
(2,014 |
) |
|
|
(184 |
) |
|
|
(184 |
) |
|
|
(1,428 |
) |
|
|
(2,014 |
) |
Bank loans |
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
(866 |
) |
|
|
(1,813 |
) |
|
|
(4,656 |
) |
|
|
(4,553 |
) |
|
|
(866 |
) |
|
|
(1,813 |
) |
|
|
(4,656 |
) |
|
|
(4,553 |
) |
Finance lease liabilities |
|
|
(13 |
) |
|
|
(12 |
) |
|
|
(23 |
) |
|
|
(52 |
) |
|
|
(7 |
) |
|
|
(6 |
) |
|
|
(10 |
) |
|
|
|
|
Bills of exchange and commercial paper |
|
|
(1,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred cash settlements |
|
|
(123 |
) |
|
|
(10 |
) |
|
|
(29 |
) |
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-derivative financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper |
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
net amounts for interest rate swaps for which
net cash flows are exchanged. |
|
(ii) |
|
contractual amounts to be exchanged representing
gross cash flows to be exchanged. |
|
(iii) |
|
for floating rate instruments, the amount
disclosed is determined by reference to the interest
rate at the last re-pricing date. |
151
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Net fair value of our financial assets and financial liabilities
The carrying amounts and fair value of our financial
assets and financial liabilities is shown in Table G
below:
Table G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
amount |
|
|
Fair value |
|
|
amount |
|
|
Fair value |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Financial assets current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and on hand |
|
|
238 |
|
|
|
238 |
|
|
|
87 |
|
|
|
87 |
|
Bills of exchange and commercial paper |
|
|
451 |
|
|
|
451 |
|
|
|
387 |
|
|
|
387 |
|
Trade debtors |
|
|
2,421 |
|
|
|
2,421 |
|
|
|
1,771 |
|
|
|
1,771 |
|
Accrued revenue |
|
|
1,027 |
|
|
|
1,027 |
|
|
|
971 |
|
|
|
971 |
|
Amounts owed by controlled entities |
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
416 |
|
Other receivables |
|
|
253 |
|
|
|
253 |
|
|
|
186 |
|
|
|
186 |
|
Cross currency swap hedge receivable |
|
|
20 |
|
|
|
20 |
|
|
|
20 |
|
|
|
20 |
|
Forward contract asset |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
4,411 |
|
|
|
4,411 |
|
|
|
3,839 |
|
|
|
3,839 |
|
|
|
|
|
|
Financial assets non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by jointly controlled and associated entities |
|
|
14 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Amounts owed by controlled entities |
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
60 |
|
Other receivables |
|
|
73 |
|
|
|
73 |
|
|
|
67 |
|
|
|
67 |
|
Cross currency swap hedge receivable |
|
|
222 |
|
|
|
222 |
|
|
|
222 |
|
|
|
222 |
|
Interest rate swap asset |
|
|
169 |
|
|
|
169 |
|
|
|
169 |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
478 |
|
|
|
478 |
|
|
|
518 |
|
|
|
518 |
|
|
|
|
|
|
|
|
|
4,889 |
|
|
|
4,889 |
|
|
|
4,357 |
|
|
|
4,357 |
|
|
|
|
|
|
Financial liabilities current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade creditors |
|
|
738 |
|
|
|
738 |
|
|
|
586 |
|
|
|
586 |
|
Accrued interest and other accrued expenses |
|
|
2,440 |
|
|
|
2,440 |
|
|
|
2,111 |
|
|
|
2,111 |
|
Other creditors |
|
|
269 |
|
|
|
269 |
|
|
|
171 |
|
|
|
171 |
|
Amounts owed to controlled entities |
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
197 |
|
Deferred cash settlements |
|
|
123 |
|
|
|
123 |
|
|
|
|
|
|
|
|
|
Loans from wholly owned controlled entities |
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
1,408 |
|
Bills of exchange and commercial paper |
|
|
1,457 |
|
|
|
1,481 |
|
|
|
1,457 |
|
|
|
1,481 |
|
Bank loans |
|
|
111 |
|
|
|
111 |
|
|
|
110 |
|
|
|
110 |
|
Other loans |
|
|
394 |
|
|
|
396 |
|
|
|
394 |
|
|
|
396 |
|
Finance leases |
|
|
7 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
Cross currency swap hedge payable |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Forward contract liability |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
5,551 |
|
|
|
5,577 |
|
|
|
6,451 |
|
|
|
6,477 |
|
|
|
|
|
|
Financial liabilities non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other creditors |
|
|
70 |
|
|
|
70 |
|
|
|
65 |
|
|
|
65 |
|
Deferred cash settlements |
|
|
127 |
|
|
|
127 |
|
|
|
|
|
|
|
|
|
Telstra bonds |
|
|
2,613 |
|
|
|
2,658 |
|
|
|
2,613 |
|
|
|
2,658 |
|
Other loans |
|
|
8,748 |
|
|
|
9,336 |
|
|
|
8,748 |
|
|
|
9,273 |
|
Finance leases |
|
|
48 |
|
|
|
48 |
|
|
|
15 |
|
|
|
15 |
|
Cross currency hedge payable |
|
|
612 |
|
|
|
612 |
|
|
|
612 |
|
|
|
612 |
|
Interest rate swap payable |
|
|
156 |
|
|
|
156 |
|
|
|
156 |
|
|
|
156 |
|
|
|
|
|
|
|
|
|
12,374 |
|
|
|
13,007 |
|
|
|
12,209 |
|
|
|
12,779 |
|
|
|
|
|
|
|
|
|
17,925 |
|
|
|
18,584 |
|
|
|
18,660 |
|
|
|
19,256 |
|
|
|
|
|
|
152
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Net fair value of our financial assets and
financial liabilities (continued)
(i) Unless there is evidence to suggest otherwise,
financial assets and financial liabilities with a short
term to maturity are considered to approximate net fair
value.
(ii) The reported balance of our borrowings and
derivative instruments excludes accrued interest which
is recorded in current trade and other receivables and
current trade and other payables in the balance sheet.
(iii) Derivative financial assets and derivative
financial liabilities are carried at fair value. Fair
value is based on the present value of the
estimated future cash flows using an appropriate market
based yield curve (also refer to note 2.27).
(iv) The fair value of the Telstra bonds is calculated
as the present value of the estimated future cash flows
using an appropriate market based yield curve (refer
also to note 2.27). The carrying value of Telstra bonds
is at amortised cost.
(v) Other loans comprise predominantly foreign
denominated debt. The difference between the fair value
and carrying value arises from the mixed measurement
bases where only part of the foreign currency borrowing
portfolio is carried at fair value with the remaining
part at amortised cost. Fair value is based on the
present value of the estimated future cash flows using
an appropriate market based yield curve (also refer to
note 2.27).
The carrying amount of other loans are denominated in
the following currencies:
Table H
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Carrying value |
|
|
|
As at |
|
|
As at |
|
|
|
30 June 2006 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
Australian dollar |
|
|
245 |
|
|
|
245 |
|
Euro |
|
|
6,336 |
|
|
|
6,336 |
|
United States dollar |
|
|
1,028 |
|
|
|
1,028 |
|
United Kingdom pound |
|
|
487 |
|
|
|
487 |
|
Japanese yen |
|
|
472 |
|
|
|
472 |
|
New Zealand dollar |
|
|
164 |
|
|
|
164 |
|
Swiss francs |
|
|
326 |
|
|
|
326 |
|
Singapore dollar |
|
|
84 |
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
9,142 |
|
|
|
9,142 |
|
|
|
|
|
|
|
|
(vi) During the year we incurred impairment
losses on our financial assets of $163 million for the
Telstra Group and $520 million for the Telstra Entity.
For the Telstra Group impairment losses comprised $161
million on trade and other receivables and $2 million on
amounts owed by associated entities. For the Telstra
Entity impairment losses comprised $138 million on trade
and other receivables and $382 million on amounts owed
by controlled entities.
153
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities
We hold a number of different financial instruments to
hedge risks relating to underlying transactions. Our
major exposure to interest rate risk and foreign
currency risk arises from our long term borrowings.
Details of our hedging activities are provided below.
We designate certain derivatives as either:
|
|
hedges of the fair value of recognised liabilities (fair value hedges); |
|
|
|
hedges of foreign currency risk associated with recognised liabilities or highly
probable forecast transactions (cash flow hedges); or |
|
|
|
hedges of a net investment in a foreign operation (net investment hedge). |
Derivatives are initially recognised at fair value on
the date a derivative contract is entered into and are
subsequently remeasured at their fair value.
The terms and conditions in relation to our derivative
instruments are similar to the terms and conditions of
the underlying hedged items. During the year we
discontinued hedge accounting for our British pound
borrowing in a fair value hedge. There was no material
impact on our income statement. All other hedging
relationships were effective at the reporting date.
For further details reference should be made to note 2.26.
(a) Fair value hedges
During the period we held cross currency principal and
interest rate swaps to mitigate our exposure to changes
in the fair value of foreign denominated debt from
fluctuations in foreign currency and interest rates. The
hedged items designated were a portion of our foreign
currency denominated borrowings. The changes in the fair
values of the hedged items resulting from movements in
exchange rates and interest rates are offset against the
changes in the value of the cross currency and interest
rate swaps. The objective of this hedging is to convert
foreign currency borrowings to floating Australian
dollar borrowings.
Gains or losses from remeasuring the fair value of the
hedge instrument are recognised within finance costs
in the income statement, together with gains and losses
in relation to the hedged item where those gains or
losses relate to the hedged risks. This net result
largely represents ineffectiveness attributable to
movements in Telstras borrowing margins. The
remeasurement of the hedged items resulted in a loss
before tax of $3 million (Telstra Entity: $3 million)
and the changes in the fair value of the hedging
instruments resulted in a gain before tax of $29 million
(Telstra Entity: $29 million) resulting in a net gain
before tax of $26 million (Telstra Entity: $26 million)
recorded in finance costs in the 2006 financial year.
The effectiveness of the hedging relationship is tested
prospectively and retrospectively by means of
statistical methods using a regression analysis.
Regression analysis is used to analyse the relationship
between the derivative instruments (the dependent
variable) and the underlying borrowings (the independent
variable). The primary objective is to determine if
changes to the hedged item and derivative are highly
correlated and, thus, supportive of the assertion that
there will be a high degree of offset in fair values
achieved by the hedge.
Refer to Table J and Table K for the value of our
derivatives designated as fair value hedges at 30 June
2006.
(b) Cash flow hedges
Cash flow hedges are used to hedge exposures relating to
our
borrowings and our ongoing business activities, where we
have highly probable purchase or settlement commitments
in foreign currencies.
During the year, we entered into cross currency and
interest rate swaps as cash flow hedges of future
payments denominated in foreign currency resulting from
our long-term overseas borrowings. The hedged items
designated were a portion of the outflows associated
with these foreign denominated borrowings. The objective
of this hedging is to hedge foreign currency risks
arising from spot rate changes and thereby mitigate the
risk of payment fluctuations as a result of exchange
rate movements.
We also entered into forward foreign currency contracts
as cash flow hedges to hedge forecast transactions
denominated in foreign currency which hedge foreign
currency risk arising from spot rate changes. The hedged
items comprised highly probable forecast foreign
currency payments for operating and capital items.
The effectiveness of the hedging relationship relating
to our borrowings is calculated prospectively and
retrospectively by means of statistical methods using a
regression analysis. The actual derivative instruments
in a cash flow hedge are regressed against the
hypothetical derivative. The primary objective is to
determine if changes to the hedged item and derivative
are highly correlated and, thus, supportive of the
assertion that there will be a high degree of offset in
cash flows achieved by the hedge.
The effectiveness of our hedges relating to highly
probable transactions is assessed prospectively based on
matching of critical terms. As both the nominal volumes
and currencies of the hedged item and the hedging
instrument are identical, a highly effective hedging
relationship is expected. An effectiveness test is
carried out retrospectively using the cumulative
dollar-offset method. For this, the changes in the fair
values of the hedging instrument and the hedged item
attributable to exchange rate changes are calculated and
a ratio is created. If this ratio is between 80 and 125
per cent, the hedge is effective.
154
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(b) Cash flow hedges (continued)
The effective portion of gains or losses on remeasuring
the fair value of the hedge instrument are recognised
directly in equity in the cash flow hedging reserve until
such time as the hedged item affects profit or loss, then
the gains or losses are transferred to other revenue or
other expenses in the income statement. In our hedge of
forecast transactions, when the forecast transaction that
is hedged results in the recognition of a non-financial
asset (for example, inventory or fixed asset), the gains
and losses previously deferred in equity are transferred
from equity and included in the measurement of the
initial cost or carrying amount of the asset. Gains or
losses on any portion of the hedge determined to be
ineffective are recognised immediately
in the income statement within other expenses or other
revenue. During the year there was no material
ineffectiveness attributable to our cash flow hedges.
If a forecast transaction is no longer expected to occur,
the cumulative gains or losses on the hedging instrument
that were deferred in equity are transferred immediately
to the income statement. During the year we did not
discontinue hedge accounting for forecast transactions no
longer expected to occur.
During 2006, net gains totalling $229 million after tax
(Telstra Entity: $229 million) resulting from the change
in the fair value of derivatives were taken directly to
equity in the cash flow hedge reserve. These changes
constitute the effective portion of the hedging
relationship. Net gains amounting to $294 million after
tax (Telstra Entity: $295 million) recognised in the cash
flow hedge reserve were transferred to the income
statement during the year.
Refer to Table J, Table K and Table L for the value of
our derivatives designated as cash flow hedges at 30
June 2006.
The following table shows the maturities of the
payments, that is when the cash flows are expected to
occur.
Table I
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Nominal cash outflows |
|
|
|
As at |
|
|
As at |
|
|
|
30 June 2006 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
Highly probable forecast
purchases (i) |
|
|
|
|
|
|
|
|
- less than one year |
|
|
(757 |
) |
|
|
(734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings (ii) |
|
|
|
|
|
|
|
|
- less than one year |
|
|
(431 |
) |
|
|
(431 |
) |
- one to five years |
|
|
(2,924 |
) |
|
|
(2,924 |
) |
- greater than five years |
|
|
(1,978 |
) |
|
|
(1,978 |
) |
|
|
|
|
|
|
|
|
|
|
(5,333 |
) |
|
|
(5,333 |
) |
|
|
|
|
|
|
|
(i) These amounts will affect our income statement in
the same time period as the cash flows are expected to
occur except for purchases of fixed assets in which case
the gains and losses on the associated hedging
instruments are included in the measurement of the
initial cost of the asset. The hedged asset purchases
affect profit as the assets are depreciated over their
useful lives. Included in the forecast purchases of $757
million (Telstra Entity: $734 million) are $593 million
of fixed asset purchases (Telstra Entity: $593 million).
(ii) The impact on our income statement from foreign
currency translation movements associated with these
hedged borrowings is expected to be nil as these
borrowings are effectively hedged.
(c) Hedges of net investments in foreign operations
We have exposure to foreign currency risk as a result of
our investments in offshore activities, including our
investments in TelstraClear Limited and Hong Kong CSL
Limited (CSL). This risk is created by the translation of
the net assets of these entities from their functional
currency to Australian dollars. We hedge our investments
in foreign operations to mitigate exposure to this risk
using forward foreign currency contracts, cross currency
swaps and/or borrowings in the relevant currency of the
investment.
The effectiveness of the hedging relationship is tested
using prospective and retrospective effectiveness tests.
In a retrospective effectiveness test, the changes in the
fair value of the hedging instruments and the change in
the value of the hedged net investment from spot rate
changes are calculated and a ratio is created. If this
ratio is between 80 and 125 per cent, the hedge is
effective. The prospective effectiveness test is
performed based on matching of critical terms. As both
the nominal volumes and currencies of the hedged item and
the hedging instrument are identical, a highly effective
hedging relationship is expected.
155
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(c) Hedges of net investments in foreign operations (continued)
Gains or losses on remeasurement of our derivative
instruments designated as hedges of foreign investments
are recognised in the foreign currency translation
reserve in equity to the extent they are effective. The
cumulative amount of the recognised gains or losses
included in equity are transferred to the income
statement when the foreign operation is sold.
Gains or losses on any portion of the hedge determined
to be ineffective are recognised in the income
statement within other expenses or other revenue.
During the year there was no material ineffectiveness
attributable to our net investment hedges.
During the year net gains of $50 million on our hedging
instruments were taken directly to equity in the foreign
currency translation reserve in the consolidated balance
sheet.
Refer to Table J and Table L for the value of our
derivatives designated as hedges of net foreign
investments at 30 June 2006.
In addition, included in the carrying value of other
loans and bills of exchange and commercial paper at 30
June 2006 are New Zealand dollar denominated borrowings
of $164 million (fair value: $164 million) and New Zealand dollar denominated commercial paper of $334
million (fair value: $334 million). These were designated
as a hedging instrument of our net investment in
TelstraClear. The loans are included within non current
financial liabilities and the commercial paper is
included within current financial liabilities of the
Telstra Group and the Telstra Entity. A foreign exchange
gain of $58 million on translation of these borrowings
and commercial paper to Australian dollars was recognised
in equity in the foreign currency translation reserve in
the consolidated balance sheet.
156
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(d) Hedging instruments
Derivative hedging instruments
Details of our derivative hedging instruments as at
balance date are shown in Table J, Table K and Table L
below. The fair value of a hedging derivative is
classified as a non-current asset or liability if the
remaining maturity of the hedged item is more than 12
months, and as a current asset or liability if the
remaining maturity of the hedged item is less than 12
months.
Table J
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Cross currency swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps designated cash flow hedges of other loans (i) |
|
|
11 |
|
|
|
|
|
|
|
11 |
|
|
|
|
|
Cross currency swaps designated fair value hedges of other loans |
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
Cross currency swaps designated hedge of net foreign investment |
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
Total |
|
|
20 |
|
|
|
6 |
|
|
|
20 |
|
|
|
6 |
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps designated cash flow hedges of other loans (i) |
|
|
53 |
|
|
|
350 |
|
|
|
53 |
|
|
|
350 |
|
Cross currency swaps designated fair value hedges of other loans |
|
|
169 |
|
|
|
259 |
|
|
|
169 |
|
|
|
259 |
|
Cross currency swaps designated hedge of net foreign investment |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
Total |
|
|
222 |
|
|
|
612 |
|
|
|
222 |
|
|
|
612 |
|
|
|
|
|
|
|
|
|
(i) |
|
Gains or losses recognised in the cash flow
hedging reserve in equity (refer note 22) on cross
currency swap contracts as at 30 June 2006 will be
continuously released to the income statement until the
underlying borrowings are repaid. |
Table K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps designated cash flow hedges of other loans (ii) |
|
|
106 |
|
|
|
107 |
|
|
|
106 |
|
|
|
107 |
|
Interest swaps designated fair value hedges of other loans |
|
|
63 |
|
|
|
49 |
|
|
|
63 |
|
|
|
49 |
|
|
|
|
|
|
Total |
|
|
169 |
|
|
|
156 |
|
|
|
169 |
|
|
|
156 |
|
|
|
|
|
|
|
|
|
(ii) |
|
Gains or losses recognised in the cash flow
hedging reserve in equity (refer to note 22) on interest
rate swap contracts as at 30 June 2006 will be
continuously released to the income statement until the
underlying borrowings are repaid. |
157
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(d) Hedging instruments (continued)
Derivative hedging instruments (continued)
The fair value of our net Australian dollar
amounts receivable/ (payable), settlement dates
and average contractual forward exchange rates are
as follows:
Table L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Forward foreign currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States (US) dollars designated as cash flow hedges: highly
probable purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- less than 3 months, at contractual forward exchange rates averaging
United States dollars 0.7328 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
- 3 to 12 months, at contractual forward exchange rates averaging United
States dollars 0.7347 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Zealand (NZ) dollars designated as hedge: net foreign investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 3 than 12 months, at contractual forward exchange rates averaging New
Zealand dollars 1.1946 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong (HK) dollars designated as hedge: net foreign investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 3 to 12 months, at contractual forward exchange rates averaging Hong
Kong dollars 5.7248 |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1 |
|
|
|
6 |
|
|
|
1 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
(i) |
|
Gains or losses recognised in the cash flow
hedging reserve in equity (refer to note 22) on forward
foreign exchange contracts as at 30 June 2006 will be
released to the income statement at dates when the cash
flow from the underlying forecast transactions will
occur. However, where the underlying forecast
transaction is a purchase of a non-financial asset (for
example, inventory or a fixed asset) the gain or loss in
the cash flow hedging reserve will be transferred and
included in the measurement of the initial cost of the
asset at the date the asset is recognised. |
|
(ii) |
|
Other forward exchange contracts which are not
included in the above designated hedging relationships
have been entered into to hedge exposure of other
payables and receivables recognised in the balance
sheet. These balances are not significant. |
158
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
Breaches
During the year we have not breached any of our
agreements with our lenders.
Capital Risk Management
Our objectives when managing capital are to safeguard
the Groups ability to continue as a going concern, so
that it can continue to provide returns for shareholders
and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of
capital.
In order to maintain or adjust the capital structure, we
may adjust the amount of dividends paid to shareholders,
return capital to shareholders or issue new shares.
We monitor capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total
capital. Net debt is calculated as total borrowings
(including borrowings and derivative financial
instruments as shown in the consolidated balance sheet)
less cash and cash equivalents. Total capital is
calculated as equity as shown in the consolidated balance
sheet plus net debt.
During 2006, our strategy was to maintain the net debt
gearing ratio within 55 to 75 per cent, in order to
secure access to finance at a reasonable cost.
The gearing ratios at 30 June 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at |
|
|
As at |
|
|
|
30 June 2006 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
Total borrowings |
|
|
13,746 |
|
|
|
14,642 |
|
less cash and cash
equivalents |
|
|
(689 |
) |
|
|
(474 |
) |
Net debt |
|
|
13,057 |
|
|
|
14,168 |
|
Total equity |
|
|
12,832 |
|
|
|
12,115 |
|
Total capital |
|
|
25,889 |
|
|
|
26,283 |
|
|
|
|
|
|
|
|
Gearing ratio |
|
|
50.4 |
% |
|
|
53.9 |
% |
|
|
|
|
|
|
|
159
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards
We are required by the Corporations Act 2001 to
prepare our financial reports for financial years
commencing on or after 1 January 2005 under the
Australian equivalents of International Financial
Reporting Standards (A-IFRS) as adopted by the
Australian Accounting Standards Board (AASB). We
implemented accounting policies in accordance with
A-IFRS on 1 July 2004, except for those relating to
financial instruments, which were implemented on 1 July
2005.
The transitional rules for first time adoption of A-IFRS
required that we restate our comparative financial
report using A-IFRS, except for AASB 132: Financial
Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement,
where comparative information was not required to be
restated. In addition, we have elected to early adopt
AASB 7: Financial Instruments: Disclosures, which
supersedes the disclosure requirements of AASB 132.
Comparatives were remeasured and restated for the year
ended 30 June 2005. Most of the adjustments on
transition were required to be made to opening retained
profits at the beginning of the first
comparative period (i.e. at 1 July 2004).
Amendments to A-IFRS transition adjustments
disclosed at 31 December 2005
We have made certain amendments to the impacts of
adopting A-IFRS on the Telstra Group disclosed at 31
December 2005. These amendments are set out below.
(i) 3G spectrum licence
Under previous Australian Generally Accepted Accounting
Principles (AGAAP) we expensed the annual payments made
under our Hong Kong 3G spectrum licence as incurred,
except for those incurred during the construction of our
3G network in Hong Kong which were capitalised as part
of the asset cost.
Based on the IFRS interpretation adopted by other 3G
mobile operators in Hong Kong, on transition we have
recorded an intangible asset of $121 million (30 June
2005: $108 million) associated with our Hong Kong 3G
spectrum licence. This includes $25 million (30 June
2005: $24 million) previously capitalised under AGAAP as
part of property, plant and equipment. A corresponding
accrual liability has also been recorded.
This intangible asset is amortised over the term of the
licence agreement. Net profit before tax has increased
by $4 million for the year ended 30 June 2005 due to
this additional amortisation and the unwinding of the
present value discount on the accrual, partially offset
by the elimination of the licence expense. For further
details refer to note 36(k).
The recognition of this spectrum licence has resulted in
a reduction in the deferred tax liability of the Telstra
Group as at 1 July 2004 of $21 million (30 June 2005:
$19 million).
(ii) Determination of tax bases
The tax base of our defined benefit asset changed as a
result of an interpretation on the treatment of the
contribution tax adjustment made to the carrying value
of the asset. As a result there was an increase to the
deferred tax liability associated with the defined
benefit asset on transition of $24 million (30 June
2005: $11 million).
In addition, we reduced the deferred tax asset of one of
our controlled entities due to the reassessment of the
tax base of certain items of property, plant and
equipment on transition by $28 million (30 June 2005:
$29 million).
For further details refer to note 36(c).
(iii) Operating leases
Under A-IFRS operating lease rental expense is
recognised on a straight line basis over the term of the
lease, even if the payments are not on that basis. Under
previous AGAAP operating lease rentals were expensed as
incurred. This has resulted in the recognition of an
additional non-current liability on transition to A-IFRS
of $37
million (30 June 2005: $48 million). Operating lease
expense increased by $11 million for the year ended 30
June 2005. Refer to note 36(e) for further details.
A-IFRS adjustments with effect from 1 July 2004
(a) AASB 2: Share-Based Payment (AASB 2)
Under previous AGAAP we recognised an expense for all
restricted shares, performance rights, deferred shares
and Telstra shares (consisting of directshares and
ownshares) issued. This expense was equal to the
funding provided to the Telstra Growthshare Trust
(Growthshare) to purchase Telstra shares on market to
underpin these equity instruments, and was recognised in
full in the income statement when the funding was
provided. Under previous AGAAP, we did not recognise an
expense for options issued on the basis that instrument
holders are required to pay the option exercise price
once the options vest and are exercised.
Under AASB 2, we recognise an expense for all
share-based remuneration. This expense is based on the
fair value of the equity instruments issued, determined
at the grant date. The fair value is calculated using an
appropriate valuation technique to estimate the price of
those equity instruments in an arms length transaction
between knowledgeable, willing parties. The fair value
calculated is charged against profit over the relevant
vesting period, adjusted to reflect actual and expected
levels of vesting.
160
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(a) AASB 2: Share-Based Payment (AASB 2) (continued)
Under the transitional exemptions of AASB 1: First-time
Adoption of Australian Equivalents to International
Financial Reporting Standards (AASB 1), we elected not
to apply AASB 2 to equity instruments granted prior to 7
November 2002.
This approach gave rise to a net positive transitional
adjustment to retained profits. If we had not made this
election, resulting in all equity instruments granted
prior to 7 November 2002 being subject to AASB 2, then
opening retained profits on transition would decrease,
with a corresponding increase in share capital.
Furthermore, there would have been an increase in labour
expense for the year ended 30 June 2005. Equity
instruments granted prior to 7 November 2002, for which
we have elected not to apply AASB 2, include those
granted under Telstra Employee Share Ownership Plan Trust
(TESOP97) and Telstra Employee Share Ownership Plan Trust
II (TESOP99), as well as certain Growthshare issues.
We own 100% of the equity of Telstra Growthshare Pty Ltd
and the Telstra ESOP Trustee Pty Ltd, the corporate
trustees for the Telstra Growthshare Trust (Growthshare),
TESOP97 and TESOP99, which administer our share-based
payment plans. Under previous AGAAP
we did not control or significantly influence these
trusts, as beneficial ownership and control remained with
the employees who participate in the share plans,
administered by the Trustee on their behalf.
Under A-IFRS, we have included the results, position and
cash flows of Growthshare, TESOP97 and TESOP99 within our
financial statements.
(i) On transition as at 1 July 2004
To record the initial recognition of Growthshare within
the Telstra Group and Telstra Entity, the loan receivable
from Growthshare was eliminated ($65 million), share
capital reduced to reflect the shares held by Growthshare
in the Telstra Entity ($117 million), and the cash held
by Growthshare was recognised ($3 million).
Other assets and liabilities held by the trusts
were considered insignificant to Telstra Group and
Telstra Entity.
Shares issued under TESOP97 and TESOP99, in conjunction
with the non-recourse loans, have been accounted for as
options. As a result, the outstanding balance of the
loans to employees under TESOP97 and TESOP99 amounting to
$174 million (comprising $24 million current receivables
and $150 million non current receivables), was deducted
from share capital of the Telstra Group and Telstra
Entity on transition to A-IFRS.
A transitional adjustment to increase Telstra Group and
Telstra Entity opening retained profits by $55 million
represents the reversal of the expense previously
recorded under AGAAP. We also recognised a transitional
expense in retained profits under AASB 2 of $4 million
relating to the amortisation over the vesting period of
equity instruments issued subsequent to 7 November 2002.
This transitional expense increased share capital by $4
million.
(ii) At 30 June 2005
The cumulative effect on the Telstra Group and Telstra
Entity at 30 June 2005 was to increase cash assets by $8
million, decrease current receivables by $24 million,
non current receivables by $175 million, and share
capital by $257 million. Labour expense decreased by $10
million, finance income decreased by $2 million, and
dividends decreased by $7 million for the year ended 30
June 2005.
(b) AASB 3: Business Combinations (AASB 3)
We previously amortised goodwill over the period of
expected benefit, not exceeding 20 years. Under A-IFRS
goodwill acquired in a business combination is not
amortised, but instead is subject to impairment testing
at each reporting date, or upon the occurrence of
triggers that may indicate a potential impairment. If
there is an indication of impairment resulting in an
impairment loss, it is recognised immediately in the
income statement.
Under the transitional arrangements of AASB 1 we had the
option of applying AASB 3 prospectively from the
transition date to A-IFRS (from 1 July 2004). We chose
this option rather than to restate all previous business
combinations. If this election had not been made, there
would not have been a significant impact on the balance
sheet or income statement because our accounting for
significant business
combinations under previous AGAAP was consistent with
A-IFRS and USGAAP, whereby we recognised all
identifiable assets and liabilities upon acquisition,
including intangible assets.
The impact of AASB 3 and associated transitional
arrangements is as follows:
|
|
all prior business combination accounting was frozen as at 1 July 2004; and |
|
|
|
the value of
goodwill was frozen as at transition date, with any amortisation that was reported under previous
AGAAP subsequent to transition date was reversed for A-IFRS restatements. |
(i) On transition as at 1 July 2004
There were no adjustments on transition as a result of AASB 3.
161
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(b) AASB 3: Business Combinations (AASB 3) (continued)
(ii) At 30 June 2005
The effect on the Telstra Group at 30 June 2005 of the
cessation of amortisation of goodwill was to increase
goodwill and decrease amortisation expense by $145
million (Telstra Entity: $4 million). Investments
accounted for using the equity method increased by $2
million for the Telstra Group, with a corresponding
decrease in share of net loss from jointly controlled
and associated entities.
(c) AASB 112: Income Taxes (AASB 112)
On transition to A-IFRS, a new method of accounting for
income taxes, known as the balance sheet approach, was
adopted, replacing the income statement approach
required by previous AGAAP. Under the new method we
generally recognise deferred tax balances in the balance
sheet when there is a difference between the carrying
value of an asset or liability and its tax base.
The adoption of the balance sheet approach has
resulted in a number of additional deferred tax balances
being recognised, as well as adjustments to existing
deferred tax balances. Furthermore, additional deferred
tax liabilities have been recognised associated with
fair value adjustments on entities acquired by us. Where
the acquisition has occurred after 1 July 2004 a
corresponding adjustment has been made to goodwill in
accordance with AASB 3.
The Telstra Entity has formed a tax consolidated group
with its Australian resident wholly owned subsidiaries.
Under previous AGAAP the Telstra Entity, as head entity
of the tax consolidated group, recognised tax balances
for all entities in the group.
Under A-IFRS and in accordance with UIG 1052 Tax
Consolidation Accounting (UIG 1052), the Telstra
Entity only accounts for its own tax balances, with the
exception of the following:
|
|
the current tax liability for the tax consolidated group; and |
|
|
|
the current and deferred tax arising from unused tax losses and tax credits for all
entities in the tax consolidated group. |
Under UIG 1052, the current tax liability of the tax
consolidated group is required to be allocated to each
of the entities in the group. As there was no tax
funding arrangement in place at 30 June 2005, this
allocation was recorded as a contribution by or
distribution to the Telstra Entity.
(i) On transition as at 1 July 2004
The Telstra Group and Telstra Entitys deferred tax
liabilities decreased as a result of the transition to
other A-IFRS standards. The transition adjustment
comprised:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
Telstra |
|
|
|
|
|
|
|
Group |
|
|
Entity |
|
|
|
Note |
|
$m |
|
|
$m |
|
|
Operating leases |
|
|
36 |
(e) |
|
|
(11 |
) |
|
|
(11 |
) |
Defined benefit asset |
|
|
36 |
(f) |
|
|
159 |
|
|
|
158 |
|
Borrowing costs |
|
|
36 |
(h) |
|
|
(129 |
) |
|
|
(129 |
) |
3G spectrum licence |
|
|
36 |
(k) |
|
|
(21 |
) |
|
|
|
|
Handset subsidies |
|
|
36 |
(k) |
|
|
(72 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
|
Net decrease in deferred tax liabilities |
|
|
|
|
|
|
(74 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
|
A corresponding increase in opening retained profits
was recorded as a result of these adjustments.
In addition, there was a transitional adjustment to
deferred tax liabilities as a result of the change in
accounting for income taxes to the balance sheet
approach, and the adoption of UIG 1052. This adjustment
consisted of:
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
Telstra |
|
|
|
Group |
|
|
Entity |
|
|
|
$m |
|
|
$m |
|
|
Tax base differences on buildings |
|
|
77 |
|
|
|
77 |
|
Tax effect of fair value adjustments on entities
acquired by us |
|
|
66 |
|
|
|
|
|
Adoption of UIG 1052 |
|
|
|
|
|
|
329 |
|
Adjustments to plant and equipment and
other temporary differences |
|
|
(105 |
) |
|
|
(104 |
) |
|
|
|
Net increase in deferred tax liabilities |
|
|
38 |
|
|
|
302 |
|
|
|
|
For the Telstra Group opening retained profits
decreased by $6 million (Telstra Entity: $142 million),
and the asset revaluation reserve reduced by $32 million
(Telstra Entity: $83 million) as a result of these
entries. Furthermore, the balance of investments
recorded by the Telstra Entity increased by $77 million.
162
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(c) AASB 112: Income Taxes (AASB 112) (continued)
(ii) At 30 June 2005
The Telstra Group and Telstra Entitys deferred tax
liabilities decreased as a result of the impact of other
A-IFRS standards as at 30 June 2005. This adjustment
consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
Telstra |
|
|
|
|
|
|
|
Group |
|
|
Entity |
|
|
|
Note |
|
$m |
|
|
$m |
|
|
Deferred payment for equipment |
|
|
36 |
(d) |
|
|
(8 |
) |
|
|
|
|
Operating leases |
|
|
36 |
(e) |
|
|
(14 |
) |
|
|
(14 |
) |
Defined benefit asset |
|
|
36 |
(f) |
|
|
79 |
|
|
|
79 |
|
Borrowing costs |
|
|
36 |
(h) |
|
|
(129 |
) |
|
|
(129 |
) |
3G spectrum licence |
|
|
36 |
(k) |
|
|
(19 |
) |
|
|
|
|
Handset subsidies |
|
|
36 |
(k) |
|
|
(91 |
) |
|
|
(91 |
) |
|
|
|
|
|
|
|
Net decrease in deferred tax liabilities |
|
|
|
|
|
|
(182 |
) |
|
|
(155 |
) |
|
|
|
|
|
|
|
The Telstra Group and Telstra Entity retained profits
increased by $24 million due to the tax effect of the
defined benefit actuarial loss. Telstra Group tax expense
for the year ended 30 June 2005 decreased by $84 million
(Telstra Entity: $77 million).
In addition, an adjustment to deferred tax liabilities
was attributable to the change in accounting for income
taxes to the balance sheet approach and the adoption of
UIG 1052. This adjustment consisted of:
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
Telstra |
|
|
|
Group |
|
|
Entity |
|
|
|
$m |
|
|
$m |
|
|
Tax base differences on buildings |
|
|
74 |
|
|
|
74 |
|
Tax effect of fair value adjustments on
entities acquired by us |
|
|
104 |
|
|
|
|
|
Adoption of UIG 1052 |
|
|
|
|
|
|
299 |
|
Adjustments to plant and equipment and
other temporary differences |
|
|
(77 |
) |
|
|
(83 |
) |
|
|
|
Net increase in deferred tax liabilities |
|
|
101 |
|
|
|
290 |
|
|
|
|
As a result of adjustments associated with the
change to the balance sheet approach, Telstra Group
goodwill increased by $63 million and the FCTR increased
by $9 million as at 30 June 2005. Income tax expense for
the Telstra Group for the year ended 30 June 2005
increased by $8 million.
For the Telstra Entity, investments increased by $107
million as at 30 June 2005. Dividend revenue increased
by $223 million and income tax expense increased by $182
million for the year ended 30 June 2005.
(d) AASB 116: Property, Plant and Equipment (AASB 116)
Under the transitional exemptions of AASB 1 we had the
option to use an assets fair value, or previously
revalued amount, as its deemed cost from the date of
transition. We elected to apply the cost model under AASB
116, and therefore the carrying value of our property,
plant and equipment (some of which had been previously
revalued) and intangible assets on the date of transition
were deemed to be cost under A-IFRS. If this election had
not been made, we would have had to restate these assets
to their original historical cost.
On transition to A-IFRS an entity is required to
derecognise items where A-IFRS does not permit such
recognition. As we have adopted the cost model under
AASB 116, the asset revaluation reserve will be
derecognised as it is not a valid reserve under the cost
model. The balance, after taking into consideration
other A-IFRS adjustments, has been transferred to the
general reserve.
Under previous AGAAP, we recognised the gross proceeds
on sale of non current assets as revenue and the cost in
other expenses. A-IFRS requires the net gain on sale of
non current assets to be classified as other income, not
separately treated as revenue and other expenses.
(i) On transition as at 1 July 2004
For the Telstra Entity, the balance of the asset
revaluation reserve of $194 million was transferred to
the general reserve on transition to A-IFRS.
(ii) At 30 June 2005
On 6 December 2004, we acquired a 50% interest in the 3G
Radio Access Network (RAN) assets of Hutchison 3G
Australia Pty Ltd (H3GA) for $450 million, payable over 2
years. Due to the deferred payment terms, under previous
AGAAP our property, plant and equipment balance increased
by $428 million, representing the present value of the
purchase price calculated using our incremental borrowing
rate. AASB 116 requires that a discount rate specific to
the asset be used, rather than our incremental borrowing
rate.
Under previous AGAAP, the release of interest associated
with the unwinding of the present value discount was
capitalised as part of property, plant and equipment
until the assets were installed ready for use. Under
A-IFRS the release of interest associated with the
unwinding of the present value discount was expensed as
incurred.
For the Telstra Group, the change in the discount rate
and the cessation of interest capitalisation resulted in
a decrease in our property, plant and equipment of $37
million, and a decrease in
current and non current payables of $10 million
(comprising $3 million current and $7 million non
current). Finance costs of the Telstra Group for the year
ended 30 June 2005 increased by $27 million.
163
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(d) AASB 116: Property, Plant and Equipment
(AASB 116) (continued)
For the Telstra Group we have reclassified revenue of
$476 million (Telstra Entity: $336 million) and other
expenses of $215 million (Telstra Entity: $203 million)
to other income associated with the net gain on sale of
non current assets for the year ended 30 June 2005.
(e) AASB 117: Leases (AASB 117)
Under previous AGAAP, operating lease payments were
expensed in the periods in which they were incurred.
Under A-IFRS, operating lease payments are expensed on a
straight line basis over the term of the lease, even if
the payments are not on that basis. Where the lease
contains a fixed rental increase each year, the total
impact of the rental increase is expensed evenly over
the lease term.
(i) On transition as at 1 July 2004
For the Telstra Group and Telstra Entity, non-current
trade and other payables increased by $37 million,
representing an increase to previously recognised
operating lease expense associated with using the
straight line method for A-IFRS, with a corresponding
decrease in opening retained profits.
(ii) At 30 June 2005
For the Telstra Group and Telstra Entity, non-current
trade and other payables increased by $48 million. For
the year ended 30 June 2005, operating lease expense
increased by $11 million.
(f) AASB 119: Employee Benefits (AASB 119)
Under previous AGAAP, we did not recognise an asset or
liability on our balance sheet for the net position of
the defined benefit plans we sponsor in Australia and
Hong Kong.
On adoption of A-IFRS, we recognised the net position of
each plan as a transitional adjustment to the balance
sheet, with a corresponding entry to retained profits.
The transitional adjustment was based on an actuarial
valuation of each scheme at transition date determined
in accordance with AASB 119.
A revised AASB 119 was issued in December 2004 and
applies to annual reporting periods beginning on or
after 1 January 2006. We have elected under s.334(5) of
the Corporations Act 2001 to early adopt this revised
accounting standard for the financial year commencing 1
July 2004.
This revised standard is similar to the current
accounting standard, with the exception of the treatment
of actuarial gains and losses. This revised standard
enables us to either:
|
|
recognise actuarial gains and losses directly in the income statement; |
|
|
|
recognise actuarial gains and losses in the income statement using the corridor approach; or |
|
|
|
recognise actuarial gains and losses directly in retained profits. |
Under this revised standard, we have elected to
recognise actuarial gains and losses directly in
retained profits. The actuarial gains and losses are
based on an actuarial valuation of each plan at
reporting date. Other components of pension costs are
recognised in the income statement as a labour expense.
Where appropriate, this additional labour cost is
capitalised as part of our constructed plant and
equipment.
(i) On transition as at 1 July 2004
The Telstra Group adjustment on transition resulted in
the
recognition of a defined benefit asset of $537 million
(Telstra Entity: $529 million), with a corresponding
increase in opening retained profits.
(ii) At 30 June 2005
The cumulative effect on the Telstra Group balance sheet
at 30 June 2005 was to recognise a defined benefit asset
of $247 million, increase property, plant and equipment
by $24 million and decrease retained profits for
actuarial losses by $90 million. Telstra Group labour
expense increased by $175 million and depreciation
expense increased by $1 million for the year ended 30
June 2005
The cumulative effect on the Telstra Entity balance
sheet at 30 June 2005 was to recognise a defined benefit
asset of $242 million, increase property, plant and
equipment by $24 million and decrease retained profits
for actuarial losses by $85 million. Telstra Group
labour expense increased by $176 million and
depreciation expense increased by $1 million for the
year ended 30 June 2005.
(g) AASB 121: The Effects of Changes in Foreign
Exchange Rates (AASB 121)
AASB 121 requires goodwill and fair value adjustments
arising on the acquisition of a foreign controlled
entity to be expressed in the functional currency of the
foreign operation. Previously, we fixed goodwill and
certain fair value adjustments in Australian dollars
based on the exchange rate at the acquisition date.
164
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(g) AASB 121: The Effects of Changes in Foreign
Exchange Rates (AASB 121) (continued)
Under the transitional rules of AASB 1 we have taken
advantage of an exemption that permits application of
AASB 121 retrospectively to goodwill and fair value
adjustments arising in all business combinations that
occurred before the date of transition to A-IFRS. This
exemption allows us to reset the goodwill and fair value
adjustments to the functional currency of the foreign
operations at the original date of acquisition. This
adjustment is primarily attributable to our investments
in the Telstra CSL Group (HKCSL) and TelstraClear Limited
(TelstraClear).
Under AASB 1 we have also applied an exemption that
permitted the resetting of the FCTR to nil as at the
date of transition to A-IFRS.
(i) On transition as at 1 July 2004
The Telstra Group transitional adjustments to reset
goodwill and fair value adjustments of foreign controlled
entities resulted in a decrease
to the FCTR of $297 million, corresponding with an
increase to property, plant and equipment of $3 million,
an increase of $14 million to intangible assets and a
decrease in goodwill of $314 million. The A-IFRS FCTR
following these and other A-IFRS adjustments was $343
million. This FCTR balance was reset to nil with a
corresponding decrease to opening retained profits.
(ii) At 30 June 2005
The cumulative effect on the Telstra Group balance sheet
at 30 June 2005 was to decrease goodwill by $454 million,
increase other intangibles by $9 million, increase
property, plant and equipment by $2 million and decrease
FCTR by $111 million. The impact on the income statement
for the year ended 30 June 2005 was a decrease in other
expenses of $11 million representing a change in the
functional currency of a foreign controlled entity.
(h) AASB 123: Borrowing Costs
In accordance with previous AGAAP, we previously
capitalised borrowing costs incurred in respect of
internally constructed property, plant and equipment and
software assets that met the criteria for qualifying
assets. The benchmark treatment required under A-IFRS is
to expense borrowing costs. AASB 123 does however permit
the alternative treatment of capitalising these costs
where they relate to qualifying assets. We have elected
to change our policy in line with the benchmark treatment
and expense our borrowing costs.
(i) On transition as at 1 July 2004
We transferred the unamortised balance of capitalised
borrowing costs included in property, plant and
equipment and software assets to retained profits. This
gave rise to a reduction in Telstra Group property,
plant and equipment of $399 million (Telstra Entity:
$367 million) and a reduction in software assets of $63
million (Telstra Entity: $63 million), with a
corresponding decrease in opening retained profits.
(ii) At 30 June 2005
For the Telstra Group the effect on the balance sheet at
30 June 2005 was to decrease property, plant and
equipment by $401 million (Telstra Entity: $374 million)
and reduce software assets by $57 million (Telstra
Entity: $57 million). Telstra Group depreciation expense
decreased by $94 million (Telstra Entity: $90 million)
and finance costs increased by $90 million (Telstra
Entity: $90 million) for the year ended 30 June 2005.
(i) AASB 128: Investments in Associates (AASB 128) and
AASB 131: Interests in Joint Ventures (AASB 131)
AASB 128/131 requires amounts that are in substance part
of the net investment in associates or jointly
controlled entities to be accounted for as part of the
carrying value of the investment for the purposes of
equity accounting the results of the associate or
jointly controlled entity. Accordingly, we have
reclassified amounts that are not currently recorded in
the carrying value of our investment in associates or
jointly controlled entities to be treated as an
extension of our equity investment. This treatment gave
rise to the continuation of equity accounting of our
share of the operating losses in respect of
those associates and jointly controlled entities that
are incurring losses and have balances as described
above.
(i) On transition as at 1 July 2004
On transition to AASB 128/131, there was a decrease to
Telstra Group non current receivables of $208 million
representing the capacity prepayment with our joint
venture entity Reach Ltd (Reach). This non current asset
was deemed to be an extension of our investment in Reach
under A-IFRS and was absorbed by the carried forward
losses in Reach not previously recognised. The impact of
this change on the Telstra Group was to decrease opening
retained profits by $348 million for our share of the
accumulated losses, offset by an increase of $140
million to the FCTR for the translation differences on
our investment in Reach. The FCTR attributable to Reach
was reset to nil as detailed in the adjustment outlined
in note 36(g).
165
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(i) AASB 128: Investments in Associates (AASB 128) and
AASB 131: Interests in Joint Ventures (AASB 131)
(continued)
(ii) At 30 June 2005
On 16 April 2005 we swapped our capacity prepayment with
Reach for an Indefeasible Right of Use (IRU). This IRU
was recorded as a deferred expense under previous AGAAP
and was being amortised over the term of the IRU being
15 years. As part of this arrangement, we agreed to fund
Reachs committed capital expenditure together with our
co-shareholder PCCW Limited for the period until 2022,
up to a value of US$106 million each, if required. Our
share was disclosed as a contingent liability under
previous AGAAP.
Under A-IFRS, the IRU was deemed to be an extension of
our investment in Reach, similar to the capacity
prepayment. Furthermore, our commitment to Reach for the
committed capital expenditure required us to recognise
additional equity accounted losses in Reach of $102
million for the year ended 30 June 2005. This gave rise
to a provision of $90 million ($32 million current and
$58 million non current) as at 30 June 2005 for the net
present value of our share of the committed capital
expenditure. Other assets current decreased by $1
million, intangibles decreased by $217 million and trade
and other payables decreased by $1 million. For the year
ended 30 June 2005, finance costs increased by $2
million associated with the unwinding of the present
value discount, amortisation expense decreased by $3
million, finance income decreased by $18 million and
exchange losses decreased by $20 million.
The effect on the Telstra Entity for our commitment to
Reach for the
committed capital expenditure was to recognise a
provision of $90 million ($32 million current and $58
million non current) as at 30 June 2005. Other current
assets decreased by $1 million, intangible assets
increased by $87 million and trade and other payables
decrease by $1 million. For the year ended 30 June 2005,
finance costs increased by $2 million and amortisation
expense increased by $1 million.
Investments accounted for using the equity method
decreased by $3 million as a result of the adoption of
A-IFRS by our jointly controlled and associated
entities. For the year ended 30 June 2005, our share of
equity accounted losses increased by $3 million.
(j) AASB 136: Impairment of Assets (AASB 136)
Our accounting policy under previous AGAAP was to assess
our current and non current assets for impairment by
determining the recoverable amount of those assets. We
wrote down the value of the non current asset where the
carrying amount exceeded recoverable amount. We assessed
recoverable amount for a group of non current assets
where those assets were considered to work together as
one.
With the adoption of AASB 136, impairment of assets is
assessed on the basis of individual cash generating
units. We have assessed our Australian
telecommunications network to be a single cash
generating unit for the purpose of this standard with
the exception of the HFC network. This approach has been
adopted as we consider that, in the generation of our
revenue streams, the delivery of our end products or
services is heavily reliant on the use of one core of
commonly shared communication assets, encompassing the
customer access network and the core network. This
ubiquitous network carries all our telecommunications
traffic throughout Australia.
Under previous AGAAP, we assessed recoverable amount on
this same ubiquitous network basis, and as a result,
there were no initial adjustments to the value of our
network assets under A-IFRS.
Each of our controlled entities, jointly controlled
entities and associated entities has also been assessed,
and generally each significant entity has at least one
separate cash generating unit in its own right. Under
AGAAP, we assessed recoverable amount on a similar
basis, and there is no initial adjustment to the value
of our assets. In accordance with AASB 1, the carrying
amount of goodwill at transition date has been tested
for impairment and no initial impairment losses were
recognised on transition to A-IFRS.
(k) AASB 138: Intangible Assets (AASB 138)
As part of the IFRS project, intangibles recognised
under previous AGAAP, including software assets
developed for internal use and deferred expenditure,
were reviewed to confirm that the criteria in AASB 138
have been met. Software assets developed for internal
use, and deferred expenditure were reclassified from
other current and non current assets to intangible
assets on transition to AASB 138. We have also
reclassified some software assets from property, plant
and equipment to intangible assets for software that is
not an integral part of property, plant and equipment.
Under previous AGAAP, we capitalised the subsidised
component of mobile handsets that were sold as part of
a service contract as a
subscriber acquisition cost. This capitalised balance
was then amortised over the contract term.
UIG 1042 Subscriber Acquisition Costs in the
Telecommunications Industry (UIG 1042) was released by
the AASB in December 2004 and prescribes the appropriate
accounting treatment of subscriber acquisition costs
based on the requirements of AASB 138. Specifically, UIG
1042 requires the cost of telephones provided to
subscribers to be excluded from subscriber acquisition
costs. As a result, under A-IFRS we have elected to
expense mobile handset subsidies as incurred.
166
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(k) AASB 138: Intangible Assets (AASB 138) (continued)
Our subsidiary in Hong Kong, HKCSL, has a licence to
utilise 3G spectrum in Hong Kong until 2016. As part of
this licence agreement, HKCSL are required to make annual
payments for the right to use this spectrum. Under
previous AGAAP we expensed these payments as incurred,
except for those incurred during the construction of our
3G network in Hong Kong which were capitalised as part of
the asset cost.
On adoption of AASB 138 and consistent with other 3G
mobile operators in Hong Kong, the Telstra Group has
recorded an intangible asset for this 3G spectrum
licence, based on the present value of our expected
future payments. This intangible asset is amortised over
the term of the agreement. A corresponding accrual has
also been recorded for our future obligations.
(i) On transition as at 1 July 2004
On transition, other current and non current assets of
the Telstra Group and Telstra Entity decreased by $205
million and $34 million respectively for the write-off
of deferred mobile handset subsidies, with a
corresponding decrease in opening retained profits.
The intangible asset associated with our Hong Kong 3G
spectrum licence amounted to $121 million on transition
in the Telstra Group, representing the present value of
our expected future payments under the licence. Under
previous AGAAP these payments were expensed as incurred,
with certain payments capitalised as part of the cost of
our Hong Kong 3G network. Of the balance of the
intangible asset, $25 million has been reclassified from
property, plant and equipment that was capitalised under
previous AGAAP. Trade and other payables have increased
by $96 million ($3 million current and $93 million non
current).
Software assets developed for internal use and deferred
expenditure were reclassified from other assets and
property, plant and equipment
to intangible assets on transition to A-IFRS. This
reclassification adjustment for the Telstra Group
amounted to $2,601 million (Telstra Entity: $2,375
million) as at transition date. This comprised $286
million (Telstra Entity: $249 million) from other current
assets, $2,292 million (Telstra Entity: $2,126 million)
from other non current assets and $23 million from
property, plant and equipment.
(ii) At 30 June 2005
The write-off of deferred mobile handset subsidies
decreased other current and non current assets of the
Telstra Group and Telstra Entity by $241 million and $62
million respectively. Goods and services purchased for
the year ended 30 June 2005 increased by $64 million.
The recognition of the Hong Kong 3G spectrum licence
increased intangibles by $108 million, decreased
property, plant and equipment by $24 million and
increased trade and other payables by $89 million ($2
million current and $87 million non current) for the
Telstra Group as at 30 June 2005. Other expenses
decreased by $5 million, amortisation increased by $4
million and finance costs increased by $5 million for
the year ended 30 June 2005.
The cumulative effect on the Telstra Group balance sheet
at 30 June 2005 for the reclassification of software and
deferred expenditure was to increase intangibles by
$2,875 million (Telstra Entity: $2,534 million). This
comprised $305 million (Telstra Entity: $264 million)
from other current assets, $2,546 million (Telstra
Entity: $2,270 million) from other non current assets
and $24 million from property, plant and equipment.
(l) Nature of A-IFRS adjustments with effect from 1 July 2004
In the following tables, presentation adjustments
reflect the reclassification of previously recognised
amounts into their A-IFRS categories.
Accounting adjustments reflect the remeasurement of
previously recognised amounts, or the recognition of
additional amounts required under A-IFRS.
167
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of profit under previous AGAAP to A-IFRS for the year ended 30 June 2005 for the consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
36 |
(d) |
|
|
22,657 |
|
|
|
(476 |
) |
|
|
|
|
|
|
22,181 |
|
Other income |
|
|
36 |
(d) |
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,657 |
|
|
|
(215 |
) |
|
|
|
|
|
|
22,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
36(a), |
(f) |
|
|
3,693 |
|
|
|
|
|
|
|
165 |
|
|
|
3,858 |
|
Goods and services purchased |
|
|
36 |
(k) |
|
|
4,147 |
|
|
|
|
|
|
|
64 |
|
|
|
4,211 |
|
Other expenses |
|
|
36(d),(e),(g),(i), |
(k) |
|
|
4,055 |
|
|
|
(215 |
) |
|
|
(25 |
) |
|
|
3,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,895 |
|
|
|
(215 |
) |
|
|
204 |
|
|
|
11,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled and associated entities |
|
|
36(b), |
(i) |
|
|
(9 |
) |
|
|
|
|
|
|
103 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,886 |
|
|
|
(215 |
) |
|
|
307 |
|
|
|
11,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and
amortisation (EBITDA) |
|
|
|
|
|
|
10,771 |
|
|
|
|
|
|
|
(307 |
) |
|
|
10,464 |
|
Depreciation and amortisation |
|
|
36(b),(f),(h),(i), |
(k) |
|
|
3,766 |
|
|
|
|
|
|
|
(237 |
) |
|
|
3,529 |
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
7,005 |
|
|
|
|
|
|
|
(70 |
) |
|
|
6,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
36(a), |
(i) |
|
|
103 |
|
|
|
|
|
|
|
(20 |
) |
|
|
83 |
|
Finance costs |
|
|
36(d),(h),(i), |
(k) |
|
|
839 |
|
|
|
|
|
|
|
124 |
|
|
|
963 |
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
736 |
|
|
|
|
|
|
|
144 |
|
|
|
880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
6,269 |
|
|
|
|
|
|
|
(214 |
) |
|
|
6,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
36 |
(c) |
|
|
1,822 |
|
|
|
|
|
|
|
(76 |
) |
|
|
1,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
4,447 |
|
|
|
|
|
|
|
(138 |
) |
|
|
4,309 |
|
|
|
|
|
|
|
|
168
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of profit under previous AGAAP to A-IFRS for the year ended 30 June 2005 for the Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
36(c), |
(d) |
|
|
19,944 |
|
|
|
(336 |
) |
|
|
223 |
|
|
|
19,831 |
|
Other income |
|
|
36 |
(d) |
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,944 |
|
|
|
(203 |
) |
|
|
223 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
36(a), |
(f) |
|
|
2,916 |
|
|
|
|
|
|
|
166 |
|
|
|
3,082 |
|
Goods and services purchased |
|
|
37 |
(k) |
|
|
2,894 |
|
|
|
|
|
|
|
64 |
|
|
|
2,958 |
|
Other expenses |
|
|
36(d),(e), |
(i) |
|
|
3,666 |
|
|
|
(203 |
) |
|
|
15 |
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,476 |
|
|
|
(203 |
) |
|
|
245 |
|
|
|
9,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and
amortisation (EBITDA) |
|
|
|
|
|
|
10,468 |
|
|
|
|
|
|
|
(22 |
) |
|
|
10,446 |
|
Depreciation and amortisation |
|
|
36(b),(f),(h), |
(i) |
|
|
3,298 |
|
|
|
|
|
|
|
(92 |
) |
|
|
3,206 |
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
7,170 |
|
|
|
|
|
|
|
70 |
|
|
|
7,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
36 |
(a) |
|
|
103 |
|
|
|
|
|
|
|
(2 |
) |
|
|
101 |
|
Finance costs |
|
|
36(h), |
(i) |
|
|
851 |
|
|
|
|
|
|
|
92 |
|
|
|
943 |
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
748 |
|
|
|
|
|
|
|
94 |
|
|
|
842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
6,422 |
|
|
|
|
|
|
|
(24 |
) |
|
|
6,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
36 |
(c) |
|
|
1,777 |
|
|
|
|
|
|
|
105 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
4,645 |
|
|
|
|
|
|
|
(129 |
) |
|
|
4,516 |
|
|
|
|
|
|
|
|
169
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at transition date, 1
July 2004, for the consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
1 July 2004 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
36 |
(a) |
|
|
687 |
|
|
|
|
|
|
|
3 |
|
|
|
690 |
|
Trade and other receivables |
|
|
36(a), |
(m) |
|
|
3,608 |
|
|
|
(192 |
) |
|
|
|
|
|
|
3,416 |
|
Inventories |
|
|
|
|
|
|
229 |
|
|
|
|
|
|
|
|
|
|
|
229 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
169 |
|
Other assets |
|
|
36 |
(k) |
|
|
803 |
|
|
|
(286 |
) |
|
|
(205 |
) |
|
|
312 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,327 |
|
|
|
(309 |
) |
|
|
(202 |
) |
|
|
4,816 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
36(a),(i) |
(m) |
|
|
740 |
|
|
|
(387 |
) |
|
|
(273 |
) |
|
|
80 |
|
Inventories |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
40 |
|
Available for sale investments |
|
|
|
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
80 |
|
Property, plant and equipment |
|
|
36(g),(h),(k) |
|
|
22,863 |
|
|
|
(23 |
) |
|
|
(421 |
) |
|
|
22,419 |
|
Intangibles |
|
|
36(g),(h),(k), |
(m) |
|
|
3,605 |
|
|
|
2,580 |
|
|
|
(242 |
) |
|
|
5,943 |
|
Deferred tax assets |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
238 |
|
|
|
|
|
|
|
238 |
|
Other assets |
|
|
36(f), |
(k) |
|
|
2,326 |
|
|
|
(2,292 |
) |
|
|
503 |
|
|
|
537 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
29,666 |
|
|
|
116 |
|
|
|
(433 |
) |
|
|
29,349 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
34,993 |
|
|
|
(193 |
) |
|
|
(635 |
) |
|
|
34,165 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36 |
(k) |
|
|
2,338 |
|
|
|
|
|
|
|
3 |
|
|
|
2,341 |
|
Borrowings |
|
|
|
|
|
|
3,246 |
|
|
|
|
|
|
|
|
|
|
|
3,246 |
|
Current tax liabilities |
|
|
|
|
|
|
539 |
|
|
|
|
|
|
|
|
|
|
|
539 |
|
Provisions |
|
|
|
|
|
|
358 |
|
|
|
|
|
|
|
|
|
|
|
358 |
|
Revenue received in advance |
|
|
|
|
|
|
1,095 |
|
|
|
|
|
|
|
|
|
|
|
1,095 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,576 |
|
|
|
|
|
|
|
3 |
|
|
|
7,579 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36(e), |
(k) |
|
|
49 |
|
|
|
|
|
|
|
130 |
|
|
|
179 |
|
Borrowings |
|
|
36 |
(m) |
|
|
9,014 |
|
|
|
(429 |
) |
|
|
|
|
|
|
8,585 |
|
Deferred tax liabilities |
|
|
36 |
(c) |
|
|
1,807 |
|
|
|
|
|
|
|
(36 |
) |
|
|
1,771 |
|
Provisions |
|
|
|
|
|
|
778 |
|
|
|
|
|
|
|
|
|
|
|
778 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
410 |
|
|
|
|
|
|
|
410 |
|
Revenue received in advance |
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
12,056 |
|
|
|
(19 |
) |
|
|
94 |
|
|
|
12,131 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
19,632 |
|
|
|
(19 |
) |
|
|
97 |
|
|
|
19,710 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
15,361 |
|
|
|
(174 |
) |
|
|
(732 |
) |
|
|
14,455 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
36 |
(a) |
|
|
6,073 |
|
|
|
(174 |
) |
|
|
(113 |
) |
|
|
5,786 |
|
Reserves |
|
|
36(c),(g), |
(i) |
|
|
(105 |
) |
|
|
|
|
|
|
154 |
|
|
|
49 |
|
Retained profits |
|
|
|
|
|
|
9,391 |
|
|
|
|
|
|
|
(773 |
) |
|
|
8,618 |
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
15,359 |
|
|
|
(174 |
) |
|
|
(732 |
) |
|
|
14,453 |
|
Minority interests |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
15,361 |
|
|
|
(174 |
) |
|
|
(732 |
) |
|
|
14,455 |
|
|
|
|
|
|
|
|
170
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at transition date, 1
July 2004, for the Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
|
1 July 2004 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
36 |
(a) |
|
|
543 |
|
|
|
|
|
|
|
3 |
|
|
|
546 |
|
Trade and other receivables |
|
|
36(a), |
(m) |
|
|
3,258 |
|
|
|
(192 |
) |
|
|
|
|
|
|
3,066 |
|
Inventories |
|
|
|
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
206 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
169 |
|
Other assets |
|
|
36 |
(k) |
|
|
687 |
|
|
|
(249 |
) |
|
|
(205 |
) |
|
|
233 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
4,694 |
|
|
|
(272 |
) |
|
|
(202 |
) |
|
|
4,220 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
36(a), |
(m) |
|
|
1,047 |
|
|
|
(387 |
) |
|
|
(65 |
) |
|
|
595 |
|
Inventories |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
32 |
|
Investments other |
|
|
36 |
(c) |
|
|
5,435 |
|
|
|
|
|
|
|
77 |
|
|
|
5,512 |
|
Property, plant and equipment |
|
|
36 |
(h) |
|
|
21,600 |
|
|
|
|
|
|
|
(367 |
) |
|
|
21,233 |
|
Intangibles |
|
|
36(h),(k), |
(m) |
|
|
236 |
|
|
|
2,354 |
|
|
|
(63 |
) |
|
|
2,527 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
238 |
|
|
|
|
|
|
|
238 |
|
Other assets |
|
|
36(f), |
(k) |
|
|
2,160 |
|
|
|
(2,126 |
) |
|
|
495 |
|
|
|
529 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,520 |
|
|
|
79 |
|
|
|
77 |
|
|
|
30,676 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,214 |
|
|
|
(193 |
) |
|
|
(125 |
) |
|
|
34,896 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
1,891 |
|
|
|
|
|
|
|
|
|
|
|
1,891 |
|
Borrowings |
|
|
|
|
|
|
5,527 |
|
|
|
|
|
|
|
|
|
|
|
5,527 |
|
Current tax liabilities |
|
|
|
|
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
512 |
|
Provisions |
|
|
|
|
|
|
331 |
|
|
|
|
|
|
|
|
|
|
|
331 |
|
Revenue received in advance |
|
|
|
|
|
|
885 |
|
|
|
|
|
|
|
|
|
|
|
885 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
9,146 |
|
|
|
|
|
|
|
|
|
|
|
9,146 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36 |
(e) |
|
|
46 |
|
|
|
|
|
|
|
37 |
|
|
|
83 |
|
Borrowings |
|
|
36 |
(m) |
|
|
9,014 |
|
|
|
(429 |
) |
|
|
|
|
|
|
8,585 |
|
Deferred tax liabilities |
|
|
36 |
(c) |
|
|
1,748 |
|
|
|
|
|
|
|
248 |
|
|
|
1,996 |
|
Provisions |
|
|
|
|
|
|
740 |
|
|
|
|
|
|
|
|
|
|
|
740 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
410 |
|
|
|
|
|
|
|
410 |
|
Revenue received in advance |
|
|
|
|
|
|
398 |
|
|
|
|
|
|
|
|
|
|
|
398 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
11,946 |
|
|
|
(19 |
) |
|
|
285 |
|
|
|
12,212 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
21,092 |
|
|
|
(19 |
) |
|
|
285 |
|
|
|
21,358 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
14,122 |
|
|
|
(174 |
) |
|
|
(410 |
) |
|
|
13,538 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
36 |
(a) |
|
|
6,073 |
|
|
|
(174 |
) |
|
|
(113 |
) |
|
|
5,786 |
|
Reserves |
|
|
36 |
(c) |
|
|
277 |
|
|
|
|
|
|
|
(83 |
) |
|
|
194 |
|
Retained profits |
|
|
|
|
|
|
7,772 |
|
|
|
|
|
|
|
(214 |
) |
|
|
7,558 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
14,122 |
|
|
|
(174 |
) |
|
|
(410 |
) |
|
|
13,538 |
|
|
|
|
|
|
|
|
171
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at 30 June 2005 for the
consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
36 |
(a) |
|
|
1,540 |
|
|
|
|
|
|
|
8 |
|
|
|
1,548 |
|
Trade and other receivables |
|
|
36(a), |
(m) |
|
|
3,577 |
|
|
|
(28 |
) |
|
|
|
|
|
|
3,549 |
|
Inventories |
|
|
|
|
|
|
232 |
|
|
|
|
|
|
|
|
|
|
|
232 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Other assets |
|
|
36(i), |
(k) |
|
|
796 |
|
|
|
(305 |
) |
|
|
(242 |
) |
|
|
249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
6,145 |
|
|
|
(329 |
) |
|
|
(234 |
) |
|
|
5,582 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
36 |
(a) |
|
|
272 |
|
|
|
(131 |
) |
|
|
(44 |
) |
|
|
97 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
36(b), |
(i) |
|
|
49 |
|
|
|
|
|
|
|
(1 |
) |
|
|
48 |
|
Property, plant and equipment |
|
|
36(d),(f),(g),(h), |
(k) |
|
|
23,351 |
|
|
|
(24 |
) |
|
|
(436 |
) |
|
|
22,891 |
|
Intangibles |
|
|
36(b),(c),(g),(h),(i),(k), |
(m) |
|
|
3,868 |
|
|
|
2,864 |
|
|
|
(403 |
) |
|
|
6,329 |
|
Deferred tax assets |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Other assets |
|
|
36(f), |
(k) |
|
|
2,608 |
|
|
|
(2,546 |
) |
|
|
185 |
|
|
|
247 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,165 |
|
|
|
163 |
|
|
|
(699 |
) |
|
|
29,629 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
36,310 |
|
|
|
(166 |
) |
|
|
(933 |
) |
|
|
35,211 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36(d),(i), |
(k) |
|
|
2,809 |
|
|
|
|
|
|
|
(2 |
) |
|
|
2,807 |
|
Borrowings |
|
|
36 |
(m) |
|
|
1,518 |
|
|
|
(11 |
) |
|
|
|
|
|
|
1,507 |
|
Current tax liabilities |
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
|
|
|
|
534 |
|
Provisions |
|
|
36 |
(i) |
|
|
389 |
|
|
|
|
|
|
|
32 |
|
|
|
421 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Revenue received in advance |
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
6,382 |
|
|
|
|
|
|
|
30 |
|
|
|
6,412 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36(d),(e), |
(k) |
|
|
122 |
|
|
|
|
|
|
|
128 |
|
|
|
250 |
|
Borrowings |
|
|
36 |
(m) |
|
|
11,816 |
|
|
|
(875 |
) |
|
|
|
|
|
|
10,941 |
|
Deferred tax liabilities |
|
|
36 |
(c) |
|
|
1,885 |
|
|
|
|
|
|
|
(81 |
) |
|
|
1,804 |
|
Provisions |
|
|
36 |
(i) |
|
|
836 |
|
|
|
|
|
|
|
58 |
|
|
|
894 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
864 |
|
|
|
|
|
|
|
864 |
|
Revenue received in advance |
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,047 |
|
|
|
(11 |
) |
|
|
105 |
|
|
|
15,141 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
21,429 |
|
|
|
(11 |
) |
|
|
135 |
|
|
|
21,553 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
14,881 |
|
|
|
(155 |
) |
|
|
(1,068 |
) |
|
|
13,658 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
36 |
(a) |
|
|
5,793 |
|
|
|
(155 |
) |
|
|
(102 |
) |
|
|
5,536 |
|
Reserves |
|
|
36(c),(g), |
(i) |
|
|
(157 |
) |
|
|
|
|
|
|
4 |
|
|
|
(153 |
) |
Retained profits |
|
|
|
|
|
|
9,243 |
|
|
|
|
|
|
|
(970 |
) |
|
|
8,273 |
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
14,879 |
|
|
|
(155 |
) |
|
|
(1,068 |
) |
|
|
13,656 |
|
Minority interests |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
14,881 |
|
|
|
(155 |
) |
|
|
(1,068 |
) |
|
|
13,658 |
|
|
|
|
|
|
|
|
172
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at 30 June 2005 for the
Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
|
30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
36 |
(a) |
|
|
1,360 |
|
|
|
|
|
|
|
8 |
|
|
|
1,368 |
|
Trade and other receivables |
|
|
36(a), |
(m) |
|
|
3,566 |
|
|
|
(28 |
) |
|
|
|
|
|
|
3,538 |
|
Inventories |
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
194 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Other assets |
|
|
36(i), |
(k) |
|
|
679 |
|
|
|
(264 |
) |
|
|
(242 |
) |
|
|
173 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,799 |
|
|
|
(288 |
) |
|
|
(234 |
) |
|
|
5,277 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
36 |
(a) |
|
|
290 |
|
|
|
(131 |
) |
|
|
(44 |
) |
|
|
115 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
36 |
(i) |
|
|
44 |
|
|
|
|
|
|
|
(3 |
) |
|
|
41 |
|
Investments other |
|
|
36 |
(c) |
|
|
6,029 |
|
|
|
|
|
|
|
107 |
|
|
|
6,136 |
|
Property, plant and equipment |
|
|
36(f), |
(h) |
|
|
21,573 |
|
|
|
|
|
|
|
(350 |
) |
|
|
21,223 |
|
Intangibles |
|
|
36(b),(h),(i),(k), |
(m) |
|
|
194 |
|
|
|
2,523 |
|
|
|
34 |
|
|
|
2,751 |
|
Other assets |
|
|
36(f), |
(k) |
|
|
2,332 |
|
|
|
(2,270 |
) |
|
|
180 |
|
|
|
242 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,477 |
|
|
|
122 |
|
|
|
(76 |
) |
|
|
30,523 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
36,276 |
|
|
|
(166 |
) |
|
|
(310 |
) |
|
|
35,800 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36 |
(i) |
|
|
1,957 |
|
|
|
|
|
|
|
(1 |
) |
|
|
1,956 |
|
Borrowings |
|
|
36 |
(m) |
|
|
3,903 |
|
|
|
(11 |
) |
|
|
|
|
|
|
3,892 |
|
Current tax liabilities |
|
|
|
|
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
519 |
|
Provisions |
|
|
36 |
(i) |
|
|
324 |
|
|
|
|
|
|
|
32 |
|
|
|
356 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Revenue received in advance |
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,615 |
|
|
|
|
|
|
|
31 |
|
|
|
7,646 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36 |
(e) |
|
|
13 |
|
|
|
|
|
|
|
48 |
|
|
|
61 |
|
Borrowings |
|
|
36 |
(m) |
|
|
11,782 |
|
|
|
(875 |
) |
|
|
|
|
|
|
10,907 |
|
Deferred tax liabilities |
|
|
36 |
(c) |
|
|
1,826 |
|
|
|
|
|
|
|
135 |
|
|
|
1,961 |
|
Provisions |
|
|
36 |
(i) |
|
|
779 |
|
|
|
|
|
|
|
58 |
|
|
|
837 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
864 |
|
|
|
|
|
|
|
864 |
|
Revenue received in advance |
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
14,781 |
|
|
|
(11 |
) |
|
|
241 |
|
|
|
15,011 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
22,396 |
|
|
|
(11 |
) |
|
|
272 |
|
|
|
22,657 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
13,880 |
|
|
|
(155 |
) |
|
|
(582 |
) |
|
|
13,143 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
36 |
(a) |
|
|
5,793 |
|
|
|
(155 |
) |
|
|
(102 |
) |
|
|
5,536 |
|
Reserves |
|
|
36 |
(c) |
|
|
277 |
|
|
|
|
|
|
|
(83 |
) |
|
|
194 |
|
Retained profits |
|
|
|
|
|
|
7,810 |
|
|
|
|
|
|
|
(397 |
) |
|
|
7,413 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
13,880 |
|
|
|
(155 |
) |
|
|
(582 |
) |
|
|
13,143 |
|
|
|
|
|
|
|
|
173
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of equity under previous AGAAP to A-IFRS for the consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
Consoli- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Asset |
|
|
currency |
|
|
|
|
|
|
dation |
|
|
Retained |
|
|
Minority |
|
|
|
|
|
|
|
|
|
|
capital |
|
|
revaluation |
|
|
translation |
|
|
General |
|
|
fair value |
|
|
profits |
|
|
interests |
|
|
Total |
|
|
|
|
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Balance at 1 July 2004 under AGAAP |
|
|
|
|
|
|
6,073 |
|
|
|
32 |
|
|
|
(186 |
) |
|
|
5 |
|
|
|
44 |
|
|
|
9,391 |
|
|
|
2 |
|
|
|
15,361 |
|
Share-based payments |
|
|
36 |
(a) |
|
|
(287 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
(236 |
) |
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
36 |
|
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
(37 |
) |
Net defined benefit asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
537 |
|
|
|
|
|
|
|
537 |
|
Foreign currency |
|
|
36 |
(g) |
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
(343 |
) |
|
|
|
|
|
|
(297 |
) |
Expensing of borrowing costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(462 |
) |
|
|
|
|
|
|
(462 |
) |
Equity accounting for Reach Ltd |
|
|
36 |
(i) |
|
|
|
|
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
(348 |
) |
|
|
|
|
|
|
(208 |
) |
Expensing handset subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(239 |
) |
|
|
|
|
|
|
(239 |
) |
|
|
|
|
|
|
|
Balance at 1 July 2004 under A-IFRS |
|
|
|
|
|
|
5,786 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
44 |
|
|
|
8,618 |
|
|
|
2 |
|
|
|
14,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2005 under AGAAP |
|
|
|
|
|
|
5,793 |
|
|
|
32 |
|
|
|
(231 |
) |
|
|
4 |
|
|
|
38 |
|
|
|
9,243 |
|
|
|
2 |
|
|
|
14,881 |
|
Share-based payments |
|
|
36 |
(a) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
(191 |
) |
Cease amortisation of goodwill |
|
|
36 |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
147 |
|
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(32 |
) |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
167 |
|
|
|
|
|
|
|
144 |
|
Deferred payment for equipment |
|
|
36 |
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
|
|
|
|
(27 |
) |
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
(48 |
) |
Net defined benefit asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271 |
|
|
|
|
|
|
|
271 |
|
Foreign currency |
|
|
36 |
(g) |
|
|
|
|
|
|
|
|
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
(332 |
) |
|
|
|
|
|
|
(443 |
) |
Expensing of borrowing costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(458 |
) |
|
|
|
|
|
|
(458 |
) |
Equity accounting for Reach Ltd |
|
|
36 |
(i) |
|
|
|
|
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
(450 |
) |
|
|
|
|
|
|
(310 |
) |
Recognition of Hong Kong 3G spectrum
licence |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(5 |
) |
Expensing handset subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(303 |
) |
|
|
|
|
|
|
(303 |
) |
|
|
|
|
|
|
|
Balance at 30 June 2005 under A-IFRS |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
(195 |
) |
|
|
4 |
|
|
|
38 |
|
|
|
8,273 |
|
|
|
2 |
|
|
|
13,658 |
|
|
|
|
|
|
|
|
174
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of equity under previous AGAAP to A-IFRS for the Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Asset |
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
capital |
|
|
|
revaluation |
|
General |
|
|
profits |
|
|
Total |
|
|
|
|
|
|
|
$m |
|
|
|
$m |
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
Balance at 1 July 2004
under AGAAP |
|
|
|
|
|
|
6,073 |
|
|
|
277 |
|
|
|
|
|
|
|
7,772 |
|
|
|
14,122 |
|
Share-based
payments |
|
|
36 |
(a) |
|
|
(287 |
) |
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
(236 |
) |
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
(88 |
) |
|
|
(171 |
) |
Property, plant and
equipment |
|
|
36 |
(d) |
|
|
|
|
|
|
(194 |
) |
|
|
194 |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
(37 |
) |
Net defined benefit
asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
529 |
|
|
|
529 |
|
Expensing of borrowing
costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(430 |
) |
|
|
(430 |
) |
Expensing handset
subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(239 |
) |
|
|
(239 |
) |
|
|
|
|
|
|
|
Balance at 1 July 2004
under A-IFRS |
|
|
|
|
|
|
5,786 |
|
|
|
|
|
|
|
194 |
|
|
|
7,558 |
|
|
|
13,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June
2005 under AGAAP |
|
|
|
|
|
|
5,793 |
|
|
|
277 |
|
|
|
|
|
|
|
7,810 |
|
|
|
13,880 |
|
Share-based
payments |
|
|
36 |
(a) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
(191 |
) |
Cease amortisation
of goodwill |
|
|
36 |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
55 |
|
|
|
(28 |
) |
Property, plant and
equipment |
|
|
36 |
(d) |
|
|
|
|
|
|
(194 |
) |
|
|
194 |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
(48 |
) |
Net defined benefit
asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266 |
|
|
|
266 |
|
Expensing of borrowing
costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(431 |
) |
|
|
(431 |
) |
Accounting for
investments |
|
|
36 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(6 |
) |
Expensing handset
subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(303 |
) |
|
|
(303 |
) |
|
|
|
|
|
|
|
Balance at 30 June
2005 under A-IFRS |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
194 |
|
|
|
7,413 |
|
|
|
13,143 |
|
|
|
|
|
|
|
|
175
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of the statement of cash flows under previous AGAAP to A-IFRS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2005 |
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Previous |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
|
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
Adjustments |
|
|
A-IFRS |
|
|
AGAAP |
|
|
Adjustments |
|
|
A-IFRS |
|
|
|
|
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Cash flows from operating activities |
|
(i),(ii),(iii) |
|
|
8,163 |
|
|
|
797 |
|
|
|
8,960 |
|
|
|
7,742 |
|
|
|
810 |
|
|
|
8,552 |
|
Cash flows from investing activities |
|
(i),(iii),(iv),(v) |
|
|
(3,809 |
) |
|
|
43 |
|
|
|
(3,766 |
) |
|
|
(2,890 |
) |
|
|
80 |
|
|
|
(2,810 |
) |
Cash flows from financing activities |
|
(ii),(iv),(v) |
|
|
(3,512 |
) |
|
|
(835 |
) |
|
|
(4,347 |
) |
|
|
(4,035 |
) |
|
|
(885 |
) |
|
|
(4,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
|
(v) |
|
|
842 |
|
|
|
5 |
|
|
|
847 |
|
|
|
817 |
|
|
|
5 |
|
|
|
822 |
|
|
|
|
|
|
|
|
|
|
As a result of the adoption of A-IFRS, the following
reclassifications have been made to the statement of cash flows:
(i) |
|
Interest received has been reclassified from operating
activities to investing activities (Telstra Group: $80 million,
Telstra Entity: $81 million); |
|
(ii) |
|
Borrowing costs paid has been reclassified from operating
activities to cash flows from financing activities and renamed
finance costs (Telstra Group: $879 million, Telstra Entity: $892
million); |
|
(iii) |
|
Dividends received are classified as cash flows from
investing activities after previously being included in cash
flows from operating activities (Telstra Group: $2 million,
Telstra Entity: $1 million); |
|
(iv) |
|
Loans to jointly controlled and associated entities was
reclassified from financing activities to investing activities
(Telstra Group: $37 million, Telstra Entity: nil); and |
|
(v) |
|
Adjustments required as a result of the consolidation
of Growthshare. For further information refer to note 36(a). |
176
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2005
(m) AASB 132: Financial Instruments: Disclosure and
Presentation (AASB 132), AASB 139: Financial Instruments:
Recognition and Measurement (AASB 139) and AASB 7: Financial
Instruments: Disclosures (AASB 7)
We have elected to apply the exemption available under AASB 1 to
apply AASB 132: Financial Instruments: Disclosure and
Presentation and AASB 139: Financial Instruments: Recognition
and Measurement from 1 July 2005. Accordingly, we have changed
our accounting policies for financial instruments from 1 July
2005.
In addition, we have elected to early adopt AASB 7 from 1 July
2005. AASB 7 supersedes the disclosure requirements, but not the
presentation requirements of AASB 132.
The transitional rules for first time adoption of A-IFRS required
that we restate our comparative financial report using A-IFRS,
except for financial instruments within the scope of AASB 132 and
AASB 139 where comparative information was not required to be
restated. The early adoption of AASB 7 did not require
comparative information for fiscal 2005 to be restated and
disclosed. Accordingly, we have applied previous AGAAP in the
comparative information on financial instruments within the scope
of AASB 132 and AASB 139.
Under previous AGAAP disclosures, derivative financial
instruments were classified within other assets and other
liabilities. For comparative purposes these previous AGAAP
amounts have been reclassified to derivative financial assets or
liabilities on the balance sheet on transition to A-IFRS. The
effect of changes in the accounting policies for financial
instruments including derivatives, as a result of the adoption of
AASB 132 and AASB 139 as at 1 July 2005 is shown below.
177
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(m) Reconciliation of balance sheet under A-IFRS for AASB 132/139 adoption as at 1 July 2005
for the consolidated Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
A-IFRS |
|
|
AASB 132/139 |
|
|
A-IFRS |
|
|
|
|
|
|
|
30 June 2005 |
|
|
adjustments |
|
|
1 July 2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
1,548 |
|
|
|
|
|
|
|
1,548 |
|
Trade and other receivables |
|
|
|
|
|
|
3,549 |
|
|
|
|
|
|
|
3,549 |
|
Inventories |
|
|
|
|
|
|
232 |
|
|
|
|
|
|
|
232 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
4 |
|
|
|
6 |
|
|
|
10 |
|
Prepayments |
|
|
|
|
|
|
249 |
|
|
|
|
|
|
|
249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,582 |
|
|
|
6 |
|
|
|
5,588 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
|
|
97 |
|
|
|
|
|
|
|
97 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
48 |
|
Property, plant and equipment |
|
|
|
|
|
|
22,891 |
|
|
|
|
|
|
|
22,891 |
|
Intangibles |
|
|
|
|
|
|
6,329 |
|
|
|
|
|
|
|
6,329 |
|
Deferred tax assets |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
|
|
|
|
512 |
|
|
|
512 |
|
Defined benefit assets |
|
|
|
|
|
|
247 |
|
|
|
|
|
|
|
247 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
29,629 |
|
|
|
512 |
|
|
|
30,141 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,211 |
|
|
|
518 |
|
|
|
35,729 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
2,807 |
|
|
|
|
|
|
|
2,807 |
|
Borrowings |
|
(ii) |
|
|
1,507 |
|
|
|
3 |
|
|
|
1,510 |
|
Current tax liabilities |
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
534 |
|
Provisions |
|
|
|
|
|
|
421 |
|
|
|
|
|
|
|
421 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
11 |
|
|
|
5 |
|
|
|
16 |
|
Revenue received in advance |
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
6,412 |
|
|
|
8 |
|
|
|
6,420 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
250 |
|
|
|
|
|
|
|
250 |
|
Borrowings |
|
(ii) |
|
|
10,941 |
|
|
|
219 |
|
|
|
11,160 |
|
Deferred tax liabilities |
|
(iii) |
|
|
1,804 |
|
|
|
32 |
|
|
|
1,836 |
|
Provisions |
|
|
|
|
|
|
894 |
|
|
|
|
|
|
|
894 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
864 |
|
|
|
185 |
|
|
|
1,049 |
|
Revenue received in advance |
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,141 |
|
|
|
436 |
|
|
|
15,577 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
21,553 |
|
|
|
444 |
|
|
|
21,997 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
13,658 |
|
|
|
74 |
|
|
|
13,732 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
5,536 |
|
Reserves |
|
(iv) |
|
|
(153 |
) |
|
|
79 |
|
|
|
(74 |
) |
Retained profits |
|
|
(v |
) |
|
|
8,273 |
|
|
|
(5 |
) |
|
|
8,268 |
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
13,656 |
|
|
|
74 |
|
|
|
13,730 |
|
|
|
|
|
|
|
|
Minority interests |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
13,658 |
|
|
|
74 |
|
|
|
13,732 |
|
|
|
|
|
|
|
|
178
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(m) Reconciliation of balance sheet under A-IFRS for AASB 132/139 adoption as at 1 July 2005
for the Telstra Entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
|
|
|
|
A-IFRS |
|
|
AASB 132/139 |
|
|
A-IFRS |
|
|
|
|
|
|
|
30 June 2005 |
|
|
adjustments |
|
|
1 July 2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
1,368 |
|
|
|
|
|
|
|
1,368 |
|
Trade and other receivables |
|
|
|
|
|
|
3,538 |
|
|
|
3 |
|
|
|
3,541 |
|
Inventories |
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
194 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
4 |
|
|
|
6 |
|
|
|
10 |
|
Prepayments |
|
|
|
|
|
|
173 |
|
|
|
|
|
|
|
173 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,277 |
|
|
|
9 |
|
|
|
5,286 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
|
|
115 |
|
|
|
1 |
|
|
|
116 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
41 |
|
Investments other |
|
|
|
|
|
|
6,136 |
|
|
|
|
|
|
|
6,136 |
|
Property, plant and equipment |
|
|
|
|
|
|
21,223 |
|
|
|
|
|
|
|
21,223 |
|
Intangibles |
|
|
|
|
|
|
2,751 |
|
|
|
|
|
|
|
2,751 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
|
|
|
|
512 |
|
|
|
512 |
|
Defined benefit assets |
|
|
|
|
|
|
242 |
|
|
|
|
|
|
|
242 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,523 |
|
|
|
513 |
|
|
|
31,036 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,800 |
|
|
|
522 |
|
|
|
36,322 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
1,956 |
|
|
|
|
|
|
|
1,956 |
|
Borrowings |
|
(ii) |
|
|
3,892 |
|
|
|
3 |
|
|
|
3,895 |
|
Current tax liabilities |
|
|
|
|
|
|
519 |
|
|
|
|
|
|
|
519 |
|
Provisions |
|
|
|
|
|
|
356 |
|
|
|
|
|
|
|
356 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
11 |
|
|
|
5 |
|
|
|
16 |
|
Revenue received in advance |
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,646 |
|
|
|
8 |
|
|
|
7,654 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
61 |
|
|
|
1 |
|
|
|
62 |
|
Borrowings |
|
(ii) |
|
|
10,907 |
|
|
|
219 |
|
|
|
11,126 |
|
Deferred tax liabilities |
|
(iii) |
|
|
1,961 |
|
|
|
32 |
|
|
|
1,993 |
|
Provisions |
|
|
|
|
|
|
837 |
|
|
|
|
|
|
|
837 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
864 |
|
|
|
185 |
|
|
|
1,049 |
|
Revenue received in advance |
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,011 |
|
|
|
437 |
|
|
|
15,448 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
22,657 |
|
|
|
445 |
|
|
|
23,102 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
13,143 |
|
|
|
77 |
|
|
|
13,220 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
5,536 |
|
Reserves |
|
(iv) |
|
|
194 |
|
|
|
82 |
|
|
|
276 |
|
Retained profits |
|
|
(v |
) |
|
|
7,413 |
|
|
|
(5 |
) |
|
|
7,408 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
13,143 |
|
|
|
77 |
|
|
|
13,220 |
|
|
|
|
|
|
|
|
179
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(m) AASB 132: Financial Instruments: Disclosure and
Presentation (AASB 132),
AASB 139: Financial Instruments: Recognition and Measurement
(AASB 139) and
AASB 7: Financial Instruments: Disclosures (AASB 7) (continued)
Adjustments were made at the date of transition (1 July 2005) to
restate the opening balance sheet of the Telstra Group to a
position consistent with the accounting policies specified in
note 2. These are listed below. Also included is where the
transitional provisions will have an effect on future periods.
(i) From 1 July 2005, the recognition and measurement of all
derivatives (including any embedded derivatives) is at fair
value. Changes in fair value are either taken to the income
statement or an equity reserve. At 1 July 2005, a $328 million
increase in net assets for the Telstra Group and Telstra Entity
was recognised representing:
|
|
a gain of $333 million on the remeasurement of our interest rate swaps and cross currency swaps
to fair value; and |
|
|
|
a loss of $5 million on the remeasurement of forward foreign exchange contracts to fair value. |
These adjustments are reflected in the previous table as:
|
|
an increase in current assets (derivative financial assets) of $6 million for the Telstra Group
and the Telstra Entity; |
|
|
|
an increase in non current assets (derivative financial assets) of $512 million for the Telstra
Group and Telstra Entity; |
|
|
|
offset by an increase in current liabilities (derivative financial liabilities) of $5
million for the Telstra Group and Telstra Entity; and |
|
|
|
an increase in non current liabilities (derivative financial liabilities) of $185 million for the
Telstra Group and Telstra Entity. |
At 1 July 2005, there were no material embedded derivatives
which required separate measurement and reporting.
(ii) From 1 July 2005, the carrying value of the hedged item in
fair value hedges is adjusted for fair value movements
attributable to the hedged risk. At 1 July 2005 a loss of $222
million was recognised for the Telstra Group and Telstra Entity
on the remeasurement of our foreign currency borrowings in fair
value hedges. This loss is capped such that the adjustment is the
lower of:
|
|
the remeasurement to fair value of the hedged item for the designated hedged risk; and |
|
|
|
the remeasurement to fair value of the hedging instrument. |
At 1 July 2005, the impact of capping the fair value movement
on our foreign currency borrowings in fair value hedges was $70
million for both the Telstra Group and Telstra Entity. This
capping amount will be amortised to the income statement on an
effective yield to maturity basis over the term of the underlying
borrowing.
This adjustment is reflected in the above table as an increase
in current borrowings of $3 million and an increase in non
current borrowings of $219 million for both the Telstra Group
and Telstra Entity.
(iii) At 1 July 2005, a $32 million increase in non current
deferred tax liabilities was recognised for both the Telstra
Group and Telstra Entity, representing the tax effect of the
above adjustments.
(iv) From 1 July 2005, the effective portion of the movement in
fair value of derivatives accounted for as cash flow hedges is
deferred in equity until such time as the hedged item affects
profit or loss. The ineffective portion is recognised immediately
in the income statement. At 1 July 2005 a post tax net increase
in reserves of $79 million for the Telstra Group and $82 million
for the Telstra Entity was recognised representing:
|
|
an increase of $81 million for both the Telstra Group and Telstra Entity to the cash flow hedging
reserve, comprising the deferred portion of the fair value of our interest rate swaps and cross
currency swaps in cash flow hedges relating to our foreign currency borrowings; and |
|
|
|
a decrease of $2 million (Telstra Entity: an increase of $1 million) to the cash flow
hedging reserve, comprising the deferred portion of the fair value of our forward foreign exchange
contracts in cash flow hedges of highly probable forecast transactions. |
(v) At 1 July 2005, the reduction to retained earnings of $5
million for both the Telstra Group and Telstra Entity comprised:
|
|
a decrease of $222 million on the remeasurement of our foreign currency borrowings in fair value
hedges; |
|
|
|
an increase of $215 million on the remeasurement of our derivatives, excluding the portion
deferred in equity relating to our cash flow hedges; and |
|
|
|
an increase of $2 million for the tax effect. |
(vi) From 1 July 2005, movement in the fair value of derivatives
accounted for as fair value hedges, together with the gain or
loss on the related hedged item attributable to the hedged risk
will be recognised in the income statement.
180
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures
Reconciliations to financial reports prepared using USGAAP
Our consolidated financial report is prepared in accordance with
the Australian equivalents of International Financial Reporting
Standards (A-IFRS), which differs in certain respects from the
accounting principles generally accepted in the United States
(USGAAP). The significant differences between A-IFRS and USGAAP
are presented throughout note 37.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Reconciliation of net income to USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-IFRS net income reported in income statement |
|
|
|
|
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments required to agree with USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
37 |
(c) |
|
|
(26 |
) |
|
|
(19 |
) |
|
|
(61 |
) |
Borrowing costs |
|
|
37 |
(d) |
|
|
(27 |
) |
|
|
(20 |
) |
|
|
(18 |
) |
Investments |
|
|
37 |
(e) |
|
|
|
|
|
|
|
|
|
|
17 |
|
Retirement benefit (expense)/gain |
|
|
37 |
(f) |
|
|
(44 |
) |
|
|
(33 |
) |
|
|
1 |
|
Income tax expense |
|
|
37 |
(g) |
|
|
(85 |
) |
|
|
(63 |
) |
|
|
(10 |
) |
Employee compensation expense |
|
|
37 |
(h) |
|
|
|
|
|
|
|
|
|
|
(7 |
) |
Derivative financial instruments and hedging activities |
|
|
37 |
(i) |
|
|
192 |
|
|
|
144 |
|
|
|
(96 |
) |
CSL New World Mobility Limited (formerly Telstra CSL Limited) |
|
|
37 |
(j) |
|
|
(634 |
) |
|
|
(471 |
) |
|
|
|
|
Fair value / general reserve adjustments |
|
|
37 |
(k) |
|
|
|
|
|
|
|
|
|
|
5 |
|
Redundancy and restructuring provision |
|
|
37 |
(m) |
|
|
161 |
|
|
|
119 |
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(n) |
|
|
|
|
|
|
|
|
|
|
64 |
|
Cumulative effect of changes in accounting principles, net of tax |
|
|
37 |
(b) |
|
|
(245 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income per USGAAP |
|
|
|
|
|
|
2,473 |
|
|
|
1,838 |
|
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement measured and classified per USGAAP(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
|
22,779 |
|
|
|
16,909 |
|
|
|
22,167 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
4,381 |
|
|
|
3,252 |
|
|
|
3,865 |
|
Goods and services purchased (ii) |
|
|
|
|
|
|
4,235 |
|
|
|
3,144 |
|
|
|
3,442 |
|
Depreciation and amortisation |
|
|
|
|
|
|
4,871 |
|
|
|
3,616 |
|
|
|
3,715 |
|
Other operating expenses |
|
|
|
|
|
|
4,829 |
|
|
|
3,585 |
|
|
|
4,556 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
18,316 |
|
|
|
13,597 |
|
|
|
15,578 |
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
4,463 |
|
|
|
3,312 |
|
|
|
6,589 |
|
Net interest expense |
|
|
|
|
|
|
(672 |
) |
|
|
(499 |
) |
|
|
(767 |
) |
Share of net gain/(loss) of jointly controlled and associated entities |
|
|
|
|
|
|
5 |
|
|
|
4 |
|
|
|
(94 |
) |
Other income |
|
|
|
|
|
|
387 |
|
|
|
288 |
|
|
|
232 |
|
|
|
|
|
|
|
|
Net income before income tax expense and minority interests |
|
|
|
|
|
|
4,183 |
|
|
|
3,105 |
|
|
|
5,960 |
|
Income tax expense |
|
|
37 |
(g) |
|
|
1,465 |
|
|
|
1,086 |
|
|
|
1,756 |
|
|
|
|
|
|
|
|
Net income before cumulative effect adjustments |
|
|
|
|
|
|
2,718 |
|
|
|
2,019 |
|
|
|
4,204 |
|
Cumulative effect of changes in accounting principles, net of tax |
|
|
37 |
(b) |
|
|
(245 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income per USGAAP |
|
|
|
|
|
|
2,473 |
|
|
|
1,838 |
|
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¢ |
|
|
US¢ |
|
|
¢ |
|
|
|
|
|
|
|
|
Dividends paid per share per USGAAP(iii) |
|
|
|
|
|
|
40.0 |
|
|
|
29.7 |
|
|
|
33.0 |
|
|
|
|
|
|
|
|
181
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared using USGAAP
(continued)
USGAAP earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
¢ |
|
|
US¢ |
|
|
¢ |
|
|
|
|
Basic earnings per share before cumulative effect of change in
accounting principles |
|
|
|
|
|
|
22.0 |
|
|
|
16.3 |
|
|
|
33.8 |
|
Cumulative effect of change in accounting principles (net of tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(b) |
|
|
(1.7 |
) |
|
|
(1.3 |
) |
|
|
|
|
Capitalisation of pension cost |
|
|
37 |
(b) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share per USGAAP (cents) |
|
|
|
|
|
|
20.0 |
|
|
|
14.8 |
|
|
|
33.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive earnings per share before cumulative effect of change in
accounting principles |
|
|
|
|
|
|
21.9 |
|
|
|
16.3 |
|
|
|
33.7 |
|
Cumulative effect of change in accounting principles (net of tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(b) |
|
|
(1.7 |
) |
|
|
(1.3 |
) |
|
|
|
|
Capitalisation of pension cost |
|
|
37 |
(b) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share per USGAAP (cents) |
|
|
|
|
|
|
19.9 |
|
|
|
14.8 |
|
|
|
33.7 |
|
|
|
|
|
|
|
|
182
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Total comprehensive income disclosure
Total comprehensive income is calculated by adding net income and
other comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Net income per USGAAP |
|
|
2,473 |
|
|
|
4,204 |
|
USGAAP other comprehensive income/(loss) |
|
|
125 |
|
|
|
(273 |
) |
|
|
|
USGAAP total comprehensive income |
|
|
2,598 |
|
|
|
3,931 |
|
|
|
|
Other comprehensive income/(loss) represents movements in
shareholders equity that are not related to contributions
from owners or payments to owners.
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended |
|
|
|
30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Foreign currency translation reserve |
|
|
125 |
|
|
|
(241 |
) |
Unrealised gain on available-for-sale
securities,
after tax of $nil (2005: $4 million
decrease) |
|
|
|
|
|
|
14 |
|
Realised gain on sale of
available-for-sale
securities transferred to net income,
after tax of
$nil (2005: $10 million decrease) |
|
|
|
|
|
|
(46 |
) |
|
|
|
USGAAP other comprehensive
income/(loss) |
|
|
125 |
|
|
|
(273 |
) |
|
|
|
The reclassification from accumulated other comprehensive income/
(loss) to net income was determined on the basis of specific
identification. Included within other comprehensive income for
the year ended 30 June 2006 is the reclassification of $132
million from the foreign currency translation reserve to the
dilution loss recognised as part of the merger between CSL and
New World PCS Holdings Limited (New World Mobility). Refer to
note 37(j) for further details.
In fiscal 2006, the proceeds from sales of available-for-sale
equity securities was $nil (2005: $141 million).
The gain recorded as part of other comprehensive income/(loss) in
relation to derivative and non derivative instruments that have
been designated as hedges of the foreign currency exposure of our
net investments in foreign operations for fiscal 2006 was $50
million (2005: $31 million gain).
(i) Income statement reclassifications
Various income statement items under A-IFRS have been
reclassified to comply with USGAAP presentation rules. These
include:
|
|
net gain on disposal of non current assets of $85 million (2005: $88 million) is recorded as
other operating income under A-IFRS but other non-operating income for USGAAP; |
|
|
|
rent from property and motor vehicles of $22 million (2005: $20 million) is recorded as
other operating revenue under A-IFRS but other non-operating income for USGAAP; |
|
|
|
loss on foreign currency transactions of $2 million (2005: $40 million gain) is recorded as other
operating expenses under A-IFRS but other non-operating income for USGAAP; |
|
|
|
miscellaneous income of $243 million (2005: $173 million) is recorded in other operating income
under A-IFRS but other non-operating income for USGAAP; and |
|
|
|
under A-IFRS, dealer commissions and bonuses of $493 million (2005: $711 million) are
included in goods and services purchased as they are directly related to our sales revenue. Under
USGAAP they are classified as other operating expenses. |
(ii) Goods and services purchased
Cost of sales includes both direct and indirect costs involved in
the sale of the Companys goods and services. For a service
company this would commonly include depreciation and other
indirect costs associated with the provision of services.
However, we do not report our costs according to this description
and classify all of our expenses according to the nature of the
expense, referred to as goods and services purchased in
relation to the sale of goods and services.
Goods and services purchased mainly comprises:
|
|
network service capacity from external communication service providers; |
|
|
|
mobile handsets sold to customers; |
|
|
|
cost of goods sold (other than mobile handsets); and |
|
|
|
directory paper costs. |
Goods and services purchased does not equate to cost of sales due
to the non inclusion of depreciation and other indirect costs
associated with the provision of our telecommunications services.
(iii) |
|
Dividends paid per share |
Dividends paid per share for USGAAP includes TESOP97 and TESOP99
options outstanding as issued shares. Refer to note 37(h).
183
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared using
USGAAP (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Reconciliation of shareholders equity to USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-IFRS shareholders equity per balance sheet |
|
|
|
|
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustments required to agree with USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
37 |
(c) |
|
|
(203 |
) |
|
|
(151 |
) |
|
|
(177 |
) |
Borrowing costs |
|
|
37 |
(d) |
|
|
543 |
|
|
|
403 |
|
|
|
570 |
|
Investments |
|
|
37 |
(e) |
|
|
(63 |
) |
|
|
(47 |
) |
|
|
(63 |
) |
Minority interests(iii) |
|
|
|
|
|
|
(246 |
) |
|
|
(183 |
) |
|
|
(2 |
) |
Retirement benefits |
|
|
37 |
(f) |
|
|
(1,242 |
) |
|
|
(921 |
) |
|
|
(193 |
) |
Income tax |
|
|
37 |
(g) |
|
|
255 |
|
|
|
189 |
|
|
|
(59 |
) |
Derivative financial instruments and hedging activities |
|
|
37 |
(i) |
|
|
(195 |
) |
|
|
(145 |
) |
|
|
(370 |
) |
CSL New World Mobility Limited (formerly Telstra CSL Limited) |
|
|
37 |
(j) |
|
|
(56 |
) |
|
|
(42 |
) |
|
|
542 |
|
Fair value / general reserve adjustments |
|
|
37 |
(k) |
|
|
(54 |
) |
|
|
(40 |
) |
|
|
(54 |
) |
Goodwill and other intangible asset adjustments |
|
|
37 |
(l) |
|
|
71 |
|
|
|
53 |
|
|
|
41 |
|
Redundancy and restructuring provision |
|
|
37 |
(m) |
|
|
161 |
|
|
|
120 |
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(n) |
|
|
|
|
|
|
|
|
|
|
303 |
|
|
|
|
|
|
|
|
Shareholders equity per USGAAP |
|
|
|
|
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet measured and classified per USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
10 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,548 |
|
Receivables |
|
|
|
|
|
|
3,701 |
|
|
|
2,747 |
|
|
|
3,515 |
|
Inventories |
|
|
12 |
|
|
|
224 |
|
|
|
166 |
|
|
|
232 |
|
Deferred tax asset |
|
|
37 |
(g) |
|
|
376 |
|
|
|
279 |
|
|
|
294 |
|
Other assets |
|
|
|
|
|
|
243 |
|
|
|
181 |
|
|
|
249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,233 |
|
|
|
3,884 |
|
|
|
5,838 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
121 |
|
|
|
90 |
|
|
|
65 |
|
Derivative financial instruments |
|
|
|
|
|
|
214 |
|
|
|
159 |
|
|
|
369 |
|
Inventories |
|
|
12 |
|
|
|
20 |
|
|
|
15 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
27 |
|
|
|
20 |
|
|
|
52 |
|
Property, plant and equipment |
|
|
|
|
|
|
50,632 |
|
|
|
37,584 |
|
|
|
48,380 |
|
Accumulated depreciation of property, plant and equipment |
|
|
|
|
|
|
(26,663 |
) |
|
|
(19,792 |
) |
|
|
(25,037 |
) |
Goodwill, net |
|
|
|
|
|
|
2,087 |
|
|
|
1,549 |
|
|
|
2,618 |
|
Other intangible assets, net |
|
|
|
|
|
|
4,101 |
|
|
|
3,044 |
|
|
|
4,662 |
|
Prepaid pension assets |
|
|
37 |
(f) |
|
|
5 |
|
|
|
4 |
|
|
|
78 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,544 |
|
|
|
22,673 |
|
|
|
31,202 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,777 |
|
|
|
26,557 |
|
|
|
37,040 |
|
|
|
|
|
|
|
|
184
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared using
USGAAP (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$ m |
|
|
US$m |
|
|
$m |
|
|
|
|
Balance sheet measured and classified per USGAAP (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables |
|
|
|
|
|
|
3,570 |
|
|
|
2,650 |
|
|
|
2,766 |
|
Borrowings short term debt |
|
|
|
|
|
|
1,583 |
|
|
|
1,175 |
|
|
|
463 |
|
Borrowings long term debt due within one year |
|
|
|
|
|
|
401 |
|
|
|
298 |
|
|
|
1,061 |
|
Income tax payable |
|
|
|
|
|
|
428 |
|
|
|
318 |
|
|
|
534 |
|
Provisions |
|
|
19 |
|
|
|
662 |
|
|
|
491 |
|
|
|
421 |
|
Other
current liabilities |
|
|
|
|
|
|
1,187 |
|
|
|
881 |
|
|
|
1,150 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,831 |
|
|
|
5,813 |
|
|
|
6,395 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables |
|
|
|
|
|
|
112 |
|
|
|
83 |
|
|
|
257 |
|
Derivative financial instruments |
|
|
|
|
|
|
525 |
|
|
|
390 |
|
|
|
859 |
|
Borrowings long term debt |
|
|
|
|
|
|
11,734 |
|
|
|
8,710 |
|
|
|
11,641 |
|
Deferred tax liability |
|
|
37 |
(g) |
|
|
1,971 |
|
|
|
1,463 |
|
|
|
2,300 |
|
Provisions |
|
|
|
|
|
|
888 |
|
|
|
659 |
|
|
|
894 |
|
Accrued pension liability |
|
|
37 |
(f) |
|
|
172 |
|
|
|
128 |
|
|
|
|
|
Other non
current liabilities |
|
|
|
|
|
|
495 |
|
|
|
367 |
|
|
|
496 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,897 |
|
|
|
11,800 |
|
|
|
16,447 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
23,728 |
|
|
|
17,613 |
|
|
|
22,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests(iii) |
|
|
23 |
|
|
|
246 |
|
|
|
183 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital 12,443,074,357 shares issued at 30 June 2006 (2005: 12,443,074,357 shares) (i) |
|
|
21 |
|
|
|
5,793 |
|
|
|
4,300 |
|
|
|
5,793 |
|
Share loan
to employees 55,104,025 shares at 30 June 2006 (2005: 60,378,525 shares) |
|
|
21 |
|
|
|
(130 |
) |
|
|
(96 |
) |
|
|
(154 |
) |
Shares held
by employee share plan trusts 17,931,918 shares at 30 June 2006 (2005: 20,216,091 shares) |
|
|
|
|
|
|
(99 |
) |
|
|
(73 |
) |
|
|
(113 |
) |
Additional paid in capital from employee share plans |
|
|
|
|
|
|
390 |
|
|
|
289 |
|
|
|
395 |
|
|
|
|
|
|
|
|
Total share capital |
|
|
|
|
|
|
5,954 |
|
|
|
4,420 |
|
|
|
5,921 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss (ii) |
|
|
|
|
|
|
(604 |
) |
|
|
(448 |
) |
|
|
(729 |
) |
Retained earnings |
|
|
|
|
|
|
6,453 |
|
|
|
4,789 |
|
|
|
9,004 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
|
|
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
|
|
|
|
|
185
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared using USGAAP (continued)
(i) Share capital
Number of shares issued includes shares issued to employees
under share loans and shares held by employee share plan trusts.
Net balance of shares issued and outstanding at 30 June 2006 is
12,370,038,414 shares (2005: 12,362,479,741 shares).
(ii) Accumulated other comprehensive loss
Accumulated other comprehensive loss, net of related tax,
for USGAAP consists of the following components:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
|
|
Foreign currency translation reserve |
|
|
(591 |
) |
|
|
(716 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
(19 |
) |
|
|
(19 |
) |
(tax effect) |
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
(13 |
) |
|
|
(13 |
) |
|
|
|
Accumulated other comprehensive loss (net of
tax) |
|
|
(604 |
) |
|
|
(729 |
) |
|
|
|
As part of the merger between CSL and New World Mobility, $132
million was reclassified from accumulated other comprehensive
loss to the dilution loss recognised on the merger. Refer to note
37(j) for further details.
(iii) Minority interest
Under A-IFRS, minority interests are presented within equity, but
separate from the parent shareholders equity. Under USGAAP,
minority interests are presented outside equity, in between
liabilities and equity. The effect of this adjustment has been
disclosed in the reconciliation of shareholders equity to
USGAAP.
37(a)
Immaterial adjustments to previously reported USGAAP amounts
As discussed in note 36, we have adopted A-IFRS from 1 July 2005.
This adoption required us to restate our financial information
for the year ended 30 June 2005 to comply with A-IFRS. As part of
this process, a number of immaterial adjustments have been made
to our previously reported USGAAP amounts. As such we have
restated certain USGAAP financial measures for the year ended 30
June 2005. The impact of these adjustments is as follows:
|
|
|
|
|
|
|
Telstra Group |
|
|
|
30 June 2005 |
|
|
|
$m |
|
Reconciliation of net income |
|
|
|
|
Net income per USGAAP as previously reported |
|
|
4,172 |
|
Adjustments: |
|
|
|
|
- Hong Kong 3G spectrum licence |
|
|
(5 |
) |
- Reach committed capex liability |
|
|
(90 |
) |
- Operating leases |
|
|
(11 |
) |
- Functional currency |
|
|
11 |
|
- Income taxes |
|
|
123 |
|
- Tax effect of above adjustments |
|
|
4 |
|
|
|
|
|
Net income per USGAAP restated |
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
|
cents per |
|
|
|
share |
|
Basic earnings per share per USGAAP as previously
reported |
|
|
33.6 |
|
Basic earnings per share per USGAAP restated |
|
|
33.8 |
|
Diluted earnings per share per USGAAP as previously
reported |
|
|
33.5 |
|
Diluted earnings per share per USGAAP restated |
|
|
33.7 |
|
|
|
|
|
|
|
|
$m |
|
Reconciliation of shareholders equity |
|
|
|
|
Shareholders equity per USGAAP as previously
reported |
|
|
14,367 |
|
Adjustments: |
|
|
|
|
- Hong Kong 3G spectrum licence |
|
|
14 |
|
- Reach committed capex liability |
|
|
(93 |
) |
- Operating leases |
|
|
(34 |
) |
- Income taxes |
|
|
(58 |
) |
|
|
|
|
Shareholders equity per USGAAP restated |
|
|
14,196 |
|
|
|
|
|
Hong Kong 3G spectrum licence
Our subsidiary in Hong Kong, HKCSL, has a licence to utilise 3G
spectrum in Hong Kong until 2016. As part of this licence
agreement, HKCSL are required to make annual payments for the
right to use this spectrum. Under previous AGAAP we expensed
these payments as incurred and historically we have not recorded
a USGAAP adjustment for this licence.
186
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared using USGAAP (continued)
Hong Kong 3G spectrum licence (continued)
However, under USGAAP this licence should have been capitalised
as an intangible asset on acquisition, based on the present value
of the expected future payments, with a corresponding liability
also recorded.
The adjustment to decrease net income per USGAAP for the year
ended 30 June 2005 of $5 million is a result of additional
amortisation of $5 million and an increase in net interest
expense of $4 million associated with the unwinding of the
present value discount, offset by a decrease in other operating
expenses of $4 million due to the reversal of the licence
payments expense.
The increase in shareholders equity per USGAAP as at 30 June
2005 of $14 million represents an increase in intangible assets
($108 million), a decrease in property, plant and equipment ($24
million), an increase in current and non-current payables ($2
million and $87 million respectively) and a decrease in deferred
tax liabilities ($19 million).
Due to the adoption of A-IFRS there is no longer a USGAAP
adjustment for this 3G spectrum licence. Refer to note 36(k).
Reach committed capex liability
During fiscal 2005, we agreed to fund the committed capital
expenditure of our jointly controlled entity Reach, together with
our co-shareholder PCCW Limited, for the period until 2022. Our
share of this commitment was disclosed as a contingent liability
under previous AGAAP and a USGAAP adjustment was recorded in our
30 June 2005 financial statements to recognise additional equity
accounted losses only to the extent of our actual payments under
the commitment to 30 June 2005.
However, under USGAAP we were required to recognise additional
equity accounted losses in Reach for our entire capital
expenditure commitment, not just the amount paid. This
adjustment has given rise to an additional $88 million of equity
accounted losses and an additional $2 million of interest
expense for the year ended 30 June 2005.
The decrease in shareholders equity per USGAAP as at 30 June
2005 of $93 million represents an increase in current and
non-current provisions of $32 million and $58 million
respectively and a decrease in investments accounted for using
the equity method of $3 million.
Due to the adoption of A-IFRS there is no longer a USGAAP
adjustment for our commitment to Reach. Refer to note 36(i).
Operating leases
Under previous AGAAP we expensed our operating lease payments as
incurred and in our previously published financial statements we
did not record a USGAAP adjustment to recognise operating lease
expenses on a straight line basis. The impact of this adjustment
is an increase to other operating expenses of $11 million for the
year ended 30 June 2005. Non-current payables increased by $48
million and deferred tax liability decreased by $14 million as at
30 June 2005.
Due to the adoption of A-IFRS there is no longer a USGAAP
adjustment for operating leases. Refer to note 36(e).
Functional currency
During the assessment of the functional currency for each of our
overseas operations as part of our adoption of A-IFRS, we
discovered that the functional currency of Telstra Global Limited
under USGAAP was incorrect. This restatement has resulted in a
decrease in other operating expenses of $11 million for the year
ended 30 June 2005, with a corresponding increase in other
comprehensive income.
Due to the adoption of A-IFRS there is no longer a USGAAP
adjustment for the functional currency of our overseas
operations. Refer to note 36(g).
Income taxes
In our 30 June 2005 financial statements, the USGAAP adjustment
to net income for income taxes has been adjusted by $123 million
due to the following:
|
|
adjusting the tax effect of our USGAAP adjustments for property, plant and equipment, resulting
in a decrease in tax expense of $44 million; |
|
|
adjustment to the deferred tax on our investments accounted for using the equity method,
resulting in a decrease in tax expense of $93 million; and |
|
|
|
not appropriately recognising deferred taxes for various balances, including intangible
assets recognised on acquisitions, resulting in a $14 million increase in tax expense. |
The majority of these adjustments to tax expense have arisen as a
result of the related deferred tax balances being written off
under USGAAP during the year ended 30 June 2005. However, with
the adoption of A-IFRS these adjustments were recorded in the
A-IFRS opening transition balance sheet at 1 July 2004. As such,
the different timing of recording these adjustments for A-IFRS
and USGAAP purposes has resulted in the majority of these
adjustments. The decrease in shareholders equity for USGAAP as
at 30 June 2005 of $58 million represents a decrease in goodwill
of $6 million and an increase in deferred tax liability of $52
million. Accumulated other comprehensive income was also reduced
by $26 million.
187
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared using USGAAP (continued)
37(b) Changes in accounting principles under USGAAP
Mobile handset subsidies
We previously deferred subsidies on mobile handset sold as part
of a bundled arrangement under USGAAP. This was based on the fact
that the revenue allocated to subsidised handsets in accordance
with EITF 00-21 Revenue Arrangements with Multiple Deliverables
(EITF 00-21), is contingent upon the delivery of the contracted
services and is therefore recognised over the expected customer
contract life. As such we previously recognised the subsidised
cost of the handsets on a similar basis.
From 1 July 2005, we have changed our accounting principle to
expense handset subsidies as incurred. This change was adopted in
order to ensure consistency with the accounting principle we have
elected to adopt under A-IFRS. Furthermore, this change in
principle treats the handset as a separate deliverable from a
cost viewpoint which is consistent with the principles of EITF
00-21.
This change in accounting principle has resulted in the write off
of $303 million of previously deferred handset subsidies as at 1
July 2005, with an adjustment to deferred tax liability of $91
million.
Capitalisation of pension cost
Historically we have recorded a USGAAP adjustment to recognise an
expense (or benefit) for the defined benefit plans that we
sponsor (refer to note 37(f)). From 1 July 2005 we have changed
our accounting principle to capitalise a portion of our pension
cost/benefit under USGAAP, where that cost/benefit is
attributable to employees who are directly engaged in the
construction of our property, plant and equipment, for the period
of time that those employees spend on the construction work.
Previously we have not capitalised a portion of this
cost/benefit.
This change in accounting principle is preferable as the pension
cost/ benefit is considered an additional labour cost and this
change would ensure consistency with how we treat other labour
costs. It is also consistent with our accounting principle under
A-IFRS.
This change has resulted in a decrease to property, plant and
equipment on 1 July 2005 of $47 million, with an associated
increase in deferred tax liability of $14 million.
188
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using USGAAP
37(c) Property, plant and equipment
Revaluations
Certain items of property, plant and equipment had been
previously revalued under A-IFRS. Revaluations of property, plant
and equipment are not allowed under USGAAP, except for permanent
impairments. As such we have reversed previously revalued
property, plant and equipment to historical cost for USGAAP
purposes.
Under A-IFRS, we have deemed the carrying value of our
property, plant and equipment to be cost and as such we no
longer revalue property, plant and equipment.
Depreciation expense and disposal gains or losses under A-IFRS
are based on the recorded amount of the asset and are therefore
higher (or lower for disposal losses) for assets that had been
previously revalued upwards. Depreciation expense and disposal
gains and losses have been adjusted to reflect amounts based on
the original cost of the asset for USGAAP.
Impairment loss reversal Hybrid Fibre Coaxial (HFC) cable network
In fiscal 1997, we wrote down the value of our HFC cable network
by $587 million. This writedown continues to be reflected in the
HFC networks carrying value under A-IFRS. Under USGAAP, the
initial future undiscounted cash flows derived from our HFC
network were greater than the recorded value and continue to be
as at 30 June 2006. As a result, the writedown has been reversed
for USGAAP. Depreciation expense has also been increased under USGAAP due to
the higher asset value.
Indirect costs
Before 1 July 1996, we expensed all indirect costs as incurred.
Under USGAAP, those indirect costs associated with operations and
management personnel directly involved in the construction of our
communication assets have been systematically allocated and
recorded as part of the cost of those assets and depreciated
accordingly.
From 1 July 1996, we changed our accounting policy in relation
to indirect cost capitalisation to be consistent with USGAAP.
Sale of property sold as part of a sale and lease back transaction
In fiscal 2003, we sold certain land and buildings under a sale
and leaseback arrangement. The net gain on the sale was
recognised in net income.
Under USGAAP, the gains made on the sale of land and buildings
as part of the sale and leaseback transaction were deferred and
are currently being recognised over the period of the underlying
leases. The original gain deferred for USGAAP was $177 million.
Purchase of radio access network (RAN) assets
In fiscal 2005, we entered into an arrangement with Hutchison 3G
Australia Pty Ltd (H3GA) to jointly own and operate H3GAs
existing third generation RAN assets and fund
future network development. The purchase consideration for our
share of the RAN assets was $447 million, payable over 2 years.
Under A-IFRS, the purchase consideration was discounted using an
asset specific discount rate. Under USGAAP, an incremental
borrowing rate was used to discount the purchase consideration.
The difference in the discount rate has resulted in a higher
asset value and depreciation expense under USGAAP, offset by
lower borrowing costs associated with the unwinding of the
discount.
Refer to note 37(e) for further information on the 3G Partnership.
Summary of property, plant and equipment adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Revaluations |
|
|
6 |
|
|
|
6 |
|
|
|
(593 |
) |
|
|
(599 |
) |
HFC cable network |
|
|
(23 |
) |
|
|
(25 |
) |
|
|
144 |
|
|
|
167 |
|
Indirect costs |
|
|
(39 |
) |
|
|
(60 |
) |
|
|
342 |
|
|
|
381 |
|
Sale and leaseback |
|
|
18 |
|
|
|
18 |
|
|
|
(108 |
) |
|
|
(126 |
) |
RAN assets |
|
|
12 |
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
|
|
(61 |
) |
|
|
(203 |
) |
|
|
(177 |
) |
|
|
|
37(d) Borrowing costs
Under A-IFRS, we expense all borrowing costs when incurred.
Under USGAAP, borrowing costs relating to the construction of
property, plant and equipment and software developed for
internal use are recorded as part of the asset cost. The
capitalised borrowing costs also result in higher depreciation
expense under USGAAP.
For USGAAP purposes, we have capitalised borrowing costs with a
net book value of $543 million as at 30 June 2006 (2005: $570
million). Additional depreciation and disposals of $108 million
(2005: $108 million) have been recorded for the year ended 30
June 2006, offset by a decrease in interest expense of $81
million (2005: $90 million).
189
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using USGAAP (continued)
37(e) Investments
3GIS Partnership
The 3GIS Partnership was established to operate the third
generation radio access network (RAN) as discussed in note 37(c).
The partners each made an initial investment of $1 but provide
additional capital as required in the form of interest-free
loans.
Under A-IFRS, we recognise our share of the RAN assets held by
the partnership within property, plant and equipment. Expenses
incurred by the partnership are on-charged to the partners in
equal proportion.
Under USGAAP, we account for the 3GIS Partnership using the
equity method. As such, the interest-free loans are considered to
form part of the investment in the partnership, and we record our
share of the partnerships results against this investment.
PCCW Limited (PCCW) Converting Note
Under A-IFRS, our converting note issued by PCCW was carried at
face value, with adjustments for accrued interest and foreign
exchange movements recorded in the income statement in operating
expenses. Under USGAAP, the instrument was classified as an
available-for-sale security with changes in fair value being
recorded in other comprehensive income.
On 30 June 2005, the note expired and was redeemed for $76
million. Under USGAAP, the balance recorded in other
comprehensive income was transferred to net income on redemption.
Reach Ltd (Reach)
In fiscal 2001, as a part of the strategic alliance with PCCW, a
jointly controlled entity, Reach, was formed through the
combination of our international wholesale business and certain
other wholesale assets together with certain PCCW assets.
Under USGAAP, this investment was recorded at the net book value
of the assets and liabilities transferred, reduced by the amount
of cash received. This resulted in a negative carrying value,
with the excess credit being recognised as an adjustment to the
amount of goodwill on other components of the interdependent
transactions in this case a reduction in the goodwill of CSL
(refer to note 37(l)).
As at 31 December 2002, we wrote down the entire carrying amount
of our investment in Reach under both A-IFRS and USGAAP, which
eliminated most of the USGAAP difference previously reported for
Reach.
For both A-IFRS and USGAAP we ceased equity accounting our
investment in Reach in fiscal 2003 due to the investment,
including other non-participating interests in Reach, being
written down to zero.
Summary of investment adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders' |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
3GIS partnership |
|
|
|
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
PCCW converting note |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
Reach Ltd |
|
|
|
|
|
|
|
|
|
|
(90 |
) |
|
|
(90 |
) |
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
(63 |
) |
|
|
(63 |
) |
|
|
|
190
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(f) Retirement benefits
Under USGAAP, our defined benefit plans are accounted for under
Statement of Financial Accounting Standards No. 87 (SFAS 87)
Employers Accounting for Pensions. While the requirements of this
standard are broadly consistent with our policy under A-IFRS (refer
note 2.24), there are a number of key differences.
Under A-IFRS, actuarial gains and losses are recognised directly in
retained earnings. Under USGAAP, the recognition of certain gains
and losses is delayed. Aggregated unrecorded gains and losses
exceeding 10% of the greater of the aggregated projected benefit
obligation or the market value of the plan assets are amortised over
the average expected service period of active employees expected to
receive benefits under the plan.
Under USGAAP, future investment and contribution taxes of the fund
are not taken into account, with only current taxes reflected in the
measurement of the net periodic pension cost and prepaid pension
asset.
Based on industry practice in Australia, under A-IFRS the defined
benefit asset is adjusted for the estimated impact of future investment
and contribution taxes of the fund, which are considered part of the
ultimate cost to settle the obligation. Future investment tax is taken
into account through an adjustment to the discount rate, while a
separate tax reserve is created to take into account future
contribution tax benefits.
Due to a change in accounting principle we now capitalise a portion of
the net period pension cost under USGAAP (refer to note 37(b)),
consistent with our policy under A-IFRS. However, under A-IFRS we
have only applied this policy from 1 July 2004, our transition date to
A-IFRS. Under USGAAP, we have adjusted our property, plant and
equipment to reflect this policy as if it had always been applied.
Furthermore, differences in the pension cost have lead to differences
in amounts capitalised. These differences between A-IFRS and
USGAAP have an ongoing impact on depreciation and amortisation.
Presented below are the disclosures required by USGAAP that are
different from A-IFRS. These disclosures have been prepared with
respect to only the defined benefit components of our pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Net periodic pension cost |
|
|
|
|
|
|
|
|
|
|
|
|
The components of net periodic pension cost for our defined
benefit plans are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost on benefits earned
|
|
|
214 |
|
|
|
159 |
|
|
|
200 |
|
Interest cost on projected benefit obligation
|
|
|
226 |
|
|
|
168 |
|
|
|
223 |
|
Expected return on assets
|
|
|
(333 |
) |
|
|
(247 |
) |
|
|
(317 |
) |
Expenses and taxation
|
|
|
16 |
|
|
|
12 |
|
|
|
16 |
|
Member contributions for defined benefits
|
|
|
(20 |
) |
|
|
(15 |
) |
|
|
(21 |
) |
Transfer of funds to defined contribution plan (i)
|
|
|
93 |
|
|
|
69 |
|
|
|
78 |
|
Curtailment loss
|
|
|
58 |
|
|
|
43 |
|
|
|
|
|
Settlement gain
|
|
|
(7 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
|
Net periodic pension cost per USGAAP |
|
|
247 |
|
|
|
184 |
|
|
|
175 |
|
Net periodic pension cost per A-IFRS |
|
|
182 |
|
|
|
136 |
|
|
|
201 |
|
Net impact on net income due to different pension cost capitalised
|
|
|
21 |
|
|
|
15 |
|
|
|
(25 |
) |
|
|
|
Total USGAAP adjustment |
|
|
44 |
|
|
|
33 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We used the following major assumptions to determine net periodic pension
cost/(benefit) under USGAAP : |
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.98 |
% |
|
|
5.98 |
% |
|
|
5.99 |
% |
Expected rate of increase in future salaries
|
|
|
3.02 |
% |
|
|
3.02 |
% |
|
|
3.97 |
% |
Expected long-term rate of return on assets
|
|
|
7.00 |
% |
|
|
7.00 |
% |
|
|
7.50 |
% |
|
|
|
191
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(f) Retirement benefits (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Projected benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of change in projected benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
|
3,964 |
|
|
|
2,942 |
|
|
|
3,540 |
|
Service cost |
|
|
214 |
|
|
|
159 |
|
|
|
200 |
|
Interest cost |
|
|
226 |
|
|
|
168 |
|
|
|
223 |
|
Member contributions |
|
|
7 |
|
|
|
5 |
|
|
|
4 |
|
Benefit payments (i) |
|
|
(715 |
) |
|
|
(531 |
) |
|
|
(69 |
) |
Curtailment loss |
|
|
58 |
|
|
|
43 |
|
|
|
|
|
Foreign currency exchange rate changes |
|
|
2 |
|
|
|
1 |
|
|
|
(7 |
) |
Actuarial (gain)/loss |
|
|
(379 |
) |
|
|
(281 |
) |
|
|
73 |
|
|
|
|
Projected benefit obligation at end of year per USGAAP
|
|
|
3,377 |
|
|
|
2,506 |
|
|
|
3,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We used the following major assumptions to determine
benefit obligations under USGAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.98 |
% |
|
|
5.98 |
% |
|
|
5.48 |
% |
Expected rate of increase in future salaries |
|
|
3.02 |
% |
|
|
3.02 |
% |
|
|
3.99 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation at end of year |
|
|
2,374 |
|
|
|
1,762 |
|
|
|
2,472 |
|
|
|
|
|
Plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of change in fair value of plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
4,519 |
|
|
|
3,354 |
|
|
|
4,302 |
|
Actual return on plan assets |
|
|
825 |
|
|
|
612 |
|
|
|
360 |
|
Transfer of funds to defined contribution plan (i) |
|
|
(93 |
) |
|
|
(69 |
) |
|
|
(78 |
) |
Employer contributions |
|
|
3 |
|
|
|
2 |
|
|
|
3 |
|
Member contributions for defined benefits |
|
|
20 |
|
|
|
15 |
|
|
|
21 |
|
Transfers/member contributions for accumulation
benefits |
|
|
7 |
|
|
|
5 |
|
|
|
4 |
|
Benefit payments (i) |
|
|
(715 |
) |
|
|
(531 |
) |
|
|
(69 |
) |
Plan expenses |
|
|
(16 |
) |
|
|
(12 |
) |
|
|
(17 |
) |
Foreign currency exchange rate changes |
|
|
2 |
|
|
|
1 |
|
|
|
(7 |
) |
|
|
|
Fair value of plan assets at end of year per
USGAAP |
|
|
4,552 |
|
|
|
3,377 |
|
|
|
4,519 |
|
|
|
|
192
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(f) Retirement benefits (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Reconciliation of funded status of plan |
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
(3,377 |
) |
|
|
(2,506 |
) |
|
|
(3,964 |
) |
Plan assets at fair value
|
|
|
4,552 |
|
|
|
3,377 |
|
|
|
4,519 |
|
|
|
|
Funded status |
|
|
1,175 |
|
|
|
871 |
|
|
|
555 |
|
Unrecognised net transition liability
|
|
|
4 |
|
|
|
3 |
|
|
|
4 |
|
Unrecognised net actuarial gain
|
|
|
(1,346 |
) |
|
|
(998 |
) |
|
|
(481 |
) |
|
|
|
Pension (liability)/asset per USGAAP |
|
|
(167 |
) |
|
|
(124 |
) |
|
|
78 |
|
Prepaid pension asset per A-IFRS
|
|
|
1,029 |
|
|
|
764 |
|
|
|
247 |
|
Differences in pension cost capitalised |
|
|
46 |
|
|
|
33 |
|
|
|
24 |
|
|
|
|
Total USGAAP adjustment |
|
|
(1,242 |
) |
|
|
(921 |
) |
|
|
(193 |
) |
|
|
|
(i) Benefits payments include payments out of the defined benefit
plan into the defined contribution plan.
193
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(g) Income tax
Under A-IFRS, we apply the balance sheet liability method of
accounting for deferred taxes, which is broadly consistent with
Statement of Financial Accounting Standards No. 109 (SFAS 109)
Accounting for Income Taxes.
Our other USGAAP adjustments disclosed in note 37 have amended
the carrying values of certain assets and liabilities under USGAAP and
has resulted in an adjustment to the deferred tax balances.
Under A-IFRS, deferred taxes that arise on the initial recognition of an
asset or liability are not recognised where the transaction is not a
business combination and affects neither accounting profit nor
taxable profit at the time of the transaction. USGAAP contains no
such exemption and as such additional deferred tax balances have
been recognised for USGAAP.
We have a number of intangible assets with an indefinite life, most
notably our Trading Post mastheads. Under A-IFRS, the tax base used
in the deferred tax calculation is the assets disposal value. It is
assumed that the accounting carrying value will only be consumed
upon disposal due to the fact that these intangible assets are not
being amortised for accounting purposes.
However, under USGAAP the tax base used in the deferred tax
calculation is the depreciable tax value, which is generally nil for
these assets. This is because the intangible assets are not being
specifically held for disposal and therefore the disposal value cannot
be used for USGAAP purposes. This has resulted in an increase in
deferred tax liability for USGAAP, with a corresponding increase in
goodwill.
For A-IFRS, we classify all deferred tax balances as non current. For
USGAAP, the classification between current and non current is based
on the balance sheet classification of the underlying net current and
non current asset or liability. Where there is no underlying asset or
liability the classification is based on when the temporary difference
is expected to reverse. The effect of this has been disclosed in the
balance sheet measured and classified per USGAAP.
Summary of income tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Initial recognition exemption |
|
|
(7 |
) |
|
|
1 |
|
|
|
(43 |
) |
|
|
(35 |
) |
Indefinite life intangibles |
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
8 |
|
Property, plant and equipment (note
37(c)) |
|
|
10 |
|
|
|
18 |
|
|
|
68 |
|
|
|
58 |
|
Borrowing costs (note 37(d)) |
|
|
7 |
|
|
|
4 |
|
|
|
(157 |
) |
|
|
(164 |
) |
Investments (note 37(e)) |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(2 |
) |
Retirement benefits (note 37(f)) |
|
|
14 |
|
|
|
(2 |
) |
|
|
373 |
|
|
|
56 |
|
Derivatives and hedging (note 37(i)) |
|
|
(58 |
) |
|
|
29 |
|
|
|
59 |
|
|
|
111 |
|
CSL New World Mobility (note 37(j)) |
|
|
|
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
General reserve (note 37(k)) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
Redundancy and restructuring (note 37(m)) |
|
|
(48 |
) |
|
|
|
|
|
|
(48 |
) |
|
|
|
|
Mobile handset
subsidies (note 37(n)) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
(91 |
) |
|
|
|
|
|
|
(85 |
) |
|
|
(10 |
) |
|
|
255 |
|
|
|
(59 |
) |
|
|
|
194
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(g) Income tax (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation, hedge and other
finance costs
|
|
|
58 |
|
|
|
43 |
|
|
|
117 |
|
Employee entitlements
|
|
|
268 |
|
|
|
199 |
|
|
|
281 |
|
Revenue received in advance
|
|
|
148 |
|
|
|
110 |
|
|
|
130 |
|
Provisions
|
|
|
164 |
|
|
|
122 |
|
|
|
64 |
|
Trade and other payables
|
|
|
57 |
|
|
|
42 |
|
|
|
38 |
|
Accrued pension liability
|
|
|
68 |
|
|
|
50 |
|
|
|
|
|
Tax losses
|
|
|
291 |
|
|
|
216 |
|
|
|
230 |
|
Other
|
|
|
78 |
|
|
|
58 |
|
|
|
23 |
|
|
|
|
Total gross deferred tax assets under USGAAP |
|
|
1,132 |
|
|
|
840 |
|
|
|
883 |
|
Valuation allowance
|
|
|
(185 |
) |
|
|
(137 |
) |
|
|
(161 |
) |
|
|
|
Total net deferred tax assets under USGAAP
|
|
|
947 |
|
|
|
703 |
|
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
2,047 |
|
|
|
1,520 |
|
|
|
2,003 |
|
Prepaid pension asset
|
|
|
|
|
|
|
|
|
|
|
23 |
|
Intangible assets
|
|
|
495 |
|
|
|
367 |
|
|
|
611 |
|
Mobile handset subsidies
|
|
|
|
|
|
|
|
|
|
|
91 |
|
|
|
|
Total deferred tax liabilities under USGAAP
|
|
|
2,542 |
|
|
|
1,887 |
|
|
|
2,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability under USGAAP
|
|
|
(1,595 |
) |
|
|
(1,184 |
) |
|
|
(2,006 |
) |
Net deferred tax liability under A-IFRS
|
|
|
1,703 |
|
|
|
1,264 |
|
|
|
1,802 |
|
|
|
|
Difference
|
|
|
108 |
|
|
|
80 |
|
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported as follows for the USGAAP balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
Net current deferred tax asset
|
|
|
376 |
|
|
|
279 |
|
|
|
294 |
|
Net non current deferred tax liability
|
|
|
(1,971 |
) |
|
|
(1,463 |
) |
|
|
(2,300 |
) |
|
|
|
|
|
|
(1,595 |
) |
|
|
(1,184 |
) |
|
|
(2,006 |
) |
|
|
|
As at 30 June 2006, our foreign operations have operating loss
carryforwards of $291 million of which $9 million will expire in 2027.
The remaining balance does not have an expiration date. We have
established a valuation allowance of $185 million to provide for the
operating loss carryforward due to our uncertainty over our ability to
utilise these operating loss carryforwards.
As at 30 June 2005, our foreign operations have operating loss
carryforwards of $230 million of which $13 million will expire in fiscal
year 2027. We have established a valuation allowance of $161 million
to provide for the operating loss carryforward due to our uncertainty
over our ability to utilise these operating loss carryforwards
195
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(g) Income tax (continued)
The following table represents the domestic and foreign components
of net income before income tax expense and minority interests and
income tax expense/(benefit), calculated in accordance with USGAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
|
Net income before income tax expense and
minority interests consists of: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
4,829 |
|
|
|
3,586 |
|
|
|
5,940 |
|
Foreign
|
|
|
(646 |
) |
|
|
(481 |
) |
|
|
20 |
|
|
|
|
Net income before income tax expense and
minority interest |
|
|
4,183 |
|
|
|
3,105 |
|
|
|
5,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit) consists of: |
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
1,785 |
|
|
|
1,325 |
|
|
|
1,718 |
|
Foreign
|
|
|
15 |
|
|
|
11 |
|
|
|
22 |
|
|
|
|
Total current income tax expense
|
|
|
1,800 |
|
|
|
1,336 |
|
|
|
1,740 |
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(326 |
) |
|
|
(243 |
) |
|
|
22 |
|
Foreign
|
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(6 |
) |
|
|
|
Total deferred income tax
expense/(benefit) |
|
|
(335 |
) |
|
|
(250 |
) |
|
|
16 |
|
|
|
|
Income tax expense, net |
|
|
1,465 |
|
|
|
1,086 |
|
|
|
1,756 |
|
|
|
|
Actual income tax expense differs from the amounts computed by
applying the statutory Australian income tax rate of 30% to net
income before income tax expense and minority interests. The
following table represents the reconciliation of the expected income
tax expense to actual income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
Expected income tax expense
|
|
|
1,255 |
|
|
|
931 |
|
|
|
1,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)/increase in income taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of different rates of tax on overseas
income |
|
|
(19 |
) |
|
|
(14 |
) |
|
|
(11 |
) |
Non assessable and non deductible items
|
|
|
88 |
|
|
|
64 |
|
|
|
(23 |
) |
Cumulative effect of changes in accounting
principles |
|
|
105 |
|
|
|
78 |
|
|
|
|
|
Under/(over) provision of tax in prior years |
|
|
36 |
|
|
|
27 |
|
|
|
2 |
|
|
|
|
Actual income tax expense for
USGAAP |
|
|
1,465 |
|
|
|
1,086 |
|
|
|
1,756 |
|
|
|
|
196
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(h) Employee share plans and compensation expenses
Our employee and executive share plans are described in note 31.
As at 1 July 2005 for USGAAP purposes, we have adopted Statement
of Financial Accounting Standards No. 123 Revised (SFAS 123R),
Share-Based Payment using the modified prospective application
method. This standard requires entities to recognise an expense for
the issue of employee stock options and similar awards based on their
fair value on the grant date and recognised over the associated service
period, which is usually the vesting period. However there is no
financial statement effect for us upon adoption of SFAS 123R, as we
previously adopted the fair value method of valuing employee stock
options and similar awards under SFAS No. 123, Accounting for Stock
Based Compensation.
Under A-IFRS, we have adopted AASB 2 Share-based Payment which
is broadly consistent with SFAS 123R. As permitted under A-IFRS and
described in note 31, we have elected to apply AASB 2 only to equity
instruments granted after 7 November 2002, which have not vested as
at 1 January 2005. Therefore a USGAAP adjustment is still required to
record the compensation expense for equity instruments issued prior
to 7 November 2002.
As a result of this adjustment, we have recorded nil compensation
expense for the year ended 30 June 2006 in the reconciliation of net
income to USGAAP (2005: $7 million).
37(i) Derivative financial instruments and hedging activities
Our risk management policies and objectives of entering into
derivative financial instruments have been disclosed in note 35,
Financial and capital risk management.
As permitted on the first-time adoption of A-IFRS, the Company
elected to not restate comparative information for financial
instruments within the scope of AASB 139: Financial Instruments:
Recognition and Measurement (AASB 139). Therefore, for the year
end 30 June 2005 the fair value of derivatives were not recorded under
A-IFRS. Beginning 1 July 2005, derivative financial instruments are
recognised and measured at fair value.
Under USGAAP, certain derivative instruments are designated as fair
value hedges. The gain or loss on the derivative instrument, as well as
the offsetting loss or gain on the hedged item attributable to the
hedged risk, is recognised in other income/expense as part of net
income during the period of the change in fair values.
Under A-IFRS, the same derivative instruments are designated as cash
flow hedges. The effective portion of the gain or loss on the derivative
instrument is reported as a component of accumulated other
comprehensive income and reclassified into net income in the same
period or periods during which the hedged transaction affects net
income. The remaining gain or loss on the derivative instrument in
excess of the cumulative change in the present value of future cash
flows of the hedged item, if any, is recognised in other income/
expense as part of net income during the period of change.
We enter into forward foreign exchange contracts to hedge certain
firm commitments denominated in foreign currencies relating to our
capital expenditure programs. Under A-IFRS, realised gains and losses
on termination of these hedges are recognised as a net cost of the
equipment acquired.
We do not designate specific forward foreign exchange contracts as
hedges under USGAAP. As a result, changes in fair value of the
forward foreign exchange contracts are required to be recognised in
net income for USGAAP purposes. We have recorded a marked to
market adjustment in other income per USGAAP for the forward
foreign exchange contracts outstanding at 30 June 2006.
As a result of the change in the capital expenditure foreign exchange
contract rates, we also recorded an adjustment to increase fixed
assets and depreciation expense. Additionally, another adjustment
to other income per USGAAP was recorded to reverse net realised
foreign exchange gains/losses capitalised in property, plant and
equipment under A-IFRS.
We enter into interest rate swaps to manage our exposure to interest
rate risk relating to our outstanding short-term commercial paper. We
do not designate the interest rate swaps used to manage our interest
rate exposure as hedges under USGAAP. As a result, changes in the fair
values of these interest rate swaps are required to be included in the
reconciliation of net income to USGAAP. We have recorded a marked
to market adjustment in other income under USGAAP for changes in
fair value of interest rate swap contracts outstanding at the fiscal year
end.
We enter into cross currency interest rate swaps to hedge our
exposure to the risk of overall changes in fair value relating to interest
rate and foreign currency risk of our foreign currency borrowings. The
ineffective portion of our hedging instruments (inclusive of the time
value of money) is taken to other income/expense.
Under USGAAP we record our derivative instruments on a net basis by
counterparty where a master netting agreement is in place. Under A-IFRS
we are precluded from netting our derivative instruments by
counterparty in the balance sheet.
197
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(i) Derivative financial instruments and hedging activities
(continued)
Summary of derivative financial instruments and hedging activities
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Forward foreign exchange contracts |
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
Interest rate swaps |
|
|
21 |
|
|
|
(85 |
) |
|
|
|
|
|
|
(163 |
) |
Cross currency
interest rate swaps |
|
|
(214 |
) |
|
|
(13 |
) |
|
|
(198 |
) |
|
|
(209 |
) |
|
|
|
|
|
|
192 |
|
|
|
(96 |
) |
|
|
(195 |
) |
|
|
(370 |
) |
|
|
|
37(j) CSL New World Mobility Limited (formerly Telstra CSL Limited
(CSL))
Original acquisition
Under previous AGAAP, acquisition costs of $999 million were written
off on acquisition of CSL in January 2001. USGAAP did not allow such
a write-off, as it could not be supported by an analysis of the
undiscounted cash flows of the entity. Accordingly, the goodwill
write-off was reversed and is carried forward as a difference in the
reconciliation of shareholders equity to USGAAP.
USGAAP adjustments were also recorded on the acquisition of CSL for
the following:
|
|
losses of $30 million on the hedge of the purchase of CSL were
included in the cost of acquisition under previous AGAAP, but were
recognised in net income under USGAAP; and |
|
|
|
recognition of a deferred tax asset of $33 million under USGAAP
associated with fair value acquisition adjustments, with a
corresponding decrease to goodwill. This deferred tax asset was
realised in fiscal 2005. |
Goodwill impairment
On 31 March 2006, we merged the CSL Group with the mobile
operations of New World PCS Holdings Limited and its controlled
entities (New World Mobility Group) to form the CSL New World
Mobility Group. Our carrying value of goodwill under USGAAP for CSL
has historically been higher than under A-IFRS due to the USGAAP
adjustments on original acquisition, and the merger transaction
indicated that a pre-existing impairment under USGAAP existed in
CSL.
We performed an impairment test on our goodwill balance in CSL prior
to recording the merger and as a result we recognised an impairment
loss in our net income per USGAAP. The fair value of CSL for the
purposes of the impairment test was calculated using a discounted
cash flow technique.
Historically under USGAAP, we have recorded impairment losses of
$394 million. These impairment losses were based on a discounted
cash flow technique used to calculate the fair value of CSL.
New World Mobility merger
Under the merger agreement, CSL issued new shares to New World
Mobility Holdings Limited for 100% of the issued capital of the New
World Mobility Group and $44 million cash. The issue of new shares
diluted our ownership interest in the merged group to 76.4%.
Under A-IFRS, a dilution gain was recognised directly in equity, being
the difference between the fair value of the interest acquired in the
New World Mobility Group and the carrying value of the diluted
interest in the merged group, including any foreign currency
translation reserve balance.
Due to the USGAAP impairment recorded in CSL goodwill just prior to
the merger transaction, the carrying value of CSL at the date of the
merger was lower under USGAAP compared to A-IFRS. Furthermore,
the foreign currency translation reserve balance associated with CSL
under USGAAP at the date of the merger was significantly higher than
the balance under A-IFRS due to the USGAAP adjustments described in
note 37(l). This lead to us recording a dilution loss on the merger under
USGAAP primarily due to the reclassification of $132 million from
accumulated other comprehensive loss. This dilution has been
recorded directly in equity for USGAAP purposes.
198
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(j) CSL New World Mobility Limited (continued)
Summary of CSL New World Mobility adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Original acquisition |
|
|
|
|
|
|
|
|
|
|
936 |
|
|
|
936 |
|
Goodwill
impairment |
|
|
(634 |
) |
|
|
|
|
|
|
(1,028 |
) |
|
|
(394 |
) |
New World Mobility merger |
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
(634 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
542 |
|
|
|
|
37(k) Fair value and general reserve adjustments
Under A-IFRS, we recorded a reserve of $54 million on the acquisition
of a controlling interest in TelstraClear Limited in December 2001,
representing our share of the fair value adjustments attributed to our
previous equity accounted ownership interest. Under USGAAP this
reserve adjustment was offset against goodwill.
Under A-IFRS, the effect of dilutions of ownership due to equity
transactions conducted by third parties are recorded in a reserve.
Under USGAAP, this is treated as a sale of ownership interest and
taken to net income. For the year ended 30 June 2006, the adjustment
to net income was $nil (2005: $5 million gain).
37(l) Goodwill and other intangible asset adjustments
Under both A-IFRS and USGAAP, goodwill is not amortised but
reviewed for impairment annually, or more frequently if certain
indicators or triggers arise. However, we ceased amortising goodwill
under USGAAP from 1 July 2002 but did not cease amortisation under
A-IFRS until 1 July 2004. As such we continue to record a historical
USGAAP adjustment.
Under both A-IFRS and USGAAP, goodwill in foreign controlled entities
is denominated in the functional currency of the foreign operation,
with translation adjustments recorded in equity. Where there is a
difference between the A-IFRS and USGAAP balance of goodwill, an
adjustment is also made to the translation effect. Furthermore, on
transition to A-IFRS we reset our foreign currency translation reserve
to zero, which has been reversed for USGAAP purposes.
Summary of goodwill and other intangible asset adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Amortisation difference |
|
|
|
|
|
|
|
|
|
|
229 |
|
|
|
229 |
|
Translation differences of goodwill in foreign operations
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71 |
|
|
|
41 |
|
|
|
|
Intangible assets subject to amortisation
Our intangible assets still subject to amortisation are brandnames,
customer bases, patents, trademarks and licences. The carrying
amount of these intangibles are disclosed in note 15. The following
table represents the estimated aggregate amortisation expense for
these intangible assets which are still amortised under USGAAP:
|
|
|
|
|
|
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|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Estimated aggregate
amortisation expense |
|
|
169 |
|
|
|
141 |
|
|
|
107 |
|
|
|
104 |
|
|
|
102 |
|
|
|
|
199
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(l) Goodwill and other intangible asset adjustments (continued)
The following table is a reconciliation of the carrying amount of our
goodwill under USGAAP by reportable segment:
Telstra Group
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|
Telstra |
|
|
|
|
|
|
|
|
|
|
Enterprise & |
|
Telstra |
|
|
|
|
|
|
|
|
Government |
|
International |
|
Sensis |
|
Other |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
Carrying amount of goodwill (USGAAP) at 30 June 2004 |
|
|
83 |
|
|
|
1,962 |
|
|
|
235 |
|
|
|
1 |
|
|
|
2,281 |
|
Additional goodwill recognised |
|
|
360 |
|
|
|
2 |
|
|
|
153 |
|
|
|
4 |
|
|
|
519 |
|
Foreign currency translation adjustment |
|
|
(6 |
) |
|
|
(176 |
) |
|
|
|
|
|
|
|
|
|
|
(182 |
) |
|
|
|
Carrying amount of goodwill (USGAAP) at 30 June 2005 |
|
|
437 |
|
|
|
1,788 |
|
|
|
388 |
|
|
|
5 |
|
|
|
2,618 |
|
Additional goodwill recognised |
|
|
4 |
|
|
|
287 |
|
|
|
33 |
|
|
|
|
|
|
|
324 |
|
Disposals |
|
|
(4 |
) |
|
|
(272 |
) |
|
|
|
|
|
|
|
|
|
|
(276 |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
55 |
|
Impairment losses |
|
|
|
|
|
|
(634 |
) |
|
|
|
|
|
|
|
|
|
|
(634 |
) |
|
|
|
Carrying amount of goodwill (USGAAP) at 30 June 2006 |
|
|
437 |
|
|
|
1,224 |
|
|
|
421 |
|
|
|
5 |
|
|
|
2,087 |
|
|
|
|
37(m) Redundancy and restructuring
The principal difference between A-IFRS and USGAAP with respect to
accruing for restructuring costs is that A-IFRS places emphasis on the
recognition of the costs of the exit plan as a whole whereas USGAAP
requires that each type of cost be examined individually to determine
when it may be accrued. The differences are primarily related to the
timing of the recognition of restructuring costs.
As a result we have recorded an adjustment of $46 million to reduce
the provision related to contractual obligations. Under USGAAP, a
liability is incurred for contractual obligations when the Company
ceases using the right conveyed by the contract. As of 30 June 2006,
the Company has not ceased using the rights conveyed by these
contracts.
An adjustment of $115 million is recorded to reduce the provision for
other exit costs. Under USGAAP, a liability is incurred for other exit
costs if the Company has already incurred the cost. As of 30 June 2006,
the Company has not incurred these expenses.
There is no significant GAAP difference between A-IFRS and USGAAP in
relation to the redundancy provision we have recognised at 30 June
2006.
37(n) Mobile handset subsidies
In fiscal 2005 under USGAAP, we deferred our mobile handset subsidies
and recognised them over the expected customer life. Under A-IFRS
we expense handset subsidies as incurred.
On 1 July 2005, we changed our accounting principle under USGAAP to
expense handset subsidies as incurred, consistent with our policy
under A-IFRS. As such there is no longer a USGAAP adjustment. Refer
to note 37(b) for further details.
The impact of this adjustment on net income for the year ended 30
June 2005 was an increase of $64 million. Shareholders equity under
USGAAP at 30 June 2005 increased by $303 million.
200
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(o) Consolidation of variable interest entities
A-IFRS requires consolidation of an entity where we are able to
dominate decision making, directly or indirectly, relating to the
financial and operating policies of that entity to enable it to operate
with us in achieving our objectives. Ownership percentage as a single
factor does not determine consolidation under A-IFRS.
USGAAP requires a beneficiary to consolidate a variable interest entity
if it is the primary beneficiary of that entity. The primary beneficiary
is defined as having a variable interest in a variable interest entity that
will absorb a majority of the entitys expected losses, receive a
majority of the entitys expected residual returns (if no party absorbs
a majority of the entitys expected losses), or both. A variable interest
entity is any legal structure used to conduct activities or hold assets
that either:
|
|
has an insufficient amount of equity to carry out its principal
activities without additional subordinated financial support; |
|
|
|
has a group of equity owners that are unable to make significant
decisions about its activities; or |
|
|
|
has a group of equity owners that do not have the obligation to
absorb losses or the right to receive returns generated by its
operations. |
We have identified the following variable interest entities for which
we are considered to be the primary beneficiary:
|
|
Telstra Employee Share Ownership Plan Trust (TESOP97); |
|
|
|
Telstra Employee Share Ownership Plan Trust II (TESOP99); and |
|
|
|
Telstra Growthshare Trust. |
These entities have been consolidated under both A-IFRS and USGAAP.
We have also identified the 3GIS Partnership to be a variable interest
entity, of which we have a significant variable interest, but we are not
the primary beneficiary. As such, we have not consolidated the 3GIS
Partnership. For further information, refer to notes 30 and 37(c).
37(p) Arrangements that contain leases
Based on the requirements of Emerging Issues Task Force Issue No. 01-
8 (EITF 01-8), Determining Whether an Arrangement Contains a
Lease, an arrangement contains a lease if fulfilment of that
arrangement is dependent upon the use of specific property, plant
and equipment and it conveys the right to control the use of the
specific property, plant and equipment to the purchaser.
If an arrangement is considered to contain a lease under EITF 01-8
then it is split into its lease and non-lease components using the
relative fair value method, with each component accounted for
separately. EITF 01-8 is only applicable to arrangements that we
entered into or modified after 1 July 2003.
Currently under A-IFRS, and for arrangements entered into prior to 1
July 2003 for USGAAP, we account for these types of arrangements as
service agreements. There is no material impact on the
reconciliations of net income and shareholders equity to USGAAP of
this difference in accounting for embedded leases.
37(q) Recently issued United States accounting standards
In June 2006, the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes An Interpretation of FASB Statement
No. 109 (FIN 48), which clarifies the accounting for uncertainty in
income taxes recognised in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for Income
Taxes. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. This
Interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition requirements. The Company is currently
evaluating the impact of this new Interpretation.
In April 2006, the FASB issued FASB Staff Position FIN 46(R)-6,
Determining the Variability to Be Considered in Applying FASB
Interpretation No. 46(R) (FSP 46(R)-6), which provides additional
guidance to consider when determining:
|
|
whether an entity is a variable interest entity; |
|
|
|
which interests are considered to be variable interests in the entity;
and |
|
|
|
which party, if any, is the primary beneficiary of a variable interest
entity. |
The Company is currently evaluating the impact of this new
interpretation.
201
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports prepared using
USGAAP (continued)
37(q) Recently issued United States accounting standards
(continued)
In March 2006, the FASB issued Statement No. 156, Accounting for
Servicing of Financial Assets (SFAS 156), which amends SFAS 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. SFAS 156 requires recognition of a
servicing asset or liability at fair value each time an obligation is
undertaken to service a financial asset by entering into a servicing
contract. SFAS 156 also provides guidance on subsequent
measurement methods for each class of servicing assets and liabilities
and specifies financial statement presentation and disclosure
requirements. SFAS 156 is effective for fiscal years beginning after
September 15, 2006 and is required to be adopted by us in the first
quarter of fiscal year 2008. The Company is currently evaluating the
impact this new Standard but believes that it will not have a material
impact on the Companys balance sheet, income statement or cash
flows.
In February 2006, the FASB issued SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments (SFAS No. 155), which amends
SFAS No. 133, Accounting for Derivatives Instruments and Hedging
Activities and SFAS No. 140, SFAS No.155 amends SFAS No. 133 to
narrow the scope exception for interest-only and principal-only strips
on debt instruments to include only such strips representing rights to
receive a specified portion of the contractual interest or principle cash
flows. SFAS No. 155 also amends SFAS No.140 to allow qualifying
special-purpose entities to hold a passive derivative financial
instrument pertaining to beneficial interests that itself is a derivative
instrument. SFAS No. 155 is effective for fiscal years beginning after 15
September 2006. The Company is currently evaluating the impact this
new Standard but believes that it will not have a material impact on
the Companys balance sheet, income statement or cash flows.
In November 2005, the FASB issued FASB Staff Position SFAS 123(R)-3,
Transition Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards (FSP 123(R)-3). FSP 123(R)-3 provides
an elective alternative method that establishes a computational
component to arrive at the beginning balance of the accumulated
paid-in capital pool related to employee compensation and a
simplified method to determine the subsequent impact on the
accumulated paid-in capital pool of employee awards that are fully
vested and outstanding upon the adoption of SFAS 123(R). The
Company does not believe that this FSP will have a material impact on
the income statement or balance sheet.
In November 2005, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) Nos. SFAS 115-1 and SFAS
124-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. This FSP addresses the
determination as to when an investment is considered impaired,
whether that impairment is other than temporary and the
measurement of an impairment loss. This FSP also includes
accounting considerations subsequent to the recognition of other than temporary impairments. The adoption of the FSP did not have a
material impact on the income statement and balance sheet.
In October 2005, the FASB issued FASB Staff Position SFAS 123(R)-2,
Practical Accommodation to the Application of Grant Date as Defined
in SFAS 123(R) (FSP 123(R)-2). FSP 123(R)-2 provides guidance on
the application of grant date as defined in SFAS 123(R). In accordance
with this standard a grant date of an award exists if:
|
|
the award is a unilateral grant; and |
|
|
|
the key terms and conditions of the award are expected to be
communicated to an individual recipient within a relatively short
time period from the date of approval |
The Company does not believe that this FSP will have a material
impact on the income statement or balance sheet.
In May 2005, the FASB issued FASB Statement No. 154, Accounting
Changes and Error Corrections a replacement of APB Opinion No. 20
and FASB Statement No. 3 (SFAS 154). SFAS 154 replaces APB
Opinion No. 20, Accounting Changes, and FASB Statement No. 3,
Reporting Accounting Changes in Interim Financial Statements and
changes the requirements for the accounting for and reporting of a
change in accounting principle. This statement applies to all
voluntary changes in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance
that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition
provisions, those provisions should be followed. SFAS 154 is effective
for accounting changes and corrections of errors made in fiscal years
beginning after 15 December 2005 and requires prospective
application. The Company is currently evaluating the impact of this
new Standard.
202
Telstra Corporation Limited and controlled entities
Directors Declaration
This directors declaration is required by the Corporations Act 2001 of
Australia.
The directors of Telstra Corporation Limited have made a resolution
that declared:
(a) |
|
the financial statements and notes, set out on pages 2 to 202 of
Telstra Corporation Limited and the Telstra Group: |
(i) comply with the Accounting Standards and Corporations
Regulations;
(ii) give a true and fair view of the financial position as at 30 June
2006 and performance, as represented by the results of the
operations and cash flows, for the year ended 30 June 2006; and
(iii) in the directors opinion, have been made out in accordance
with the Corporations Act 2001.
(b) |
|
they have received declarations as required by S.295A of the
Corporations Act 2001; |
|
(c) |
|
at the date of this declaration, in the directors opinion, there are
reasonable grounds to believe that Telstra Corporation Limited
will be able to pay its debts as and when they become due and
payable in Australia; and |
|
(d) |
|
at the date of this declaration there are reasonable grounds to
believe that the members of the extended closed group identified
in note 29(a) to the full financial statements, as parties to a Deed
of Cross Guarantee, will be able to meet any obligations or
liabilities to which they are, or may become subject to, under the
Deed of Cross Guarantee described in note 29(a). |
In accordance with subsection 334(5) of the Corporations Act 2001,
the directors have elected to adopt the following Australian
accounting standards early for the year ended 30 June 2006:
|
|
|
AASB 119: Employee Benefits (issued in December 2004); |
|
|
|
|
AASB 7: Financial Instruments: Disclosures; |
|
|
|
|
AASB 2005-3: Amendments to Australian Accounting
Standards; and |
|
|
|
|
AASB 2005-10: Amendments to Australian Accounting
Standards. |
For and on behalf of the board
|
|
|
|
|
|
|
|
|
Donald G McGauchie
|
|
Solomon D Trujillo |
Chairman
|
|
Chief Executive Officer and |
|
|
Executive Director |
|
|
|
Date: 10 August 2006 |
|
|
Melbourne, Australia |
|
|
203
Telstra Corporation Limited and controlled entities
Independent Audit Report to the Members of Telstra Corporation Limited
This report is included solely for the purpose of incorporation in Telstra
Corporation Limiteds Annual Report 2006 as filed with the Australian
Stock Exchange and the Australian Securities and Investments
Commission.
Scope
The financial report and directors responsibility
The financial report comprises the income statement, balance sheet,
statement of cash flows, and statement of recognised income and
expense, accompanying notes to the financial statements, and the
directors declaration for Telstra Corporation Limited (the Telstra
Entity) and the consolidated entity, for the year ended 30 June 2006.
The consolidated entity comprises both the Telstra Entity and the
entities it controlled during that year (the Telstra Group).
The directors of the Telstra Entity are responsible for preparing a
financial report that gives a true and fair view of the financial position
and performance of the Telstra Entity and the Telstra Group, and that
complies with Accounting Standards in Australia, in accordance with
the Corporations Act 2001. This includes responsibility for the
maintenance of adequate accounting records and internal controls
that are designed to prevent and detect fraud and error, and for the
accounting policies and accounting estimates inherent in the
financial report.
Audit approach
I have conducted an independent audit of the financial report in order
to express an opinion on it to the members of the Telstra Entity. My
audit was conducted in accordance with Australian National Audit
Office Auditing Standards, which incorporate the Australian Auditing
and Assurance Standards, in order to provide reasonable assurance as
to whether the financial report is free of material misstatement. The
nature of an audit is influenced by factors such as the use of
professional judgement, selective testing, the inherent limitations of
internal control, and the availability of persuasive rather than
conclusive evidence. Therefore, an audit cannot guarantee that all
material misstatements have been detected.
I performed procedures to assess whether in all material respects the
financial report presents fairly, in accordance with the Corporations
Act 2001, including compliance with Accounting Standards in
Australia, and other mandatory financial reporting requirements in
Australia, a view that is consistent with my understanding of the
Telstra Entitys and the Telstra Groups financial position, and of their
performance as represented by the results of their operations and
cash flows.
I formed my audit opinion on the basis of these procedures, which
included:
|
|
examining, on a test basis, information to provide evidence
supporting the amounts and disclosures in the financial report,
and |
|
|
|
assessing the appropriateness of the accounting policies and
disclosures used and the reasonableness of significant accounting
estimates made by the directors. |
I have also audited the explanation and quantification of the major
differences between Australian Accounting Standards compared to
generally accepted accounting principles in United States of America,
which is presented in note 37 to the financial statements. I have
audited note 37 in order to form an opinion whether in all material
respects, it presents fairly, in accordance with Accounting Standards
in Australia and other mandatory financial reporting requirements in
Australia and generally accepted accounting principles in the United
States of America, the major differences between Australian
Accounting Standards and generally accepted accounting principles
in the United States of America.
While I considered the effectiveness of managements internal
controls over financial reporting when determining the nature and
extent of the procedures, my audit was not designed to provide
assurance on internal controls.
I performed procedures to assess whether the substance of business
transactions was accurately reflected in the financial report. These
and the other procedures did not include consideration or judgment of
the appropriateness or reasonableness of the business plans or
strategies adopted by the directors and management of the Telstra
Entity.
Independence
I am independent of the Telstra Group, and have met the
independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001. I have given to the
directors of the Telstra Entity a written Auditors Independence
Declaration a copy of which is included in the Directors Report. In
addition to the audit of the financial report, additional services were
undertaken as disclosed in the notes to the financial statements. The
provision of these services has not impaired my independence.
204
Telstra Corporation Limited and controlled entities
Independent Audit Report to the Members of Telstra Corporation Limited (continued)
Audit opinion
In my opinion, the financial report of the Telstra Group is in
accordance with:
(a) |
the Corporations Act 2001 including: |
|
(i) |
|
giving a true and fair view of the financial position of the
Telstra Entity and the Telstra Group as at 30 June 2006 and of
their performance for the year ended on that date; and |
|
|
(ii) |
|
complying with Accounting Standards in Australia and the
Corporations Regulations 2001; and |
(b) |
other mandatory professional reporting requirements in
Australia. |
Further, in my opinion, note 37 to the financial statements presents
fairly the major differences between Australian Accounting Standards
and generally accepted accounting principles in the United States of
America.
Ian McPhee
Auditor-General
Date: 10 August 2006
Canberra, Australia
205
Telstra Corporation Limited and controlled entities
Directors Report
For the year ended 30 June 2006
1
In accordance with a resolution of the Board, the directors present their report on the
consolidated entity (Telstra Group) consisting of Telstra Corporation Limited and the entities it
controlled at the end of or during the year ended 30 June 2006.
This is our first full year financial report prepared in accordance with Australian equivalents to
International Financial Reporting Standards (A-IFRS). When preparing this directors report,
we have amended certain accounting and valuation methods applied under the previous
Australian Generally Accepted Accounting Principles (AGAAP) to comply with A-IFRS. With the
exception of financial instruments, the comparative figures have been restated to reflect these
adjustments.
This year has seen the commencement of a 3 to 5 year transformation of the company to
improve long term shareholder value. The financial performance of the Company in fiscal
2006 was impacted by the investment in this transformation and provision for future
restructuring.
Principal activity
Telstras principal activity during the financial year was to provide telecommunications and
information services for domestic and international customers. There has been no significant
change in the nature of this activity during the year.
Results of operations
Telstras profit for the year was $3,181 million (2005: $4,309 million). This result was after
deducting:
|
|
|
net finance costs of $936 million (2005: $880 million); and |
|
|
|
|
income tax expense of $1,380 million (2005: $1,746 million). |
Earnings before interest and income tax expense was $5,497 million, representing a decrease
of $1,438 million or 20.7% on the prior years result of $6,935 million. This decrease was due to
higher labour costs, in particular redundancy costs, higher goods and services purchased and
increases in other expenses supporting revenue growth. Expenses were also impacted by the
recognition of transformation related expenses, including a provision at year end for
redundancy and restructuring costs of $427 million to be incurred as part of our business
transformation.
Review of operations
Financial performance
Our total income (excluding finance income) increased by $658 million or 2.9% to $23,100
million, reflecting a rise in total revenue (excluding finance income) of $591 million or 2.7% and
other income by $67 million or 25.7%.
Total income (excluding finance income) growth was mainly attributable to:
|
|
mobile goods and services $284 million or 6.1%; |
|
|
|
internet and IP solutions revenue $530 million or 38.5%; |
|
|
|
advertising and directories revenue $126 million or 7.9%; and |
|
|
|
pay TV bundling $57 million or 21.7%. |
Mobile goods and services revenue increased largely due to increases in mobile data,
international roaming and mobile interconnection revenues. Our interconnection revenues
increased primarily due to Hutchison 3G roaming services, which commenced in April 2005. In
addition, we continued to experience growth in the number of mobiles in operation of 261,000
to reach a total of 8.5 million, as well as increased revenue from mobile handset sales. 3G
services were launched and take up has been very promising. Data usage is particularly strong
by 3G users.
2
The increase in internet and IP solutions revenue was due to the significant growth in the
number of subscribers to our Bigpond broadband product. During fiscal 2006 we increased the
number of broadband subscribers by 1.2 million to 2.9 million, reflecting wholesale subscribers
of 1.4 million and retail subscribers of 1.5 million.
Our advertising and directories revenue increased compared with the prior year due to the
continued strong performance of our Yellow pages® and White pages® print directories and
strong growth in online products. This growth has also been driven by innovative marketing
and product development strategies.
Pay TV bundling revenue increased due to new subscribers and current subscribers migrating
to the FOXTEL digital premium product as a result of promotions during the year, offering
minimal price installation and discounted packages.
Partially offsetting the revenue growth was a decline in PSTN product revenues of $540 million
or 6.7% as the market continues to move towards new products and services. There has been a
general reduction in PSTN volumes during the year with a decline in retail basic access lines
and volume reductions across local calls, national long distance calls, international direct calls
and fixed interconnection. Yields have also declined due to competitive pricing pressure and
continuing customer migration to other products. The rate of decline in the second half of the
year has reduced.
Total operating expenses (before depreciation and amortisation, finance costs and income tax
expense) increased by $1,637 million or 13.8% compared with the prior year. This growth was
mainly attributable to:
|
|
labour $506 million or 13.1%; |
|
|
|
goods and services purchased $519 million or 12.3%; and |
|
|
|
other expenses $612 million or 16.0%. |
Excluding the effects of our transformation costs, our total operating expenses (before
depreciation and amortisation, finance costs and income tax expense) increased by $933
million or 7.9%. Further details of the increase in expenses is discussed below.
Labour costs grew in fiscal 2006 mainly due to the following:
|
|
an increase in redundancy expense due to transformation initiatives; |
|
|
|
annual salary increases due to enterprise agreements and annual salary reviews; and |
|
|
|
an increase in labour expense of controlled entities as a result of entities acquired during
fiscal 2005 being included for the full year in fiscal 2006. |
Goods and services purchased increased due to the following:
|
|
an increase in network payments as a result of a rise in the number of terminations on
other networks and additional network access charges incurred as a result of our 3G
partnership activities; |
|
|
|
higher handset subsidies from an increase in the take up of subsidised plans; |
|
|
|
a rise in purchases of pay TV services to enable us to provide bundled products to meet
market demand; and |
|
|
|
increased costs associated with our restructuring provision. |
3
Other expenses grew due to the following:
|
|
recognition of a restructuring provision associated with our property rationalisation,
cancellation of server leases and decommissioning of certain information technology
platforms; |
|
|
|
increased maintenance costs of the existing 3G network and the operational expenditure
relating to the construction of the new 3G 850 network; and |
|
|
|
increased costs associated with our transformation initiatives, including higher
consultancy costs for transformation activities and additional market research as part of
our market based management approach. |
Depreciation and amortisation costs grew to $4,087 million or by 15.8% in fiscal 2006 primarily
due to the reassessment of service lives of our assets as part of the transformation strategy. As
a result, we have accelerated depreciation and amortisation on our CDMA network, switching
systems, certain business and operational support systems and related software totalling $422
million for the year.
Partially offsetting the growth in other expenses was a reduction in our bad and doubtful debt
expense resulting from improved credit management performance that led to lower debtor
provision requirements and write offs, as well as reduced payments to external debt collection
agents.
Net finance costs increased by $56 million or 6.4% in fiscal 2006, primarily due to higher levels
of debts driven by the cash requirements to fund the payment of our dividends and capital
expenditure associated with the improvement of our core infrastructure. Our borrowings have
also been affected by a higher effective interest rate as a result of refinancing elements of our
maturing debt. The net debt gearing level remains within the financial parameters set by the
Board.
Income tax expense decreased by $366 million or 20.9% to $1,380 million in fiscal 2006 mainly
as a result of the lower profit. The effective tax rate in the current year was 30.3% compared
with the prior year rate of 28.8%. The effective tax rate is consistent with the Commonwealth
statutory marginal income tax corporate rate of 30.0%. The effective tax rate has increased
from the prior year mainly due to reduced differences for partnership losses and an increase in
the under provision for tax from prior periods.
Financial condition
We continued to maintain a strong financial position, as demonstrated by us generating free
cash flow of $4,550 million. During fiscal 2006 we continued to develop our core infrastructure
network and re-energise our Company through ongoing operational transformation. In
addition, we acquired a number of strategic investments and paid a total of $4,970 million to
shareholders as dividends in fiscal 2006.
As part of our ongoing operational transformation, we have introduced the one factory
methology to consolidate and simplify the way we operate at all levels of the business.
Previously, we had invested in multiple platforms in our exisiting networks. We intend on
using economies of scale to ensure rationalisation of the number of operational platforms. We
are currently implementing new business support systems and operational support systems to
deliver simplificiation of our current processes and new capababilities cost effectively.
During fiscal 2006, we merged our 100% owned Hong Kong mobile operations (Telstra CSL
Group) with the Hong Kong mobile operations of New World PCS Holdings Limited and its
controlled entities (New World Mobility Group) to form the CSL New World Mobility Group.
Under the merger agreement, Telstra CSL Limited (Telstra CSL) issued new shares to New World
Mobility Holdings Limited in return for 100% of the issued capital of the New World Mobility
Group and $42 million in net proceeds. The share issue diluted Telstras ownership in the
merged group to 76.4%.
4
This merger was undertaken as the two entities undertake complementary services in
providing mobile telecommunication products and services in Hong Kong. We believe the CSL
New World Mobility Group will be able to leverage their strong brand recognition and common
network. The merged entity will also create the largest wireless service provider in the Hong
Kong market.
During fiscal 2006, our credit rating outlook was adjusted by Standard and Poors, and Moodys.
The change was initiated as a result of the uncertain environment in which we are operating,
reflected by the regulatory uncertainty and the speculation surrounding the further sale of
shares in our Company. As a result, our current credit ratings are as follows:
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Long term |
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Short term |
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Outlook |
Standard & Poors
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A
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A1
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negative |
Moodys
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A2
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P1
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negative |
Fitch
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A+
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F1
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negative |
Our financial condition has enabled us to execute partially our announced capital
management program. During fiscal 2006, we returned $4,970 million to shareholders as
ordinary and special dividend payments. In fiscal 2006, we paid two special dividends of 6
cents per share ($1,492 million) with our final dividend and interim dividend. We announced
during the year that the third year of the capital management policy would not occur. Refer to
the strategy section below for further details.
We reported a strong free cash flow position, which enabled the company to pay increased
dividends and fund the acquisition of a number of new entities. We continue to source cash
through ongoing operating activities and through careful capital and cash management.
Our cash flow before financing activities (free cash flow) position remains strong despite
declining to $4,550 million in the year from $5,194 million in the prior year. This decline was
driven by higher levels of cash used in investing activities as we undertake our network and
information technology platform transformation and a decline in operating performance.
Cash used in investing activities was $4,012 million, representing an increase of $246 million
over the prior year. The increase is mainly attributable to capital expenditure to upgrade our
telecommunications networks, eliminate components that are no longer useful and improve
the systems used to operate our networks. Our investing expenditure also includes $312
million of deferred payments in relation to our purchase of the 3G radio access network assets
from Hutchison Australia Pty Ltd in fiscal 2005.
Our cash used in financing activities was $5,399 million, resulting from the funding of dividend
payments and the refinancing of our maturing debt, offset by net proceeds from borrowings
received from a number of our private placements.
Investor return and other key ratios
Our basic earnings per share decreased to 25.7 cents per share in fiscal 2006 from 34.7 cents per
share in the prior year. The decrease was due to lower profit in fiscal 2006.
We have declared a final fully franked dividend of 14 cents per ordinary share ($1,739 million),
bringing declared dividends per share for fiscal 2006 to 34 cents per share. The prior year
declared dividends amounted to 40 cents per share. The dividends paid in fiscal 2006 were 40
cents per share compared with dividends paid in fiscal 2005 of 33 cents per share. In addition
to our dividends in fiscal 2005, we returned $750 million to shareholders through an off market
share buy-back during fiscal 2005.
5
Other relevant measures of return include the following:
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Return on average assets 2006: 15.8% (2005: 20.6%) |
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Return on average equity 2006: 24.2% (2005: 30.6%) |
The return on both average assets and average equity is lower in fiscal 2006 primarily due to
lower profit as previously discussed.
Strategy
We are Australias largest telecommunications and information services company. We offer a
full range of telecommunication products and services throughout Australia and various
telecommunication services in certain overseas countries.
During fiscal 2006, we announced our new strategic and operational focus to continually move
forward as an Australian market leader in the telecommunications industry. This review was a
blueprint for improving our long term performance by providing a solid platform to drive
future growth and create operational efficiencies.
Our vision is to streamline our processes to provide solutions that are simple and valued by our
customers, which we believe will ultimately lead to the creation of long term value for our
shareholders. Our strategy involves:
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providing customers with integrated telecommunication services; |
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investing in systems and processes to remove complexity and cost from the business; |
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continually improving our operating performance in mobiles and broadband, as well as
accelerating opportunities in Sensis;. |
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investing in new services and applications to differentiate us from our competitors; and |
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targeted investing in areas where we can create value for our shareholders. |
We intend to deliver our new strategy through the implementation of a one factory approach
and market based management. The one factory approach involves bringing together the
operations and management of our internal IT systems, removing duplication and complexity
in our systems and implementing simpler and efficient processes and systems, which we
believe will improve our operational efficiency and cost structure. Market based management
involves us obtaining a better understanding of each of our respective customers unique
segment needs, priorities and expectations. It is based on extensive market research, which we
will utilise to ensure our processes and procedures meet our various customer requirements to
ultimately provide them with better services.
In addition, we currently face a series of business operating issues that we expect will impact
our future results. These issues range from regulatory issues, including unconditioned local
loop access pricing and operational separation, to the potential full sale of the Company.
We are currently in the process of rebuilding, redirecting and transforming the Company. The
next three to five years will see us concentrate on rebuilding the network, redirecting resources
into next generation services, reshaping the business and segmentation of customers
according to their needs. By streamlining our operations, while better satisfying the needs of
our customers, we believe we can deliver the financial performance improvements expected by
our shareholders.
Although the transformation of our Company is at an early stage, current progress is
encouraging. Our transformation has already resulted in our national 3GSM 850 network build
being more than 60% complete. Savings have been achieved by consolidating office space,
vacating existing leases and sourcing mobile devices through global supply-chain specialist,
Brightstar. In addition, we have slowed the PSTN revenue decline in the second half of the
year and increased the number of customers using three or more Telstra products. At the same
time, we have significantly reduced our customers unsatisfied demand for ADSL broadband.
6
Our Fibre to the Node (FTTN) project is on hold, however we have devoted substantial time and
resources in discussions with the ACCC to achieve regulation reform, including safeguards for
shareholder investments. Until our actual costs are recognised and the ACCCs regulatory
practices change, we will not invest in a FTTN broadband network.
We believe that the successful transformation of our Company will achieve the following:
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simplified and integrated experience for our customers; |
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Telstra Bigpond to be Australias leading ISP and services entity; |
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Sensis to be Australias leading information resource; |
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our Company to have the leading wireless network with faster speeds and best in-building
coverage, as well as Australias largest IP network, providing customers with integrated
telecommunications services; and |
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operational and cost efficiencies. |
During fiscal 2006, we revised our capital management policy to not make the last payment of
a special dividend. No decision with respect to the payment or funding of future ordinary
dividends has been made. The Board will make these decisions in the normal cycle having
regard to, among other factors, the Companys earnings and cash flow, as well as regulatory
decisions.
Industry dynamics
The Australian telecommunications industry is continually changing. We have seen the
number of mobile handsets in the Australian market continue to grow, as well as the use of
mobile services. Most households continue to maintain a basic access line, however PSTN
products are increasingly being substituted by wireless products.
Advances in technology continue to transform the telecommunications industry. In recent
years, we have seen various new product offerings released to the market, including the
provision of high-speed wireless services, 3G mobile services. Voice services over IP (VoIP) is
another area of change for which the industry is preparing. We have successfully
commissioned and commenced testing our next generation VoIP platform which we believe
will offer value added broadband services to our customers in the future. We expect take up of
this product to increase in future reporting periods, as the market becomes more aware of its
performance capabilities.
We aim to be at the forefront of providing leading edge telecommunication services to meet
the demands of our customers. During fiscal 2006, we proposed the roll out of the new 3G 850
network. In addition to current services already experienced on existing networks, we believe
future 3G 850 customers will enjoy many enhanced features, such as improved video calling
services and faster broadband access speeds, in addition to better in-building coverage.
The broadband sector is in a significant growth phase as the demand for high speed internet
access accelerates. We have recently seen large increases in broadband subscribers and a
steady fall in prices as providers compete for market share. We expect the broadband sector to
continue its expansion through the provision of new innovative products.
As telecommunications, computing and media technologies continue to converge, we are
focused on enhancing our capabilities to provide new and innovative application and content
services and to expand further into these converging markets. The challenge for
telecommunications companies moving forward will be to continue maximising revenues from
higher margin traditional products such as PSTN products, while managing the shift in
customer demand to lower margin emerging products such as broadband. Overall operating
margins are under constant pressure from the product mix change to lower margin products.
However, as we build a software based cost efficient infrastructure, new products, applications
and content can be delivered at low incremental costs to again provide good margins.
7
We continue to be at the forefront of these, and other technology advancements as we
continue to devote substantial capital to upgrading and simplifying our telecommunications
networks to meet customer demand, particularly for the new product and growth areas. We
believe we are well positioned to focus on these areas of new customer demand by providing a
broad range of innovative products with creative and competitive pricing structures.
Sale of the Commonwealths remaining interest in Telstra
The Commonwealth Government has passed legislation to enable the sale of its remaining
interest in Telstra. The Government has stated that it is yet to decide about proceeding with a
sale. This decision will include an assessment of whether the level of demand for the shares
would allow a partial or full sale of the Commonwealths remaining interest. Until this
decision is made by the Government and announced, it is unclear how this may affect our
capital structure, operations and corporate compliance obligations. Any sale by the
Commonwealth of its remaining interest will require our managements time and resources.
Dividends
The directors have declared a fully franked final dividend of 14 cents per share ($1,739 million).
The dividends will be franked at a tax rate of 30%. The record date for the final dividend will be
25 August 2006 with payment being made on 22 September 2006. Shares will trade excluding
entitlement to the dividend on 21 August 2006.
During fiscal 2006, the following dividends were paid:
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Dividend |
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Date declared |
|
Date paid |
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Dividend per share |
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Total dividend |
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Final dividend for
the year ended 30
June 2005
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11 August 2005
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31 October 2005
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14 cents franked to 100%
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$1,739 million |
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Special dividend
for the year ended
30 June 2005
|
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11 August 2005
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31 October 2005
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6 cents franked to
100%
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$746 million |
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Interim dividend
for the year ended
30 June 2006
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8 February 2006
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24 March 2006
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14 cents franked to
100%
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$1,739 million |
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Special dividend
for the year ended
30 June 2006
|
|
8 February 2006
|
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24 March 2006
|
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6 cents franked to
100%
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$746 million |
At present, it is expected that we will be able to fully frank declared dividends out of
fiscal 2007 earnings. However, the directors can give no assurance as to the future level of dividends, or of
the franking of these dividends. This is because our ability to frank dividends depends upon,
among other factors, our earnings, Government legislation and our tax position.
8
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of our Company during the
financial year ended 30 June 2006, except for:
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we announced our new strategic and operational focus to continually move forward as
an Australian market leader in the telecommunications industry. As part of this
strategic review, we unveiled a blueprint for improving our long term performance; and |
|
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|
we are involved in continuing discussions over the future regulatory environment
impacting the Australian telecommunications industry in general and us in particular.
The regulatory environment we operate in has a significant impact on our future
performance. There are several key regulatory decisions, whether recently made or
pending, which will shape the future of our Company. We are currently in discussions
with the regulators, which we hope will advance the best interests of our shareholders,
customers and the nation. |
Likely developments and prospects
The directors believe, on reasonable grounds, that Telstra would be likely to be unreasonably
prejudiced if the directors were to provide more information than there is in this report or the
financial report about:
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the likely developments and future prospects of Telstras operations; or |
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the expected results of those operations in the future. |
Events occurring after the end of the financial year
The directors are not aware of any matter or circumstance that has arisen since the end of the
financial year that, in their opinion, has significantly affected or may significantly affect in
future years Telstras operations, the results of those operations or the state of Telstras
affairs; other than:
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on 31 July 2006, our 50% owned pay television joint venture FOXTEL entered into a new
$600 million syndicated secured term loan facility to fund the refinancing of previous
loan facilities (including the $550 million syndicated facility), and to enable it to meet
future cash flow and expenditure requirements. |
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The equity contribution deed (ECD) entered into by us and FOXTELs other ultimate
shareholders, News Corporation Limited and Publishing and Broadcasting Limited has
been terminated. Under this arrangement, recourse to our controlled entity Telstra
Media Pty Ltd, as a FOXTEL partner, is limited to the assets of the FOXTEL Partnerships. |
Details about directors and executives
Changes to the directors of Telstra Corporation Limited during the financial year and up to the
date of this report were:
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John E Fletcher resigned as director on 30 June 2006; |
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Peter J Willcox was appointed as director on 17 May 2006; |
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John D Zeglis was appointed director on 17 May 2006; |
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John T Ralph retired as director on 11 August 2005; |
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Anthony J Clark retired as director on 11 August 2005; |
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Solomon D Trujillo was appointed CEO and executive director on 1 July 2005; and |
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Zygmunt E Switkowski resigned as CEO and executive director on 1 July 2005. |
9
Information about directors and senior executives is provided as follows and forms part of this
report:
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names of directors and details of their qualifications, experience, special
responsibilities and directorships of other listed companies are given on pages 14 to 19; |
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number of Board and Committee meetings and attendance by directors at these
meetings is provided on page 20; |
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details of director and senior executive shareholdings in Telstra are shown on page 20;
and |
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details of director and senior executive remuneration is detailed in the remuneration
report on pages 22 to 48. |
Company secretary
The qualifications, experience and responsibilities of our company secretary are provided on
page 19 and forms part of this report.
Directors and officers indemnity
Constitution
Our constitution provides for us to indemnify each officer to the maximum extent permitted by
law for any liability incurred as an officer provided that:
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the liability is not owed to us or a related body corporate; |
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the liability is not for a pecuniary penalty or compensation order made by a Court
under the Corporations Act 2001; and |
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the liability does not arise out of conduct involving a lack of good faith. |
Our constitution also provides for us to indemnify each officer, to the maximum extent
permitted by law, for legal costs and expenses incurred in defending civil or criminal
proceedings.
If one of our officers or employees is asked by us to be a director or alternate director of a
company which is not related to us, our constitution provides for us to indemnify the officer or
employee out of our property for any liability he or she incurs. This indemnity only applies if
the liability was incurred in the officers or employees capacity as a director of that other
company. It is also subject to any corporate policy made by our CEO. Our constitution also
allows us to indemnify employees and outside officers in some circumstances. The terms
officer, employee and outside officer are defined in our constitution.
Deeds of indemnity in favour of directors, officers and employees
Telstra has also executed deeds of indemnity in favour of:
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directors of the Telstra Entity (including past directors); |
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secretaries and executive officers of the Telstra Entity (other than Telstra Entity
directors) and directors, secretaries and executive officers of our wholly owned
subsidiaries; |
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directors, secretaries and executive officers of a related body corporate of the Telstra
Entity (other than a wholly owned subsidiary) while the director, secretary or
executive officer was also an employee of the Telstra Entity or a director or employee
of a wholly owned subsidiary of the Telstra Entity (other than Telstra Entity directors);
and |
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employees of Telstra appointed to the boards of other companies as our nominees. |
Each of these deeds provides an indemnity on substantially the same terms as the indemnity
provided in the constitution in favour of officers. The indemnity in favour of directors also
gives directors a right of access to Board papers and requires Telstra to maintain insurance
cover for the directors.
10
Additionally, Telstra has executed an indemnity in favour of employees (including executive
officers other than directors) in respect of liabilities incurred in the formulation, entering into
or carrying out, of a Telstra Sale Scheme (as defined in the Telstra Corporation Act 1991 (Cwth)).
This indemnity would cover liabilities incurred by an employee in connection with the proposed sale
by the Commonwealth of its remaining shareholding in Telstra. The indemnity is subject to an
exclusion for liabilities arising out of conduct involving a lack of good faith.
In April 2006, the Commonwealth Government executed a Deed of Indemnity in favour of the directors
of Telstra to cover liabilities incurred by those directors in connection with a Telstra Sale
Scheme (as defined in the Telstra Corporation Act 1991 (Cwth)). This indemnity is subject to
certain limited exclusions described in the Deed. The Commonwealth also executed a similar
indemnity in favour of Telstra Executives (as defined in the Deed). The class of Telstra
Executives includes persons who are likely to be involved in enabling Telstra to assist the
Commonwealth in relation to a Telstra Sale Scheme.
Directors and officers insurance
Telstra maintains a directors and officers insurance policy that, subject to some exceptions,
provides worldwide insurance cover to past, present or future directors, secretaries or executive
officers of the Telstra Entity and its subsidiaries. Telstra has paid the premium for the policy.
The directors and officers insurance policy prohibits disclosure of the premium payable under the
policy and the nature of the liabilities insured.
Environmental regulation and performance
Telstras operations are subject to some significant environmental regulation under
Commonwealth, State and Territory law, particularly with regard to:
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the impact of the rollout of telecommunications infrastructure; |
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site contamination; and |
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waste management. |
Telstra has established procedures to monitor and manage compliance with existing
environmental regulations and new regulations as they come into force.
The directors are not aware of any significant breaches of environmental regulation during the
financial year.
Audit and non-audit services
The Auditor-General and Ernst & Young are authorised to perform all audit services, including an
examination or review of the financial statements of the Company in accordance with the laws and
rules of each jurisdiction in which filings are made for the purpose of expressing an opinion on
such statements.
The Audit Committee approves the provision of recurring audit services as part of the annual
approval of the audit plan. Additional audit and non-audit services are pre-approved by the Audit
Committee provided they fall within a defined list of services specified by the Audit Committee.
Those additional audit and non-audit services that are not listed have to be specifically approved
by the Audit Committee prior to the commencement of any engagement. In addition, all non-audit
services with a value over $100,000 must be separately approved by the Audit Committee, even if the
service is listed as a pre-approved service.
11
The Auditor-General does not provide non-audit services. Ernst & Young does provide non-audit
services, but are specifically prohibited from performing any of the following services:
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bookkeeping services and other services related to preparing Telstras accounting records of
financial statements; |
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financial information system design and implementation services; |
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appraisal or valuation services, fairness opinions, or contribution in kind reports; |
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actuarial services; |
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internal audit services; |
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management function or human resources; |
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broker or dealer, investment adviser, or investment banking services; |
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taxation advice of a strategic or tax planning nature; and |
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legal services or expert services unrelated to the audit. |
In addition, Ernst & Young may only provide non-audit services if the performance of the non-audit
service will not cause the total annual revenue to Ernst & Young from non-audit work to exceed the
aggregate annual amount of Ernst & Youngs audit fees. The Audit Committee will not approve the
provision of a non-audit service by Ernst & Young if the provision of the service would compromise
Ernst & Youngs independence.
The provision of non-audit services by Ernst & Young is monitored by the Audit Committee via
bi-annual reports to the Audit Committee. In addition, where engagements involve services from the
defined list of services, these are reported to the Audit Committee at the following meeting.
The Audit Committee expects the Auditor-General and requires Ernst & Young to submit annually to
the Audit Committee a formal written report delineating all relationships between the
Auditor-General, Ernst & Young and the Telstra Group. This includes:
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a listing of all audit and non-audit fees billed by the Auditor-General and Ernst & Young in
the most recent fiscal year; |
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a statement on whether the Auditor-General and Ernst & Young are satisfied that the provision
of the audit and any non-audit services is compatible with auditor independence; and |
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a statement regarding the Auditor Generals and Ernst & Youngs internal quality control
procedures. |
A copy of the independence of the auditor declaration is set out on page 21 and forms part of this
report.
The Audit Committee submits annually to the Board a formal written report detailing the nature and
amount of any non-audit services rendered by Ernst & Young during the most recent fiscal year and
an explanation of why the provision of these non-audit services is compatible with auditor
independence. If applicable, the Audit Committee recommends that the Board take appropriate action
in response to the Audit Committees report to satisfy itself of Ernst & Youngs independence.
Details of amounts paid or payable to the auditor for non-audit services provided during the year
are located in note 8 to our financial statements.
For the reason set out above, the directors are satisfied that the provision of non-audit services
by the external auditor during the year ended 30 June 2006 is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001.
12
Rounding of amounts
The Telstra Entity is a company of the kind referred to in the Australian Securities and
Investments Commission class order 98/100, dated 10 July 1998 and issued pursuant to section 341(1)
of the Corporations Act 2001. As a result, amounts in this report and the accompanying financial
report have been rounded to the nearest million dollars, except where otherwise indicated.
This report is made in accordance with a resolution of the directors.
Donald McGauchie
Chairman
10 August 2006
Solomon D Trujillo
Chief Executive Officer and Executive Director
10 August 2006
13
Directors profiles
As at 10 August 2006, our directors were as follows:
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Year of initial |
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Year last re- |
Name |
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Age |
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Position |
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appointment |
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elected (1) |
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Donald G McGauchie
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56 |
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Chairman
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1998 |
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2005 |
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Solomon D Trujillo (2)
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54 |
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CEO and
executive director
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2005 |
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Belinda J Hutchinson
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53 |
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Director
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2001 |
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2004 |
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Catherine B Livingstone
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50 |
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Director
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2000 |
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2005 |
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Charles Macek
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59 |
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Director
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2001 |
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2004 |
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John W Stocker
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61 |
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Director
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1996 |
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2003 |
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Peter J Willcox (3)
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60 |
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Director
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2006 |
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John D Zeglis (3)
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59 |
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Director
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2006 |
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(1) |
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Other than the CEO, one third of directors are subject to re-election by rotation each year. |
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(2) |
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Solomon D Trujillo was appointed CEO and executive director on 1 July 2005. |
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(3) |
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In accordance with our constitution, Peter Willcox and John Zeglis have been appointed to fill
interim positions and will stand for election at the 2006 annual general meeting. |
A brief biography for each of the directors as at 10 August 2006 is presented below:
Donald G McGauchie AO
Age 56
Chairman
Mr McGauchie joined Telstra as a non-executive director in September 1998 and was appointed as
chairman in July 2004. He is chairman of the Nomination Committee and is a member of the
Remuneration Committee.
Experience:
Mr McGauchie has wide commercial experience within the food processing, commodity trading, finance
and telecommunication sectors. He also has extensive public policy experience, having previously
held several high-level advisory positions to the government including the Prime Ministers
Supermarket to Asia Council, the Foreign Affairs Council and the Trade Policy Advisory Council.
Directorships of other listed companies current:
Director, James Hardie Industries NV (2003- ) and Nufarm Limited (2003- ).
Directorships of listed companies past three years:
Deputy Chairman, Ridley Corporation Limited (1998-2004); Director, National Foods Limited
(2000-2005) and Graincorp Limited (1999-2003).
Other:
Current: Director, Reserve Bank of Australia; Partner, C&E McGauchie Terrick West Estate.
Former: President of the National Farmers Federation (1994-1998); Chairman, Rural Finance
Corporation (2003-2004).
Awarded the Centenary Medal for service to Australian society through
agriculture and business in 2003. Appointed an officer in the general division of the Order of
Australia in 2004.
14
Solomon D Trujillo BSc, BBus, MBA, Hon Doctor of Law Degrees
(University of Wyoming, University of Colorado)
Age 54
Mr Trujillo joined Telstra as CEO on 1 July 2005.
Experience:
Mr Trujillo has spent his career in the communications sector where he managed fixed line,
wireless, broadband and directory businesses and served as a leader in the shift to market-based
management. He most recently served as CEO of Orange SA, one of Europes leading wireless
companies. Mr Trujillo was chairman and CEO of US West until he retired in July 2000 after the
companys merger with Qwest Communications.
Directorships of other listed companies current:
Target Corporation (1994- ).
Directorships of listed companies past three years:
Director, Electronic Data Systems Corporation (EDS) (2005-2005), PepsiCo Inc. (2000-2005), Orange
SA (2001-2005) and Gannett Co Inc (2002-2006).
Other:
Current: Member, World Economic Forum (2005- ) and UCLAs School of Public Affairs (2000- );
Trustee, Boston College; Director, Tomas Rivera Policy Institute (1991- ).
Recipient, the Ronald H. Brown Corporate Bridge Builder Award in 1999 from President Clinton for
his lifetime commitment as an advocate of workplace diversity.
Belinda J Hutchinson BEc, FCA
Age 53
Ms Hutchinson joined Telstra as a non-executive director in November 2001. She has been a member
of the Audit Committee since February 2005.
Experience:
Ms Hutchinson has had a long association with the banking industry and has been associated with
Macquarie Bank since 1992 where she was an executive director. She was previously a vice president
of Citibank Ltd.
Directorships of other listed companies current:
Director, QBE Insurance Group Limited (1997- ) and Coles-Myer Ltd (2005- ).
Directorships of listed companies past three years:
Director, TAB Limited (1997-2004) and Crane Group Limited (1997-2004).
Other:
Current: Director, St Vincents and Mater Health Sydney Limited (2001- ); President, Library
Council of New South Wales (2005- ) (member since 1997); and Consultant, Macquarie Bank Limited
(1997- ).
Former: Director of Energy Australia Limited (1997- 2005).
15
Catherine B Livingstone BA (Hons), FCA, FTSE
Age 50
Ms Livingstone joined Telstra as non-executive director in November 2000. She is a member of the
Audit Committee and the Technology Committee.
Experience:
Ms Livingstone has a degree in accounting and has held several finance and general management roles
predominantly in the medical devices sector. Ms Livingstone was the chief executive of Cochlear
Limited (1994-2000).
Directorships of other listed companies current:
Director, Macquarie Bank Limited (2003- ).
Directorships of listed companies past three years:
Director, Goodman Fielder Ltd (2000-2003) and Rural Press Limited (2000-2003).
Other:
Current: Chairman, CSIRO (2001- ); Member, Business/Industry/Higher Education Collaboration
Committee (BIHECC).
Former: Chairman and Director Australian Business Foundation (2000-2005);
Director, Sydney Institute (1998-2005); Former Member, Department of Accounting and Finance
Advisory Board Macquarie University.
Charles Macek - BEc, MAdmin, FAICD, FCPA, FAIM, SF Fin, FCA
Age 59
Mr Macek joined Telstra as a non-executive director in November 2001. He is a member of the Audit
Committee and Nomination Committee and is chairman of the Remuneration Committee.
Experience:
Mr Macek has a strong background in economics and has had a long association with the finance and
investment industry. His former roles include 16 years as founding managing director and chief
investment officer and subsequently chairman of County Investment Management Ltd.
Directorships of other listed companies current:
Director, Wesfarmers Ltd (2001- ) and Living Cell Technologies Limited (2006- ).
Directorships of listed companies past three years:
Chairman and Director, IOOF Holdings Ltd (2002-2003).
Other:
Current: Chairman, Sustainable Investment Research Institute Pty Ltd (2002- ) and Financial
Reporting Council (FRC) (2003- ); Director, Williamson Community Leadership Program Limited (2004-
); Victorian Councillor, Australian Institute of Company Directors; Member, New Zealand Accounting
Standards Review Board and Investment Committee of Unisuper Ltd.
Former: Chairman, Centre for Eye Research Australia Ltd (1996-2003); Director of Famoice
Technology Pty Ltd (2001-2004) and Vertex Capital Pty Ltd (2004-2006).
16
John W Stocker - AO, MB, BSc, BMedSc, PhD, FRACP, FTSE
Age 61
Dr Stocker joined Telstra as a non-executive director in October 1996. He is chairman of the Audit
Committee and Technology Committee.
Experience:
Dr Stocker has had a distinguished career in pharmaceutical research and extensive experience in
management of research and development, and its commercialisation including in his role as chief
scientist for the Commonwealth of Australia (1996-1999).
Directorships of other listed companies current:
Chairman, Sigma Pharmaceuticals Ltd (2005- ); Director, Circadian Technologies Ltd (1996- ) and
Nufarm Limited (1998- ).
Directorships of listed companies past three years:
Chairman, Sigma Company Ltd (1998-2005); Director, Cambridge Antibody Technology Group plc
(1995-2006).
Other:
Current: Principal, Foursight Associates Pty Ltd.
Former: Chairman, Grape and Wine Research and Development Corporation (1997-2004).
Peter J Willcox MA
Age 60
Mr Willcox joined Telstra as a non-executive director on 17 May 2006.
Mr Willcox holds a masters degree in physics from Cambridge University and following a 28 year
career in the international petroleum industry was appointed as CEO of BHP Petroleum Limited, from
1986 to 1994. He has wide and diverse experience as a director and chairman of Australian and
American listed companies. He is a fellow of the Australian Institute of Company Directors and
sits on the advisory board of CVC Asia Pacific (Australia) Limited.
Directorships of other listed companies current:
Chairman, Mayne Pharma (2005- ).
Directorships of listed companies past three years:
Chairman, AMP Limited (2002- 2005) and Mayne Group Ltd (2002-2005).
Other:
Current: Director, CSIRO (2006- ).
Former: Deputy Chairman, Energy Developments Ltd (1994-2002), Lend Lease Corporation (1994-2000);
Director: J.H. Faulding & Co Ltd (1994-2001), James Hardie Industries Ltd (1994-2001), North Ltd
(1994-2000), Schroders (Australia) Ltd (1994-1999), BHP Ltd (1988-1994), Woodside Petroleum
(1986-1993), Tejas Gas Corporation (1987-1994) and Hamilton Oil Corporation (1987-1991).
17
John D Zeglis BSc Finance, JD Law
Age 59
Mr Zeglis joined Telstra as a non-executive director on 17 May 2006.
Mr Zeglis has a legal background, and became partner with the law firm Sidley & Austin in 1978.
His qualifications include a BSc in finance from the University of Illinois, and a JD in law from
Harvard.
Mr Zeglis has had a long and distinguished career in the US telecommunications sector. He joined
AT&T in 1984, and was elected as president of AT&T in 1998 and chairman and CEO of the AT&T
Wireless Group in 1999. He continued as CEO of AT&T Wireless until retiring in November 2004
following the companys sale to Cingular Wireless.
Directorships of other listed companies current:
Director, Helmerich & Payne Corporation (1989- ).
Directorships of listed companies past three years:
Director, Georgia Pacific Corporation (2001-2005).
Other:
Current: Director, AMX Corporation; (2005- ) and State Farm
Automobile Insurance (2004- ).
Former: Director, Sara Lee Corporation (1998-2000) and Illinois Power Company (1992-1996).
During the year and through to the date of the report, the following directors resigned or
retired:
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John E Fletcher resigned as a director on 30 June 2006; |
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John T Ralph retired as a director on 11 August 2005; |
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Anthony J Clark retired as a director on 11 August 2005; and |
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Zygmunt E Switkowski resigned as a director on 1 July 2005. |
A brief biography for each of the former directors is presented below:
John E Fletcher - FCPA
Mr Fletcher joined Telstra as a non-executive director in November 2000. He was a member of the
Nomination Committee and the Remuneration Committee. John E Fletcher resigned as director on 30
June 2006.
Mr Fletcher has had extensive experience in management in the transport industry and was formerly
chief executive of Brambles Industries Ltd. Mr Fletcher was employed by Brambles for 27 years,
initially in an accounting role and then in a series of operating and senior management positions
before being appointed as chief executive in 1993.
John T Ralph - AC, FCPA, FTSE, FAICD, FAIM, FAusIMM, Hon LLD (Melbourne & Queensland), DUniv (ACU)
Mr Ralph joined Telstra as non-executive director and deputy chairman in October 1996. He was a member of the Audit Committee,
Nomination Committee and Remuneration Committee. John Ralph retired as director on 11 August 2005.
Mr Ralph has had over 50 years of experience in the mining and finance industries. Mr Ralph was
formerly chief executive and managing director of CRA Limited. He has previously served on the
boards of several of Australias largest companies including the Commonwealth Bank of Australia
Limited, BHP Billiton Limited and Fosters Group Limited.
18
Anthony J Clark - AM, FCA, FAICD
Mr Clark joined Telstra as a non-executive director in October 1996. He served on the Audit
Committee until February 2005. Anthony Clark retired as director on 11 August 2005.
Mr Clark has had extensive experience in the accounting field, specialising in audit and advisory
services and is a fellow of the Institute of Chartered Accountants and a fellow of the Australian
Institute of Company Directors. Mr Clark was formerly a managing partner KPMG NSW.
Zygmunt E Switkowski - BSc (Hons), PhD, FAICD
Mr Switkowski was appointed CEO and executive director from March 1999. Zygmunt Switkowski
resigned as CEO and executive director on 1 July 2005.
Formerly CEO of Optus Communications Ltd and chairman and managing director of Kodak (Australasia)
Pty Ltd and the Business Council of Australia.
Qualifications and experience of our company secretary
Douglas C Gration - FCIS, BSc, LLB (Hons), GDip AppFin
Age 40
Mr Gration was appointed company secretary of Telstra Corporation Limited in August 2001.
Before joining Telstra, Mr Gration was a partner in a leading national law firm. He specialised in
corporate finance and securities law, mergers and acquisitions and joint ventures and other
commercial contracts, and played a key role in the T1 and T2 privatisations. Mr Gration also
advised on telecommunication regulatory matters. Other roles previously held in Telstra include
deputy group general counsel and Infrastructure Services and Wholesale general counsel.
19
Directors meetings
Each director attended the following Board and committee meetings during the year as a member of
the Board or relevant committee:
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Board |
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Committees(5)
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Audit |
|
Nominations |
|
Remuneration |
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Technology |
|
|
a |
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b |
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|
a |
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b |
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a |
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b |
|
a |
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b |
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a |
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b |
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D G McGauchie |
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13 |
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13 |
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4 |
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4 |
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4 |
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4 |
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J T Ralph (1) |
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1 |
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1 |
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1 |
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1 |
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2 |
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2 |
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2 |
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2 |
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A J Clark (1) |
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1 |
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1 |
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S D Trujillo (2) |
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13 |
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13 |
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J E Fletcher (3) |
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13 |
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13 |
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4 |
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4 |
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4 |
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4 |
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B J Hutchinson |
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13 |
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13 |
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6 |
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6 |
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C B Livingstone |
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13 |
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13 |
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6 |
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6 |
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2 |
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2 |
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C Macek |
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13 |
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13 |
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6 |
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6 |
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4 |
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4 |
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4 |
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4 |
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J W Stocker |
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13 |
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13 |
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6 |
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6 |
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2 |
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2 |
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P J Willcox (4) |
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2 |
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2 |
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J D Zeglis (4) |
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2 |
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2 |
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Column a: number of meetings held while a member.
Column b: number of meetings attended. |
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(1) |
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Retired from the Board on 11 August 2005. |
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(2) |
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Appointed CEO and executive director on 1
July 2005. |
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(3) |
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Resigned from the Board on 30
June 2006. |
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(4) |
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Appointed to the Board on 17
May 2006. |
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(5) |
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Committee meetings are open to all directors to attend in an ex officio capacity. |
Director and senior executive shareholdings in Telstra
As at 10 August 2006:
Directors
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|
|
|
|
|
|
|
|
|
|
|
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Number of shares held |
|
|
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Direct |
|
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Indirect |
|
|
|
|
|
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interest |
|
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interest (1) |
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Total |
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Donald G McGauchie |
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1,866 |
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55,775 |
|
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57,641 |
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Solomon D Trujillo |
|
|
|
|
|
|
|
|
|
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Belinda J Hutchinson |
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38,912 |
|
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35,866 |
|
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74,778 |
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Catherine B Livingstone |
|
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11,637 |
|
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23,051 |
|
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34,688 |
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Charles Macek |
|
|
|
|
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48,576 |
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|
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48,576 |
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John W Stocker |
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2,953 |
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94,288 |
|
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97,241 |
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Peter J Willcox |
|
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10,000 |
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10,000 |
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John D Zeglis |
|
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|
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(1) |
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Shares in which the director does not have a relevant interest, including shares held by
the director related entities, are excluded from indirect interest. |
Senior executives
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Number of shares held |
|
|
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Direct |
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Indirect |
|
|
|
|
|
|
interest |
|
|
interest (1) |
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Total |
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Bruce Akhurst |
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4,880 |
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17,000 |
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|
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21,880 |
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Deena Shiff |
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|
5,680 |
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|
|
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|
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5,680 |
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David Moffatt |
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147,900 |
|
|
|
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147,900 |
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Kate McKenzie |
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John Stanhope |
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57,221 |
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57,221 |
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David Thodey |
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63,462 |
|
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|
800 |
|
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64,262 |
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Gregory Winn |
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(1) |
|
Shares in which the senior executive does not have a relevant interest, including shares
held by related entities of the executive, are excluded from indirect interest. |
20
Auditors Independence Declaration to the directors of Telstra Corporation Limited
In relation to my audit of the financial report of Telstra Group (comprising Telstra Corporation
Limited and the entities it controlled during the year) for the financial year ended 30 June 2006,
to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional
conduct.
Ian McPhee
Auditor-General
10 August 2006
Canberra, Australia
21
Remuneration report
The Remuneration Report forms part of the Directors Report and is set out under the
following headings:
CONTENTS
REMUNERATION AT TELSTRA
The Remuneration Committee
Remuneration policy
Changes to the remuneration strategy
CEO AND SENIOR EXECUTIVES
Remuneration strategy
Remuneration structure
Linking the remuneration structure to the business strategy
Remuneration mix
Fixed remuneration
Short term incentive (STI)
Long term incentive (LTI)
RELATIONSHIP BETWEEN REMUNERATION AND TELSTRAS PERFORMANCE
Defining company performance
DETAILS OF SENIOR EXECUTIVES REMUNERATION
Contract arrangements
Relocation costs associated with overseas senior executives
NON-EXECUTIVE DIRECTORS
Remuneration policy and strategy
Remuneration structure
Retirement benefits
Other benefits
Details of non-executive directors remuneration
This report for the year ended 30 June 2006 was prepared by the directors in accordance with the
Corporations Act 2001. Under AASB 124 Related Party Disclosures (AASB 124), we are required to
disclose remuneration details for our key management personnel (KMP). In addition to the
directors, our KMP also includes the Chief Operating Officer and the Group Managing Directors
listed in Figure 17. For the remainder of this report the KMP (other than the directors) will
collectively be referred to as senior executives.
REMUNERATION AT TELSTRA
Telstra proactively manages executive and director remuneration arrangements to ensure
that their remuneration is a key element supporting our business strategy by aligning reward
to the achievement of strategic objectives. We also ensure that it is competitive in the
markets we draw our talent from and that the needs of all stakeholders are taken into
consideration when remuneration decisions are made.
22
Remuneration report
The Remuneration Committee
The policy, strategy and structure for the Board, CEO and senior executive
remuneration is overseen and regularly reviewed by the Boards Remuneration
Committee.
The Telstra Board Remuneration Committee (Committee) is responsible for reviewing and recommending
to the Board the remuneration policy, strategy and structure for Telstras Board, the CEO and
senior executives. The Committees roles and responsibilities, composition and membership is
detailed on our website. The Committee also has a responsibility to ensure that our remuneration
strategy considers corporate governance principles and expectations of stakeholder bodies.
Any decision made by the Committee concerning an individual executives remuneration is made
without that executive being present.
Remuneration policy
The remuneration policy consists of principles that guide the Committee in its
deliberations, and which should be taken into consideration when formulating the strategy
and structure of remuneration.
The
Committee is guided by the following principles when formulating
remuneration strategy and structure.
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Senior executive remuneration should: |
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Non-executive director remuneration should: |
reflect the size and scope of the role and be
market competitive in order to attract and
retain talent
be competitive in domestic and global markets
motivate executives to deliver short and long
term business objectives
be aligned with shareholder value creation
be differentiated based on individual
performance
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be distinguished from executive remuneration
be fee based, not performance based
be partly remunerated in the form of equity in
order to align with the returns to shareholders |
Changes to the remuneration strategy
In line with major changes to Telstras business strategy this fiscal year, we
have reviewed and updated our remuneration structure.
During fiscal 2006 the Board approved a new business strategy for Telstra. The new strategy will
transform the company over several years in order to meet the challenges of a competitive global
market.
With the new business strategy significantly changing the companys commercial and operational
focus, it was important to update the metrics used to determine incentive outcomes to give
appropriate weight to Telstras new priorities. In parallel with the development of the business
strategy, the Committee commissioned an extensive review of the remuneration strategy.
23
Remuneration report
The focus of the remuneration review was to advise on contemporary market practice, the
relationship between fixed and variable remuneration and the measures which would drive
remuneration outcomes in the context of a significant strategic realignment of the business. The
aim was to reward the CEO and senior executives on the delivery of transformational and
operational outcomes in line with the key elements of the new business strategy. An additional
objective of the review was to link the successful delivery of the transformation to future
shareholder wealth creation. Management, with input from an external remuneration consultant,
formally presented the results of the review to the Committee in December 2005.
The review concluded that the CEO and senior executive remuneration strategy would need to have
increased flexibility in order to:
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focus on achieving long term transformation of the company while delivering
on short term performance; |
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reinforce and reward performance measures that will evolve with the companys
changing objectives; |
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attract and retain world-class executive talent; and |
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support a variety of employment arrangements and durations. |
Introduction of new performance measures
The three elements of Telstras remuneration structure fixed remuneration, short term incentives
(STI) and long term incentives (LTI) complement each other and will support the execution of
business strategy in both the short and long term. These elements are consistent with previous
years incentive plans. However, new performance measures (which are discussed in detail later in
this report) have been introduced to encourage executives to focus on key business outcomes and to
ensure that reward payouts occur when the company and the individual achieve the transformational
and operational goals set by the Board.
Figure 1 illustrates how the remuneration strategy and structure are aligned to, and support,
the business strategy through the use of performance measures.
Figure 1: Alignment of the business and remuneration strategies
24
Remuneration report
CEO AND SENIOR EXECUTIVES
Remuneration strategy
Our remuneration strategy for the CEO and senior executives includes performance
measures that are aligned to the key elements of Telstras new business strategy.
The senior executive remuneration strategy has been repositioned to drive the delivery of the
transformation milestones that have been outlined in Telstras business strategy. Over the next 3
5 years, the remuneration strategy will be based on performance measures that are strongly aligned
to those transformation outcomes as well as on other traditional business measures. The weighting
of performance measures is expected to evolve over time from initial weighting on transformation
measures to:
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operational measures for the STI; and |
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growth and return measures for the LTI. |
Figure 2 shows the proportion of the STI and LTI that depends on transformation measures for
fiscal 2006. It is also indicative of how the emphasis on the transformation measures will
diminish progressively as our transformation milestones are achieved. (However, it is not
intended to represent future weightings of remuneration elements.)
Figure 2: Remuneration structure that supports Telstras transformational goals
25
Remuneration report
Remuneration structure
The remuneration structure ensures that rewards are linked to strategic outcomes.
When reviewing the structure and mix of the remuneration packages of the CEO and senior
executives, the Committee takes into account:
|
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remuneration practices in other major corporations in Australia (in terms of
both salary levels and the ratio between fixed and at risk components); |
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|
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remuneration practices of global corporations within our comparative peer
group; and |
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a range of macro-economic indicators used to determine likely movements in
broad salary rates. |
For fiscal 2006, the remuneration structure for the CEO and senior executives consisted of:
|
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fixed remuneration; |
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short term incentive (at risk); and |
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long term incentive (atrisk). |
Linking the remuneration structure to the business strategy
The main benefits of linking senior executives rewards to specific performance
measures are to increase focus and understanding by senior executives of the key
strategic objectives of the business and provide motivation by rewarding employees on
strategy execution.
Figure 3 shows in detail how the remuneration structure is designed to satisfy the
requirements of the new business strategy, by setting and monitoring specific performance
measures for the various elements of remuneration.
Ordinarily, the Committee considers, and recommends to the Board, the measures and targets for
the incentive plans during the annual budget setting process. However, for fiscal 2006, the
Committee considered the remuneration strategy in parallel with the strategic review of the
company. The Committee recommended that the incentive measures should focus on the
transformation through to fiscal 2010. The fiscal 2010 strategic targets outlined to
shareholders in November 2005 were used as a starting point to determine the fiscal 2006 STI and
LTI performance measures.
To link the remuneration structure to business strategy, the Committee prioritised the
business strategic objectives by considering:
|
|
what could be measured; |
|
|
|
what objectives would have the greatest impact; and |
|
|
|
what aggregate of measures would best support the key themes of the strategy. |
26
Remuneration report
At the end of each financial year, the Committee reviews the companys audited financial
results and the results of the other performance measures, and assesses performance against each
measure to determine the percentage of STI and LTI that is payable. Measures are tracked by an
internal project office and, where appropriate, the achievement against targets will be
independently audited.
Figure 3: Performance measures selected to ensure a focus on key business strategies
|
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|
Remuneration |
|
Performance |
|
How is it measured? |
|
Link to business strategy |
element |
|
measures |
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|
|
|
Company Financial
|
|
EBITDA Earnings before interest, tax,
depreciation, amortisation.
|
|
To achieve earnings objective. |
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|
|
|
|
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|
|
Cost Reduction
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Amount of accelerated cost savings.
|
|
To identify and deliver near term operating
cost saving benefits that enable
investment in transformation initiatives. |
|
|
|
|
|
|
|
STI
(Cash)
|
|
3G 850 Network
|
|
The number of sites that are 3G
equipped and receiving transmission.
|
|
To deliver on the wireless strategy that
enables mobile revenue growth, reduces
cost and optimises the mobile business. |
|
|
|
|
|
|
|
|
|
Broadband
marketshare
|
|
The increase in Telstras share of retail
broadband customers.
|
|
To achieve an increase in Telstras retail
broadband marketshare. |
|
|
|
|
|
|
|
|
|
Individual
accountabilities
|
|
The achievement of personal goals
which include business unit specific
targets.
|
|
To align the individuals personal goals
with the business goals. |
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|
|
|
|
|
|
|
Revenue Growth
|
|
The year over year revenue growth rate
over the periods 3 and 5 years.
|
|
To drive the development of new revenue
and overall growth. |
|
|
|
|
|
|
|
|
|
Operating Expense
|
|
The total operating expense growth
rate over the periods 3 and 5 years.
|
|
To drive cost control and restructure the
cost base of the company. |
|
|
|
|
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|
IT Transformation
milestones
|
|
The time taken to achieve a targeted
reduction of Business Support Systems
(BSS) and Operational Support Systems
(OSS).
|
|
To reduce complexity, reduce cost and
provide an enhanced customer experience
by reducing the number of systems. |
|
|
|
|
|
|
|
LTI
(Performance
Rights)
|
|
Network
Transformation
milestones
|
|
The time taken to achieve network
simplification and build a new
platform.
|
|
To simplify the network to reduce
complexity and cost, while providing a new
platform for revenue growth. |
|
|
|
|
|
|
|
|
|
Return on
Investment (ROI)
over 3 years
|
|
EBIT over Average Investment (Average
of Net Debt plus Shareholder Funds).
|
|
To measure the return gained from the
financial investment in the
transformational goals. |
|
|
|
|
|
|
|
|
|
Total Shareholder
Return (TSR) Growth
over 5 years
|
|
Absolute growth in share price and
accumulated dividends from 19 August
2005.
|
|
To measure the value derived from
execution of the business strategy. |
In the case of Bruce Akhurst the STI is measured against specific financial metrics for
Sensis in lieu of the Telstra financial and transformational measures detailed above. Sensis
EBIT contribution and Cashflow make up 80% of his STI and the remaining 20% is based on
individual accountabilities.
To ensure the continued alignment of transformation objectives, the creation of value and executive
reward, the Committee initiated a review of the linkage between the remuneration strategy and
business strategy. Any changes to the remuneration strategy as a result of this review will be
reported to shareholders.
27
Remuneration report
Remuneration mix
Executive remuneration is composed of both fixed and at risk elements.
The remuneration mix describes the ratio of the different components of an executives pay. To
strengthen the link to company performance, the Board has determined that a significant proportion
of the total remuneration for the CEO and senior executives should be at risk representing
components that are awarded based on performance. This means senior executives can only earn
significant rewards if pre-determined company measures and targets are achieved. The at risk
components of a senior executives remuneration package are calculated by reference to that
individuals fixed remuneration.
Figure 4 shows the remuneration mix based on the maximum level of reward for the CEO and senior
executives.
Figure 4: Telstras remuneration mix
If the minimum performance level is not achieved, no STI or LTI will be awarded and the
executive receives 100% of fixed remuneration and 0% of their at risk remuneration. The
percentage of at risk pay increases with the increase in accountability.
Fixed remuneration
Fixed remuneration is in line with similar roles in the applicable market.
Fixed remuneration is made up of:
|
|
base salary including salary sacrifice benefits and applicable fringe benefits
tax; and |
|
|
|
superannuation. |
28
Remuneration report
Fixed remuneration is influenced by the scope of the role and the knowledge, skills and
experience required of the position holder. To ensure remuneration is market competitive, the
Committee takes into account local, home country and global market rates. In determining what
market rates to use for comparison purposes the Committee assesses a range of factors including
company size (based on market capitalisation), industry in which the comparative company
operates and global footprint.
For superannuation, in addition to mandatory contributions, the CEO and senior executives
may contribute additional amounts, subject to legislative requirements.
Fixed remuneration is reviewed annually as part of the companys overall remuneration review
process and is assessed against the companys and the individuals performance.
For fiscal 2006, the CEO was responsible for reviewing and determining the remuneration of the
company secretary. However, the remuneration policy described in this report in relation to the
senior executives and the discussion of the relationship between that policy and our performance
applies to the company secretary. The company secretary participates in the STI plan and the LTI
plan on the terms set out in this report.
Short term incentive (STI)
The STI component delivers reward on achievement of annual performance targets.
The STI is an annual at risk component of remuneration for the CEO and senior executives. During
fiscal 2006, the Committee ceased the Short Term Incentive Equity (STIE) Plan. As such the annual
STI payment for fiscal 2006 is delivered in cash, compared with fiscal 2005 when the STI was
delivered half in cash and half in equity instruments. The objective of the STI plan is to
encourage executives to meet annual business objectives and their own individual performance
targets.
How STI is calculated
The CEO and senior executives STI payment is based on their fixed remuneration, individual
STI opportunity (explained below) and achievements against performance measures. This is
illustrated in Figure 5.
Figure 5: Calculating the STI payment
STI opportunity and performance levels required
Depending on the role they perform, each senior executive has an STI opportunity ranging from
100% 140% of fixed remuneration where maximum performance is met. The maximum STI opportunity
varies according to the role. As illustrated in Figure 6, each of the performance measures has
three different levels of performance.
29
Remuneration report
Figure 6: STI opportunity for differing levels of performance
|
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|
|
|
|
|
|
|
|
|
|
|
|
Senior |
Level of performance |
|
|
|
CEO |
|
Executives |
(% of STI opportunity) |
|
Description |
|
(% of fixed remuneration) |
Gateway (25%)
|
|
The gateway level must be reached before any
value can be attributed to each measure.
|
|
|
25 |
% |
|
25% 35% |
|
|
|
|
|
|
|
|
|
Target (50%)
|
|
The target level represents challenging but
achievable levels of performance.
|
|
|
50 |
% |
|
50% 70% |
|
|
|
|
|
|
|
|
|
Maximum (100%)
|
|
Achievement of the maximum level requires
significant performance above and beyond normal
expectations and will result in significant
improvement in key operational areas.
|
|
|
100 |
% |
|
100% 140% |
The level of performance determines the level of payment against each weighted measure.
Achieving the target level of performance on each measure therefore equates to 50% of an
individuals maximum STI payment.
The STI performance measures
Performance against specific measures is assessed before any individuals STI payment can be
determined. The individual accountabilities for the CEO are determined by the Board
and that of the senior executives are determined by the CEO. All individual measures are
strongly aligned to the individuals contribution towards corporate and business unit
objectives.
STI payment for the CEO
The CEOs contract provides for an STI payment for fiscal 2006 of up to a maximum of $3 million,
of which $1.5 million was paid on commencement of employment. The initial $1.5 million was paid
subject to the successful delivery of the new business strategy and transformation plan for the
company. This payment was disclosed in the 2005 Remuneration Report.
The remaining maximum potential payment of $1.5 million will be paid subject to the CEO
satisfying the performance measures described in Figure 3.
Long term incentive (LTI)
The LTI is the second at risk component of remuneration and it is delivered in the form of
performance rights for fiscal 2006. Performance rights are the right to acquire a Telstra share at
minimal cost to the employee ($1 exercise price per parcel of shares exercised on any single day)
when specified performance measures are achieved. The performance rights are administered through
the Telstra Growthshare Trust.
In prior years the equity instruments allocated as part of the LTI plans included restricted
shares, options, deferred shares and performance rights.
The LTI plan supports the business strategy by aligning executive compensation with key performance
measures and targets that support the transformation. The LTI is limited to the 220 most senior
employees, as this group is responsible for leading the transformation and will drive the success
of the business
30
Remuneration report
How performance rights are allocated
The CEO and senior executives receive an allocation of performance rights that is
calculated as a percentage of their fixed remuneration.
Figure 7: Calculating the allocation of performance rights
|
|
|
|
* |
|
The full market value of a Telstra share is used when we allocate performance rights (5
day volume weighted average share price). This differs from the accounting value under the
executive remuneration table in Figure17, which reflects the amortised accounting valuation of
these rights and any other LTI equity granted in previous years.
|
Vesting
The performance rights that the CEO and senior executives receive will vest depending upon the
companys achievement of the relevant performance measures. Performance rights that have vested
means that the executive has a full interest in the right and is free to exercise the right at any
time until the expiry date. The allocation, test and expiry dates are illustrated in Figure 8.
Figure 8: Performance right timeline
The value of the LTI at vesting
The actual value to the executive of the LTI at vesting can be calculated using the
formula in Figure 9.
Figure 9: Determining the market value of performance rights at vesting dates
|
|
|
|
* |
|
This value is likely to be different from the values at allocation and the
accounting values disclosed in the remuneration table in Figure 17.
|
The LTI performance measures
Similar to the STI plan, the LTI performance measures are also linked to the business strategy and
transformation of the company. This approach ensures that any rewards derived from the LTI plan by
the senior executives are consistent with the successful execution of the initiatives over a
number of years. Successful execution of the initiatives should, in turn, drive sustainable
increases in shareholder wealth.
The measures will be assessed based on a scale of performance at 30 June 2008 and 30 June 2010.
The vesting arrangements are explained in Figure 10.
31
Remuneration report
Figure 10: LTI vesting arrangements for fiscal 2006
|
|
|
|
|
|
|
Year 3 |
|
Year 5 |
Target not
achieved
|
|
25% of performance rights for Year 3
tranche lapses.
The remaining 75% of performance rights
will be added to the Year 5 tranche and
may vest based on performance against
the Year 5 performance scale.
|
|
All unvested performance rights will lapse. |
|
|
|
|
|
Target
achieved but
below
Maximum
|
|
The number of performance rights vest on
a scale between Target and Maximum.
Any performance rights that do not vest
will be discounted by 25% and the balance
added to the Year 5 tranche and may vest
on the Year 5 performance scale for each
measure.
|
|
For the Year 5 tranche the number of
performance rights vest on a scale
between Target and Maximum.
The carried forward Year 3 balance will be
added to the Year 5 tranche and assessed
against the Year 5 performance targets.
Any performance rights that do not vest
as a result of not reaching the Maximum
of the Year 5 hurdle will lapse. |
|
|
|
|
|
Maximum
achieved
|
|
All performance rights for the Year 3
tranche (up to 60% of the 2005 allocation)
will vest if all maximum targets are
achieved.
|
|
All performance rights for the Year 5
tranche (up to 40% of the 2005 allocation),
and any remaining Year 3 tranche, will
vest if all maximum targets are achieved. |
Exercising performance rights
A performance right can only be exercised (that is, a share can only be acquired by the
executive) if the performance right vests. Once vested, the performance right can be exercised
by the executive at any time up to 7 years from the grant date. Once the performance rights
have been exercised the participant becomes the beneficial owner and is entitled to any
dividend, bonus issue, return of capital or other distribution in respect of those shares.
Restrictions on hedging
The CEO and senior executives are restricted from entering into arrangements which
effectively operate to limit the economic risk of their security holdings in shares allocated
under the LTI plan during the period the shares are held in trust.
Lapsed performance rights
Where a performance right does not vest by year 5, because the performance measures have not
been achieved, the right will lapse and no benefit will accrue to the executive.
If the CEO or a senior executive:
|
|
resigns and their performance rights are not yet exercisable, those rights will
lapse; |
|
|
|
retires or ceases employment due to death or total permanent incapacity, and
their performance rights are not yet exercisable, those rights will be exercisable if the relevant
performance measure is met in accordance with the prescribed schedule; |
|
|
|
is made redundant, and their performance rights are not yet exercisable, the
number of unvested rights is adjusted to reflect the executives service period and will be
exercisable if the relevant performance measure is met in accordance with the prescribed schedule;
or |
32
Remuneration report
|
|
ceases employment with Telstra for any other reason and their performance
rights are not yet exercisable, the Board will decide whether those rights should lapse or
remain available for exercise if the relevant performance measure is met. |
RELATIONSHIP BETWEEN REMUNERATION AND TELSTRAS PERFORMANCE
The payment levels of the at risk components of remuneration should reflect Telstras
corporate performance.
Defining company performance
Telstra ultimately assesses its company performance by reference to increases in
shareholder wealth and earnings.
Shareholder wealth
Shareholder wealth is the total return to an investor over a given period. It consists of three
components: dividends paid, the movement in the market value of shares over that period, and any
return of capital to shareholders, excluding buy-backs.
Dividends paid
Over the five years to 30 June 2006 we have increased the total amount returned to
shareholders through dividends and special dividends each year. Our total dividends paid per
share each fiscal year for the last five years is shown in Figure 11.
Market value of shares
During fiscal 2005 Telstras daily closing share price has fluctuated between a low of $3.63
and a high of $5.14. Figure 11 shows the share price on 30 June for the last five years.
Figure 11: Share price at year end and dividends paid per share for the last 5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
Year ended |
|
Year ended |
|
Year ended |
|
|
30 June 2006 |
|
30 June 2005 |
|
30 June 2004 |
|
30 June 2003 |
|
30 June 2002 |
Share Price ($) |
|
|
3.68 |
|
|
|
5.06 |
|
|
|
5.03 |
|
|
|
4.40 |
|
|
|
4.66 |
|
Total dividends
paid/declared per share (c) |
|
|
34.0 |
|
|
|
40.0 |
|
|
|
26.0 |
|
|
|
27.0 |
|
|
|
22.0 |
|
Return of capital
During the five years to 30 June 2006 we undertook two off-market share buy-backs as part of our
capital management strategy, returning $1,751 million (excluding associated costs) to
shareholders. All ordinary shares bought back were subsequently cancelled.
33
Remuneration report
Figure 12: Share buy back
|
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|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
|
|
|
Date |
|
Number of |
|
Cost |
|
Buy-back |
|
Franked |
|
Capital |
|
|
ordinary |
|
Purchase |
|
Transaction |
|
price per |
|
dividend |
|
component |
|
|
shares bought |
|
consideration |
|
costs |
|
share |
|
component |
|
per share |
|
|
back |
|
|
|
|
|
|
|
per share |
|
|
|
|
|
|
$ m |
|
$ m |
|
$ |
|
$ |
|
$ |
24 Nov 2003 |
|
|
238,241,174 |
|
|
|
1,001 |
|
|
|
8 |
|
|
|
4.20 |
|
|
|
2.70 |
|
|
|
1.50 |
|
15 Nov 2004 |
|
|
185,284,669 |
|
|
|
750 |
|
|
|
6 |
|
|
|
4.05 |
|
|
|
2.55 |
|
|
|
1.50 |
|
Earnings
Our companys earnings over the five years to 30 June 2006 are summarised in Figure 13.
Figure 13: Our 5 year earnings history
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
Year ended |
|
Year ended |
|
Year ended |
|
|
30 June 2006 |
|
30 June 2005 |
|
30 June 2004 |
|
30 June 2003 |
|
30 June 2002 |
|
|
$m |
|
$m |
|
$m (1) |
|
$m (1) |
|
$m (1) |
Sales revenue |
|
|
22,750 |
|
|
|
22,161 |
|
|
|
20,737 |
|
|
|
20,495 |
|
|
|
20,196 |
|
EBITDA |
|
|
9,584 |
|
|
|
10,464 |
|
|
|
10,175 |
|
|
|
9,170 |
|
|
|
9,483 |
|
Net profit available to Telstra |
|
|
3,181 |
|
|
|
4,309 |
|
|
|
4,118 |
|
|
|
3,429 |
|
|
|
3,661 |
|
|
|
|
(1) |
|
During fiscal 2006, we adopted Australian equivalents to International Financial Reporting
Standards (A-IFRS). We restated our comparative information for the year ended 30 June 2005. The
previous financial years ended 30 June 2004, 30 June 2003 and 30 June 2002 are presented under the
previous Australian Generally Accepted Accounting Principles (AGAAP). |
Remuneration vs company performance
Telstras remuneration strategy aligns with the new business strategy by
assigning clear transformational and operational targets with longer term
objectives which will deliver increases in shareholder wealth.
As stated in our remuneration strategy, a significant proportion of the CEO and senior
executives total remuneration depends on the achievement of specific short and long term
targets.
STI results and payments
Financial measures have represented a significant percentage of the STI plan over the last five
years and therefore financial performance has a direct impact on the rewards received through
the plan. The financial measures:
|
|
provide a strong correlation with our ability to increase shareholder
returns; |
|
|
|
have a direct impact on our bottom line; and |
|
|
|
are measures over which the executives can exercise control. |
The average STI received by senior executives as a percentage of the maximum achievable
payment for achieving those short term measures is reflected in Figure 14.
34
Remuneration report
Figure 14: Average STI payment as a % of maximum payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
Fiscal |
|
Fiscal |
|
Fiscal |
|
Fiscal |
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
STI received |
|
|
73.8 |
% |
|
|
54.6 |
% (1) |
|
|
31.4 |
% |
|
|
41.1 |
% |
|
|
57.6 |
% |
|
|
|
(1). |
|
This includes both the cash and equity components for fiscal 2005. While the total
equity component is included in determining the above percentage, the value of the rights to
Telstra shares granted in fiscal 2005 will be reflected in remuneration over the following 3
years as the shares vest over their performance period. |
The above calculation is made by aggregating the actual STI payments to the CEO and senior
executives for the financial year and dividing that by the aggregate maximum achievable payments
for those same executives. The result is then expressed as a percentage of the maximum
achievable STI payment.
Relationship between company performance and STI payments
Figure 15 demonstrates the relationship between the companys performance in the form of EBITDA
and the percentage of STI payments that were made in each fiscal year.
Figure 15: Relationship between company performance (EBITDA) and STI payments
LTI results and payments
Any LTI awarded to an executive is required to be reported in accordance with International Financial Reporting Standards (IFRS). This requires a value to be attributed to the
LTI equity granted before vesting has occurred. That value is then amortised over the vesting
period (ie the five-year performance period for fiscal 2006 allocations). However, as vesting of
any equity allocated under the LTI plans is subject to a range of internal and external
performance measures, senior executives may or may not ultimately derive any value from these
equity instruments.
35
Remuneration report
As at 30 June 2006 the vesting status of LTI equity is as follows:
Figure 16: LTI Status
|
|
|
|
|
Status of plan |
|
Result |
|
Next steps |
The fiscal 2001 plans
(September 2000 and
March 2001*) did not
meet the performance
measure.
|
|
All instruments have
lapsed.
|
|
The performance
period for these
plans expired in
fiscal 2006 and both
plans have ceased. |
|
|
|
|
|
The fiscal 2002 plans
(September 2001 and
March 2002*) did not
meet the performance
measure in the first
quarter of the
performance period.
|
|
Half of all
allocations lapsed.
|
|
For September 2001,
the performance
measures were
subsequently achieved
in fiscal 2005 and
the remaining half of
the allocations
vested. The March
2002 plan performance
measures are
currently below the
required performance
hurdle. |
|
|
|
|
|
The fiscal 2003 plan
did not meet the
performance hurdle in
the first quarter of
the performance
period.
|
|
Half of all
allocations lapsed.
|
|
The performance
measures are
currently below the
required performance
hurdle. |
|
|
|
|
|
Fiscal 2004, 2005 and
2006 plans have yet
to enter their
respective
performance periods.
|
|
No instruments have
lapsed or vested yet.
|
|
Performance measures
have not yet reached
the assessment
points. |
|
|
|
* |
|
March allocations were mid-cycle allocations to accommodate new executives. |
DETAILS OF SENIOR EXECUTIVES REMUNERATION
Detailed explanation of the various components of remuneration received by the CEO and
senior executives in fiscal 2006.
In this section we set out the remuneration of our CEO and the senior executives who are key
management personnel. These executives had authority and responsibility for planning, directing and
controlling the activities of Telstra and its controlled entities during fiscal 2006. They also
include the five highest remunerated executives.
Figure 17 sets out the short term employee benefits, post-employment benefits and share-based
remuneration received during the fiscal year as calculated under applicable accounting standards.
It also details the remuneration components of those senior executives who ceased employment with
Telstra during fiscal 2006 and would otherwise have been included in this report.
Figure 18 sets out the details of the annual STI for fiscal 2006, and Figure 19 sets out the
amortised value of the CEO and senior executive allocations under the LTI plans.
Remuneration received in fiscal 2006
The remuneration of our key management personnel (excluding non-executive directors) are set out in
the following tables. In accordance with the requirements of AASB 124, the remuneration disclosures
for fiscal 2006 only include remuneration relating to the portion of the relevant periods that each
individual was considered a KMP. As a result this approach can distort year-on-year remuneration comparisons.
36
Remuneration report
Termination payments to Dr Switkowski in fiscal 2006
As specified in the remuneration report for fiscal 2005 Dr Switkowski ceased employment with the
company on 1 July 2005 and was entitled to receive termination payments in accordance with his
employment contract including:
|
§ |
|
a termination payment of 12 months fixed remuneration $2,092,000; and |
|
|
§ |
|
accrued annual and long service leave $1,059,526.42. |
These payments have been aggregated and appear in Figure 17 under Termination benefits in
accordance with the prescribed accounting standards.
Dr Switkowski also received a payment of $1,961,000 under the 2004/05 STI plan. This payment
is not included in Figure 17 as it has previously been disclosed in the remuneration report
for fiscal 2005.
In addition, and consistent with last years remuneration report, Figure 21 shows Dr
Switkowskis retained allocations of equity under the Deferred Remuneration and LTI plans.
37
Figure 17: Senior executives remuneration
|
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|
|
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|
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|
|
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|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
Post- |
|
|
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|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
employment |
|
Termination |
|
long term |
|
|
|
|
|
|
|
|
|
|
Short term employee benefits |
|
benefits |
|
benefits |
|
benefits |
|
Equity settled share-based payments |
|
|
|
|
|
|
|
|
|
|
|
|
Short |
|
Non- |
|
|
|
|
|
|
|
|
|
Accrued |
|
|
|
|
|
|
|
|
|
|
Salary |
|
term |
|
monetary |
|
|
|
|
|
|
|
|
|
long |
|
Short term |
|
|
|
|
|
|
|
|
|
|
|
|
and Fees |
|
Incentives |
|
benefits |
|
|
|
|
|
Superannu |
|
Termination |
|
service |
|
incentive |
|
Deferred |
|
Other equity |
|
Total |
Name |
|
|
|
|
|
(1) |
|
(2) |
|
(3) |
|
Other (4) |
|
ation (5) |
|
benefits |
|
leave |
|
shares (6) |
|
shares (7) |
|
(8) |
|
($) |
Solomon Trujillo |
|
Commenced |
|
|
2,987,861 |
|
|
|
2,581,200 |
|
|
|
|
|
|
|
1,745,011 |
|
|
|
1,012,139 |
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
309,305 |
|
|
|
8,710,516 |
|
Chief Executive
Officer |
|
1 July 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
Ongoing |
|
|
984,974 |
|
|
|
1,519,035 |
|
|
|
11,740 |
|
|
|
|
|
|
|
188,026 |
|
|
|
|
|
|
|
29,325 |
|
|
|
276,443 |
|
|
|
115,592 |
|
|
|
650,036 |
|
|
|
3,775,171 |
|
Chief Executive
Officer, Sensis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
Appointed |
|
|
223,280 |
|
|
|
180,950 |
|
|
|
|
|
|
|
|
|
|
|
20,787 |
|
|
|
|
|
|
|
6,026 |
|
|
|
22,067 |
|
|
|
|
|
|
|
30,871 |
|
|
|
483,981 |
|
Group Managing
Director, |
|
GMD 16 Jan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Wholesale |
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
Ongoing |
|
|
876,970 |
|
|
|
1,019,991 |
|
|
|
18,138 |
|
|
|
|
|
|
|
316,030 |
|
|
|
|
|
|
|
29,825 |
|
|
|
131,095 |
|
|
|
129,101 |
|
|
|
779,461 |
|
|
|
3,300,611 |
|
Group Managing
Director,
Telstra Consumer &
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
Ongoing |
|
|
645,857 |
|
|
|
768,951 |
|
|
|
6,062 |
|
|
|
|
|
|
|
116,643 |
|
|
|
|
|
|
|
20,000 |
|
|
|
155,829 |
|
|
|
37,438 |
|
|
|
214,391 |
|
|
|
1,965,171 |
|
Group Managing
Director,
Telstra Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Stanhope |
|
Ongoing |
|
|
919,499 |
|
|
|
655,412 |
|
|
|
9,668 |
|
|
|
|
|
|
|
101,001 |
|
|
|
|
|
|
|
25,825 |
|
|
|
126,792 |
|
|
|
76,968 |
|
|
|
335,804 |
|
|
|
2,250,969 |
|
CFO and Group
Managing
Director, Finance &
Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Thodey |
|
Ongoing |
|
|
1,031,086 |
|
|
|
926,798 |
|
|
|
8,248 |
|
|
|
|
|
|
|
52,914 |
|
|
|
|
|
|
|
27,100 |
|
|
|
108,869 |
|
|
|
105,198 |
|
|
|
560,789 |
|
|
|
2,821,002 |
|
Group Managing
Director,
Telstra Business &
Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Winn |
|
Commenced |
|
|
1,280,944 |
|
|
|
1,408,918 |
|
|
|
1,685 |
|
|
|
1,101,907 |
|
|
|
10,814 |
|
|
|
|
|
|
|
32,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,836,446 |
|
Chief Operating
Officer |
|
11 Aug 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
|
|
|
|
8,950,471 |
|
|
|
9,061,255 |
|
|
|
55,541 |
|
|
|
2,846,918 |
|
|
|
1,818,354 |
|
|
|
|
|
|
|
245,279 |
|
|
|
821,095 |
|
|
|
464,297 |
|
|
|
2,880,657 |
|
|
|
27,143,867 |
|
38
Remuneration report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post- |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employment |
|
Termination |
|
long term |
|
|
|
|
|
|
|
|
|
|
Short term employee benefits |
|
benefits |
|
benefits |
|
benefits |
|
Equity settled share-based payments |
|
|
|
|
|
|
|
|
|
|
|
|
Short |
|
Non- |
|
|
|
|
|
|
|
|
|
Accrued |
|
|
|
|
|
|
|
|
|
|
Salary |
|
term |
|
monetary |
|
|
|
|
|
|
|
|
|
long |
|
Short term |
|
|
|
|
|
|
|
|
|
|
|
|
and Fees |
|
Incentives |
|
benefits |
|
|
|
|
|
Superannu |
|
Termination |
|
service |
|
incentive |
|
Deferred |
|
Other equity |
|
Total |
Name |
|
|
|
|
|
(1) |
|
(2) |
|
(3) |
|
Other (4) |
|
ation (5) |
|
benefits |
|
leave |
|
shares (6) |
|
shares (7) |
|
(8) |
|
($) |
Past Employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski |
|
Ceased 1 |
|
|
5,451 |
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
281 |
|
|
|
3,151,526 |
(9) |
|
|
|
|
|
|
|
|
|
|
491,049 |
(10) |
|
|
4,516 |
(11) |
|
|
3,652,858 |
|
|
|
July 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
|
|
|
|
5,451 |
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
281 |
|
|
|
3,151,526 |
|
|
|
|
|
|
|
|
|
|
|
491,049 |
|
|
|
4,516 |
|
|
|
3,652,858 |
|
TOTAL |
|
|
|
|
|
|
8,955,922 |
|
|
|
9,061,255 |
|
|
|
55,576 |
|
|
|
2,846,918 |
|
|
|
1,818,635 |
|
|
|
3,151,526 |
|
|
|
245,279 |
|
|
|
821,095 |
|
|
|
955,346 |
|
|
|
2,885,173 |
|
|
|
30,796,725 |
|
|
|
|
(1) |
|
Includes salary, salary sacrifice benefits (excluding salary sacrifice superannuation
which is included under Superannuation) and fringe benefits tax. |
|
(2) |
|
Short term incentive relates to performance in fiscal 2006 and is based on actual
performance for Telstra and the individual. |
|
(3) |
|
Includes the benefit of interest-free loans under TESOP97 and TESOP99, the value of
personal home security services provided by Telstra and the value of the personal use of
products and services related to Telstra employment. |
|
(4) |
|
Includes payments made to executives on commencement of employment with Telstra and
relocation payments made in accordance with their relocation agreement and which are
classified as remuneration under the accounting standards. |
|
(5) |
|
Represents company contributions to superannuation as well as any additional
superannuation contribution made through salary sacrifice by executives. |
|
(6) |
|
This represents the value of Short Term Incentive Shares allocated under the 2004/05
STI Equity plan whereby 50% of the STI payment was provided as shares to be distributed
over 3 years at 12 month intervals. The values shown represent the annualised value for
fiscal 2006 in accordance with the relevant accounting standards. |
|
(7) |
|
The value included in deferred shares relates to the current year amortised value of
vested and unvested shares issued in fiscal 2003 and fiscal 2004 under the Deferred
Remuneration Plan. The values shown represent the annualised value for fiscal 2006 in
accordance with the relevant accounting standards |
|
(8) |
|
The value represents the annualised value of restricted shares, performance rights
and options as detailed in figure 21. The executive only receives value if the performance
hurdles are met. |
|
(9) |
|
Includes payments made on cessation of employment with Telstra in accordance with his
employment contract. The payments include unused annual and long service leave and an
eligible termination payment equal to 12 months fixed remuneration. |
|
(10) |
|
The value represents the remaining amortised value of deferred shares which has been
brought forward due to the early vesting of Deferred Shares following separation from
Telstra. |
|
(11) |
|
The value represents the pro-rated amortised value of restricted shares, options and
performance rights following Dr Switkowskis separation from Telstra on 1 July 2005. |
39
Remuneration report
Figure 18: STI for fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
|
|
|
|
potential STI |
|
Actual STI |
|
% of the maximum |
Name |
|
($) |
|
($) |
|
potential |
Solomon Trujillo |
|
|
3,000,000 |
* |
|
|
2,581,200 |
|
|
|
86.0 |
% |
Bruce Akhurst |
|
|
1,642,200 |
|
|
|
1,519,035 |
|
|
|
92.5 |
% |
Kate McKenzie |
|
|
241,041 |
|
|
|
180,950 |
|
|
|
75.1 |
% |
David Moffatt |
|
|
1,670,200 |
|
|
|
1,019,991 |
|
|
|
61.1 |
% |
Deena Shiff |
|
|
1,120,000 |
|
|
|
768,951 |
|
|
|
68.7 |
% |
John Stanhope |
|
|
1,055,294 |
|
|
|
655,412 |
|
|
|
62.1 |
% |
David Thodey |
|
|
1,517,600 |
|
|
|
926,798 |
|
|
|
61.1 |
% |
Gregory Winn |
|
|
2,030,000 |
|
|
|
1,408,918 |
|
|
|
69.4 |
% |
|
|
|
* |
|
$1,500,000 for strategic plan & $1,500,000 based on fiscal 2006 performance measures. |
Tax Equalisation of foreign earned income
As prefaced in their employment contracts, Mr Trujillo and Mr Winn received reimbursement for
the additional personal income tax payable due to a double taxing in Australia and the United
States as a result of the international taxation
rules covering foreign earned income. This only applies for fiscal 2006 as changes to the
international taxation provisions come into effect on 1 July 2006 and no further payments will
be required.
Equity valuations
Figure 19 provides the amortised accounting value of all LTI equity instruments,
including allocations of equity made from fiscal 2001 2006.
The senior executives have not received any monetary value from any of these equity grants apart
from the September 2001 Performance Rights plan and the September 2002 Deferred Share plan (see
Figure 20), either because the LTI performance measures were not satisfied during the performance
period or the performance period is continuing. The value attributed to the unvested instruments
allocated on 8 September 2000 and 16 March 2001 only reflects the notional value until 8 September
2005 and 16 March 2006, respectively, when they lapsed.
Where allocations have been made to the CEO and senior executives for fiscal 2002, 2003, 2004,
2005 and 2006 and have not yet vested, the CEO and senior executives may or may not derive any
value from these allocations as they are still subject to performance measures and the performance
period has not yet expired.
40
Remuneration report
Figure 19: Amortised accounting value of all LTI equity for fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortised value of LTI equity allocations |
|
|
|
|
(1) (2) |
|
Total |
|
|
|
|
|
|
Performance |
|
Restricted |
|
|
|
|
Options |
|
rights (3) |
|
shares |
|
|
|
|
($) |
|
($) |
|
($) |
|
($) |
Solomon Trujillo |
|
|
|
|
|
|
309,305 |
|
|
|
|
|
|
|
309,305 |
|
Bruce Akhurst |
|
|
290,185 |
|
|
|
354,513 |
|
|
|
5,338 |
|
|
|
650,036 |
|
Kate McKenzie |
|
|
|
|
|
|
30,871 |
|
|
|
|
|
|
|
30,871 |
|
David Moffatt |
|
|
367,050 |
|
|
|
391,010 |
|
|
|
21,401 |
|
|
|
779,461 |
|
Deena Shiff |
|
|
82,016 |
|
|
|
131,691 |
|
|
|
684 |
|
|
|
214,391 |
|
John Stanhope |
|
|
113,080 |
|
|
|
220,808 |
|
|
|
1,916 |
|
|
|
335,804 |
|
David Thodey |
|
|
241,368 |
|
|
|
319,421 |
|
|
|
|
|
|
|
560,789 |
|
Gregory Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski (4) |
|
|
1,743 |
|
|
|
2,737 |
|
|
|
36 |
|
|
|
4,516 |
|
|
|
|
(1) |
|
The value of each instrument is calculated by applying option valuation methodologies as
described in note 31 to the financial statements and is then amortised over the relevant vesting
period. The values included in the table relate to the current year amortised value of all LTI
instruments detailed as other equity in the remuneration table. The valuations used in current year
disclosures are based on the same underlying assumptions as the previous year. Please refer to note
31 for details on our employee share plans. |
|
(2) |
|
Where a vesting scale is used, the table reflects the maximum achievable allocation. |
|
(3) |
|
The September 2002 plan failed to satisfy the performance measure in the first quarter of the
performance period. In accordance with the terms of the plan half the maximum potential allocation
of performance rights lapsed on 6 December 2005. Although an accounting value is recorded above,
the executives received no value from this plan. |
|
(4) |
|
This represents the pro-rated amortised value of LTI instruments up to date of separation in
accordance with accounting standards. These equity instruments are still subject to meeting
performance hurdles and Dr Switkowski may or may not derive any value from these instruments. |
Outstanding equity-based instruments
The accounting value and actual number of the CEO and senior executives performance rights,
restricted shares and options that were granted, exercised and lapsed in fiscal 2006 are set out in
Figure 20 and Figure 21. As the values shown in Figure 20 represent the accounting value, the
executive may not have actually received these amounts. The value of lapsed instruments in Figure
20 is based on the accounting value. This value is included to address our reporting obligations
only. Where these instruments lapse, there is no benefit at all to the executive, and therefore no
transfer of any equity or equity-related instrument. All instruments that have lapsed were
subjected to the external performance measure of Total Shareholder Return (TSR).
Figure 20: Value of equity instruments granted, exercised and lapsed in fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted during period (1) |
|
|
|
|
|
|
|
|
|
Aggregate of rights |
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
|
|
|
granted, exercised |
|
|
|
|
|
|
Remuneration |
|
Exercised |
|
Lapsed |
|
and lapsed |
|
|
($) |
|
(2) |
|
($) |
|
($) |
|
($) |
Solomon Trujillo |
|
|
2,482,011 |
|
|
|
28.5 |
% |
|
|
|
|
|
|
|
|
|
|
2,482,011 |
|
Bruce Akhurst |
|
|
436,714 |
|
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
436,714 |
|
Kate McKenzie |
|
|
164,838 |
|
|
|
34.1 |
% |
|
|
|
|
|
|
|
|
|
|
164,838 |
|
David Moffatt |
|
|
444,159 |
|
|
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
444,159 |
|
Deena Shiff |
|
|
297,846 |
|
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
297,846 |
|
John Stanhope |
|
|
384,589 |
|
|
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
384,589 |
|
David Thodey |
|
|
403,578 |
|
|
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
|
403,578 |
|
Gregory Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This represents the accounting value at grant date of performance rights
granted in fiscal 2006. |
|
(2) |
|
Total Remuneration is the sum of short term benefits, post employment benefits and
share based payments detailed in Figure 19. |
41
Remuneration report
The actual number of LTI instruments that were granted, exercised and lapsed in fiscal 2006
is set out in Figure 21. Of the performance rights allocated in fiscal 2006, 100% of the
allocations were granted and none were forfeited, lapsed or vested during fiscal 2006. However,
all unvested equity instruments may lapse in future years if the performance measures are not
satisfied.
Figure 21: Number of equity-based instruments granted, vested, exercised and lapsed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested but |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
not |
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
Lapsed |
|
Balance at |
|
exercised |
|
|
|
|
Balance at 1 |
|
during period |
|
Exercised |
|
during |
|
30 June |
|
during |
|
|
Instrument |
|
July 2005 |
|
(1) |
|
during period |
|
period (2) |
|
2006 (3) |
|
period (4) |
Solomon Trujillo |
|
Performance Rights |
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
Performance Rights |
|
|
473,600 |
|
|
|
147,240 |
|
|
|
59,000 |
|
|
|
66,900 |
|
|
|
494,940 |
|
|
|
|
|
|
|
Restricted shares |
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
805,000 |
|
|
|
|
|
|
|
|
|
|
|
188,000 |
|
|
|
617,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
135,300 |
|
|
|
|
|
|
|
66,900 |
|
|
|
|
|
|
|
68,400 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
120,967 |
|
|
|
|
|
|
|
|
|
|
|
120,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
Performance Rights |
|
|
36,000 |
|
|
|
55,576 |
|
|
|
|
|
|
|
|
|
|
|
91,576 |
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
18,905 |
|
|
|
|
|
|
|
|
|
|
|
18,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
Performance Rights |
|
|
521,600 |
|
|
|
149,750 |
|
|
|
71,000 |
|
|
|
76,300 |
|
|
|
524,050 |
|
|
|
|
|
|
|
Restricted shares |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
890,000 |
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
740,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
152,400 |
|
|
|
|
|
|
|
76,300 |
|
|
|
|
|
|
|
76,100 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
57,365 |
|
|
|
|
|
|
|
|
|
|
|
57,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
Performance Rights |
|
|
151,600 |
|
|
|
100,420 |
|
|
|
17,000 |
|
|
|
19,800 |
|
|
|
215,220 |
|
|
|
|
|
|
|
Restricted shares |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
202,200 |
|
|
|
|
|
|
|
|
|
|
|
24,200 |
|
|
|
178,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
42,300 |
|
|
|
|
|
|
|
19,800 |
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
68,188 |
|
|
|
|
|
|
|
|
|
|
|
68,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Stanhope |
|
Performance Rights |
|
|
290,000 |
|
|
|
129,666 |
|
|
|
23,000 |
|
|
|
23,800 |
|
|
|
372,866 |
|
|
|
|
|
|
|
Restricted shares |
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
310,000 |
|
|
|
|
|
|
|
|
|
|
|
69,000 |
|
|
|
241,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
73,200 |
|
|
|
|
|
|
|
23,800 |
|
|
|
|
|
|
|
49,400 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
55,482 |
|
|
|
|
|
|
|
|
|
|
|
55,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Thodey |
|
Performance Rights |
|
|
427,200 |
|
|
|
136,068 |
|
|
|
51,000 |
|
|
|
59,000 |
|
|
|
453,268 |
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
534,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
534,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
121,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,600 |
|
|
|
59,000 |
|
|
|
Incentive shares |
|
|
|
|
|
|
47,639 |
|
|
|
|
|
|
|
|
|
|
|
47,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski |
|
Performance Rights |
|
|
1,643,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,643,600 |
|
|
|
|
|
|
|
Restricted shares |
|
|
96,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,000 |
|
|
|
|
|
|
|
Options |
|
|
1,810,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,810,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
500,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,700 |
|
|
|
|
|
|
|
|
(1) |
|
Instruments granted during fiscal 2006 relate to the annual LTI plan for fiscal 2006 and
the STI plan for fiscal 2005. |
|
(2) |
|
No equity instruments granted during fiscal 2006 lapsed in fiscal 2006. |
|
(3) |
|
This represents the number of vested and unvested equity instruments which have not been
exercised or lapsed as at 30 June 2006, or in the case of Dr Switkowski, the date of
cessation with Telstra. |
|
(4) |
|
The number of instruments that vested during fiscal 2006 relate to the September 2002 Deferred
Shares and had not been exercised at 30 June 2006. |
Contract arrangements
The key terms and conditions for the CEO and senior executive service contracts are set out
in Figure 22.
A contract typically outlines the components of remuneration paid to the executive but does not
prescribe how remuneration levels are to be modified from year to year.
42
Remuneration report
Generally, contracts can be terminated by either the company or senior executive providing 6
months notice. Upon notice being given Telstra can require the executive to remain employed by
Telstra for the notice period or terminate employment immediately by providing payment in lieu of
notice.
Figure 22: Summary of contract arrangements for CEO and senior executives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
|
Term of |
|
remuneration |
|
Additional |
|
Notice |
|
Termination |
Name |
|
agreement |
|
at 30 June 2006 |
|
conditions |
|
Period (1) |
|
payment (2) |
Solomon Trujillo
|
|
Ongoing
|
|
$ |
3,000,000 |
|
|
nil
|
|
30 days
|
|
12 months (3) |
Bruce Akhurst
|
|
Ongoing
|
|
$ |
1,173,000 |
|
|
nil
|
|
6 months
|
|
12 months |
Kate McKenzie
|
|
Ongoing
|
|
$ |
530,000 |
|
|
nil
|
|
6 months
|
|
12 months |
David Moffatt
|
|
Ongoing
|
|
$ |
1,193,000 |
|
|
nil
|
|
6 months
|
|
12 months |
Deena Shiff
|
|
Ongoing
|
|
$ |
800,000 |
|
|
nil
|
|
6 months
|
|
12 months |
John Stanhope
|
|
Ongoing
|
|
$ |
1,033,000 |
|
|
nil
|
|
6 months
|
|
12 months |
David Thodey
|
|
Ongoing
|
|
$ |
1,084,000 |
|
|
nil
|
|
6 months
|
|
12 months |
Gregory Winn
|
|
11 August 2005
to 10 August
2007(3)
|
|
$ |
1,450,000 |
|
|
$500,000 sign on
bonus paid 12
Sept 2005.
Contract
completion
payments (4)
|
|
3 months
|
|
6 months + pro-rata
at target STI + pro-rata contract
completion payment
(where pro-rata
performance met) |
Zygmunt
Switkowski
|
|
1 September
2003 to 31
December 2007
|
|
$ |
2,092,000 |
|
|
nil
|
|
6 months
|
|
12 months |
|
|
|
(1) |
|
Upon notice being given Telstra can require the executive to work through the notice
period or terminate employment immediately by providing payment in lieu of notice. |
|
(2) |
|
Payment is calculated on fixed remuneration as at date of termination. There will be
no payment if termination is a result of serious misconduct or redundancy (in which case
Telstras redundancy policy applies). |
|
(3) |
|
A 24 month termination payment applied where Mr Trujillos employment was terminated
in the first 12 months. As this period has now expired the standard 12 month termination
payment will apply. |
|
(4) |
|
Where both parties mutually agree, the contract can be extended by 12 months until 8
August 2008. Where extended, and termination occurs between 2-3 years of employment, Mr.
Winn is paid the lesser of: remaining fixed remuneration to completion or 6 months fixed
remuneration and pro-rata 3rd year contract completion payment (where pro-rata
performance is met). |
|
(5) |
|
Contract completion payments are in lieu of LTI participation (due to fixed term
contract). Payment of up to $1.8m subject to performance against pre-determined measures. Where
contract is extended an additional contract completion payment of $500,000 is available. |
Relocation costs associated with overseas senior executives
During the year the Board implemented significant changes to the executive management team.
In addition to Solomon Trujillo joining Telstra as the Chief Executive Officer, a number of key
executives were recruited to drive the major transformational changes required under the new
business strategy.
Where executives have been recruited from overseas, appropriate reward to secure their employment
was negotiated. This can include overseas relocation benefits in accordance with our relocation
policies or the executives contract of employment.
43
Remuneration report
The range of benefits and services provided to these senior executives under those
arrangements may include:
|
|
travel to Australia for themselves and their immediate family on commencement; |
|
|
|
a defined number of round-trip air tickets to their place of origin for
themselves and their family; |
|
|
|
furniture storage and removal costs; |
|
|
|
rental assistance while in Australia for an initial period of time; |
|
|
|
a relocation allowance to cover incidental and miscellaneous expenses; |
|
|
|
health insurance; |
|
|
|
tax advice; and |
|
|
|
tax equalisation of foreign earned income. |
NON-EXECUTIVE DIRECTORS
Remuneration policy and strategy
In order to maintain their independence and impartiality, non-executive directors are
remunerated with fees which are not linked to company performance. The total fee pool is
approved by shareholders.
Our non-executive directors are remunerated in accordance with our constitution, which provides
for the following:
|
|
an aggregate limit of fees is set and varied only by approval of a
resolution of shareholders at the annual general meeting; and |
|
|
|
the Board determines how those fees are allocated among the directors within
the fee pool. |
In recognition of the increased time and responsibility of non-executive directors, on 25 October
2005, shareholders approved an increase to the directors fee pool to $2,000,000 per annum
(previously $1,320,000 per annum). As a result of this increase:
|
|
fees paid to Board members, including additional fees paid for service on
Board committees were increased; and |
|
|
|
existing retirement benefits to non-executive directors, employed before 1
July 2002, were integrated into the overall fee pool. |
In determining the required level for the fee pool and individual director fee levels, the
Committee makes recommendations to the Board, and in the case of the fee pool, the Board makes a
recommendation to shareholders, taking into account:
|
|
the companys existing remuneration policies; |
|
|
|
independent professional advice; |
|
|
|
the fee pools of other comparable companies (based on company size using
market capitalisation); |
|
|
|
fees paid to individual directors by comparable companies; |
44
Remuneration report
|
|
the general time commitment and responsibilities involved; |
|
|
|
the risks associated with discharging the duties attaching to the role of
director; and |
|
|
|
the level of fees necessary to attract and retain directors of a suitable
calibre. |
In order
to maintain their independence and impartiality, the remuneration of the non-executive
directors is not linked to the performance of the company, except through their participation in
the Directshare plan, which is explained below.
Remuneration structure
Non-executive directors receive a total remuneration package based on their role on
the Board and their committee memberships. Non-executive directors must sacrifice at
least 20% of their fees into Telstra shares to align their interests with those of our
shareholders.
All Board and committee fees, including superannuation, paid to non-executive directors in fiscal
2006 remain within the new fee pool. Board and Committee fees were increased in fiscal 2006 to
take into account the changes to retirement benefits made following the 2005 Annual General
Meeting and prevailing market rates for directors fees. Following these increases the Board and
Committee fees payable to directors in fiscal 2006 are set out below.
Board fees
|
|
|
|
|
|
|
|
|
|
|
Chairman |
|
|
Director |
|
Board |
|
$ |
450,000 |
|
|
$ |
130,000 |
|
Committee fees
Board members, excluding the Chairman, are paid the following additional fees for service on
Board committees:
|
|
|
|
|
|
|
|
|
Committee |
|
Chairman |
|
Member |
Audit Committee |
|
$ |
70,000 |
|
|
$ |
35,000 |
|
Remuneration Committee |
|
$ |
14,000 |
|
|
$ |
7,000 |
|
Nomination Committee |
|
|
|
|
|
$ |
7,000 |
|
Technology Committee |
|
$ |
7,000 |
|
|
$ |
7,000 |
|
The Board considered these fees appropriate given the additional time requirements of
committee members, the complex matters before the committees and, in the case of the Audit
Committee, an increased number of committee meetings and governance requirements.
Components of the total remuneration package (TRP)
The Board has determined that a non-executive directors total remuneration will consist of three
components: cash, shares (through the Directshare plan) and superannuation. Each year directors are
asked to specify the allocation of their total remuneration between these three components, subject
to the following conditions:
|
|
at least 30% must be taken as cash; |
|
|
|
at least 20% must be taken as Directshares; and |
45
Remuneration report
|
|
the minimum superannuation guarantee contribution must be made, where
applicable. |
The Board will continue to periodically review its approach to the non-executive directors
remuneration structure to ensure it compares with general industry practice and best practice
principles of corporate governance.
Equity compensation Directshare
Directshare aims to encourage a longer-term perspective and to align the directors
interests with those of our shareholders.
Through our Directshare plan, non-executive directors are required to sacrifice a minimum of 20%
of their TRP towards the acquisition of restricted Telstra shares. The shares are purchased
on-market and allocated to the participating non-executive director at market price. The shares
are held in trust and are unable to be dealt with for 5 years unless the participating director
ceases to be a director of Telstra.
If a non-executive director chooses to increase their participation in the Directshare plan, they
take a greater percentage of TRP in Telstra shares, and their cash component is reduced. As the
allocation of Directshares is simply a
percentage of the non-executive directors TRP, it is not subject to the satisfaction of a
performance measure.
Directors are restricted from entering into arrangements which effectively operate to limit
the economic risk of their shareholdings allocated under the Directshare plan during the
period the shares are held in trust.
Superannuation
Mandatory superannuation contributions are included as part of each directors total
remuneration. Directors may choose to increase the proportion of their remuneration taken as
superannuation, subject to legislative requirements.
Retirement benefits
In accordance with good corporate governance practice, we do not provide retirement
benefits for directors appointed after 30 June 2002. However, non-executive directors appointed
before that date were eligible to receive retirement benefits on retiring as a director.
At the annual general meeting on 25 October 2005, we explained that as a result of the increase in
the directors fee pool, retirement benefits would cease to accrue. This means that directors who
were appointed before 30 June 2002 will receive cash equal to the benefits accrued to 25 October
2005. These benefits will be indexed by reference to changes in Telstras share price between
that date and the date the directors retirement takes effect.
This approach:
|
|
aligns directors interests with those of stakeholders and with the long
term success of the company; |
|
|
|
subjects the value of the retirement benefit to movement in Telstras share
price and dividend payments; and |
46
Remuneration report
|
|
maintains the principle that this payment be made when the director retires,
rather than provide an early cash payout of the retirement benefits at the time these
arrangements were approved. |
Figure 23 shows the increase in retirement benefits payable to non-executive directors appointed
before 30 June 2002 and the value of the payment to the director if he or she had retired on 30
June 2006.
Figure 23: Non-executive directors increases in retirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indexed |
|
Payment to |
|
|
|
|
|
|
Increase in |
|
|
|
|
|
increase in |
|
director if he/she |
|
|
Balance as |
|
value to |
|
Total value to |
|
value to |
|
had retired on 30 |
|
|
at 2005 |
|
25 October 05 |
|
25 October 05 |
|
30 June 06 |
|
June 2006 (1) |
|
|
(a) |
|
(b) |
|
(a) + (b) |
|
(c) - (a) |
|
(c) |
Name |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Donald G McGauchie |
|
|
340,673 |
|
|
|
76,169 |
|
|
|
416,842 |
|
|
|
60,094 |
|
|
|
400,767 |
|
John E Fletcher |
|
|
126,138 |
|
|
|
13,829 |
|
|
|
139,967 |
|
|
|
8,437 |
|
|
|
134,575 |
(2) |
Belinda J Hutchinson |
|
|
103,794 |
|
|
|
16,584 |
|
|
|
120,378 |
|
|
|
11,943 |
|
|
|
115,737 |
|
Catherine B Livingstone |
|
|
143,074 |
|
|
|
18,059 |
|
|
|
161,133 |
|
|
|
11,849 |
|
|
|
154,923 |
|
Charles Macek |
|
|
117,949 |
|
|
|
17,315 |
|
|
|
135,264 |
|
|
|
12,099 |
|
|
|
130,048 |
|
John W Stocker |
|
|
342,176 |
|
|
|
27,273 |
|
|
|
369,449 |
|
|
|
13,026 |
|
|
|
355,202 |
|
|
|
|
(1) |
|
The value is calculated by multiplying the number of notional shares plus additional notional sharesallocated for re-invested dividends
by $3.68 being the volume weighted average price of Telstra shares traded on 30 June 2006. |
|
(2) |
|
John Fletcher resigned as a director on 30 June 2006 and was paid this amount in accordance with the retirmenet benefit policy. This
amount is also included as a termination payment in Figure24. |
Other benefits
Directors also receive reimbursement for reasonable travelling, accommodation and other
expenses incurred in travelling to or from meetings of the Board or committees, or when otherwise
engaged on company business. We also provide directors with telecommunications and other services
and equipment to assist them in performing their duties. From time to time, we may also make
products and services available to directors without charge to allow them to familiarise themselves
with our products and services and with recent technological developments.
To the extent any of these items are considered a personal benefit to a director, the value of the
benefit is included in the non-monetary benefits column in Figure 24.
Details of non-executive directors remuneration
Figure 24 provides the details of all remuneration paid to our non-executive directors in
fiscal 2006.
47
Remuneration report
Figure 24: Non-executive directors details of remuneration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity settled |
|
|
|
|
|
|
|
|
|
|
Termination |
|
share-based |
|
|
|
|
|
|
Short term employee benefits |
|
Post-employment benefits |
|
benefits |
|
payments |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary and |
|
monetary |
|
|
|
|
|
Superannu |
|
Retirement |
|
Termination |
|
|
|
|
Name |
|
|
|
Fees (1) |
|
benefits (2) |
|
Other |
|
ation |
|
benefits |
|
benefits (3) |
|
Direct share |
|
Total |
Donald G McGauchie |
|
Ongoing |
|
|
312,236 |
|
|
|
3,078 |
|
|
|
|
|
|
|
12,158 |
|
|
|
60,094 |
|
|
|
|
|
|
|
81,099 |
|
|
|
468,665 |
|
Chairman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John T Ralph (4) |
|
Retired COB 11 Aug 2005 |
|
|
17,474 |
|
|
|
380 |
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
462,548 |
|
|
|
|
|
|
|
480,402 |
|
Deputy Chairman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony J Clark (4) |
|
Retired COB 11 Aug 2005 |
|
|
9,015 |
|
|
|
458 |
|
|
|
|
|
|
|
970 |
|
|
|
|
|
|
|
278,846 |
|
|
|
|
|
|
|
289,289 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E Fletcher (6) |
|
Resigned COB 30 June |
|
|
94,209 |
|
|
|
2,775 |
|
|
|
|
|
|
|
8,056 |
|
|
|
|
|
|
|
134,575 |
|
|
|
26,422 |
|
|
|
266,037 |
|
Director |
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belinda J Hutchinson |
|
Ongoing |
|
|
100,611 |
|
|
|
2,288 |
|
|
|
|
|
|
|
18,551 |
|
|
|
11,943 |
|
|
|
|
|
|
|
29,740 |
|
|
|
163,133 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catherine Livingstone |
|
Ongoing |
|
|
113,063 |
|
|
|
2,288 |
|
|
|
|
|
|
|
10,998 |
|
|
|
11,849 |
|
|
|
|
|
|
|
31,015 |
|
|
|
169,213 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Macek |
|
Ongoing |
|
|
123,032 |
|
|
|
2,748 |
|
|
|
|
|
|
|
11,227 |
|
|
|
12,099 |
|
|
|
|
|
|
|
33,565 |
|
|
|
182,671 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W Stocker |
|
Ongoing |
|
|
110,817 |
|
|
|
2,288 |
|
|
|
|
|
|
|
39,006 |
|
|
|
13,026 |
|
|
|
|
|
|
|
37,390 |
|
|
|
202,527 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Willcox (7) |
|
Commenced 17 May 2006 |
|
|
11,872 |
|
|
|
|
|
|
|
|
|
|
|
1,069 |
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
16,176 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Zeglis (7) |
|
Commenced 17 May 2006 |
|
|
12,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
16,176 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
905,270 |
|
|
|
16,303 |
|
|
|
|
|
|
|
102,035 |
|
|
|
109,011 |
|
|
|
875,969 |
|
|
|
245,701 |
|
|
|
2,254,289 |
|
|
|
|
(1) |
|
Includes fees for membership on Board committees. |
|
(2) |
|
Includes the value of the personal use of products and services. |
|
(3) |
|
These payments relate to eligible retirement benefits payable on cessation as Directors of
Telstra. |
|
(4) |
|
Mr Ralph and Mr Clark retired as Directors of Telstra effective 11 August 2005. |
|
(5) |
|
Under current superannuation legislation Mr Ralph did not receive superannuation benefits as he
had passed his 70th birthday. |
|
(6) |
|
Mr Fletcher resigned as a Director of Telstra on 30 June 2006. |
|
(7) |
|
Mr Willcox and Mr Zeglis were appointed as Directors on 17 May 2006. Mr Zeglis is based in the
United States. |
|
(8) |
|
There are no individual contracts for service with our non-executive directors other than as
described above in relation to post-employment benefits. |
48
|
|
|
10 August 2006 |
|
|
|
|
Office of the Company Secretary |
|
|
|
|
|
Level 41 |
Company Announcements Office
|
|
242 Exhibition Street |
Australian Stock Exchange
|
|
MELBOURNE VIC 3000 |
4th Floor, 20 Bridge Street
|
|
AUSTRALIA |
SYDNEY NSW 2000 |
|
|
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Full Year 2006 Results Analyst briefing
In accordance with the listing rules, I enclose a presentation for release to the
market.
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
These presentations include certain forward-looking statements that
are subject to various risks and uncertainties. Actual results,
performance or achievements could be significantly different from those
expressed in, or implied by, these forward-looking statements. Such
forward-looking statements are not guarantees of future performance
and involve known and unknown risks, uncertainties and other factors,
many of which are beyond the control of Telstra, which may cause
actual results to differ materially from those expressed in the
statements contained in these presentations. For example, the factors
that are likely to affect the results of Telstra include general
economic conditions in Australia; exchange rates; competition in the
markets in which Telstra will operate; the inherent regulatory risks
in the businesses of Telstra; the substantial technological changes
taking place in the telecommunications industry; and the continuing
growth in the data, internet, mobile and other telecommunications
markets where Telstra will operate. A number of these factors are
described in Telstras Annual Report and Form 20-F. |
· All forward-looking figures in this presentation are unaudited and
based on AGAAP. Certain figures may be subject to rounding
differences. All market share information in this presentation is
based on management estimates based on internally available
information unless otherwise indicated. |
· These presentations do not relate to the offering of any shares in
Telstra. You may be aware that the Commonwealth is considering selling
its stake in Telstra. If any sale of the Commonwealths stake in
Telstra proceeds, a prospectus for the offer of those securities will
be made available to Australian investors at the time of the offer and
anyone wishingto acquire shares under the offer will need to complete
the application form that will be in, or that will accompany, the
prospectus. |
1
Telstra Corporation Limited |
Sol Trujillo Chief
Executive Officer |
2
Highlights
Earnings at Top end of negative EBIT guidance......through high calorie growth |
· Acceleration of revenue growth |
Total revenue growth of 3.9% in 2H Strong growth in 3G
subscribers vs 1.5% in 1H (+297 k) with significant ARPU uplift
relative to 2G (+37%) |
Slowed PSTN decline to 5.8% in 2H vs 7.6% in 1H
Accelerations in mobile service revenue to 4.8% in H2 (vs 4.4% in
H1) |
New wave revenue growth of 46%
Non SMS data revenue up 121%
Improvements in subscriber mix (58%
... and Significant Cost take-out post paid)
Headcount down 3,800 on year Broadband |
More than 850 projects stopped, 3% gain in Market share
$157m OPEX savings 3:1 net adds versus nearest competitor |
$500m in CAPEX savings Internet Direct and IP Solutions |
· ...supporting significant investments 29% growth year on
year in Transformation Sensis |
$962m in Operating Expenses |
6.9% revenue growth with EBITDA $1.348bn in cash Operating
capex margin expansion |
Delivered results on targets and building momentum... |
3
1H vs2H Trends 1
Reported ($billions) 1H06 % 2H06 % FY06 %
Sales Revenue 11.5 1.5 11.3 3.9 22.8 2.7
EBITDA 5.3 (3.4) 4.3 (14.1) 9.6 (8.4)
EBITDA (%) 46.1% (2.5) 38.1% (7.7) 42.1% (5.1)
EBITDA (before Transformation costs) 5.3 (3.4) 4.8 (3.3) 10.1 (3.2)
EBITDA (% before Transformation Costs) 46.1% (2.3) 42.5% (3.2) 44.5% (2.7%)
EBIT 3.5 (7.0) 2.0 (37.2) 5.5 (20.7)
EBIT (before transformation costs) 3.5 (7.0) 3.0 (7.1) 6.5 (6.9)
NPAT 2.1 (10.3) 1.1 (46.1) 3.2 (26.2)
Cash Capex 2 2.1 11.6 2.2 23.1 4.3 20.2
Free Cash Flow 2.0 (4.4) 2.6 (17.4) 4.6 (12.4)
(1) Includes $427m R & R provision and $422m accelerated depreciation in 2H06
(2) Includes $1,348m of transformation CAPEX incurred entirely in 2H06
4
....whilst investing more than $2.3bn in 6 months for transformation |
4
Telstras Transformation is on track and
gaining Momentum... |
On Track
98% population coverage
Better in-building coverage
Wireless Deployment of 3G 850 MhzNetwork 9 |
Average network data
speeds of
500kps.1.1Mbps at
launch, increasing to
14Mbps in 2007 |
Deployment of IP/MPLS Core, Reduced network complexity |
Wireless 9 Multiservice Edge and
IP-DSLAMs Far greater capacity and speed |
Market Superior understanding of customer Reduced time
to market 9 Based needs to realign marketing
and Focused and effective Mgmt channel organisations
go-to-market |
IT Systems Transform capability to deliver cost Reduced
cost of ownership 9 effective processes |
...to deliver superior operating leverage moving forward |
5
Driving Long Term Shareholder Value |
Scale oLeading Telco market
share |
· Most complete set of assets
oFixed, Mobile, Broadband, Sensis, Foxtel |
· Platform rationalisation/Reduce IT complexity |
· Headcount reduction 10,000 12,000 to FY10 |
Driving convergence, innovation and cost take-out |
6
Driving Long Term Shareholder Value |
3G Mobile ADSL Broadband BigPond |
New product
offerings via
cable and wireless |
· HSDPA
national
wireless
broadband
rollout |
· Superior
brand and
operational
metrics |
· Integrated content Wireless Cable |
delivering
differentiated
value based offers |
Competing, differentiating, winning on value 7 |
7
Driving Long Term Shareholder Value |
Online Usage Unique Browsers* |
Based on June quarter average monthly
usage |
Continued growth in 7.41m revenue and earnings
+26.5% |
FY06 Revenue +6.9% 5.86m (2H +9%).
EBITDA up 10.2% |
· World class core directories business |
· Yellow Pages OnLine largest contributor FY05 FY06
to revenue growth Yellow Pages ® OnLine Revenue Growth |
· Online growth exceeds print for first time 140 |
120 Usage,
customers, revenue,
yields and margins
all up. |
· Strong emerging business growth 80 |
Access to Telstras unparalleled
40 distribution 20 |
0
2002 2003 2004 2005 2006
Leading online and emerging growth 8
*Source Nielsen//NetRatings Site Census April to June 2006 v 2005. |
8
· Revenue momentum of 2H 2006 to carry into FY07 |
· FY07 will represent the peak of the Opexand Capex spend for
Transformation with the delivery of key building blocks of the
transformation program |
· EBIT Growth of 4-6% on a reported basis (flat to -2% on an underlying basis) |
· Cash Operating Capex spend of $5.4 $5.7bn, the largest ever
committed effort in Telstras history |
Continuous focus on growth opportunities in convergence 9 |
9
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10 August 2006 |
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|
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Office of the Company Secretary |
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|
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Level 41 |
Company Announcements Office
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|
242 Exhibition Street |
Australian Stock Exchange
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MELBOURNE VIC 3000 |
4th Floor, 20 Bridge Street
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AUSTRALIA |
SYDNEY NSW 2000 |
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Full Year 2006 Results CFO Analyst briefing presentation
In accordance with the listing rules, I enclose a presentation for release to the market.
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Telstra Corporation Limited |
John Stanhope Chief
Financial Officer |
1
FY2006 Financial Highlights
Sales Revenue up 2.7%, Domestic Sales Revenue up 2.2% |
Retail Broadband Revenue up 58%, Retail Broadband
SIOs up 72% to 1.5m Revenue Mobiles Revenue up
6.1%, Mobile SIOs up 3% to 8.5m |
Sensis Revenue up 6.9%, driven by strong 2H
PSTN Revenue decline stabilised, down 6.7% (1H down 7.6%, 2H down 5.8%)
Operating Expenses up 13.8% (excl. transformation up 9.2%) |
Labour Expense up 13.1% (excl. transformation
redundancy up 3.2%) Costs Goods and Services
purchased up 12.3% (excl. transformation up 12.7%) |
Other Costs up 16% (excl. transformation up 11.5%) |
Depreciation and Amortisation up 15.8% (excl.
transformation accelerated D & A up 3.9%) Earnings EBIT
down 20.7% (incl. R&R Provision of $427m), down 14.6% (excl. R&R Provision) |
On or ahead of target in all aspects |
Transformation Gross transformation operating costs of $1.1 bn (net transformation costs $962m)
Cash capex within revised guidance of $4.1 to $4.4bn at $4.3 bn
Headcount reduction ahead of target over 3,000 reductions in 05/06
Dividends Final ordinary dividend 14 cps. Total ordinary dividend 28 cps fully franked for year
Delivered on full year guidance |
2
Reported Full Year Results |
($billions except dividend per share) FY05 3
FY06 3 % Sales Revenue 22.2 22.8 2.7 EBITDA
10.5 9.6 (8.4) |
EBIT 6.9 5.5 (20.7) NPAT 4.3 3.2 (26.2) |
Cash Capex 3.5 4.3 20.2 Free Cash Flow 1 5.2 4.6 (12.4) |
Ordinary DPS (cents) declared 2 28.0 28.0 -EPS (cents)
34.7 25.7 (25.9) |
(1) Free cash flow definition has changed, and under A-IFRS
interest paid is treated as financing cash flow (2) FY05 excludes 12
cps special dividend and FY06 excludes 6c special dividend (3)
Prepared under A-IFRS
Total income growth of 2.9% 3 |
3
Full Year 2006 Guidance
ActualGuidance
Underlying EBIT-6.9%-7% to -10% 9
EBIT (pre R & R)-14.6%-15% to -20% 9
EBIT (post R & R)-20.7%-21% to -26% 9
Cash Capex$4.3 bn$4.1 to $4.4 bn 9
Transformation costs reduced 2nd half earnings |
Capexwithin revised guidance following
tougher procurement outcomes and stopping projects not
aligned to strategy |
Delivered on our market guidance 4 |
4
EBIT and Restructuring & Redundancy
Provision |
Restructuring & Redundancy 05/06
-6.9%
Provision ($m) |
$422m CDMA migration 107 Decommissioning
costs 58 Lease / contract penalties 44 |
-14.6% $427m $5,924m ($157m) $170m Other 32 |
Total restructuring provision
241 Redundancy provision 186 |
-20.7%
Total Restructuring & Redundancy Prov 427
$5,497m
Underlying EBIT decline of 6.9%
Reported EBIT margin fell 710 basis
EBIT EBIT EBIT
R&R points to 24% |
provision reported FY06 Benefits Now
Current year Accel depn Program opex
reported FY06 (pre-prov) redund costs underlying FY06
Underlying EBITDA margin decline of |
Adjustments consistent with previous guidance 5 |
5
Full Year Results Half Year Trends 1 |
Reported ($billions) 1H06 % ¢ 2H06 % ¢ FY06 % ¢ Sales
Revenue 11.5 1.5 11.3 3.9 22.8 2.7 Total Income 11.6 1.9 11.5 4.0
23.1 2.9 |
Operating Expenses 6.3 6.8 7.2 20.7 13.5 13.8 EBITDA 5.3 (3.4) 4.3
(14.1) 9.6 (8.4)
EBITDA Margin (%) 46.1% (2.5) 38.1% (7.7) 42.1% (5.1) EBIT 3.5 (7.0)
2.0 (37.2) 5.5 (20.7) |
EBIT (before transformation costs) 3.5(7.0) 3.0 (7.1) 6.5 (6.9)
NPAT 2.1 (10.3) 1.1 (46.1) 3.2 (26.2) |
Cash Capex 2.1 11.6 2.2 23.1 4.3 20.2 Free Cash Flow 2.0 (4.4) 2.6
(17.4) 4.6 (12.4) |
(1) Includes $427m R & R provision and $422m accelerated depreciation in 2H |
Transformation impacted earnings in 2H06 |
6
Sales Drivers
Drivers of
Movement $m Revenue Growth Actual$m Growth % |
284 Mobiles 4,972 6.1 267 Retail
Broadband 730 58 200 Wholesale Broadband 461 77
126 Sensis (Adv & Directories) 1,711 7.9 |
98 Internet Direct & IP Solutions 428 29 |
58 Solutions Management 989 6.2 (82) SpecialisedData 884
(8.5) (83) ISDN 807 (9.3) (540) PSTN Voice 7, 478 (6.7) |
Delivering on key strategy day revenue targets 7
Retail Broadband |
7
· Revenue growth of 58%
Revenues |
· Retail broadband market share up to 44% |
· Retail broadband SIOs increased by 72% |
· Wireless broadband SIOs grew 424% $730m Competition
driving ARPU down across the +58% $463m market |
FY05 FY06 44% 43% 42% 41% |
Retail Broadband ARPU per month ($) 41% |
60 856k 623k
40 427k
20 FY04 1H05 FY05 1H06 FY06 |
Retail broadband subscribers Includes retail broadband, Mobile
0 including wireless broadband broadband and Internet Direct
1H04 1H04 1H05 2H05 1H06 2H06 (Retail ADSL) customers |
(1) Telstra internal forecasts |
Market leading churn at 1.3% per month 8 |
8
Mobiles
Mobiles Revenue Mobiles ARPU per month ($)
% FY ARPUs
$4,688m +6.1 $4,972m |
60 Postpaid
Mobile Handsets |
$4,307m Mobile Services1 $4,505m 20 |
FY05 FY06 1H04 1H04 1H05 2H05 1H06 2H06
Mobile data revenue growth of 26% |
SMS messages exceeded 3 billion, up 32%
2005 2006 % Non SMS data revenue up 121% |
3G subscribers grew 497% in 2H
Telstra 57% 58% +1 |
· 3G average spend 37% more than 2G Optus 47%
44% -3 |
· Capped plans 7.4% of postpaid mobile base Vodafone
29% 27% -2 SACs (blended) increased 14% to $137 |
(1) Includes
offnet terminating
only (2) Company
reports |
Strong 3G take up in 2H 9 |
9
12.75m Australians use a Sensis service more
Revenue than 10 times each a month 1 +6.9%
$1,826m $1,708m Accounts for almost 14% of the
Australian |
Emerging Business $209m
$177m main media advertising market 2
$154m Classifieds $143m
Online usage up 27% to 7.4 million
$269m White Pages® $302m
-Print & Online unique browsers 3 |
Over 60 million Whereis®maps downloaded each month
$1,108m Yellow Pages® $1,172m -Print & Online
Customer satisfaction with sales reps above 8.0 |
FY05 FY06 $845m
Strong online revenue growth 10.2%
Yellow Pages online 54% to $124m
Reported EBIT growth of 7.7% to $910m
Directory margins improving, especially online |
Delivered on full year guidance FY05 FY06 |
(1) Roy Morgan Single Source
Australia, April 2005 March 2006, base
Australians 14+ (2) Sensis data and CEASA
Main Media Report, 2005 (3) Nielsen /
NetRatings Site Census, June quarter 2006
v 2005 |
Strong 2H revenue growth of 9% 10 |
10
PSTN
8,100 PSTN Revenue & SIO |
$8,018m
($44m)
-6.7%
($261m) |
10.2m ($100m) 7,700 ($33m) 10.1m ($75m) ($4m)
($23m) $4,132m 7,500 $7,478m $3,886m $3,818m 10.0m
$3,660m 7,300 1H05 2H05 1H06 2H06 7,100 FY05 Basic STD
ID VAS FY06 Revenue SIO |
Access Local CallsFixed to MobileTerminating
Revenue decline slowed in 2H to 5.8% v 1H 7.6% PSTN Revenue Growth
Broadband migration causing loss of 2nd line
2%
Capped plans pushing fixed to mobile substitution
Competition forcing yields down 0%
1H04 2H04 1H05 2H05 1H06 2H06
Churn metrics improved in 2H (2%) |
Subscription pricing launched
in April and benefit (4%)
expected to flow through into the
06/07 year and (6%) beyond
(8%) |
Innovative pricing helping slow PSTN decline 11 |
11
Operating Expenses
Operating Expenses Labour |
13.8% Redundancy 13,750 $612m $13,521m ($114m) |
13,500 ($427m) Cost of goods purchased |
9.2%
13,250 Increased sales revenue
$519m $12,979m |
13,000 from marketing activity 12,750
Handset subsidies |
Network payments 12,500 $506m 12,250
Other operating expenses |
12,000 $11,884m Consultancy |
11,750 Service contracts and 11,500
agreements Reported Labour Goods & Other Underlying
Current R & R Reported Project write-offs FY05
Services FY06 Year Provision FY06 Transf. Costs |
Net transformation costs of $541 m incurred (excl. D&A) 12 |
12
4,500 13.1% 3,262 $119m $4,363m ($236m) 4,400 $443m 4,300
4,200 ($170m) 4,100 3.2% 52,705 |
49,443 4,000 $23m $3,980m $87m ($84m) 3,900 $3,858m ($60m) 3,800 |
3,700
Salary Overtime,Redundancy Other R & R Current Year
Reported FY05 Increase Contractors Headcount Reduction Reported FY06
Provision Redundancy Benefits Now Underlying FY06 |
& Agency Total workforce down by over 3,800 before
New |
Labourexpense up 1.7% (excluding all redundancy)
World acquisition
Redundancy of $443m: |
New World added 597 staff $170m expense incurred in
current year to group $186m provision for 2,600 staff made
redundant over 2 years $87m net movement in business as usual
redundancy |
R & R Provision of $236m: |
$186m redundancy provision for 2,600
staff over 2 years $50m other
labourrelated restructuring transformation
costs |
Progress on workforce rationalisation 13 |
13
+12.3% + 12.7% 4,800 $46m ($12m) $70m $4,746m $4,730m ($54m) 4,700 $52m $98m 4,600 $144m 4,500 |
Reported Cost of Commissions/ Network Managed Service Reported R
& R Benefits Underlying Other FY05 Goods Sold Subsidies Payments
Services Fees FY06 Provision Now FY06 |
Marketing activity driven sales volume
Aggressive handset subsidy policy implemented by New World
FOXTEL subscribers increased the Pay TV bundling service fees |
$54m transformation costs included in Other, offset by $70m savings included in cost of goods sold
Cost growth driven by competitive customer offers in 2H 14 |
14
+16% 4,500 $26m ($13m) $4,427m ($137m) $42m
4,400 $138m $66m ($101m) +12% 4,300 $4,254m $139m 4,200 $280m 4,100 |
Reported Service Net Foreign Promotion & Property & Reported R & R
Benefits Underlying Impairment Other Office FY05 Contracts Currency
Advertising IT Rental FY06 Provision Now FY06 Expenses |
Network maintenance and
transformation activity $137m
of R & R provision booked against Other |
Commonwealth Games and competition increased marketing activity
Cost growth driven through meeting customer demand 15 |
15
Depreciation & Amortisation |
$4,087m Accelerated depreciation and 2005/06
Accelerated $422m amortisation (D & A) ($m)
$3,529m Depreciation $744m Strategic review $653m
Amortisation service life changes -Network
related 262 -Software 160 Depreciation Total
accelerated D & A 422 $2,876m $2,921m |
FY05 FY06
D & A up by 3.9% (excludes accelerated depreciation) |
Amortisation driven by reduction in service life
of general software following the strategic review |
Accelerated depreciation will continue in 06/07 between $300 to $350 million
Transformation review of asset service life increased D & A 16 |
16
$4,255m1 Transformation Capex 2005/06
20% ($ m) |
+ 2 1 % $279m $1,348m Transformation
Wireless 455 OSS / BSS 159 Other (incl. network fixes) 100
Total Transformation Capex 1,348 $3,260m -21% |
No transformation capexin 1H06 |
Wireline and wireless driving transformation
capex FY05 FY06 Domestic capex(excluding 3G and |
(1) Excludes investments transformation) fell as focus on transformation |
Paid $315m to Hutchison
for 3G infrastructure sharing,
$112m paid in July 06 |
Focus on rollout 3G 850 and NGN 17 |
17
CSL New World TelstraClear HK$ FY05 FY06 % NZ$
FY05 FY06 % Income 4,308 4,831 12.1 Income 676 693 2.5 |
EBITDA1,272 1,390 9.3 EBITDA1221241.6
EBIT725686 (5.4) EBIT(19)(20) 5.3%
CSL and New World merger completed on Net income up 2.5%
31 March 2006 Calling revenues declined due to price erosion
3 months NW results included and pricing plan reductions in internet and IP
Merger synergies starting to be realised business driven by retail competition
Integration on track Strong growth in business sector |
Leading mobile operator in Hong Kong Evaluating
strategic options given regulatory environment |
CSL & New World merger completed 18 |
18
Cash Flow & Financial Parameters
Cash Flow Financial Parameters |
5,200 Current Target 5,100 Jun 06 |
5,000
Debt Servicing 1.7 2.1 1.4
4,900
($246m)
4,800 Gearing |
55% 75% 50.4% 4, 700 net debt |
-12.4%
4,600 $4,550m Interest cover >7 times 10.2 |
Reported Operating Investing
Reported FY05 FY06 |
Operating cash flow decreased by 4.4% impacted by:
Lower profits in the year following inclusion of transformation costs
Higher tax paid to tax office due to low tax installment rate in fiscal 2005
Investing cash flow increased as we execute on transformation
Well positioned on all target parameters 19 |
19
FY 2007 Guidance
Guidance on Reported Numbers Underlying Business Performance
Revenue Growth of 2% to 2.5% Growth of 2% to 2.5% |
Depreciation & D & A similar to FY06 incl accelerated D & A
similar to FY06 before Amortisation D & A of $300m to $350m
accelerated depreciation |
EBIT Growth in range of +4% to +6% Flat to minus 2% |
Cash operating Range $5.4bn to $5.7bn
due to capex transformation |
Level of dividend subject to Dividend regulatory outcomes and normal board considerations |
FY07 guidance based on band 2 $22 ULL price and no FTTN 20 |
20
FY 2007 Factors Impacting Half Year Performance |
Revenue Recognition of Melbourne Yellow Pages delayed to 2H07 |
· New World revenues to be included for full 12 months |
· 1H07 to incur significant transformation
expenses Operating Costs No transformation costs
1H06 |
· New World costs to be included for full
12 months |
Depreciation & 1H07 Accelerated D & A in range
$150m to $175m Amortisation 1H06 No accelerated D &
A incurred |
EBIT 1H07 decline in range of -17% to -20%
2H07 to more than offset 1H07 decline
1H07 EBIT decline to be compensated in 2H07 21 |
21
Telstra Corporation Limited |
22
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10 August 2006 |
|
|
|
|
Office of the Company Secretary |
|
|
|
|
|
Level 41 |
Company Announcements Office
|
|
242 Exhibition Street |
Australian Stock Exchange
|
|
MELBOURNE VIC 3000 |
4th Floor, 20 Bridge Street
|
|
AUSTRALIA |
SYDNEY NSW 2000 |
|
|
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
CEO Letter to Shareholder
In accordance with the listing rules, I enclose an announcement for release to the market.
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
|
|
|
Telstra
Corporation Limited ABN
33 051 775 556
Office of the CEO
242 Exhibition
Street MELBOURNE
VIC 3000 Mail to:
Locked Bag 5639
MELBOURNE VIC 3001
|
|
|
10 August 2006
Financial results for the year ended 30 June 2006
Dear Shareholder
As part of our continuing commitment to more direct, more frequent and more timely communications
with our shareholders I am writing to you about Telstras financial results which were released to
the market today. The past year was marked by the launch on 15 November 2005 of our five-year
strategy to transform our customer experience and improve our operations to deliver long term
shareholder value. The management team and the Board of Directors are committed to that objective.
Our results reflect good progress in creating the New Telstra. Were on track or ahead of plan on
nearly every front.
Financial results
We informed you last November of our expectations, given the transformation investments we
outlined, for a decline in the level of earnings before interest and tax (EBIT) for the year ended
30 June. Our results were in line with our expectations of a decline of 20 to 25 per cent (pc).
EBIT declined 20.7pc or $1.4 billion to $5.5 billion. Before transformation costs earnings from
our normal operations declined 6.9pc to $6.5 billion.
Free cash flow (cash flow from business operations less cash spent on investing in the business)
was strong at $4.5 billion. Our cash position remains strong. This cash was used to pay dividends
and our borrowing costs.
Our financial performance has been shaped by new capital investments and expenditure as we
undertake projects to improve the experience for our customers, build new networks, make
productivity gains, reduce complexity inside our business and continue to integrate our services
(e.g. offering BigPond over mobiles) ... and improve future earnings, returns and cash flows.
While EBIT was down for the year, largely due to bringing forward into the second half of the year
operating expenses relating to our transformation, for example, accelerating depreciation of
assets being replaced and providing for the restructure and some staff redundancies, sales revenue
was up 2.7pc. With a strong performance in the second half we increased sales revenue 3.9pc.
Contributions in the second half included:
|
|
Mobiles revenue up 7.6pc this is a strong result as weve improved our offerings using
research based customer segmentation |
|
|
Sensis revenue up 9pc an outstanding result, in the face of substantial pressure from competitors |
|
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Strong broadband growth as indicated by increased revenue, subscribers and market share. |
We slowed the decline in our fixed line (PSTN) revenues. The second half decline slowed by nearly
one fifth to 5.8pc compared with the first halfs 7.6pc. Were tackling this hard by integrating
services, customer win back programs, introducing value-based subscription plans and other well
received initiatives.
Were competing hard on your behalf customers are making choices based on the value were
offering.
We have improved our network reliability and service levels in the past year. Our customer
satisfaction results have significantly improved in both connections and fault repair. We
maintained our high performance in meeting customer service guarantee timeframes. BigPonds call
centre performance continues to outrank its peers.
We announced a profit after tax today of $3.18 billion for the year, down $1.13 billion or 26.2pc
on the prior year. Telstras Board of Directors has declared a final ordinary dividend of 24 cents
per share, fully franked. This brings the total ordinary dividend declared for the year to 28 cents
per share, representing a total of $3.5 billion. More information on our full year 2006 result is
provided in the attachment.
Our Transformation
We told the market today that the transformation to the New Telstra requires us to take tough
medicine throughout our business for a while yet but we are on track. For example, our new
national 3G 850 wireless network project is on schedule to be delivered by the start of 2007. We
are rebuilding this great Australian company and laying the foundation for new revenue, improved
earnings and cash flow.
Already, in only seven months, our transformation has realised over $150 million in expense
savings and around $500 million in capital expenditure savings. Workforce reductions since 1 July
2005 amount to 3,262 staff and the dollar savings will flow through in 2006/07 and beyond.
Regulation
The regulatory environment is the one disappointing aspect of the past year. The Australian
Competition and Consumer Commission (ACCC) recently expanded the scope of and extended for a
further three years regulation mandating competitors below-cost access to our fixed network.
Value destroying regulation slows or diverts investment that would otherwise be used to improve
our customers experience, earn a competitive return for shareholders and provide infrastructure
and advanced services that Australia needs to be globally competitive.
Uncertainty remains over DLL (unconditioned local loop) pricing the price we can charge our
competitors to access your $30 billion copper network. Telstra follows Government policy of
averaging its prices for all retail customers across Australia. But the ACCC will not follow the
same principle for wholesale customers. The ACCC sets wholesale prices based broadly on population
density which are below Telstras costs to deliver. It now appears that the ACCC intends to reduce
ULL prices further. Should this come to pass, we will be required by the regulator to continue
supplying the ULL service well below our costs. This means you, our shareholders, will continue to
subsidise the shareholders of our largely foreign owned competitors.
We invested many months in discussions with the ACCC working towards a solution where Telstra could
build a fibre to the node network. This network would provide Australia with high speed broadband
much further from our exchanges than the current network will allow. But we reached an impasse on
the measurement of the real costs of building and maintaining our network particularly the issue
of what contributions our competitors should make to the construction and upkeep of the rural
network. If you cant agree on costs you cant agree on prices, so the FTTN talks between Telstra
and the ACCC broke down. This is unfortunate as more investment in high speed broadband capacity is
required to enable Australia to compete internationally. However, our guiding principle is that we
expect to earn a competitive rate of return when we invest your money. When we cant, we wont
invest.
Outlook
Despite these challenges, this is an exciting time for Telstra as we execute our longer term
strategy to transform Telstra into a company focused on delivering customers innovative,
value-based products, services and solutions.
All of us want to see the results of the strategy reflected in improved share price performance.
This is what is driving our strategy though as I have said, there will be another year of
significant investment required to execute the transformation. As a result, in the next financial
year ending 30 June 2007, you should expect to see:
|
|
Revenue growth of 2pc to 2.5pc |
|
|
EBIT growth of between 4pc and 6pc off a base of $5.5 billion for the year ending 30 June 2006 |
|
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Cash Operating Capital Expenditure of between $5.4 billion and $5.7 billion |
|
|
Dividends the level of future dividends remains subject to key regulatory decisions and
will be considered by the Board at the appropriate time. |
Telstra is assisting the Government in preparations for the possible sale of its 51.8pc stake in
Telstra. We believe this sale is in your best interests. Should the sale proceed, a sale of shares
to the public is our preference. We do not want a situation where one investor holds a significant
number of shares that it intends to sell over time as this could place a lid on the share price
performance until such a sell-down is completed.
The Board and I remain committed to informing you of progress in transforming our company. For more
information on Telstra visit our investor relations website
http://www.telstra.com.au/abouttelstra/investor or our consumer advocacy website
http://www.nowwearetalking.com.au.
Please contact us with any questions or comments by email at investor.relations@team.telstra.com
Solomon D Trujillo
Chief Executive
Officer
|
|
|
Telstra
Corporation Limited ABN
33 051 775 556
Office of the CEO
242 Exhibition
Street MELBOURNE
VIC 3000 Mail to:
Locked Bag 5639
MELBOURNE VIC 3001
|
|
|
Telstra Corporation Limited Financial results for the year ended 30 June 2006
This is a high level summary of the results for the year ended 30 June 2006 announced on 10 August 2006.
For further information visit our investor relations website http://www.telstra.com.au/abouttelstra/investor
Income Statement
The financial performance for the year has been impacted by:
|
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The continuing decline of the PSTN revenues as customers are migrating to other products |
|
|
Improved revenue performance across all products in the second half, although this has
required additional spend |
|
|
Costs incurred in the second half on the transformation Telstra. |
Key points on the result
|
|
Net profit was $3,181 million, down 26.2pc |
|
|
Earnings before interest and income tax expense (EBIT) was $5,497 million, down 20.7pc |
|
|
Transformation costs and provisions for redundancy and restructuring totalling $962 million
in the second half of the year |
|
|
EBIT before transformation costs down 6.9pc to $6,461 million. |
Revenue
Sales revenue increased by 2.7pc to $22,772 million.
Sales revenue in the first half of Fiscal 06 grew l.5pc, in the second half sales revenue grew
3.9pc. This improvement is due to Telstra competing well in the market with value based offers
across fixed line (PSTN), Mobiles, Broadband and Sensis.
PSTN revenue declined 6.7pc to $7,478 million. PSTN revenue declined 7.6pc in the first half. We
have slowed this 5.8pc in the second half. There has been a general reduction in PSTN volumes and
yields have declined due to competitive pricing pressure and continuing customer migration to other
products.
Mobile revenue increased 6.1pc largely due to the performance of mobiles data revenue,
international roaming and mobile interconnection revenues. Second half revenues grew 7.6pc as we
focus growing our 3G customer base.
Retail Broadband grew 58pc to $730 million as we grew subscriber market share over the year 3 per
cent to 44pc.
Sensis revenue increased 7.9pc to $1,711 million with 9pc growth in the second half due to the
continued strong performance of our Yellow and White pages directories.
Pay TV bundling revenue increased due to the migration of customers to FOXTEL digital, as well as
promotions during the period, offering minimal price installation and discounted packages.
Operating expenses (before finance costs, income tax expense and Depreciation and amortisation)
increased by 13.8pc to $13,521 million. Excluding transformation costs of $692 million Operating
expenses were up 9.2pc to 12,979 million.
Labour expense up 13.1pc to $4,364 million due to:
|
|
Redundancy expense of $344 million associated with the reduction in
our workforce by 3,262 staff to 49,443 |
|
|
Redundancy and restructuring costs associated with making 2,600 staff
redundant over the next two years |
|
|
Excluding redundancy costs Labour expense was up l.7pc mainly due to
salary increases. |
Goods and services purchased up 12.3pc to $4,730 million due to:
|
|
Higher cost of goods sold and mobile handsets
subsidies as we compete in the market |
|
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Network payments resulting from increased
competition. |
|
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Other expenses up 16.0pc to $4,427 million due to: |
|
|
Maintenance costs associated with the existing
3G network |
|
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Higher consultancy costs due to transformation
activities |
|
|
Increased market research due to a focus on
understanding customer needs |
|
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Costs associated with property rationalisation,
cancellation of server leases, and the
decommissioning of certain IT platforms and
operational and business support systems. |
Depreciation and amortisation costs grew to $4,087 million or by 15.8pc as we have accelerated
depreciation and amortisation on our CDMA network, switching systems, certain business and
operational support systems and related software totalling $422 million. Before accelerated
Depreciation and amortisation the increase would have been 3.9pc.
The lower profit reduced income tax expense by 21pc to $1,381 million.
Telstra Corporation Limited
Financial result for the year ended 30 June 2006 continued
This is a high level summary of the results for the year ended 30 June 2006 announced on 10
August 2006. For further information visit our investor relations website
http://www.telstra.com.au/abouttelstra/investor
Balance sheet
We continue to maintain a strong balance sheet with net assets of $12,832 million, compared
with net assets of $13,658 million as at 30 June 2005. The decrease in net assets of $826 million
comprised an increase in total liabilities of $1,790 million and increase in our total assets of
$964 million.
The increase in total liabilities of $1,790 million was primarily due to:
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Total borrowing increasing $930 million to fund capital invested as part
of transformation and dividend payments |
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Trade and other payables grew by $710 million, reflecting additional accrued
expenditure associated with the roll out of the 3GSM850 network. |
The increase in total assets of $964 million was mainly due to:
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Superannuation assets increased by $782 million primarily due to the recognition of actuarial
gains on the Telstra Superannuation Scheme |
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Property, plant and equipment increased $731 million, due to the assets acquired in the CSL
New World Mobility merger and the additional capital expenditure on our
transformation, offset by depreciation expense |
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A decrease in cash and cash equivalents of $859 million to pay dividends and interest on our
borrowings. |
Cash Flows
We continue to generate large Free Cash Flows and our cash flow position remains strong though
it declined to $4,550 million from $5,194 million in the prior year. Free Cash Flow is defined as
cash from operation activities less cash used in investing activities.
Free Cash Flow declined to $4,550 million due to:
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$234 million decline in the cash flow generated by our core business primarily
due to the decline in our fixed line revenues and higher levels of expenditure as we
commenced our transformation in the second half and increased marketing
activity to drive revenue |
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$164 million increase in tax paid during the year |
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$246m increase investing cash flows mainly as a result of
increased spend on building and upgrading our networks
and systems to improve the customer experience
as we undertake our transformation. |
We used our Free Cash Flow to:
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Pay dividends to our shareholders of $4,970 million
representing 40 cents per share (this included two special
dividends totalling 12 cents per share) |
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Pay interest of $940 million to our debt holders. |
These payments totalled $5,910 million, $1,366 million higher than our free cash flow. This
excess was funded mainly by an increase in our net debt (borrowings less cash on hand) of $1,281
million.
Investor return and other key ratios
Basic earnings per share decreased to 25.7 cents per share in fiscal 2006 from 34.7 cents per
share in the prior year. The decrease was due to lower profit in fiscal 2006.
We have declared a final fully franked ordinary dividend of 14 cents per share ($1,739 million),
bringing ordinary dividends per share declared for fiscal 2006 to 28 cents per share. Total
dividends paid in fiscal 2006 amounted to 40 cents per share.
Other relevant measures of return to investors include the following:
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Return on average assets 2006: 15.8% (2005: 20.6%) |
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Return on average assets is lower in fiscal 2006 primarily due to the lower profit. |
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Return on average equity 2006: 24.2% (2005: 30.6%). |
The decrease in return on average equity in fiscal 2006 is due to the lower profit for the year
and increased dividend payments in fiscal 2006 reducing shareholders equity.
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10 August 2006
The Manager
Company Announcements Office
Australian Stock Exchange
4th
Floor, 20 Bridge Street SYDNEY NSW 2000
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Office of the Company Secretary
Level 41
242 Exhibition Street MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400 Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript from Full Year 2006 Results Media Briefing
In accordance with the listing rules, I attach a copy of the transcript from todays Full
Year 2006 Results media briefing for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
TELSTRA CORPORATION LIMITED
FY 2006 RESULTS
THURSDAY 10 AUGUST 2006
MEDIA BRIEFING
SOL TRUJILLO: I will try to be brief in terms of my comments. Some of you perhaps had a
chance to sit through the first session. What we are doing today is announcing our results and
results for first half or first full year and second half results, trying to give you some
colour, if you will, or some detail in terms of whats behind the numbers.
First of all we came out with EBIT results of $5.5 billion. Those of you that have been
covering Telstra, you know that we gave guidance of a decline in terms of our EBIT numbers of
21 to 26 per cent. We came in at 20.7 per cent, which basically says that we are in line with
guidance. In terms of our underlying numbers, when you think about the total number, it
includes a lot of our transformation costs, it includes the acceleration and depreciation, it
includes things like the cost for redundancies and when you strip some of those out, the
underlying performance decline goes to 6.9 per cent, where we had underlying performance of
$6.46 billion. To use the comparable number there, we gave guidance of 7 to 10 per cent in
terms of decline. So, we have come in essentially slightly below our guidance relative to the
bottom line type of numbers.
But, when we talk about transformation and when you talk about Telstra, if you want to really
understand, and I am going to emphasise, if your interest is understanding transformation of
Telstra, you have to look then about the driver numbers and you have to look at what really is
important as you think about the future of Telstra and the first thing you have to look at is
essentially growth. The biggest problem Telstra has had is that it has declining revenues, it
has a core part of its revenue stream PSTN that is in significant decline, it is a significant
part of the business and the question is: Are we turning that around?
If you look at the second half versus first half, and just as a quick reminder first half we
announced our results in February, we had just had our strategy session in November, so second
half we had a chance to begin implementation of our new strategy for Telstra.
In the case of mobiles, we had strong second half growth of 7.6 per cent, with improved
offerings and customer segmentation driving a lot of what we were doing there. In terms of
total revenue growth, we came in at 6.1 per cent and our revenue base now is at about $4.97
billion.
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But the key story underneath that is really about where is mobile revenue growth going?
What is the game that we, Telstra, need to win? And that really is about 3G because the key
for me, as I think about winning and I think about growing this business and when I think
about creating shareholder value, it is about where customers are going to be focused, where
they are going to spend more, where they are going to use more, where they are going to have
more functionality delivered to them and that is about 3G. And in the case of 3G, we grew our
3G base significantly and, most importantly, we are focused on that 3G base where our ARPUs,
our average revenue per user, is now about $20 higher per month than those on 2G post-pay.
In the case of broadband, our market share continues to grow. We are up 3 per cent for the
year. We added retail customers at the rate of three to one of our nearest competitor. So we
have a better value proposition, we have a better delivery system and our customers are voting
with their wallets.
In the case of Sensis, we have had a strong performance with Sensis as well. In the case of
our total year revenues they were up 6.9 per cent, but second half revenues were up over 9 per
cent. Our on-line revenue growth, so if you think about Sensis, half of it, if you think about
the business, part of it is print and the other part is our on-line services and how we think
about growing in the new digital, new media world, and for the first time in the history of
Sensis, our absolute revenue growth for on-line has now exceeded the growth for print. Again,
another significant accomplishment in terms of how we think about repositioning and the
transition of this company.
But we dont stop there because another key platform for us in the enterprise base when you
think about business customers, in particular, our IP services revenues grew 34 per cent,
where now they account for almost $500 million in terms of our revenue streams in the business
and they are growing aggressively and I can tell you that again David Thodey and Deena Shiff,
who run our businesses part of the business, they are very focused in terms of what we are
going to be able to do there.
So, as you look at the business, we have in fact accelerated revenue growth H2 versus H1,
which is to me a sign of health, it is a health metric as I look at the business. But I dont
want to stop there because transformation is about re-accelerating, re-energising the
business, but maybe more importantly in the near term is how do we take costs out of the
business? How do we restructure this business so that when we think about creating shareholder
value, which is what we are all about, it is about taking out costs. How do you think about
costs?
Part of a company like Telstra is we have a lot of full-time equivalent people
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working in this business, whether it be directly, part-time, contracted, whatever it
might be. In this case, in the year we have taken out about 3,800 full-time equivalent heads
in terms of the business. We have done that with the sole purpose and sole focus and sole
criteria around removing non-value add work out of the business. That is the primary purpose.
So that again we can take that money and reinvest it for the things that are important as we
look at transforming the business.
So, we have done that, we have actually stopped 800 projects, saving about $500 million in
capex and we have also cut a lot of costs out of our business through many different ways,
which has now reduced our opex spend by about $157 million, so it is about tough management,
we talked about tough medicine, we talked about tough processes that we are now putting in
place, whether it be procurement, whether it be productivity management, whether it be
performance-based management, or any of the kinds of things that we talked about back in
November.
So, the punchline here is that our transformation is on or ahead of plan on virtually all
fronts and we are gaining momentum.
One other thing thats important, though, as we think about revenues and as we think about
costs and as we think about the things that we are doing in terms of laying new networks,
building new IT systems and platforms, is that what about the customer? Wheres the customer
in the mix here? And what has happened to service because, with a transformation like this you
can lose focus, you can get too focused on the technology, focused on too many other things,
and if you look at our results again over the last reporting period, our results, our service
results for Telstra, are the best that they have ever been, period. End of story. So, a lot of
momentum, a lot of good work by the people that are running this business, every day.
In terms of other activities relative to our transformation, our wireless network is basically
ahead of schedule. It is more than 75 per cent complete. We made a commitment to the market
that last November we said we would build this wireless HSDPA 3G 850 network in a year and
that we would be able to turn it up by the beginning of 07. At that point of time nobody
believed it was possible, because nobody has ever built a network of this magnitude, this
size, anywhere in the world in that timeframe.
We are on schedule, slightly ahead of schedule, and it is our intent to meet that commitment.
We also said that we would build out this wireline IP, MPLS core network over the next few
years, so that we could in fact have this capability to serve our business customers in the
new and unique ways that are way beyond what our competitors or even we have today. Were
about 60 per cent of the way down in terms of building out our sites. So were serving
customers today but were going to have even greater capability tomorrow.
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The third dimension about transformation is about how do we get Telstra to start
operating differently and innovating and leading the market in many different ways. I talked
in particular about our integration strategy, of enabling customers to use multiple
capabilities across our Telstra portfolio of companies in simple, easy to use ways; one click,
one touch, one button, one screen, one call, one whatever. Weve started that migration. Were
not done, were started. But you saw some of it in terms of what we delivered in the
Commonwealth Games. When we roll out our 3G HSDPA network at the beginning of next year youre
going to see a lot of capability brought that really brings to life this capability, in
addition to what were doing today with BigPond and mobiles and other things in terms of our
business. So we are innovating, but only beginning.
We also talked about, as part of our transformation, the core implementation of market-based
management, which is a core principle about transforming this business where the customer is
really at the centre of our business. We have now begun that implementation. We are now seeing
the results of it in terms of our service delivery, improved revenue growth, and also, then,
the other core metric that anybody that operates one of these businesses looks at all the
time, which is churn. Is our churn also reducing? And I can tell you today, in terms of our
results, our churn is reducing significantly.
The case of IT, our information technology, the systems that essentially drive everything that
were doing in the business today, they are on, or ahead of plan on virtually all fronts.
Theyre about enabling capabilities, so that on the front end, when a customer deals with one
of our people, were going to make it simpler, easier, faster, better, more consultative, and
if youre dealing on the back end of our business, in terms of the delivery processes were
going to make it simpler, easier, faster, better, and in every case lower cost in terms of how
we deliver. So that is critical for us.
What we also announced this morning was that in terms of our outlook, our guidance for the
coming year, is that we would continue to look for revenue growth in the 2 to 2.5 per cent
range. Wed look at EBIT growth of 4 to 6 per cent, with underlying EBIT flat to minus 2 per
cent. The level of future dividends will be subject to regulatory outcomes and will be
considered by the board at whatever the appropriate time is, if there is a need to address
that issue.
So as we look at this business, the last thing that I would just say is that were now,
essentially, seven or eight months into our transformation. This coming year will be the peak
year for our spend. So our guidance is reflective of additional spend, we will spend more
Opex, operating expense, well spend more Capex, our capital expense, than any year in the
history. So you will see these kinds of numbers, in terms of growth, that are constrained by
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additional investment. There will have been no company, at least that Im aware of in the
history of this country, that will have invested for the future like Telstra is doing. Thats
a commitment that the board of directors of Telstra have made, because fixing this company,
transforming this company from a good company to a world-class company is not something you do
in one quarter, its not something you do in one year, its something that you have to do in a
fundamental transformational way, and thats what we are. Thats the commitment that the board
of directors of Telstra have made to all of its shareholders. So with that, I will stop and
open it up for questions.
QUESTION: John Durie. Sol, three questions, one of a general nature, two, just housekeeping.
Firstly, Im sort of a little bit confused. Today we got a very upbeat message in terms of the
future for Telstra and in terms of the FTTN decision I think you said words to the effect of
that it was disappointing but youre happy to go with the flow. I was wondering whether you
could explain I didnt understand the rationale for what happened earlier in the week,
where, you know, you sort of hit the megaphone 50 times volume to make the issue a big
political issue, when today the message is directly contrary to what was put out earlier in
the week?
SOL TRUJILLO: Okay. John, number one, I dont think I said I was happy to go with the flow. I
said we will deal with whatever we need to deal with. From an operating standpoint, as we said
back in November of last year, we had this asterisk on whether we were going to do Fibre To
The Node or not, it was going to be subject to all the regulatory settings, and as its turned
out, the regulatory settings arent appropriate for making that additional investment. So
thats done. I spend my time on the business, trying to run the business to compete and to win
and to create shareholder value, ultimately. Thats what weve been doing. So in terms of what
were doing is, were focusing on that. This week, what Phil Burgess was doing was basically
informing the market that we had reached a stalemate. That was as simple as that. Now, how all
of you choose to cover it, how you like to cover it, how you like to, you know, deal with
that, thats not something we create. But its something that we thought was important in
terms of sharing the information, and, mostly importantly, why there was no solution to what
we thought would be a great promising capability for Australia.
QUESTION: Just to follow, I mean he said were now were now just had to go track broadband,
were destined for Third World status on broadband, and yet today you were telling us that you
can deliver 17 megabits already and there is a lot of exciting alternatives. So its directly
contrasting.
SOL TRUJILLO: Well, no, let me, again, John, make sure you have the facts, so that when you
make statements like that youre always using factual context. The key here is that when I
talk about our HFC network, its built in five cities, not 20 cities, not 18 cities, so its
not reaching out beyond the five
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cities. When you look at the footprints of our competitors or where we might be placing
our DSL 2 plus, it tends to be in those places where there is clusters, where there is density
of people. The only solution thats coming, John, that will be an opportunity to solve what I
would call beyond the normal economic interest, is really going to be with our wireless
broadband solution. That becomes very important and do I have hopes for it? The answer is yes.
The simple answer is yes because there is no regulation there, right. Its, you know, wireless
is, you know, for Optus, for Vodafone, for 3, for us, for everybody, is an unregulated
business, so youre only as good as you can be. Thats a good thing because we will be better
than our competitors, and we also think about all Australians, not just some.
QUESTION: Just two quick housekeeping. First, I think John Stanhope said that PSTN revenue is
about a third of your base now. Just as a point of your reference, could you tell us how much
that was, say, two years ago, three years ago? Secondly, would it be possible to get a figure
of the total cost of acquisition costs for new customers in the last half, please?
SOL TRUJILLO: Okay. John, Im going to, because I dont have history here, Ill ask John
Stanhope to help with that answer, okay.
JOHN STANHOPE: John, about three years ago it would have been about 40 per cent. PSTN revenue
would have been about 40 per cent. What was the other part of your question, Im sorry?
QUESTION: Customer acquisition costs.
JOHN
STANHOPE: For?
QUESTION: Well, for mobiles?
JOHN STANHOPE: For mobiles? The average customer acquisition cost was about $134. As I said
earlier, it did go up in the last quarter in particular because we have a very strong
marketing campaign going on, particularly around 3G. Because 3G, as Sol has said, is very
important to us to lead and win in that market.
QUESTION: How much would it have been in the last quarter, John?
JOHN STANHOPE: Sorry?
QUESTION: How much in the last quarter?
JOHN STANHOPE: Last quarter was about $178, and thats brought the average up. But, as I said,
that was because of a very focused 3G campaign in the last quarter.
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QUESTION: Jessie (indistinct). Sol, youve already got an ADSL2 footprint thats bigger
than all your rivals. Why not turn it on straight away?
SOL TRUJILLO: Well, Jessie, were waiting to see what the regulator is thinking, doing,
ultimately going to decide in terms of how we choose whichever directions that we take. The
good news is that we do have options and the good news is, we will explore whatever, and
exploit, whatever options that we have. As I said earlier today, Im not going to give
specifics today about what were going to do, when were going to do it, because my job is not
to educate our competitors, my job is to beat our competitors, and thats what we intend to
do.
QUESTION: You said when youd be coming back here this time next year you will have regained
the lead, or taken the lead in 3G. Is that sort of forecasting a price war against 3?
SOL TRUJILLO: Were not into price wars. What youre going to see over the next year is a
value proposition, an offer, a capability, a set of services that are way beyond anything
anybody else can do in Australia, because our shareholders are making an investment to offer
services on this wireless capability like no others. So were risking capital, yes, we are
risking capital, were making an investment, but its to be better in the marketplace, with no
regulators trying to decide who wins and who loses, well let the customers decide who wins
and who loses.
QUESTION: So its not just a matter of call prices or handset subsidies?
SOL TRUJILLO: Well, you know, we will do what we need to do in the market. Clearly if you look
at what David has done the market or what Dana is doing in the market, its nowhere near what
our competitors are doing because we are the market leader, we have better quality, we have
better coverage, we have better service and were going to exploit that even further with more
capabilities that it will bring.
QUESTION: Michael Sainsbury of The Australian. Couple of questions. The first question is on
ULL; youve got $22 in the results. If it comes in at 17 or 18, which is where a lot of the
market thinks its going to come in, there was a report this week that thats where it is,
what effect does that have on your outlook? The second question is about the segments. Some of
the EBIT falls in the consumer business and enterprise and government are pretty steep. Can
you give us some sort of commentary around where you see those different segments going and
what effect another rise in interest rates and a general downturn in economic conditions might
have on your businesses?
SOL TRUJILLO: In terms of the ULL question, you know, there has been a lot
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of speculation. I dont plan, you know, on a speculative basis in terms of what it means.
Obviously, mathematically, the way that we would calculate what the impact is, is you take the
current base of customers that are paying whatever theyre paying today, look at the delta
between the two, multiply it times the volume and youd say thats the first calculation. The
second part of the calculation is what happens with our competitors and how will it stimulate
their deployments and what is your forecast of what their growth might be and what kind of
market share theyll take. Some of that gets into speculation. The other part of it is, is
where are they deploying? Because one of the interesting questions for me always is, when I
get briefed on what others are doing, is to see what theyre telling the financial community.
If you add them all up, in terms of where theyre deploying and the market that theyre
looking at, they all tend to be in the same place. There is only so many customers in every
place and you can probably add up to about 500 per cent of market in terms of what the
forecasts are. So when we look at that, we have to factor in a lot of numbers and a lot of
stages to come out with the calculations. Right now were not spending a lot of time on that
kind of thing because were spending our time getting our business running, doing the things
that we know we need to do, the things that we can control. Weve been driving since November
and now you get a first glance at it with H2 results, and there is a lot more coming in H1 of
this year and H2 of this year and the following years after that. The second part of your
question?
QUESTION: It was on the different segments, and I think its the first time you reported those
and I think thats a good thing. Just that some of the drops in EBIT for the different
businesses and how thats going to pan out over the next year, according to the different
segments youve got there. And whether any further downturn in economic conditions, you know,
rise in interest rates, you know, higher petrol prices is going to have an effect? How much
does that affect your business these days?
SOL TRUJILLO: Well obviously were affected by the same variables that everybody else is. So
if the economy is tough in New South Wales versus Western Australia, we do see the differences
in terms of purchase behaviour and all that. So thats factored into some of our guidance. We
have our economists on board that help us think about those as we do our planning.
In terms of how we are competing, and if you look at it segment by segment, obviously I think
you have seen a pretty significant revitalisation of our consumer segment here in H2. I think
thats terrific. I think you saw, earlier last year, some revitalisation in terms of what
were calling internally our Telstra business segment, which is our small and medium
enterprises, as we try to define them. Obviously David Thodey, in terms of the enterprise side
of the business, for the first time in several years now weve broken into positive growth at
the top line in terms of our enterprise business. So all of that is good. Do I expect more?
Absolutely. If you talk to anybody thats on my
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team, there is no such thing as doing less next year than you did the prior year. So we
are focused on that and we are going to continue to grow in each of those sectors.
QUESTION: Jennifer Hewitt. You talked a lot today about shareholder value. Obviously one of
the things that people are looking at, potential shareholders as well in terms of T3, is the
dividend policy. Dont you think it would help shareholders if you gave them a little bit more
certainty as the government decides what its going to do with T3?
SOL TRUJILLO: Well, Jennifer, I agree with you. I think that certainty is a good thing. If I
had all my variables that were certain that would drive it and the board had all those
variables certain, we could give more guidance. The problem is, a core part of our mix in this
kind of business, and this is unique to Telstra because our competitors arent regulated the
same way, is that we have this confusion right now, or uncertainty, relative to whats going
to happen with the unbundled local loop pricing. So until we know what it is, you know, the
board really cant deal with that, until they know what the facts are. So I agree, I mean
certainty is a good thing, weve been saying this now for a year, wed like to see to see
certainty. Thats why we had a lot of work put into it over the last six months, with Phil and
others trying to work that issue. But were not there yet. So when it happens, if there are
changes, we will deal with it.
QUESTION: One other point. A lot of your competitors complain that you make life more
difficult for them, that you kind of increase the delays, you dont make it easy for them to
put in their own DSLAMS, things like that, and youre deliberately doing that. Do you have a
comment on that?
SOL TRUJILLO: That is absolutely incorrect in the aggregate. There may be an instance or two
where there has been something that might have happened. But we get forecasts. We have a
contractual set of relationships with these customers that have to give us forecasts because
we dont just deal with demand as it pops up. In every case they tend to miss their forecasts
because they always are more optimistic and then they dont show up for the work and we cant
incur the costs just on speculation. So what weve been trying to do is work with them on
getting tighter processes and getting more accountabilities. So we deliver when we make
commitments and they live with those forecasts that they make, because we incur costs every
time that that happens. So, you know, Kate McKenzie, who is sitting over here, shes working
hard at trying to improve that process because we do want to serve them well. We do want to
serve them well, but were going to serve them as cost effectively as we serve our other
customers inside this business. We dont just go build on speculation; we do work with real
work and then when customers are willing to pay.
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QUESTION: Just one last point. The FTTN cable, the service, was only going to go to the
five major capital cities anyway. Im not quite sure how that fits with you now saying youve
got plenty of alternatives, and also that it was really Phil seemed to suggest that, on its
own merits, it was a rational investment, but it just didnt that the cross-subsidy for the
bush was the real issue?
SOL TRUJILLO: I guess were mixing two things here, so let me make sure I understand your
question. In the case of FTTN, would I like to build out FTTN? The answer is absolutely yes.
Did I say this morning that we wouldnt like to do that? No, I didnt say that. What I said
is, is that we have all the capabilities that we need to compete effectively in the
marketplace to grow and to take share. Could we grow more by extending capabilities out
further beyond the five major markets and some of the dense locations here in Australia? The
answer is yes. But the regulatory settings, as they are, will enable us, enforce us, into
competing where our competitors invest, and we will do that in the interests of our
shareholders. Now, in the case of what Phil has said earlier this week, were trying to find a
way to balance this issue thats a policy issue here in Australia, which we support, which is
that retail, there was a great desire by the Parliament, by the government, to have one price
available to everybody, which, in a country like Australia, we didnt disagree with, we didnt
criticise, we actually supported because that is good policy. What the breakdown is, is when
you want to go off of that in a wholesale construct, to say, Well we need to deaverage, even
though were averaging at retail, which then drives this difference and the disparity in
terms of costs. Well then how do you deal with the costs? Because the costs of serving outside
of your core metro areas is dramatically higher and somebody has got to cover that. Thats why
at retail people wanted one average retail price and thats why we argue that at wholesale you
have to have the same principle and you have to include all the
costs. So as a business
person I stand here today, on behalf of our shareholders, to say we will do those things that
make economic sense for our shareholders because we can earn competitive returns. Those things
where people want us to lose money on and to actually do a wealth transfer from Australian
shareholders to Singaporean shareholders, we wont support it. We wont do that.
QUESTION: Alan Kohler. Sol, a couple of questions, Ill do them one at a time. But I just
wonder if you are prepared, or able, to tell us how much youre actually losing in the bush?
Phil said the other day there is a million lines in the bush, 9 million lines in the city.
What Phil said on the call the other day was that the surcharge that was required on the city
lines, to pay for the bush loss, was $13.63. I guess we can all do a sum and figure out what
that means. Can you actually tell us what youre losing in the bush?
SOL
TRUJILLO: Alan, I actually cant give you a number because we would have to do some
sit down go and through a whole series of assumptions and
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calculations. But I can tell you that what Phil shared, I think, with all of you was this
notion that says when you the calculations using the models that both ACMA and the regulators
and everybody here, prior to my arrival, were using, youd come out with costs that, say, were
somewhere in the 1.8, $1.7 billion range of just costs that have to be covered every year. But
Ill tell you as an operator: If you think about the fact that you may have two or 300,000
customers that are really what I would call bush-served customers, and if you made an
assumption that said the average cost to serve them per loop might be anywhere between $20,000
per loop and $100,000 on average, you can do the maths. Youre talking about multiple billions
of dollars of invested capital. Then you can divide it by 12 and you can divide it by a price,
spread it across, you know, eight or 10 million customers and say how much should you recover
every month just to cover those invested costs in terms of the business. Im not trying to
create a new costs model right here, Im just trying to say, logically, we spend that money.
QUESTION: Is what youre saying, you want that cost to be made transparent?
SOL TRUJILLO: Well what were saying is, if you want to have an averaging retail policy, you
should have averaging at wholesale, you include all the costs. You dont pretend that those
costs arent there. Thats been, you know, the magic pudding here. I mean, there is no magic
pudding, the costs are real, we write cheques every day. The interesting thing about all of
this is that if you look over the last five years, we have actually put in another 5 million
kilometres of copper just over the last five years, copper pairs. So if you look at that and
you look at how much copper has increased, if you look - and thats gone up three times. If you
look at fuel, which all of us pay, and look at it going up four or five or whatever times its
been in the last five years, if you look at the costs of labour, if you look at every cost
variable in terms of how we do all this, none of that has gone down, its gone up anywhere
between 20 to 50 per cent, depending upon the variable. So if anybody tells me that our costs
are going down, therefore prices should go down, they do not understand business, how you run
a business.
QUESTION: Can I just ask another one? Michael Sainsbury asked before about ULL pricing and he
talked about the fact that there is a suggestion that its going to be $17.70 in band 2, and
you said, Well, you know, who knows? And thats fair enough. Can you tell us what youre
actually charging now, the wholesale customers, on average? Without giving individual customer
information, what are you charging wholesale customers for ULL now?
SOL TRUJILLO: Were basically, on average, charging around $22 today, based on old contracts,
old methodologies that were here two years ago, three years ago, whenever the contracts were
entered into.
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QUESTION: Emma Connors here from The Financial Review. Im just can you hear me?
SOL TRUJILLO: Yes, yes.
QUESTION: Im just interested in your views on R&D. In the last year there has been quite a
few jobs gone from what was the old Telstra research labs. Im just wondering what level of
R&D you think you need to maintain to remain an informed buyer of new technology?
SOL TRUJILLO: Again, I wont talk about a number, but I will tell you what we have decided as
important in the business and we have Hugh Bradlow sitting here in the audience. Telstra can
never match the investment of a SISCO, of an Alcatel, of a Lucent, of a Siemens, or any of the
other major manufacturers of equipment and services. So what we have done is not tried to
outspend them in terms of inventing things that they will be much better at inventing, but
what we have done is weve said what we want to be the best in the world at is applying
technology and enabling the services that our customers can use and, based upon the research
that weve done, will want and are willing to pay for. Notice I say willing to pay for it, in
terms of how were thinking about it as a business. So again youre going to see, now, a lot
of work thats under way, under Hughs leadership, who works with Greg in terms of our network
and technology part of the business, that we will continue to innovate. Youre going to see
some capabilities that well be making public here in a short period of time, relative to how
were doing that, how were taking our technology to the next level and how were going to
bring to Australia what I would call world-class, best in the world capabilities. Because it
will enable us to drive revenues, it will enable us to introduce products and services and it
will enable us to drive costs out of our business.
QUESTION: One more quick question on the IT side. The press release talks about a new contract
with IBM, its going to save $250 million. Im just wondering what the total value of that
contract is?
SOL TRUJILLO: Off the top of my head I cant tell you. Maybe we can follow up with you later.
QUESTION: Okay, thanks.
QUESTION: Would it be fair to say that T3 is, effectively, dead in the water if we have no
clarity over the dividend policy?
SOL TRUJILLO: Im sorry, can you repeat that?
QUESTION: I am just asking is it fair for to us as that, given there is little clarity over
the dividend policy, that T3 is effectively dead?
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SOL TRUJILLO: I am not quite understanding what the question is.
QUESTION: The question is there seems to be a lack of clarity over the dividend policy. I mean
where does that leave the government if it wants to sell its stake in Telstra?
SOL TRUJILLO: I think there is kind of a value chain here in terms of a series of events, that
we all would like clarity. You are talking of the first person that said clarity is absolutely
critical. I have been saying that for a year, so what we want to do is try to get clarity.
Hopefully through the regulatory processes we can get clarity and then we have clarity as a
business in terms of what the implications of decisions are, which then leads to any necessary
decisions that we need to take, whether they happen or not, whether there is any change or not,
to be made and then ultimately that allows T3 to have more clarity in terms of their processes
and, you know, its a chain of events and I cant control the beginning points.
QUESTION: Lyndle McFarlane, Dow Jones. You have been travelling a lot overseas in your past
year. I am just wondering you have obviously met with a couple of large international funds
in that time. Just wondering what the feedback has been like from those funds in interest in
Telstra and T3 shares?
SOL TRUJILLO: I have probably had, I dont know, somewhere between 30 and 40 total meetings
with various funds and individuals and the common theme is that, one, people are interested in
this transformation. Most of them got out of the stock probably two to three years ago and they
are now intrigued because they are intrigued by the transformation. However, consistently
across the board, everybody says But the reason why I got out two or three years ago was
because of the regulatory climate, so whats happening now? Whats the update?
You know, the update is basically, as you and I know today, we dont know yet, and so that
leads to some of this uncertainty that is there. People are concerned and, as investors, the
one thing that is clear is that you want to know what kind of returns you can earn on whatever
investments that are being made in that company and you want to know that they are predictable
returns to the extent that you can.
Clearly there is variables in running a company that they understand; competition, how well
management does, competing with those that they compete with, technology changes and all that,
but thats what management controls. The piece that they like to get updates on is basically,
as it relates to Australia probably in particular, is relative to this regulatory certainty,
which I think the government has talked about, those who have been
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managing the T3 process as well as Telstra, so the good news is that there is not a lot
of disagreement on that point and the bad news is we dont have the clarity yet.
QUESTION: Just following up that last question, you are saying T3 would actually be a very
hard sell for you at the moment.
SOL TRUJILLO: No, I didnt say that.
QUESTION: But the implication is that, with the regulatory uncertainty, foreign investors
wont be interested. They might be intrigued, but they wouldnt buy.
SOL TRUJILLO: What I said is that, if you are an investor, think about yourself. As you make
choices there are certain variables that drive your investing decision. Can you get clarity or
are you comfortable with unclarity if there is enough offsetting factors that allow you to
look at this issue in total?
One of the important things that I do talk about is the fact that, when people want to focus
on fibre to the node and if that doesnt happen, does your strategy end? The answer is it is a
piece of our strategy, but it is not the strategy. Our strategy is around transformation. I
articulated earlier, it is clear; fibre to the node is just a piece.
QUESTION: Just following on that, it seems as though you are getting strong revenue growth,
strong gains in market share but at the cost of your profit margins which are shrinking at a
fairly rapid rate by industry standards. So, could you just explain when is the turning point,
when is the average retail, the 1.6 million mums and dads, going to know Telstra will start to
improve its profits and may be pay higher dividends. Is it 2009?
SOL TRUJILLO: I will answer part of your question which is about what to tell everyone and the
story is no different than what we said last November. We were real clear that this is a five
year transformation plan, number one. Number two, it is about rebuilding our networks,
rebuilding our IT infrastructure, rebuilding the whole innovation and go to market systems and
capabilities in this business and it would not be done in one year, one quarter or one month.
So, what we did say is that this year 05/06 would be the beginning of spend, because
obviously H2 is when we began triggering it. What we said was 06/07 would be the peak year
in terms of spend, so margins obviously would go down. Mathematically, anybody that has basic
maths would understand margins are going to do down. Why? Because we are spending more. It is
no great mystery and it is no great issue at this stage; it is part of a plan.
So, in terms of the final part of your question, is if you look at when does that
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start changing. You start looking at reduction in opex spending, capex spending in the
07/08 periods, accelerating in 08/09 and then
obviously 09/10 you will start seeing all
the fruits of all turn_ups, of all the networks, of all the systems, of all the capabilities
and thats no different than what we said back in November. And what we are here today trying
to do is just bring more clarity because now people have had a chance to see the first half
year of implementation. And is it taking effect? The answer is yes.
QUESTION: Just finally, I believe broadband is not declared yet. Are you concerned that it
might be declared by the ACCC, just given the history of whats going on?
SOL TRUJILLO: You know, again I dont know because there is, I dont know how many players,
20, 30 players that provide broadband. There is 700 plus ISPs. I am sure they would love to be
regulated like we are.
QUESTION: Ross Greenwood, Nine network. Just in terms of the comments that you have made about
the capex and also the dividend, just looking at the cashflow statement now, clearly you are
in a negative cashflow situation as the spend rises. In fact, the net cashflow outflow is
almost equal to the rise in the dividend this year. Though you are seeking clarity from the
competition regulator, would it not be unreasonable to suggest that the dividend would still
be in question, despite the clarity that you are seeking, because of the cashflow, the
negative cashflow situation you are likely to confront over the coming years?
SOL TRUJILLO: Obviously there is a lot of considerations in terms of when you look at dividend
policy and you look at moments in time, right? In the case of what we are doing today, if you
look at our transformation, our transformation is very predictable. There is no mystery in the
numbers that you are seeing today, other than good performance. There is not going to be any
mystery that it is going to start getting better in terms of opex spend and capex spend two
years out and that there will be improved cashflow generated in this business and it
materially gets better the year after and the year after. So it is predictable and most of our
spend tends to be one time, one time in the sense that it is over a couple, two and a half
years in terms of the majority chunk.
Whats not predictable is what regulatory outcomes are, how pricing goes, what are the terms
and conditions that go with it and how much more is there in terms of what you look at. Thats
been the biggest variable here for Telstra for a number of years and so I guess, Ross, what
Im saying is that the board, we had a board meeting yesterday, we made a decision around the
dividend for the last reporting period and thats the information the board has which is what
our plan is. They know how much we are going to spend, they know when the spending stops and
therefore they are comfortable with the
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dividend as we have declared it for this period and they will deal with the next dividend
declaration at the appropriate point in time.
QUESTION: So, therefore, because of the lack of clarity, you can understand the nervousness
surrounding the share price while there is also nervousness surrounding the dividend policy?
SOL TRUJILLO: Ross, there is nothing more that I want to see happen than our shareholders get
the value creation that we are going to create in this business. I want to see it reflected in
share price. I want to see it reflected in all the ways that we can deliver value to them. But
we have to go through some of these steps before we can start proposing and declaring and
making decisions without some of the facts yet to be done. We still have to deliver more,
right? I mean we have had a good last six months in terms of our beginning implementation, but
this management team, including yours truly, we still have more to deliver in terms of what we
have to do and Im serious about that. We are working hard every day to make sure we hit the
numbers and the board needs to see more, they have to have more data, more information. So
thats why boards, not just Telstra board, but most boards, they will always convene, assess
where the conditions of the business are and declare policy based on what they know.
oo00oo
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11 August 2006
The Manager
Company Announcements Office
Australian Stock Exchange
4th
Floor, 20 Bridge Street
SYDNEY NSW 2000
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Office of the Company Secretary
Level 41
242 Exhibition Street MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400 Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript from Full Year 2006 Results Media Briefing
In accordance with the listing rules, I attach a copy of the transcript from todays
Full Year 2006 Results media briefing for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
TELSTRA CORPORATION LIMITED
FY 2006 RESULTS
THURSDAY 10 AUGUST 2006
ANALYSTS BRIEFING
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SOL TRUJILLO: Thank you David. Good morning everyone. I do want to thank you for coming
because we have a lot to share with you today. Obviously here at Telstra we have been very
busy since I first addressed you 12 months ago but also since I last addressed you in terms of
the financial community six months ago.
We have been working hard as a company in terms of transforming the business. We talked about
the fact that we were going to be taking tough medicine, we talked about the fact that we
would be in essence doing the things that we needed to do over the next five years to
fundamentally allow this company to create real, sustainable share owner value.
At the same time we talked about three year increments, five year increments and then
obviously we operate within the idea of year-to-year in running this business. But today we
will have a chance to tell but how we are transforming our customer experience, how we are
improving our operations and essentially building all the platforms so that we can in fact
increase delivery in terms of shareholder value.
So, the story I guess, to put it simply, will be simply one that says we are on track, we are
on budget and we are on time.
If we can move to the first chart here. Last year in November we announced our transformation
strategy. We talked about the fact that we were going to be investing in new networks in
systems, new marketing capabilities, operating capability, as we think about our business. In
doing so we gave you guidance, we gave you a five-year guidance, and then obviously we gave
you guidance for the 05/06 year.
The punchline here is that our results, our earnings, were at the better end of our guidance
and if you look at our EBIT we came in at $5.5 billion, which is reflected in terms of
year-on-year a 20.7 per cent decline. That is reflective again of the investments that we have
been making into the business as we have also taken costs out. What I want to do is take you
through some of the numbers and help you understand what happened inside the company.
As we look at the main drivers, lets start first with revenues. In the case of revenues, our
year end sales revenue was at 2.7 per cent end of year, which is higher than our guidance of 2
to 2.5 per cent. But the real story again, thinking back to we announced a strategy in
mid-November, we began implementing it obviously in H2. The real story, therefore, is what
happened in H2 versus H1.
If you look at our revenues, first half we reported 1.5 per cent year-on-year growth. Second
half, we are reporting 3.9 per cent year-on-year growth. One of the core issues as we look at
revenues that we have talked about, and I talked about last August and I talked about again in
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February, was this element of PSTN. Obviously PSTN is a core part of our business and PSTN is
a lesser part of our business today than it has been in the past. This now accounts for about
30 per cent of our revenues, but our PSTN first half declined at 7.6 per cent, second half it
is down to 5.8 per cent. So we have made progress, we said we were going to do this; we have
begun that progress by essentially working on many different fronts.
One is about our subscription pricing plans that I said we would put in place. I have seen
this movie before; we are doing some of the things that have worked, not only in terms of my
experience in the US but also my experience in
Europe. Some of the issues are quite the same and our ability to simplify pricing issues,
packaging issues for our customers is very important. So we are after that. We are doing it in
our consumers part of the business; we are doing it also in our business segment of the
marketplace.
On top of that, we have more aggressively started attacking win-back programs and processes
and finally a key part of our strategy is around how we think about integrated services and
our ability to offer those to our customers in simplified packages and in simplified ways. All
three of those dimensions are making a difference as we start slowing down that rate of loss
on PSTN.
On top of that I also talked in terms of revenues about the fact that we have to start
creating new revenues from new products, new services, new platforms, new networks. So, today
in the numbers that John will cover we are going to show you that our new wave revenues, as we
call them, inside the business grew by 46 per cent to $2.7 billion and now account for 13 per
cent of our total sales revenue.
So that gives you a sense for what has been happening on the revenue side and clearly H1
versus H2, big difference, because the strategies are now being implemented. But thats not
enough in terms of the way that we described what we were going to do, because we also have to
tackle this issue of the cost structure of this company called Telstra. What I said when I
first came was we were going to streamline this business, we were going to take out costs that
were not important in terms of serving our customers and creating the experience that our
customers want and need.
So we have been aggressive at that. We have taken out about $157 million of opex spend through
headcount reductions, handset procurements, sourcing reductions, productivity improvements and
driving more efficiencies in our business. Again, all of this is really before we start
turning up systems that we are currently starting to build, that we are investing in as we
speak, this year, next year, when we start looking at our opportunities to further streamline
and improve our customer experiences in terms of the business.
We have reduced, within the Telstra operations, the number of FTEs by 3,800. Now, that is a
pretty aggressive number and a pretty significant number, when you think about the guidelines
and the guidance that we gave you about after three years we would be looking at somewhere
between 6,000 and 8,000 FTEs out of the business, and after five years 10,000 to 12,000. So,
we are making good progress there. Again, it is about taking out work, it is about taking out
all of the things in the business that are not important, again for our customers in terms of
the experience that we want to deliver to our customers.
We have saved, as I said before, about $500 million in capex by stopping over 800 projects
which were not aligned to the strategy and we basically toughened our approach in terms of
procurement and all the operating elements of our business. So when those of you that watch
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what Greg Winn and his team are doing, it is making a big difference. That run rate, when you
think about the base level of spend, which is really important to me, when John talks about
underlying earnings, those are going to be critical drivers to watch as we go through year 2,
year 3, year 4 and 5 of the transformation. So revenues, costs.
Now I want to talk about market-based management because you have heard me talk about that
again from the very beginning, whats happened there. Clearly market-based management for me
is the driver of a lot of the growth that you have seen in terms of acceleration, in addition
to management working very hard in terms of the disciplines of driving growth and competing
effectively in the marketplace. Because again some of you have heard me say we were taking
tough medicine, but I think when you look at the results in the marketplace now, when we talk
about some of these areas, we are dishing out some pretty tough medicine to our competitors as
well.
In terms of market-based management, we are focused on what I would like to call high calorie
growth. This has led to a strong second half performance in mobiles, broadband, IP solutions
and Sensis. In the case of mobiles, I want to make sure that we all understand at least where
our headset is at in terms of Telstra. We can talk about mobiles in total and we will in terms
of our growth, but I want to focus today, just like I did in our last meeting, around
broadband, where I said broadband is key and that is a game we will win as we compete in the
marketplace.
But I would also say equally important is the notion of 3G and growing in 3G, because as we
look at the consumer marketplace today and when I say consumer I mean consumers in the home
as well as consumers in businesses the idea of growing with 3G is going to be critical
because over the next five years most of us are going to be 3G and higher users of mobile
services. So we have prioritised that here in H2 in terms of where our growth is going to be.
So our growth in terms of 3G subscribers, we are up 297,000 in H2 and we have added another
100,000 subscribers just since the end of June. We are seeing that 3G ARPU, which is critical
when we think about again why 3G and is 3G really worth it versus 2G, because that has been a
question raised in Europe in particular for most of the 3G deployments. We are seeing now,
with our customers and our base, that a 3G ARPU customer is about $20 higher per month in
revenue than a 2G customer.
Some of you may say, Well, why? I mean whats different? Well, what we are seeing is that
the number of actions taken in terms of accessing something, whether it be music or clips or
whatever it might be, is up about seven times over where a 2G customer would be at. So, you
generate that revenue, you generate the usage, you generate the kind of revenues that we are
starting to see.
So, when you think about Telstra and you look at Telstra going forward, 3G is going to be a
critical part of our strategic thrust going forward. That ties with what we said last November
about building this 3G HSDPA 850 network. Because we are building competitive advantage, we
are building capabilities that our customers are going to want and will use and will buy more
from.
So, as we look at that, again; big success for us in terms of the strategic thrust that we
have and being the 3G market leader. John will go through all the details in terms of the full
set of revenue numbers, but again we outperformed our nearest or the biggest competitor we
have in this marketplace in terms of revenue growth on mobiles.
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In broadband, obviously, we are the leader. BigPond has the best capability in the
marketplace by far and we continue to do well in this part of business. We have increased our
market share, again in H2, by another percentage point. We are up three percentage points in
terms of market share for the year, we have been adding retail subscribers at the rate of
three to one, versus our nearest competitor.
On top of that, one of the other questions when you are an operator of a business that you
have to spend time looking at is, well, we may be adding a lot of volume and we may be
growing, but what does churn look like? What does churn look like? And in the case of BigPond
again we have benchmarked churn and we are near world class, best in class kinds of levels of
churn where we are running somewhere between 1 and 1.2 per month in terms of churn. That is
critical as we look at how we are going to operate our business going forward. So churn is a
focus point for us across the business, but in particular in broadband, where you have a lot
of growth.
In the enterprise market, which is another growth platform for us as we think about IP
services, we have delivered strong growth. Obviously David Thodey and his team have been
working hard on integrated applications and services on top of just the pure carriage, but
when we look at our IP growth we are leading the industry again and our growth here was over
34 per cent, our revenues are now over $500 million just associated with these IP-based
services. But thats not enough yet, we are going to do more, and David and his team have some
exciting plans for the coming year.
But, moving on to Sensis, which is another growth platform that we have in our business, our
information search and interactive applications and services business delivered a strong 6.9
per cent revenue growth and a 10 per cent EBIT growth, so Sensis has delivered on what we said
we were going to do, so I am pleased with what Bruce Akhurst and his team are doing,
But there is more. The more is how we are growing. It is one thing to grow EBIT at double
digits and it is another thing in this kind of business to not only grow EBITDA but grow top
line at 6.9, almost 7 per cent. But the question is how are we doing it, do we have
sustainable growth there? Because that should be a question everybody should ask and the
answer is yes. We are growing our core product, which is print, but for the first time now we
have reached the point where our on-line new media type of revenues, the absolute volume of
growth has now exceeded that of print growth, which is reflective of the fact that we are
growing fast, to the tune that our on-line growth is now about 46 per cent growth rate, which
again, if you get inside my head and how Im thinking about this business, it is about new
revenue sources, it is about how we integrate and it is about how we create continuous and
sustainable competitive advantage. Thats what essentially Bruce and his team are doing right
now at Sensis.
So we have accelerated growth, we are taking out costs, streamlining the business, changing
our processes, investing in the business, got a lot going on inside the company.
One of the questions that somebody sceptical might say is, Sol, you could lose focus, there
are so many things going on, and what about the customer? Well, to me that is equally
important in all the numbers that we look at. If you look at the service delivery of this
company and you look at the aggregate of the set of numbers that Greg Winn and Mick Rocca and
the team that are out there working every day in terms of installing, repairing, engineering
and doing all the things that are part of how we deliver service to our customers, our results
now are the highest they have ever been in the history of Telstra. So, doing all the things in
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terms of transformation, but still running the machine, running the business better than its
been run in the past and thats good news for our customers and ultimately it is good news for
our shareholders.
Lets move on and talk about the numbers specifically. We have got a chart here where you can
read all the numbers and again John will go through these in some detail. I have talked about
the first half revenues. The punchline here in terms of earnings is that it is at the better
end of our guidance because we have worked hard while we have spent a lot and invested a lot
in terms of the business. EBIT is down, we have talked about the tough medicine and we are
going to continue taking tough medicine this year as well.
This year of 06/07 will be our peak spend year in both opex and capex as we look at the
business. We can see that our cashflow is still strong at $4.6 billion, but again spending
will accelerate this year.
As we move to the next chart, I just want to quickly cover some of what is also happening in a
little bit more detail and again as we get into Q and A we can talk some more. If you look at
wireless as one of the core thrusts of the business that I talked back in November about, you
have to understand whats happening in the 850 3G network. We said that we would build it in
record time, said we would do it in a years time, we would turn up our network by 1 January
or the first part of 07, and I would say that we are on track to be able to do that. Right
now, the plans are that we will have 98 per cent population coverage. Obviously with the 850
capability, for those of you that are using our network or anybody elses network, when you go
in a building and sometimes you have to lean by a window or you have a dropped call, the
experience is going to change significantly.
For those of you that are 3G users, and youve now started making, regularly, video calls, and
you go on building and you see the degradation in terms of the experience today. 850 will
change that experience as well.
When you look at the data speeds, in terms of the average network data speeds, ultimately when
we launch this network at the beginning of next year, well be talking about turn up speeds,
in terms of peak speeds, of 3.6 megabits that will be available. Now, I have to tell you that
there is a guy sitting in the front row here by the name of Greg Winn who would correct me if
we were inside the company, so Ill correct myself: Greg would say the network that were
turning up is capable of 7.2 megabits per second. When we turn up we will be limited by
handsets and PC cards in terms of their data rates that will be embedded, in terms of the
capabilities there. So from a customer experience standpoint the peak speeds will be 3.6
megabits. When we talk to customers well talk about an average experience of somewhere
between half a megabit and a megabit in terms of if you have a lot of users on network, using
within a cell site or a sector. But in early days youre going to find that the experience
will be in the plus 1, 2 megabit kind of range in terms of the unique experience thats going
to be there.
So we have a capability thats going to create significant advantage for us in the marketplace
because we will be everywhere, we will be faster and well have more capabilities in terms of
the network that we will have. Not only that, by the mid-year of 2007 the network capabilities
will have peak capabilities going up to 14 plus megabits. So thats the wireless side;
building competitive advantage as part of our transformation.
The next layer is around our fixed line and where we think about wire line capabilities with
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our IP MPLS core, or as some people have talked about, this transition from the old circuit
switch kind of network into an IP-centric network. Were reducing the complexity, were
building greater capacity and speed, which is going to enable us to take a lot of costs out of
how we operate our networks. Were well on plan in terms of our ability to deliver that
capability, so that all of our business customers are going to have the best in the world
capabilities right here in Australia.
As we look at market-based management, its making a big difference. If you talk to David
Moffat, if you talk to Deena Shiff, they will tell you about the knowledge that we now have
about our customers and what impact its starting to have on campaigns and offers that we are
working in the marketplace, it does make a difference. So we have now started implementing,
were still waiting for some of our IT deployments in terms of some of the CRM and other
capabilities that will enable it to be implemented to a much more effective extent, but its
all there and its all happening.
In the case of our IT systems, that is the work that is beginning, right? We started it in H2,
negotiated contracts, picked vendors, picked suppliers, and now theyre starting to build.
Over the next two years there is a lot of work that will be happening where they build the
capabilities, will stop the old capabilities, pull it out, insert the new, and that will
dramatically change a lot of our experience that our people have in running the business,
working the business every day, as well as the experience that our customers have in terms of
doing business with Telstra. Its going to dramatically change the flexibility that we have in
terms of introducing new products and services, how we combine things on bills, how we do all
the things that our customers have been telling us in all the research that we have done since
weve started this whole focus on transformation here in Australia.
So if we can move on to the next chart. All of this is about building sustainable shareholder
value. We want to grow shareholder value and you dont do it by temporising solutions. You
dont do it by looking for quick fixes for one quarter, one half or one year. So this
management and the board have imposed a real discipline on the business that says, We really
want to do this right, and when were done, this company will have capabilities like no other
anywhere in the world. As you see the strategy play out over time, you will see the value of
what were going to do. Part of the benefit that we have here is that this telco, this company
called Telstra, does have leading market share, which means we have scale. We have the most
complete set of assets. We have fixed, we have mobile, we have broadband, we have Sensis, and
we have a partnership in this company called Foxtel. We have customers that want more. They do
want more, given the research that we have done. But they want it their way and they want it
simpler, and they want it easier to use. They want a lot of things that would unlock some of
the keys to spending that they do in other segments, with other companies, with other
industries. In our case part of our growth is going to be about taking share from our
competitors, because were competitors. But a lot of it is also going to be about spending
that occurs in other ways that were going to go take. Were going to disintermediate others
in the marketplace so that we can create growth in terms of this business. Were going to
create value and I want to make sure that everybody understands that we are spending our time
focusing on how we create the value drivers and how we affect the value drivers. So some of it
is about our strategy, some of it is about revenue growth, some of it is about how were going
to integrate assets in terms of our services and create that one touch, one button, one
screen capability, but a lot of it is also about the cost. Those of you that do valuations,
you do your models, you know how powerful low cost structures are. So weve taken the steps
about one factory, there is no more silos, there is no more multiple networks, there is no
more of any of the stuff that you used to hear about at Telstra: Its now under one leader,
one
strategy and one set of implementations in terms of what were doing.
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Were rationalising all of our platforms that we talked about, 1,250 down to 250 to 300 when
were done. Were only keeping resources in the business, whether they be dollar resources or
people resources, that are focused on the things that add value to our customers. If they
dont add value to the customer, then we dont do it in terms of the way were going to run
this business going forward.
So if we can move on to the next chart. As we do that, I just want to emphasise some of our
platforms here that are critical for growth that some of you just need to keep close to and
keep track of as we evolve here as a company. One of those platforms is our broadband flat
platform. We have an entity called BigPond and this entity is a well-branded entity. As a
matter of fact, when we do our brand research it tests as high as almost any brand in
Australia, and it is growing in its brand strength and significance. I made a decision last
year to invest in this brand as a brand that customers will like, customers accept and
customers will want to do more business with, and it is working, to be quite frank. Were
introducing new offerings, were going to do it in multiple platforms, whether it be DSL,
whether it be HFC, or whether it be any other delivery platform, including our wireless high
speed platform. Because our customers arent just locked into one technology or one platform,
as a matter of fact most of our customers are locked into capabilities that they want to have
and have delivered to them.
]But back to the broadband, back to BigPond. Were going to focus on integrating content and
delivering differentiated value in terms of what we do there. As I told you back in November,
our job is not to spend the game competing in the game of terms of just price discounting, it
really is about adding value so that we differentiate ourselves from our competitors. Clearly,
in the case of BigPond, we have done that, we have done it well. I dont say that based on my
opinion, I say that based on what customers are buying. To me, as Ive said before, Im not
here as a politician, Im here as a representative of the shareholder. The votes that count to
me are the votes of our customers and whether theyre buying more. In this case the strategy
is working well and were going to further differentiate in that space. So if we can move on
to the next one.
Beyond that I want to talk specifically about Sensis. Were going to continue to grow
revenues and earnings here. Some people, after our November strategy session, questioned -and
actually Ive seen some numbers of people estimating what Sensiss growth would even be for
this year, and obviously they were way off. Our revenue is now up 7 per cent for the year,
second half revenues were up almost 9 per cent and EBITDA was up double digits. We do have a
world-class business here. I am familiar with this, Ive been familiar with businesses around
the world, and the capabilities that we have here are just as good, if not better, than
anywhere else in the world, and were now executing in terms of the strategies there.
So as we look at the business and we think about our on-line capabilities, in addition to
print -and by the way, were not losing focus on print, were very focused on the print
business, but were also focused on the great opportunities that we have here in terms of the
business. But what were also going to be doing is helping people understand that were going
to take Sensis on-line, through BigPond, in a big way. Were going to take Sensis onto
mobiles, so that if youre in Australia, anywhere that you go, you can get access to the
Sensis brand platforms that we have within that portfolio. So youre going to see continued
growth here on the online business within this business as we continue to stay focused on our
print business. You can go on to the next one.
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So, in closing, before I turn it over to John, I just want to emphasise a few things again. As
you track what we do its important to look at H2 versus H1, kicked in our new strategy, and
the question is, is the strategy working? Yes, it is. Are we doing what we said we were going
to do? Yes, we are. A reminder, Opex, Capex, John will talk about this in a little bit of
detail here, this coming year, 06, 07, will be our peak year in terms of our transformation
spend, continuing to build those building blocks. The networks, systems and some of the core
initiatives that we have that underlie our marketing efforts in terms of the business.
So the guidance that John will, again, articulate in more detail for the coming year will be
that were going to be look at EBIT growth in a range of 4 to 6 per cent on an imported basis.
Were going to be looking at cash operating Capex of somewhere between 5.4 and $5.7 billion.
Again, its a lot of money, but its all about building for the future, its all about
building for sustainable shareholder value creation. So with that, Ill turn it over to John
JOHN STANHOPE: Thank you very much, Sol, and good morning, ladies and gentlemen both in
Melbourne and in Sydney.
I know youre probably all dying to get to the Q&A, but this is a fairly complex set of
financials, because intermingled with our business as usual, if you like, performance, there
is the transformation. So I do want to take a bit of time to go through the numbers for the
year, and of course the outlook, as Sol mentioned, for fiscal 07, which is important as we
continue with our transformation.
So let me start with the financial highlights for the year, some of which Sol has been
through. But, quickly; sales revenue grew by 2.7 per cent. When you exclude the merger with
New World, in Hong Kong, which came into play on 1 April, our sales revenue grew 2.4 per cent.
Our domestic business, so the Australian sales revenue, grew 2.2 per cent. All of these are at
the better end of our longer-term guidance of between 2 and 2.5 per cent CAGR over five years.
Strong growth continues in broadband, Sensis and mobiles, as youve heard. The PSTN declined
6.7 per cent for the full year, with a first half decline of 7.6 per cent and a second half
decline of 5.8 per cent. That is a slowing of that decline in the second half of the year.
Just quickly looking at the operating costs, and remembering the first half did not include
any transformation related costs; full year operating expenses grew by 13.8 per cent. If you
net out the, or if you take out the net transformation costs of $541 million, operating
expenses grew by 9.2 per cent. Ill provide some further detail later in the presentation
about all that.
We have declared a final fully franked ordinary dividend of 14 cents per share, bringing
ordinary dividends per share declared for fiscal 2006, to 28 cents per share. Total dividends
paid in fiscal 2006 amounted to 40 cents per share, which included two payments of 6 cents
special dividends.
This is the first full financial year where we have reported under the Australian equivalent
of International Financial Reporting Standards, or IFRS, as they are known. The fiscal 05 year
comparatives have been restated to an IFRS, and this what our fiscal year 06 guidance was
based on. One important change to the accounting methodology is that interest paid is treated
as a finance in cash flow and is not part of the free cash flow calculation going forward.
But, importantly, and I want everybody to understand, all our comparatives that you see in the
documentation and in the slides presented here today, all the year-on-year movements, are
like-for-like.
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Sales revenue grew 2.7 per cent to the 22.8 billion you see there. As I said, without CSL
coming in, it was 2.4 per cent. EBITDA and EBIT declined by 8.4 per cent and 20.7 per cent
respectively, as the transformation costs did take effect in the second half of the year.
Net profit after tax decreased by 26 per cent.
We delivered at the better end on all ranges of our full year earnings guidance. We spent 4.3
billion in cash Capex for the full year, heavily weighted towards the second half, and within,
also, the revised guidance range that we issued about cash Capex in May. We saved around 700
million in Capex in the fiscal and we banked $500 million of that saving.
Its probably worth explaining how we move from the reported outcomes, or underlying, or EBIT
position, to our underlying EBIT position, which is really trying to explain the underlying
performance, or the real business performance of the business. The reported EBIT for the full
year, as youve heard, was $5.5 billion, or a decline of 20.7 per cent. From the reported
result we add back the restructuring and redundancy provision, which you will see is $427
million, to derive an EBIT position pre restructuring provision, of a decline 14.6 per cent;
if youll recall, the guidance was somewhere between 15 and 20 per cent, to $5.9 billion. We
then move, or remove, the net current transformation costs of 535 million, made up of savings
from the Benefits Now program that you can see on the slide, current year redundancy costs
above what we originally planned. So not all redundancy costs because we do have normal
year-on-year activity there.
Accelerated depreciation and amortisation, due to the transformation strategy implementation,
and Ill talk a little more about depreciation and amortisation later, and the program costs
with the transformation program. So when you adjust for these, we arrive at our EBIT from our
underlying operations, so our business performance, of $6.5 billion, which represents a
decline of 6.9 per cent. You will recall that our guidance for the underlying business was
between minus 7 to minus 10 per cent.
The restructuring and the redundancy provision raised, of 427 million, represents $186 million
covering 2,600 staff being made redundant over the next one and two years, and $241 million
covering mainly CDMA migration, penalties associated with exiting leases early and
decommissioning systems.
The result, really, is a story of two halves. The first half was characterised by modest
revenue growth of 1.5 per cent and EBIT decline of 7 per cent, as the traditional PSTN
business continued to fall and competition in the mobile space squeezed margins further. In
the second half sales revenue grew by 3.9 per cent, more than doubling the first half revenue
growth. The second half revenue growth was driven by improved Sensis performance, as youve
heard, its been driven by mobiles performance and the slowing down of the PSTN decline, and
of course, the fact that the New World merger occurred in the second half. If you just take
out the New World merger impact, the growth in second half of 3.4 per cent; still a very
strong growth.
The expense line ramped up in the second half, as the transformation implementation took
effect, and we responded to competitive threats, particularly in the mobile sector, with
strong marketing campaigns in the last quarter. The increase in expenses impacted on margins,
as you will see from the slide, with the EBITDA margin falling 7.7 per cent in the second half
and 5.1 per cent for the full year. The EBIT margin fell 7.1 per cent for the full year on a
reported basis, as we did expect.
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The underlying earnings margins, that is sort of removing the net transformation costs
including redundancy and restructuring, were EBITDA at 45 per cent, a fall of 2.7 per cent,
and an EBIT margin of 28 per cent, a fall of 2.9 per cent. So you can see the differences
there between the transformation impacts and the underlying business performance. In the
second half we did spend $1.3 billion in transformation Capex, primarily on new next
generation networks including the wireless 3G, 850 and the wire line IP core.
So lets have a look at the sales drivers. Broadband, Sensis and mobiles continued strong
growth in the fiscal year, and Ill cover those in particular in more detail later. The
Internet Direct and IP solutions revenue was up 29 per cent, driven by the increased use of
IP-based services by our business customers, a trend that we believe will continue. Wholesale
broadband revenue was up 77 per cent, driven by strong subscriber growth of 61 per cent, and
solutions management, or managed services, if you like, that revenue increased 6.2 per cent,
mainly driven by significant contracts, one by KAZ, our IT services group. Our pay TV
revenues continued to grow, and while they are a pass through in margin terms, pay TV bundling
is helping to reduce churn. Resale net churn improved to minus 13,000 SIOs for the month of
June, compared to the years average of minus 22,000. So churn is coming down.
So let me turn to broadband in particular. Retail broadband revenues grew by 58 per cent, to
730 million, this is just retail broadband, so BigPond. Our competitive broadband marketing
initiatives helped grow the retail broadband subscriber base by 72 per cent for the year.
Total retail broadband subscribers ended the year at 1.5 million. Thats an increase of over
600,000, or 72 per cent, as we continue to migrate narrow band customers to broadband and win
market share.
During the year we launched BigPond Cable Extreme with download speeds of up to 17 megabits
per second, and BigPond cable subscribers grew by 26 per cent. We also launched BigPond
wireless broadband, growing subscribers by 272 per cent in the second half. Our retail market
share is now 44 per cent. We grew market share, as Sol mentioned, by another percentage point
in the second half, and overall increase in the year of 3 per cent. Retail total broadband
ARPU fell 13 per cent to $52, of course impacted by price competition and our own discounted
broadband offerings that have been very successful, as you can see from the previous numbers
in the marketplace. On the upside, strong network performance and customer satisfaction have
driven down the churn to 1.3 per cent per month, a level that really is world-class.
So let me have a look at mobiles, mobile activity in the company.
Mobiles revenue grew by 6.1 per cent, to just under $5 billion for the year, which was
comprised of mobile services revenue growth of 4.6 per cent, to $4.5 billion, including
terminating revenues and wholesale and data revenues. Mobile handsets; revenue growth of 23
per cent to $467 million, with second half growth driven by our ramp up in the 3G market.
Mobile services and operation was up 3.2 per cent to, or a growth of 261,000 to a total of 8.5
million customers. Strategic drivers of the growth included the increase in 3G subscribers,
around 500 per cent in the second half, including wireless broadband. Data was the driver of
mobile services revenue growth. It was up 26 per cent. Total data, as a percentage of mobile
services revenue, is 15.3 per cent, excluding wireless broadband. If wireless broadband was
included, data is around 16.8 per cent of mobile services revenue. Our 3G customers are
driving data growth. Data, as a percentage of 3G revenue when wireless broadband is included,
is 58 per cent, compared to 18 per cent for 2G. Mobile data revenue growth consists
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of, there were over 3 billion SMS messages sent in the fiscal year, and thats up 31.9 per
cent, and 20.2 million MMS messages were sent. Thats up 81 per cent. Other mobile data was up
121 per cent, and that includes things like the Blackberry and so on and Blackberry and
wireless cards, and so on, and the Blackberry SIO increased 84 per cent. Voice yields
continued to be under pressure as more high value customers moved to capped plans. Of the post
paid base, 7 per cent of our customers are on capped plans. Telstra increased its post paid
percentage proportion from 57 per cent to 58 per cent during 2006, compared to a 3 per cent
decline for our nearest competition, down from 47 per cent to 44 per cent, and Vodafone, down
2 per cent from 29 to 27 per cent. ARPUs stayed flat for the post paid period and total ARPU
was down marginally, to 38.35, thats an ARPU number without terminating revenues, which was a
decline of 2.5 per cent.
Our 3G average spend is around $81.20, compared with ARPU from 2GSM of around 59.20. So you
can see the higher spending customers are on the 3G network. Subscriber acquisition costs,
with our increased marketing campaigns, went up 14 per cent to $137 on average for the year,
and it, of course, was driven largely in the last quarter by a very active campaign.
Let me just move to Sensis. Sensis delivered on its 67 per cent revenue guidance, growing
revenue, as youve heard, by 6.9 per cent, to $1.8 billion. Revenue grew by 9 per cent in the
second half, so a strong second half, compared to the 5.3 per cent growth in the first half.
The second half revenue growth was led by Yellow Pages on-line, and regional print
directories. Yellow Pages revenue grew by 5.8 per cent to .2 billion, with print revenues
growing, still growing, by 2 per cent, to just over 1 billion, while Yellow Pages on-line
revenue grew 54 per cent to 124 million. White Pages revenue grew by 12 per cent to $302
million, driven by strong performance both in print and on-line.
The Trading Post revenues were down 7 per cent due to one less sales week in the year, but
with strong competitions from the dailies and the local print in Sydney and Melbourne. The
revenues of the business are expected to return to positive growth in. 06, 07 due to the
emergence of on-line as the major Trading Post growth engine. Sensiss emerging businesses
delivered 19 per cent revenue growth in the year and now earn revenues in excess of 200
million. What I mean by emerging business, an example is the interactive local search
capability, location and navigation services, and of course the 123 Voice Connect services.
Underlying EBIT in Sensis grew 10.2 per cent and after excluding some acceleration of D&A that
we did in that business as well and a write-back of deferred expenses. Reported EBIT was up
7.7 per cent.
Lets have a look at PSTN. PSTN revenues declined 6.7 per cent to $7.5 billion and, as Sol
said, PSTN now is a little less than one third of our revenue base and it slowed in the second
half to a 5.8 per cent decline compared to that first half decline of 7.6 per cent.
Calling revenues were down across the board, driven by mobile substitution and a lower SIO
base or number of lines in service and of course migration to broadband and there was some
pricing discounts. Access revenues are down 1.3 per cent due to the number of lines reduced,
which was 1.8 per cent to 9.94 million lines. Retail customers fell, so retail lines fell 3.4
per cent or 270,000, primarily to the migration and substitution to other products, broadband
and mobile, and the wholesale customer lines grew 4.3 per cent or 90,000 as they churned from
our retail business. So, you can see a net there of 180,000 line reduction.
A range of value-based subscription priced plans are in the market now. They have been
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Transcript produced by WordWave International |
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launched to also address the PSTN decline. They are really in their infancy and we expect to
see the impact of that in 06/07.
So, let me now move to expenses. Operating expenses increased by 14 per cent to 13 and a half
billion dollars and excluding the transformation from operating expenses, the operating
expenses increased by 9.2 per cent to $13 billion. I will explain each category in more detail
in a minute but at a high level labour costs increased driven by redundancy costs, goods and
services purchased increased as a result of higher sale volumes of handsets with higher mobile
subsidies, all this off the back of our aggressive marketing campaigns. There was also goods
and services purchase related to the growth in broadband business.
Other expenses increased driven by consultancy service contracts and agreements associated
with the rehabilitation of the network and project write-offs and I will explain this a little
in a minute.
So, lets look at labour in particular in a little more detail. Labour expenses rose 13 per
cent to $4.4 billion in the year. But when you exclude all the redundancy impacts, so thats
the R and R provision and the in-year redundancy, redundancy pay rises and increases
associated sorry, the impact, the growth, was 1.7 per cent, so 13 per cent real growth, 1.7
per cent.
Redundancy, pay rises and increases associated with controlled entities has pushed the labour
expenses up, so we had a full year of a number of our subsidiaries but of course that was
offset by a degree in staff numbers, overtime, agency and contractor employment. We will see
the flow-through of the 05/06 head count reduction which you have learned about in 06/07
because much of it was in the second half of the year. Transformation, restructuring and
redundancy costs total $406 million, $170 million of current year expense and $236 million
included in the R and R provision. So, we have a combination there of the provision and
in-year redundancy costs.
Excluding the CSL New World merger, the workforce reduction was 3,859. Including New World so
we brought some staff in when we merged with that entity, the workforce reduction becomes
3,262 on a net basis.
Goods and services. 12.3 per cent was the growth to $4.7 billion. There were small increases
across most categories but the biggest drivers of cost growth were cost of goods sold which
were up 26.3 per cent. Cost of goods sold is a good thing as it is obviously following revenue
growth and it was driven by our mobile marketing campaigns and the BigPond broadband demand.
Handset subsidies, so again associated with our mobile campaign, were up 18.9 per cent and of
course CSL New World did launch through the year an aggressive handset offer in Hong Kong.
Network payments, so payments out for the use of other peoples networks, were up 5.1 per
cent, driven by volume of traffic from mobile and SMS terminating on other carrier networks.
In addition, the growth in our UK, US and Asia operations have increased offshore network
out-payments.
So, having a look now at other expenses. They increased 16 per cent to $4.4 billion. When you
exclude the transformation related costs, this category of other expenses increased 12 per
cent to $4.3 billion. One of the largest areas to increase here was service contracts, they
went up by 18 per cent. It was driven by transformation costs relating to the creation and
operation of the program office and operational expenditure related to the construction, so
opex not
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capital related to the construction of the 3G 850 network.
We did increase our spend on network maintenance and rehabilitation in the access network and
of course we started to maintain our 3G 2100 network. Volume-based increases included
installations of digital pay TV and increased activations for BigPond product and these are
things that we do through our service contracts and agreements. Marketing costs were up 7.9
per cent due to spending around our Commonwealth Games sponsorship, but also our more
aggressive competitive responses, particularly in the mobile space.
The other expense category includes a restructuring provision of $137 million and that is
related to property rationalisation, cancellation of server leases, decommissioning of systems
and stock obsolescence costs, so you obviously should be getting a flavour here that we have
prepared the way in 05/06 with our provisions and so on for the transformation program.
Again, we have done this in depreciation and amortisation, so let me just talk you through
this. As expected, our depreciation and amortisation expenses increased by 16 per cent to just
over $4 billion and that figure does include $422 million of accelerated depreciation and
amortisation on assets that we have reduced the service lives because they are coming out of
the business, with the transformation. Excluding the acceleration of depreciation and
amortisation, it increased 3.9 per cent and this increase is really consistent with the growth
in our asset base over the past few years and now the inclusion of the New World assets with
the CSL New World merger.
So, let me talk about capital expenditure now, our cash capital expenditure. The total cash
capital expenditure increased by 4.2 per cent to $4.3 billion and that, as I mentioned before,
was within our cash capex guidance range that we gave in May. Excluding acquisitions, capex
increased 20 per cent to $4.25 billion as we execute our transformation. Domestically, so in
Australia, we spent $1.35 billion on the transformation in the second half and you can see on
the slide this included $634 million on building the new core IP network and next generation
ethernet transmission network which will support high-speed broadband, $455 million on
building the 3G 850 wireless network and $159 million on OSS and BSS streamlining and
improving customer care and billing solutions while decommissioning numerous fragmented legacy
systems.
Total domestic capex spent on existing networks, so our normal base, if you like, serving
customer demand, was $2.6 billion for the year, which we expect will continue to fall as we
continue on with the transformation.
Let me just cover a couple of our international businesses here. We completed the merger
between CSL and New World on 31 March. New World was consolidated into our group numbers from
1 April. The merged entry grew 12 per cent, of which 8.7 per cent was due to New World coming
into the business and CSL revenue growth was driven by rising data revenues like in Australia
with our business and local and international voice and prepaid revenue.
EBIT was down 5.4 per cent to $HK686 million, driven by the inclusion of some merger costs,
the increased subsidies as part of the increased promotional activities and higher offshore
out-payments associated with higher international voice revenues out of that business in Hong
Kong.
Telstra Clear reported an increase of 2.5 per cent in total revenue to $NZ693 million. The
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increase is attributable to a strong consumer revenue growth and the full year inclusion of
Sytec, which is similar to KAZ and IT services group that we acquired in the prior year.
So, cashflows and our financial parameters that we continue to inform the market about. Free
cashflow declined 12.4 per cent to $4.55 billion due to lower earnings, the decline in
earnings that you have seen, higher tax paid due to an instalment tax rate correction by the
tax office, higher capital expenditure due to the transformation, and lower asset sales than
the prior year.
With regard to our financial parameters, that is our debt servicing, our net debt gearing and
our interest cover, you can see we are very comfortably sitting against all of those measures
as at 30 June 2006.
Now, our guidance, 2007 guidance. In developing the guidance for fiscal 07 we have made the
following assumptions. These are important: No FTTN build, ULL pricing in band 2 of $22, and
it is the largest year for transformation spend in terms of capex and opex and we have assumed
in this guidance no additional provision being raised for restructuring and redundancy in
06/07. That last point is important. We may still consider to do that if we have the right
conditions in terms of knowing if there are any more and it fits in with the accounting
standards and so on. It is important you understand the assumptions behind this guidance.
The guidance is also based on reported numbers for fiscal year 06 being the base, so not the
underlying numbers, and we expect revenue growth therefore of 2 to 2.5 per cent, so around
still our long-term guidance CAGR for five years. That depreciation and amortisation will be
at around the same levels as last year and that EBIT will grow in the range 4 to 6 per cent
and our cash operating capital expenditure will significantly increase from last year to
between $5.4 billion and $5.7 billion.
We expect our underlying EBIT, and this is calculated on the same basis as I stepped you
through our underlying EBIT earlier, to be in the range of flat to minus 2 per cent when
compared with the fiscal year 06 underlying EBIT of 6.5, so let me just get that into your
head. Minus 6.9 per cent EBIT was the underlying business performance 05/06. We are saying
an improvement to flat to minus 2 per cent underlying EBIT performance in 07.
We expect the increase in operating capital expenditure for fiscal 07 is for increased
transformation expenditure, including the completion of the footprint of the 3G 850 wireless
network rollout, continuing wire line transformation and expenditure aimed at further reducing
single points of network failure, as well as platform rationalisation and major spends in
continuing our business support system and operational support system redevelopment.
The level of future dividends will be subject to regulatory outcomes and of course other
normal board considerations such as the cash position of the company.
I just want to bring one more thing to your attention, because we are very much about no
surprises and we dont want any surprises when we stand up here in February about the first
half performance, so it is important that I take you through this.
There will be some unusual half one, year-on-year outcomes because of the profile of last
years spend and a revenue recognition change that is occurring and of course the inclusion of
New World for the full year. The following factors will affect the half-on-half performance in
the 06/07 fiscal year. There will be a delay in the revenue recognition of the Melbourne
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Yellow Pages book until January 07, so it slips from one half into another. That will impact
revenue and EBIT in half one 07, but of course it is made up in the second half.
New World consolidation, as I said, for the full 12 months, transformation costs occurring in
half one 07, so the half we are in right now, compared to nil in half one 06, so again that
will impact the half result and no accelerated D&A, or depreciation and amortisation, occurred
in half one 06, but there will be some half one 07 and we expect that in the range of $150
million to $175 million will be recognised in half one of this fiscal.
The impact of these results will cause a significant reduction in the half one EBIT in the
range of 17 to 20 per cent, so in other words you will see a large negative number in the half
one result because of all those elements that I have just outlined and it is important that
everybody understands that. But these impacts will be more than made up in the second half of
fiscal 07 due to the timing, the transformation timing.
It is important, I believe, for us to provide this guidance to you so there arent any
surprises as we report our interim profit results early next calendar. You should not expect
us, of course, to provide this sort of half-on-half guidance in future, unless there are some
significant factors that we become aware of.
So, thank you for listening to that. I think it was important to take you through the detail
and now Sol and I will take questions.
QUESTION: Patrick Russell, Merrill Lynch. Just a question on the guidance first in relation to
the ULL. If we do see a change on that, will we see a formal set of guidance restated and
potential timing on that from your perspective as you see it now? The second thing, I just
wanted to get a feel as to how the second half PSTN revenues were affected by the wholesale
price increases, whether you can sort of give any idea of what the underlying was ex that.
Thirdly, on the operating costs up 9 per cent on an underlying basis, I guess trying to get a
handle on when you think that can come back because that is pretty high growth, in particular
looking at performance bonuses and commissions up 180 per cent; just trying to work out
whether there is a dynamic there, the harder you push sales, the harder we are going to see
negative surprises on cost of sales and that will confiscate the gains you are making in terms
of your market share improvements. Thats about it, thank you.
SOL TRUJILLO: I will take part of it and then I will ask John to comment. In terms of the
guidance on ULL, I guess we will give updates based upon that moment in time or a comfortable
period after we can assess whatever decisions the regulator chooses to make, so we will
provide an update at an appropriate time. Relative to the second half PSTN, I will let John
take a swipe at that regarding your specific focus on wholesale.
JOHN STANHOPE: Patrick, the wholesale impact on PSTN was that there was a price impact of 60
million, but that was the price movement for wholesale for the whole year in access and there
was an $89 million positive impact on volume in wholesale as well. Thats again spread across
the whole year, but just remember access went down $44 million, which is 1.3 per cent, and
retail was mostly volume, but there was a price impact positive of 60 in wholesale.
QUESTION: So Im crystal clear on this, so stripping it out, that price increase would be $60
million on a like-for-like basis if you hadnt put that price increase through.
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JOHN STANHOPE: Yes, thats right.
SOL TRUJILLO: The third piece is relative to the push on sales and what I will do is I will
just have David Moffatt, who basically has most of that responsibility in terms of volumes, I
will have David talk about that.
DAVID MOFFATT: Thank you, Sol. Patrick, you have got an unusual amount of the renegotiations
of all the dealer contracts that we had that are loaded into those numbers. What we did is we
took nearly 200 plus, more than that, contracts and we renegotiated all of those and we took
the trailing commission rates that we had and we brought them forward to a much shorter period
of time, predominately from five years to two years, and there were some one-off payments that
were part of that.
To the comment about is the growth in cost of goods sold justified, the answer from our point
of view is, if you strip that out, yes, it is, and the reason is very simple. We see a lift
in ARPU, we have seen a very strong lift in the mix of data, almost double the rate of what we
could get normally on a subscriber, and so the combination of those two things, all of which
is on contract, means that we are very comfortable with the rate of growth that we have got
and the cost aligned to revenue growth not just now but in the future.
SOL TRUJILLO: I will just add one other comment and that is clearly it is our intent to grow
this business and to maintain and grow market share, so we will act accordingly in the
marketplace in terms of, with those principles, to keep market share or grow it and we will do
what we need to do, so that should be clear to everybody in this room and to all of our
competitors.
QUESTION: Good morning John. Good morning, Sol. Tim Smeallie from Citigroup. Just following on
from that comment on cost of sales, if we look at mobile cost of sales growth, it looked like
it grew by about 20 per cent in the previous year on 6 per cent revenue growth. Just wondering
do you expect will that trend continue and how many years should we expect that to occur?
Secondly, looking at the capex guidance for next year, obviously that is hell of a lot of
money to spend above business as usual capex, so can we get some clarity on where the $2.5
billion is going and how thats being spent? It looks like a lot of that has been brought
forward.
Thirdly, if we look back to the strategy day in November, I guess we saw there were three
things that underpinned it: Business transformation, a ULL price of $30 to support the
revenue growth and fibre to the node to deliver I guess the sweet spot in growth from 09
onwards. I guess two out of the three factors arent happening now, so can we get some clarity
in terms of will we hear about a new statutory in the short term or can you give us some
colour on that today?
SOL TRUJILLO: Let me begin with the last question and then I am going to ask Greg to talk a
little bit about what we are spending the majority of our capex on as we go into the next year
and then I will ask David to talk a little bit more about this mobile cost of goods thinking.
In terms of our strategy and back to November 15, I outlined kind of four or five key
principles, maybe organised a little bit different than what you have articulated here. The
first thing is that broadband is going to be critical in terms of our business and we were
going to do what we needed to do to grow that business and we are doing that. Part of it is
on the platforms it could be fibre to the node, where we could accelerate with more band
width; part
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of it was around ADSL in terms of how we already had infrastructure in place that we were
using; part of it is that we have been using our cable infrastructure HFC for delivery of
that; and then part of it is on an ongoing bases, in terms of day-to-day commercial
relationships, we have commercial contracts, laying fibre for various customers, whether they
be state governments, whether they be large enterprises, community developments, whatever it
might be, so there is a whole combination of platforms that we are using and fibre to the node
was one that we are articulated we thought would be great for this country and we thought
would be great in terms of having a more ubiquitous, predictable, well-known base of
capability for all customers.
You know, the government has made their choices and we will go with the flow. What does that
mean at this stage? It means we are driving today, as you have seen in these results, and
growing on the platforms we have been using and they are better platforms than any of our
competitors. We will out compete our competitors on what we have today and we will continue
to expand on those existing platforms. But there will be one new dimension coming into play
that nobody will have, at least not initially and they will never catch up to us, and that is
relative to our wireless broadband platform. That is going to be powerful, we are exploring
technologies beyond just what I would call the classic, you know, you and I could make calls
and we could do a lot of things on our devices today, but we are also going to be exploring
what we can do around wireless local loop, off of that platform.
Again, if you talk to our technology experts, where I know some of you have, we have Hugh
Bradlow here and Mike Ryde in addition to Greg and some of the folks that have been working on
this; there is a lot of potential for us. I am not going to get into the details today, as I
said earlier, because I am not going to explain to our competitors what we are going to do in
the marketplace. I wont do that. We will let them find out in the marketplace what we do, as
they have been so far the last six months.
In terms of what else are we doing as core and when I think about it as an operator, because
the regulatory piece is a piece, it has been important, but it overtakes too much of the
conversation is the way I think about it and the reason why I end up talking about it is
because people ask me. But when we think about value creation and sustainable value creation,
we have to get a much lower cost platform in this business and, yes, a little bit of our cost
takeout is being masked by cost of goods in terms of how we think about mobiles and some of
that is one time in terms of how David explained it and he will talk some more, but a lot of
this is going to be about the people takeout, the process efficiencies, the reduced time that
we have to have people interfacing with customers and doing work and checking work and doing
all those things; that is still happening. We are implementing our IP kind of transition in
terms of our next generation network because you have to remember our next generation network
isnt just about fibre to the node. Thats only a component piece. It is about soft switching,
it is about this IP core, it is about your Edge network, it is about a lot of elements that we
are doing regardless of regulatory kinds of activities.
So, a lot is happening. The vast majority of what we outlined on November 15 is not impacted,
it is just that slice of fibre to the node. We have alternative delivery platforms that are
better than what our competitors have in spite of what they say. We only talk about what will
be delivered and we will continue to press those issues.
David, do you want to talk about the cost of goods issue?
DAVID MOFFATT: Thanks, Sol. Tim, a few things. Lets start with the customer. What we
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have learned in this massive push on 3G is that the customers use more services and it is very
dramatic to us, so we have compared usage on a 2G customer who has then migrated to 3G and we
have seen very big uplifts in terms of revenue growth and in terms of data usage and, for
example, the number of events, they go from using typically seven on a high performance
handset as a 2G customer to maybe 25 on a 3G. So, there is a very big shift in the market,
more capability, thats where you want to be, so obviously we have pushed the button on that.
On the cost of goods sold side, we are going to have a number of things happening. I
explained the issue on the commission side, there is some one-offs in there. That is now much
more aligned to ARPU growth because of the way we have restructured the arrangements, so that
will track more to ARPU growth for us with our dealers and of course handsets. What we have
done is, as a result of the early phase of 3D, a lot of those costs, of those unit costs are
quite high. As we get volumes up and we push into our strategic partner arrangements, the
prices of those come down, so you will see a commensurate reduction in the unit cost of those
on a relative basis.
So the combination of what the customers want, the services, the revenue growth, all of those
kinds of things, plus what we are doing on the cost side and the scale and of course winning
market share and you can see we have grown our post-paid share by a point relative to all the
major competitors and we have really pushed ahead in terms of the strategic game, which is all
about 3G. As Sol said, we have added over 100,000 since June, 317,000, so effectively 4 per
cent of the other players major push that took them three and a half years to get.
QUESTION: So we should expect Telstra to still be very aggressive, in terms of subsidies, in
the market over the next 12 to 24 months?
DAVID MOFFAT: Relative to the market well be competitive, but we know were creating value as
a result of what were doing. We have absolutely no doubt about that.
SOL TRUJILLO: Greg, did you want to talk about the Capex spend?
GREG WINN: Basically to repeat what Sol said, Ill start from the, kind of, core out. One of
our key strategies is soft switching. We have our first two soft switches in the country
installed and running in our lab. We are going to press hard in this fiscal year with further
deployment of the soft switch, begin that capability. There are 2 million line capacity
switches moving out from the switching core into the back call or transmission network. That
work is well underway, were continuing to accelerate there. I believe Sol indicated, or John
did, that were at about 60 per cent of what we want to do there. We have installed, we
havent tested a lot of it yet, but we have it installed and are going through turn up phases.
Obviously on the 3G network, the early returns that David mentioned are extremely pleasing, so
were accelerating our 3G 850 build. Were still on plan, on target, but it looks like we may
have some more opportunity there, so were going to be to be looking at reinforcing our back
call, given the applications. Were working on our service delivery platforms. New service
delivery platforms are coming on-line that are going to enable more content, seamless, one
touch, one click capabilities.
Then on the systems side, we have a lot going on in the system world as well. We have our
first major systems drop late in the calendar year of 07, not this fiscal year, but the lions
share of the work will be done in this fiscal year and well be into a kind of a cold soak
load testing, regression testing on all of our new billing systems, etcetera, late this fiscal
year in preparation
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for the first cut over in the 07, 08 year. So there is a lot going on across the board,
everything from our network operating centre capabilities, the IP networks, the cores,
resiliency, survivability, robustness, and thats why the lions share of Capex has been spent
this year.
SOL TRUJILLO: Thank you. Im going to take a question here from Sydney, since theyve been
waiting here, and then well come back here to Melbourne. Sydney.
QUESTION: Justin Cameron from Credit Suisse. Just two questions; one on the Capex, maybe a
bit of follow up on the previous question. Im just trying to understand how the Capex will
trend over the next kind of three years now. If you look back six months ago, the guidance
from Telstra at the time, I think, was 23 to 25 per cent Capex to sales, and I think given
youve got this significant hump, I suppose, in the 07 year, can we start looking at factoring
in a step back in the vicinity of 500 to $800 million, and obviously, as a result of that, you
get a significant improvement in the free cash flow in the proceeding, kind of, two years
after that. So just a bit more feedback, I suppose, on where that trend will be in the next
two to three years on a Capex to sales perspective. Secondly, probably for John: Just in
relation to the PSTN, there was improvement in the trends for the fixed line business in the
second half, coming in at a 5.8 per cent decline. Now, again going back six months ago, the
guidance from Telstra was that it was declines of, I think, 8 to 9 per cent in the fixed line
business. Are we expecting now to look at the circa 6 per cent declines going forward? Is that
something that we can expect in the fixed line business, and whats the expectation there?
SOL TRUJILLO: Okay, let me start with the Capex. The answer Im not going to give you any
numbers, so we wont do that at this stage. But in terms of the fundamental question youre
asking, Justin, about will our Capex spend go down significantly after the 07 or 06, 07 year
that were now into; the answer is yes. It will go down significantly, but not fully back to
what I would call normal spend levels because were still deploying soft switching, were
still doing some of the work in terms of our core infrastructure and still finalising a lot of
our IT work at that point in time. But the bulk of the spend is in this 07, 06, so the way to
think about it is, obviously, this is our peak year, next year we see the beginning of a
relatively significant decline, and after that then it really steps down.
Now, the guidance that we gave last November was that we would expect that our Capex to sales,
the classic metric, would be in the low double digits range, as part of our guidance. I
believe that, and obviously its our intent to work to those levels, if not exceed them.
Because we are building this, the networks that we are putting in place are going to be highly
evolvable, and after that theyre primarily software upgrades as opposed to a lot of physical
change out of infrastructure, both at the wireless side and the fixed line side in terms of
what were doing. Then on the IT side, what we will have will be the latest generation of
infrastructure.
Im going to make one other comment, and I dont mean to go on too long in terms of answering
this question; but the key difference of what youre seeing on this transformation, versus
anything I have seen anywhere in the world, is that we are fixing the core systems and the
core networks; not temporising, not slightly improving, these are fundamental evolutionary
fixes that were putting in place. One other thing is that were enabling this integrated
strategy, and you again will start seeing it play out over the next 12 months, 24 months, of
how we can integrate capabilities from a customer experience standpoint that nobody in the
world will be doing like Telstra. Thats what the investment is for, Justin.
JOHN STANHOPE: Justin, just on PSTN declines, Im not going to give out a number like I
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did last year, but actually the number that I gave out last year we came very close to. But we
are continuing to work on arresting the decline in PSTN revenues. It has a number of elements
to it, it has integration of services, PSTN, mobile, broadband, and it has the subscription
price plans that really, as I said, are new, relatively new, in the marketplace, so we still
have the impacts of those to flow through. Of course, our market-base management segmentation
will help our customers to understand there is still value to be had in the fixed line or PSTN
network. So I guess Im not going to give out a number, Justin, but it is still our aim to
continue to arrest that decline. I might just make one comment on Capex, too, Tims question.
That is that there shouldnt be too many surprises about a higher Capex level in this fiscal
year. I mean, we only really started the transformation in 05, 06 and, sort of, weve only
been going at it really seven months and we spent 1.3 billion in that seven months. So this
is, as Sol has said a couple of times now, this is the intense year of our capital
(indistinct).
SOL TRUJILLO: Back here to - - -
QUESTION: - - - on the Capex, and I suppose Im not going to get an answer on the dividend,
but if you look at whats going on with the balance sheet settings of Telstra right now and if
youre talking about Capex coming down from the 08 year onwards, and obviously in your big
picture scheme of the operating perspective on the business, that will be improving. I mean,
looking at the overall financial settings of Telstra, it would suggest that, from a dividend
perspective, there is so much capacity there for Telstra to maintain its current payout.
Realistically, going forward, I mean is there a risk to your dividend payout profile for
Telstra?
SOL TRUJILLO: Ultimately the dividend payment is a function of board conversation. But, you
know, as we think about cash flow, as we think about cash generation, there is many
considerations. Part of it is, you know, how were looking right now at our spend. Were
making some significant investments in this business. There may be offsets or other impacts in
terms of what happens relative to regulatory decisions and perhaps other marketplace
requirements. So for us, you know, to make any further comments on dividends, as youre
implying here, were not going to. But, you know, obviously we have leverage on the balance
sheet, we have strong cash flow generation, but there is always impacts that can take it the
other direction, especially here in Australia, the way regulatory processes have historically
worked. We will reserve judgment until appropriate times, as a board, to look at any issues
relative to dividends or dividend payouts. Well go back here to Melbourne.
QUESTION: Christian Guerra from Goldman Sachs JBWeir. Ill just ask you three questions this
morning. The first one is on the broadband performance; obviously a fantastic performance,
with 300,000 new subscribers. Im just wondering if you could tell us how many of those new
subscribers were bundled with the PSTN network. Secondly, just a question on your 07 guidance:
Youre talking about 07 being the biggest year in terms of transformation costs. Im just
wondering if you could tell us the magnitude of the number on the Opex side, excluding the
D&A. Thirdly; in the first half we saw that you actually increased the useful life of some
assets, which give you a D&A benefit of about $65 million in the first half. Im just
wondering whether we should double that for the full year? Thanks.
SOL TRUJILLO: Do you want to take the broadband question?
DAVID MOFFAT: Christian, the answer on the broadband is 93 per cent of our customers, and
thats been consistent all the way through, have PSTN services with us if they take broadband
up with us. We have an offer in the marketplace at the moment which is 12 months at half
price. One of the gates that you to go through to get that deal is to have your
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PSTN service with us. So were very keen to have people bundle PSTN and their mobile services
with us, and that strategy seems to be working well.
JOHN STANHOPE: Christian, the acceleration of depreciation is very similar in 06, 07. The
service life impact is 134 million, so doubling is pretty close.
QUESTION: Just the 06 Opex, in terms of transformation program sorry, 07 transformation
program Opex.
JOHN STANHOPE: Sorry, what was the question in relation to that?
QUESTION: You said that 07 is the lightest year in terms of transformation costs on the Opex
side. Im just wondering, stripping out the D&A, whats the sort of Opex that youre talking
about?
JOHN STANHOPE: Im not going to give a growth number around it, if thats what youre talking.
But, you know, Capex, Opex ratio, if youre talking about the Opex related to the Capex
program, its usually 90/10, somewhere around that; 90 per cent Capex, 10 per cent Opex.
QUESTION: So thats the number we should be using, just to be crystal clear, that 640 million
was the Opex in 06, including the R&R provision, and in 07 we should be using that, sort of,
90/10 ratio on the transformation program Capex to Opex?
JOHN STANHOPE: Yes.
QUESTION: Thanks.
SOL TRUJILLO: Well take a question from Sydney and then come back Melbourne.
QUESTION: Mark McDonald from BBY. Three questions. Firstly in relation to labour redundancy
costs: I see that at note 7 to the accounts, page 40, the labour redundancy expense is
expressed at $356 million. Im just wondering if you can clarify how that figure relates to
the 186 used in the presentation? Secondly, Ive also noted that in the second half, in your
mobile networks, you saw a very significant change in the representation of CDMA to GSM in
your customer base. The CDMA customers grew strongly in the second half and there was also
quite a notable drop in the number of GSM customers, over 500,000. So Im wondering if you can
explain what you believe is happening in the mobile customer area to effect such a big swing,
particularly in the context of your announcements relating to the closure of CDMA and the big
uplift in customer numbers there? Thirdly, also in respect of the network based question;
given your recent announcement that youre not going to proceed with FTTN, can you clarify the
number of end user access lines that are carried, at least in part by fibre, to the local
exchange? In the past weve heard that Telstra has made investments in fibre in the local loop
from the exchange to RIMS. What proportion of your lines, of end user access lines, are
carried over some form of FTTN in the network today?
SOL TRUJILLO: Okay, why dont we start first with the redundancies?
JOHN STANHOPE: Yes, the accounts question. On that page the redundancy relates to the in year
redundancy as well as the provision. So the 356 is the redundancy expense in the year, as well
as the 186 provision. So there was redundancy expensed in year, and we provided
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redundancy for the future years. 186 is future years and the remainder is what was spent in
the year.
SOL TRUJILLO: Relative to the CDMA question, obviously we are focused on 3G, as I said. Weve
rolled out, also, a very strong offer during the past year of EVDO, and Ill ask David Moffat
to comment on that as well.
DAVID MOFFAT: Thanks, Sol. The change in terms of the CDMA subscribers is because those
customers have that available to them at the moment and that part of the market is still
growing for us. So obviously were going to satisfy that demand. But its also the point that
Sol made around wireless data cards, which has seen a very heavy growth. So thats the
numbers in the CDMA.
On the GSM side, what we did is we integrated two platforms and we had a series of customers
who, on that, were basically werent using the network, and so those customers have been
deactivated. So that was a very large deactivation, it was really about 390,000. They were
all prepaid customers. So our high growth strategies are on our customers who are on 3G,
firstly, and on a contract, secondly on 2G and on a contract and are prepared to invest with
us and stay with us and use services, and what weve done is weve detuned the focus on the
prepaid side, particularly those that are not using actively with us, and we cleaned that out
as we rationalised one of our platforms. To give you some idea for the prepaid users, who we
still want to service; those customers who are unique users to us went up 12 per cent in the
year. So we had a good growth in the customers who are prepared to work with us and grow with
us. So thats what youre seeing in those movement of those numbers.
SOL TRUJILLO: I dont know if you can see here can you see me here there in Sydney? Im
holding one of the data cards, you know, our BigPond card that you can insert into your
laptop. Again, we have about 100,000 customers that have now become subscribers. So when we
think about new wave and we think about next series of growth, clearly were starting with
EVDO, but when we roll out at HSDPA network, its going to be big, because life changes at
that point in time when you can get multimegabit capability and carry with you wherever you
go. So we are the market leaders, we intend to be the market leaders, and we will continue to
grow. In the interim, what were doing with our EVDO customers is obviously were generally
entering into a contract with them and we will give them great service on the platform that
theyre using today that it will be even better as they continue to migrate on to our HSDPA
platform going forward.
Then in terms of the fibre question and the number of ultimate lines served via fibre, I
cannot give you that answer and maybe we can follow up with you off line.
QUESTION: Good morning, gentlemen, its Richard Eary from UBS. Three questions its more on
clarity actually. One is on the actual depreciation number that you gave out of 4 billion, or
4.1, for last year. John, you said earlier that you thought that was that was going to be the
same level for 07, or does that number still include the accelerated appreciation on top of
that? That will be the first question. Second, if that is the case, am I right in assuming
that the EBITDA guidance on flat depreciation would be 9.7 to 9.8 billion for 07, pre any
restructuring provisions that you may decide to book later in the year, depending on obviously
how accounting standards change? Lastly, is that given where the margins are today relative to
your long-term guidance, and obviously there are some issues with regards to long-term
guidance based on regulatory decisions, can you just give us a little bit more clarity in
terms of the magnitude of costs savings that we can expect to see coming out of the business
in 08, 09,
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in terms of, obviously, a rebound, in terms of whether you can put that you know, some of
your international peers have given some clarity on that, I just wonder whether you can put
some numbers around that?
JOHN STANHOPE: Well, let me deal with the D&A question? The D&A has that 4 billion has got
the acceleration in it. What I said to the 06, 07 year will be a similar level of D&A and
will include some acceleration as well at about the same level.
QUESTION: So thats 4.1 for 07, is the number?
JOHN STANHOPE: Its around about the same level.
QUESTION: So that implies the EBITDA is around 9.7 to 9.8, based on your EBIT growth guidance?
JOHN STANHOPE: Yes. You can figure that out.
SOL TRUJILLO: In terms of the cost take out guidance in terms of absolute numbers, again I
wont give you numbers at this stage. What we gave as guidance back in November was that when
you looked at our cost structure, meaning where our cost levels were at that point in time at
the end of first half, we said when we finished this transformation wed be at that same
operating cost level in terms of run rates, or better, if we can do that, in terms of the full
implementation of this set of systems were implementing, as well as the operating run rates
of the new networks that we will put in place. Were still standing by that, were still
talking about the 6 to 8,000 full-time equivalent reduction in terms of the first three years,
were still focused on the 10 to 12,000 full-time equivalent reduction within the five-year
period of time. So those are the core driver metrics in terms of how you think about labour
costs within the business, and then some of the associated loadings and other costs that are
generated with labour. But in terms of the process costs, I cant give you the individual ones
because were still in the process of detailing that as we implement some of the plans we
have. Some of them we do have targets, but we dont disclose those at this stage.
QUESTION: So can I just follow up just one final question. With regard to the Capex guidance
you gave of 5.4 to 5.7 billion, does that exclude any additional Capex which may come back to
the table on plan B if fibre is now off the table? Or is that including some degree of Capex
with relation to that change in strategy potentially?
JOHN STANHOPE: There is no fibre Capex in that number.
QUESTION: But is there any, sort of, HFC or plan B Capex within that number?
SOL TRUJILLO: We basically have reflected in that number what we think we need to compete and
operate the business effectively to hit the numbers that we have given you as guidance.
QUESTION: Thanks.
QUESTION: - - - four questions: The first one, a similar question to an earlier question; I
also noted the big increase in CDMA subscribers in the year. Youve now got 1.7 million CDMA
subscribers. Whats your plan when the network does close? What are you going to do with these
customers in terms of, you know, the cost involved in transferring them across
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to the new network? Is there any forward guidance on how youre going to handle that? The
second question on margins: The year just gone, if you strip out all the restructuring,
redundancy charges, your margin has fallen close to 3 per cent. Its the biggest decline weve
seen for well really ever, I guess. Its a long way from the 50 to 52 per cent that youre
looking for by 2010. Can you just give us a bit of a look at what the trajectory between 45
and 50 to 52 looks like? Are we going to see next year go down or up? Then in 08 how quickly
do we get back to up the 50 number? The third question is on your subscription pricing plans.
We had a bit of a toe in the water on that earlier in the year at the very high end. How
quickly do you think were going to see subscription plans move across the mass market? Then,
finally; now that fibre to the node is off the agenda, how quickly are we going to see Telstra
offering the ADSL 2 plus services into the market with broadband speeds in excess of 1.5 megs
on DSL? Okay, let me try to take them quickly here in the order that you asked them regarding
the CDMA and the migration of customers. Clearly, as youve heard me say almost a year ago and
today, we will expect to turn up our network by the first of the year in terms of the HSDPA
network. The value proposition is going to be very strong in terms of speeds, reach, quality,
advantage, services, etcetera. So what we expect to see before we reach that first quarter of
CDMA, the first quarter of 08 when we have noticed everybody that we would intend to shutdown
the CDMA network, we would expect to see a lot of migration based upon the value propositions
that were going to have in the marketplace. There may be some customers at the very end
that, for whatever the reasons are, havent changed. We will work very closely to migrate
those customers, in a positive way to help them make that move over to the new network.
Because, again, it will be a dramatically better experience for all of our customers. So how
much we have set aside; we have it built into our plan in terms of Im not going to give you
an amount because obviously we dont know for sure how many customers will migrate over. We
have some estimates based upon what weve already seen with conversions from 2G to 3G, and
also what weve seen in some conversions that have been modelled after other countries. But
the point is, is that we think we have a strong value proposition, we will do whats right for
the customer and we will make sure that this is a very successful migration, because, again,
customers are going to benefit.
In terms of the margin question, you know, logically you can expect, as you have seen, that
margins will drop as you increase Opex, in particular Opex spend fairly significantly. Weve
seen in the 05, 06 year, youre going to really see it in 06, 07 in terms of what were doing
in terms of Opex spend. Its a mathematical calculation. In terms of going past the subsequent
year; we will start seeing margins climb back up. Why? Because, number one, spend will be
reduced. But secondly whats going to take it back to some of the prior levels is that were
going to be on an operating model thats going to be different. When we looked at all the
operating costs and you think about how we run our networks, its going to be a different cost
model. When you think about the front end of the business and you think about how we
interface with customers, all the systems, all the time, all the processes involved are going
to be dramatically streamlined. That cost of serving a customer is going to be dramatically
different. When we introduced new products and services on the platforms that we do today, the
cost to introduce, the cost of building the cost of systems, the cost of processes, the cost
of people, all of those thing are going to be dramatically reduced. The cycle time in which we
do it is going to be, again, significantly changed. All of those are going to be part of
process costs take out, in addition to physical operational cost take out. We have modelled
our business model going forward and we have a strong belief that we will be able to hit the
EBIT margins that John has talked about in terms of the guidance here, and were building all
the layers of capability as we speak. So timeframe wise, yes, you will see it beginning in
years three of our transformation, accelerating in year 4, and obviously really being strong
in year 5, when we get to that point of having implemented most of what we said we were going
to do.
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In terms of the subscription, going across a broader set of customers, clearly both David and
Dina have their plans and maybe David wants to make a comment and then Dina could you comment
real quickly?
DAVID MOFFATT: Sure. The big competition that we faced at the top end, we have now obviously
addressed that with a really competitive package and that meant that, from an industry point
of view, where some of the mobile-only players were targeting us most aggressively, we have
effectively neutralised that competitive risk and thats been really well received by the
customers because it is a terrific value proposition. Across the rest of the base, we already
had a terrific set of plans and, as Sol has already mentioned, we have seen a big reduction in
the run rate of churn as a result of getting those plans just right.
Now what we plan to do is actually add more value, more value through the combination of
integration and more value into existing capabilities that we know through market-based
management works for our customers on the PSTN that maybe they havent thought about as much
in the past. So, we are pretty excited about the way in which subscription pricing has helped
to us drive our overall business.
DEENA SHIFF: The small to medium enterprise-base introduced I guess the equivalent of what
David has done in the consumer space in July, so we are only just starting to see the early
effects of that. Satisfyingly, the take-up has been much higher in effect in win-backs from
other players in the market, so obviously thats the best kind of incremental effects that we
are looking for. It is early days yet, but what it is saying to us is that small businesses
appreciate the cost certainty associated with this kind of price structure and will continue
to put more types of pricing structures into the market to continue to effect the market
outcome.
SOL TRUJILLO: The last question you asked was relative to DSL2 plus.
QUESTION: Yes. When are we going to see DSL speeds from Telstra greater than one and a half
megs, as some of your competitors are now offering?
SOL TRUJILLO: We have them today. If you happen to be a Cable Extreme customer today, you can
get up to 17 megabits per second today and we have customers that are on that service today.
In effect, as I said earlier, our delivery plans, our service plans, our competitive plans are
going to be tied to what we need to do with the SL2 plus to compete with those who are
deploying, what we can do with our HFC network, what we can do with our wireless platform that
we are building and enhancing, and what we are going to be able to do in terms of private
contracts.
I am not going to give any specifics, I wont give you dates, just simply because I am not
going to signal to our competitors what we are going to do, but, trust me, we will compete
very effectively and we will have better value propositions in the market.
QUESTION: One follow-up question, perhaps a different way to ask the margin question. The
margin erosion in the last 12 months was really all about customer acquisition; very
aggressive handset subsidies, aggressive cost of goods sold. Do you have numbers in your mind
about what market share figures you want to get to? In mobiles you have mid-40s, broadband
about the same. Is there a number like 55 per cent share of the mobile market or broadband
market we want to get? Thats really going to drive your behaviour in terms of how aggressive
you are going to continue to be on the customer acquisition.
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SOL TRUJILLO: Again I am not going to give you a number and I am going to tell you why,
besides not wanting to give you a number, because again Im not going to signal to my
competitors what we are going to do, but the answer to that question is not as simple as that.
Because for me it is about winning the gains where its important, so do I want to have a very
significant success in terms of 3G market share? Absolutely. Will we be able to do that with
the competitive advantage that we are building? Absolutely, because thats where customers are
going to be. Just like customers now are moving, as they used to, in the mobile space onto a
broadband platform, we are finding that this is becoming a way of life.
Band width and the need for band width in order to do things that are part of your everyday
life is absolutely critical, so winning in 3G market share is very important and my
expectations, if you are looking for something to quote me on, when we talk next year we
should be the market leader in 3G, right? We got to the game late, we havent deployed as
early as others, but a year from now we will be the market leader, because this is the
important game in which we need to win, in addition to broadband, in addition to wireless
broadband, in addition to delivery on other platforms, as we think about it. That is going to
be how we think about creating shareholder value and the simple reason is that that is where
customers are willing to pay more and to do more and to use more as we think about the
business going forward.
I am instructed that we have to end. I am sorry, Tim. We will bring it to - - -
QUESTION: Just two very brief ones. Do you think you can get the 850 network up and running
for the December quarter to launch with the Christmas period and also, just looking at Sensis,
Bruce has a big target to get 3 billion in the next three or four years. Is he seeing anything
in terms of yields per page in terms of Sensis and the new on-line threats?
SOL TRUJILLO: Again, just two quick responses. In terms of our network, we are on plan, we are
working hard. Our target was to get it done in record speed, record speed being by the 1st of
the year. Thats what our plan is and thats what we are going for in terms of what we do.
In terms of Sensis, obviously I think the margins that we showed today, both in terms of print
and the increase of margins on on-line, are very strong and improving and I think the job that
our Sensis team is doing is terrific and the nice thing is that the new revenues are carrying
very strong margins and I do have to say that this is a scale business. It is scale and we are
going to look to scale up so that we can continue to improve margins. Thank you all.
oo00oo
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14 August 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street |
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra responds to media article regarding ULL access pricing.
Telstra notes the media commentary this morning regarding ULL Access Pricing. Telstra wishes
to inform the market that after business hours on the evening of Friday 11 August 2006 it received
advice from the ACCC that the ACCC had made an Interim Determination in respect of a ULLS Access
Dispute with one of Telstras lower volume ULLS wholesale customers at a price of $17.70 per month
in Band 2 ($7.20 for Band 1 and $34.20 for Band 3). There is no price determined for Band 4 as the
Access Seeker concerned does not acquire ULLS in Band 4. These prices replace on an interim basis
the current pricing (benchmarked at $22 in Band 2) for this Access Seeker only.
Telstras guidance provided on 10 August was clearly stated as being based on the then current
price of $22 (a price which remains current as of this morning in respect of the bulk of our ULLS
lines). The ACCC may now follow this Interim Determination with other Interim Determinations in
respect of other ULLS Access Disputes. Importantly, these would all be Interim Determinations by
the ACCC, pending Final Determinations being made by the ACCC at a date or dates to be determined
by the ACCC.
Once there is sufficient certainty on all necessary elements, Telstra will assess the impact on its
business and review its market guidance, and make any related announcements at the appropriate
time.
Yours sincerely
Fiona Mead
Assistant Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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TELSTRA CORPORATION LIMITED |
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Name:
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Douglas Gration |
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Title:
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Company Secretary |
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Date: 14 August 2006 |