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 28 February 2007
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.
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
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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Telstra Corporation Limited Financial Results for the Half Year ended 31 December 2006 |
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Analyst Briefing Half year results presentation pack |
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CEO letter to shareholders, half-year review and BACK Telstra brochure |
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Transcript from Telstras Analyst briefing Half year results |
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Appendix 3Y Change in Directors interest Notice |
15 February 2007
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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 Half Year ended 31 December 2006
In accordance with Listing Rules, I enclose the following for immediate release:
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Appendix 4D half yearly report; |
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Half year results and operations review financial highlights; |
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Media release; |
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4. |
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Half year financial report for the half year ended 31 Dec 2006; and |
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Directors report. |
Telstra will conduct an analyst briefing at 9.15 AM and media briefing at 11.45 AM on the half
year results. A webcast of the briefings will be available from 9.15 AM AEDT at
http://www.telstra.com.au/abouttelstra/investor/calendarevent.cfm?ObjectID=1202 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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Half-year report |
Telstra Corporation Limited and controlled entities
Appendix 4D
Half-year report
For the half-year ended 31 December 2006
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Telstra
Corporation Limited and controlled entities
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Half-year report |
Appendix 4D
Half-year report
31 December 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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Half-year ended 31 December |
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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 |
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11,645 |
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11,415 |
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230 |
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2.0 |
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Other income (including finance income) |
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181 |
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170 |
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11 |
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6.5 |
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Profit for the period |
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1,712 |
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2,142 |
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(430 |
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(20.1 |
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Profit for the period available to Telstra Entity shareholders |
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1,704 |
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2,143 |
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(439 |
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(20.5 |
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During the half-years ended 31 December 2006 and 31 December 2005, there were no individual
transactions that had a sufficiently significant impact on our income statement that require
specific disclosure, except for:
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Telstra Group |
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Half-year ended |
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31 December |
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2006 |
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2005 |
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$m |
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$m |
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Depreciation and amortisation |
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accelerated amortisation of intangibles |
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14 |
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accelerated depreciation of property, plant and equipment |
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134 |
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148 |
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Income tax benefit |
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(44 |
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Net items after income tax benefit |
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104 |
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As part of our transformation a decision was made last financial year to shut down certain networks, platforms and applications . This has resulted in the accelerated depreciation and
amortisation of certain assets that, while currently in use, will be decommissioned.
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Telstra
Corporation Limited and controlled entities
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Half-year report |
Appendix 4D
Half-year report
31 December 2006
Telstra Corporation Limited
Results for announcement to the market (continued)
Dividends declared per ordinary share
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Half-year ended |
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31 December |
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2006 |
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2005 |
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¢ |
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¢ |
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Dividends declared per ordinary share |
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Interim dividend |
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14.0 |
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14.0 |
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Special dividend to be paid with the interim dividend |
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6.0 |
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Total interim dividend |
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14.0 |
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20.0 |
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Final dividends for the financial year ended 30 June provided for
and paid during the interim period |
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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 final dividend provided for and paid during the interim period |
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14.0 |
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20.0 |
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Our interim and final ordinary dividends are fully franked at a tax rate of 30%.
Our interim ordinary dividend in respect of the half-year ended 31 December 2006 will have a record
date of 2 March 2007 with payment to be made on 30 March 2007. Shares will trade excluding
entitlement to the dividend on 26 February 2007.
Our final ordinary dividend in respect of the financial year ended 30 June 2006 was provided for
and paid during the interim period. The final ordinary dividend had a record date of 25 August
2006 and payment was made on 22 September 2006.
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Telstra
Corporation Limited and controlled entities
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Half-year report |
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Appendix 4D
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Half-year ended 31 December 2006 |
Telstra Corporation Limited and controlled entities
Australian Business Number (ABN): 33 051 775 556
Contents and reference page
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Appendix 4D Requirements |
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Reference |
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1. Reporting period and the previous corresponding period.
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Refer to the 31 December 2006 half-year 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. Net tangible assets per security.
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Refer item 1 on page 5 of this report. |
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4. Details of entities where control has been gained or lost during the
period.
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Refer item 2 on page 5 of this report. |
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5. 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 8: Events after
balance date in the 31 December 2006 half-year financial report
lodged with this document for additional information. |
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6. Details of dividend or distribution reinvestment plans in operation
and the last date for the receipt of an election notice for participation in
an dividend or distribution reinvestment plan.
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Refer item 3 on page 5 of this report. |
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7. Details of our joint venture and associated entities.
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Refer item 4 on page 6 of this document for details on our jointly
controlled and associated entities. |
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8. Accounting standards used in compiling reports by foreign entities
(e.g. International Accounting Standards).
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Not applicable. |
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9. If the accounts are subject to audit dispute or qualification, a
description of the dispute or qualification.
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Refer item 5 on page 6 of this report. |
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Half-year report
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Telstra Corporation Limited and controlled entities |
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Appendix 4D
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Half-year ended 31 December 2006 |
1. Net
tangible assets per security
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Telstra Group |
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Half-year ended |
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31 December |
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2006 |
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2005 |
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¢ |
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Net tangible assets per security |
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53.0 |
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59.3 |
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2.
Details of entities where control has been gained or lost during the
period
Entities where control has been gained during the period
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On 31 August 2006, we acquired a 55%
shareholding (on an undiluted basis) in SouFun
Holdings Limited (SouFun) for a total
consideration of $337 million including
acquisition costs. |
Entities
where control has been lost during the period
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On 31 August 2006, our controlled entity Kaz
Group Pty Limited sold its 100% shareholdings in
controlled entities Australian Administration
Services Pty Ltd, AAS Superannuation Services Pty
Ltd and Atune Financial Solutions Pty Ltd for a
total cash consideration of $212 million (net of
cash balances of the disposed entities). |
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On 28 November 2006, our controlled entity
Sensis Pty Ltd sold its 61% shareholdings in our
controlled entity Platefood Limited for a total
consideration of $10 million. |
Refer to note 6 in the 31 December 2006 half-year
financial report lodged with this document for
further information.
3. Details of dividend or distribution
reinvestment plans in operation
During the half-years ended 31 December 2006 and
31 December 2005, we had no dividend or distribution
reinvestment plans in operation.
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Telstra Corporation Limited and controlled entities
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Half-year report |
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Appendix 4D
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Half-year ended 31 December 2006 |
4. Details of investments in joint
ventures and associated entities
Our investments in jointly controlled and
associated entities are listed below:
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Telstra Group |
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Ownership interest |
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As at |
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31 December |
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30 June |
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2006 |
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Principal activities |
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Jointly controlled entities |
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FOXTEL Partnerships # |
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Pay television |
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50.0 |
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50.0 |
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Customer Services Pty Ltd |
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Customer service |
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50.0 |
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50.0 |
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FOXTEL Management Pty Ltd |
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Management services |
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50.0 |
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50.0 |
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FOXTEL Cable Television Pty Ltd |
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Pay television |
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80.0 |
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80.0 |
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Reach Ltd (incorporated in Bermuda) (a) |
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International connectivity services |
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50.0 |
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50.0 |
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TNAS Limited (incorporated in New Zealand)(b) |
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Toll free number portability in New Zealand |
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33.3 |
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33.3 |
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Money Solutions Pty Ltd |
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Financial advice and education services |
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50.0 |
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Enhanced Processing Technologies Pty Ltd |
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Business process outsourcing |
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60.0 |
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60.0 |
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3GIS Pty Ltd (a) |
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Management services |
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50.0 |
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50.0 |
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3GIS Partnership (a) |
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3G network services |
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50.0 |
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50.0 |
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Bridge Mobile Pte Ltd (incorporated in
Singapore) |
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Regional roaming provider |
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12.5 |
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12.5 |
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m.Net Corporation Limited |
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Mobile phone content provider |
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26.3 |
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26.4 |
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Associated entities |
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Australian-Japan Cable Holdings Limited
(incorporated in Bermuda) (a) |
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Network cable provider |
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46.9 |
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46.9 |
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Telstra Super Pty Ltd |
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Superannuation trustee |
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100.0 |
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100.0 |
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Keycorp Limited |
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Electronic transactions solutions |
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47.6 |
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47.6 |
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Telstra Foundation Limited |
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Charitable trustee organisation |
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100.0 |
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100.0 |
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LinkMe Pty Ltd |
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Internet recruitment provider |
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40.7 |
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40.0 |
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Unless noted, all investments have a balance date of
30 June and are incorporated in Australia.
# This includes both the FOXTEL partnership and the
FOXTEL television partnership.
(a) Balance date is 31 December.
(b) Balance date is 31 March.
5.
Statement about the audit status
Our half-year report is based on the financial
report of Telstra Corporation Limited and its
controlled entities for the half-year ended 31 December
2006, which has been reviewed by Ernst & Young. Our
half-year financial report is not subject to audit
dispute or qualification. Refer to the 31 December
2006 half-year financial report for the independent
review report provided to the members of Telstra
Corporation Limited.
6
Telstra Corporation Limited and controlled entities
Results and operations review
Half-year ended 31 December 2006
Results ahead of guidance, company transformation continues
Results
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Sales revenue grew by 2.0% or $225 million to $11,630 million |
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Sales revenue grew by 3.6% adjusting for the change in
revenue recognition of the Melbourne
YellowTM Book |
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Operating expenses (before depreciation and amortisation) grew by 9.9% or $621 million to
$6,880 million |
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EBIT declined by 15.7% or $546 million to $2,938 million |
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Profit after tax and minority interest declined by 20.5% or $439 million to $1,704 million |
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Cash operating capital expenditure (excluding investments) of $2,509 million, up 22.8% |
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Basic earnings per share of 13.8 cents, down 3.5 cents |
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Interim dividend declared of 14 cents per share, fully franked |
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Mobiles revenue grew by 11.8% or $296 million to $2,798 million |
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Broadband revenue grew by 43.7% or $236 million to $776 million |
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PSTN revenue declined by 5.6% or $216 million to $3,615 million |
Thursday, 15 February, 2007
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Financial Highlights
Half-year ended 31 December 2006
Results ahead of guidance, company transformation continues
Telstra Corporation Limited and its controlled entities (Telstra) reported profit after tax
and minority interest of $1,704 million for the half-year ended 31 December 2006, a decrease of
20.5% on the prior half-year. Basic earnings per share (EPS) declined from 17.3 cents to 13.8
cents. Earnings before interest and tax (EBIT) decreased by 15.7% to $2,938 million, slightly
better than guidance.
Margins declined with a decrease in EBIT margin of 5.2 basis points to 25.3% and an EBITDA margin
decrease of 4.0 basis points to 42.3% as expected while undergoing the largest spend year on our
transformation.
Income
Total income grew by 2.2% or $253 million in the current half-year to $11,797 million.
Revenue growth was achieved through increases in mobiles, broadband, CSL New World and IP access.
However, revenue growth was partially offset by a decline in fixed telephony of 4.9%, which
included a 5.6% decrease in PSTN revenue, as well as declines in specialised data, narrowband, and
advertising and directories due to the deferral of Melbourne Yellow print directory production to
January 2007. When removing $174 million from the prior year performance relating to this print
directory, total income grew by 3.8%.
In assessing the performance of the mobiles and broadband products throughout these financial
highlights we have changed the presentation from the prior year. As wireless data cards operate on
the mobile network and provide a broadband service we have grossed up the mobile and broadband
revenues and physicals to include the results from EVDO and Next G data cards, this is consistent
with industry practice. The elimination of the grossed up component is shown separately in the
operating revenue summary.
Expenses
Operating expenses increased by 9.9% due to higher goods and services purchased, particularly subscriber acquisition costs supporting revenue growth, and increases in other expenses mainly
due to transformation activity, increased promotions and advertising expenses and added expenses
from entities acquired. This was offset by reduced labour costs as a result of lower staff numbers
and use of the redundancy provision raised in fiscal 2006. Total expenses (before interest and
tax) increased by 9.9%, which includes depreciation and amortisation growth of 9.9% driven by
transformation activity.
Net finance costs grew by 18.2% to $520 million due to higher average net debt levels and
increasing
interest rates.
Income tax expense decreased by 21.7% to $706 million.
Business transformation
The business transformation is progressing well and some of the highlights achieved during
the half-year include the launch of the Next G network, the ADSL 2+ launch, workplace productivity
improvements, customer service improvements and benefits from market based management initiatives
(i.e. subscription pricing). We have already begun reducing the complexity in our business and have
exited approximately 140 IT platforms and applications, and are starting to see the benefits from
our revenue acceleration program, including broadband and mobiles growth, a reduction in PSTN
decline and growth in online revenue. However, we are 13 months into our 5 year transformation plan
and there is still a lot of work to be done.
1
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
The key financial impacts that you will see throughout this document include the following:
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Labour costs we have achieved a significant reduction in our total 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. Redundancy expenses have also declined for the
half-year as costs associated with transformation were charged against the provision for
redundancy raised at the end of fiscal 2006; |
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Provision for restructuring and redundancy costs under Australian accounting standards we
made provision in fiscal 2006 for the expected costs of restructuring the business as part of
our transformation. The total provision raised in June 2006 was $427 million. As at 31
December 2006, the remaining balance of the total provision is $288 million; |
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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 component has contributed $148 million to the
increase in depreciation and amortisation expenditure; and |
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other various operational costs have been impacted by the implementation of business
transformation for the half-year as highlighted throughout the document. In total transformation
costs resulted in an increase in overall expenses of $137 million from the prior half-year
primarily within our service contracts and agreements expense. |
Changes to accounting treatments
We have applied UIG 4: Determining Whether an Arrangement Contains a Lease (UIG 4) to the
results reported for the first time in the half-year ended 31 December 2006. This UIG has impacted
both the recognition and classification of some 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 UIG 4. For detailed information regarding the impact of UIG 4 on
our financial information, refer to the December 2006 half-year financial statements. These are
available on our investor relations website at www.telstra.com.au/abouttelstra/investor/index.cfm.
These impacts have an immaterial impact on earnings.
Cash flow
Operating cash flow less investing cash flow (free cash flow) decreased by 55.9% for the
half-year ended 31 December 2006 to $862 million. This decline was due to a reduction in net cash
provided by operating activities driven by higher levels of external expenditure, and increased
cash used in investing activities as we launched our Next G network and continued working on the
IP enablement of our network and IT transformation.
Capital expenditure
Cash capital expenditure for the half-year ended 31 December 2006 increased by 38.0% to
$2,846 million. Core operating expenditure increased by 22.8% to $2,509 million. Higher capital
expenditure was driven primarily by the IP enablement of our network, IT transformation, as well as
the roll out of the Next G network. There was also an increase in our acquisitive investment
expenditure by $318 million largely related to our acquisition of SouFun.
2
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Treasury operations
Telstras financial position remains strong with current long-term credit ratings as of
January 2007 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 $14,473 million, a $1,697 million increase on the equivalent balance at
31 December 2005, largely driven by lower net cash produced from the ongoing operations of the
business offset by higher capital cash demands from our transformation investment. The balance
sheet continues to have strong capital settings.
Dividend
A fully franked interim ordinary dividend of 14 cents per share has been declared and is
payable on 30 March 2007. It is the current intention of the Board to declare fully franked
ordinary dividends of 28 cents per share for fiscal 2007. This assumes that we continue to be
successful in implementing our transformation strategy and there are no further material adverse
regulatory outcomes during the course of fiscal 2007. The final amount of dividends declared for
any year is a decision for the Board to make twice a year in its normal cycle having regard to our
earnings and cash flows as well as future regulatory impacts and all other factors that affect our
operations.
Outlook
We will continue to execute our strategy that was announced in November 2005. We have
started the investment in our transformation and we have seen margin pressure continue as our
revenue mix changes. Earnings have declined at both the EBITDA and EBIT lines, impacted by
transformational spend and costs of goods and services purchased as we invest in the future
revenue growth of the company particularly in 3GSM mobile services and broadband.
With our next generation networks, we continue to put 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 a result of our success in both the broadband and mobiles markets and lower than expected
impacts, at this stage, of ULL take-up, we expect full year revenue growth to be between 2.5% to
3.0% and a significant turnaround in EBIT performance in the second half for a full year
expectation of 3.0% to 5.0% EBIT growth. Our second half revenues will include revenue from the
distribution of the Melbourne Yellow book, deferred from the first half results of the prior
corresponding period. The second half of fiscal 2006 also included a full half of transformation
spend and the raising of a redundancy and restructuring provision. We do not expect to raise
another redundancy and restructuring provision during fiscal 2007.
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 continue to be phased out in the 2007 fiscal year.
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 with gradual improvement from 07/08 assuming
no investment in fibre to the node. Cash operating capital expenditure is expected to be in the
range of $5.4 billion to $5.7 billion in fiscal 2007.
3
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
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
Anthony OBrien
Acting Director, Investor Relations
Telstra Corporation Limited
Phone: +61 (3) 9634 8014,
Email: Investor.relations@team.telstra.com
4
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Table of contents
|
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|
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|
Page |
|
for the half-year ended 31 December 2006 |
|
Number |
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Summary financial information |
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6 |
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7 |
|
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8 |
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9 |
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10 |
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Analysis information |
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11 |
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13 |
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13 |
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18 |
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19 |
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20 |
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20 |
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21 |
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21 |
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22 |
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26 |
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28 |
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29 |
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30 |
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31 |
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32 |
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33 |
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34 |
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35 |
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36 |
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38 |
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40 |
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41 |
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42 |
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42 |
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43 |
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44 |
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46 |
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47 |
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48 |
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52 |
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|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
56 |
|
Product restatement |
|
|
58 |
|
Revenue half-yearly comparison |
|
|
59 |
|
5
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Summary financial information
Results of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$ m |
|
|
$m |
|
|
(% change) |
|
|
Sales revenue |
|
|
11,630 |
|
|
|
11,405 |
|
|
|
225 |
|
|
|
2.0 |
% |
Other revenue (excl. finance income) |
|
|
15 |
|
|
|
10 |
|
|
|
5 |
|
|
|
50.0 |
% |
|
|
|
|
|
|
|
Total revenue (excl. finance income) |
|
|
11,645 |
|
|
|
11,415 |
|
|
|
230 |
|
|
|
2.0 |
% |
Other income |
|
|
152 |
|
|
|
129 |
|
|
|
23 |
|
|
|
17.8 |
% |
|
|
|
|
|
|
|
Total income (excl. finance income) |
|
|
11,797 |
|
|
|
11,544 |
|
|
|
253 |
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour expense |
|
|
1,996 |
|
|
|
2,053 |
|
|
|
(57 |
) |
|
|
(2.8 |
%) |
Goods and services purchased |
|
|
2,566 |
|
|
|
2,195 |
|
|
|
371 |
|
|
|
16.9 |
% |
Other expenses |
|
|
2,318 |
|
|
|
2,011 |
|
|
|
307 |
|
|
|
15.3 |
% |
|
|
|
|
|
|
|
Operating expenses |
|
|
6,880 |
|
|
|
6,259 |
|
|
|
621 |
|
|
|
9.9 |
% |
Share of net loss from jointly controlled and associated entities |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) |
|
|
4,916 |
|
|
|
5,284 |
|
|
|
(368 |
) |
|
|
(7.0 |
%) |
Depreciation & amortisation |
|
|
1,978 |
|
|
|
1,800 |
|
|
|
178 |
|
|
|
9.9 |
% |
|
|
|
|
|
|
|
Earnings before interest & income tax expense (EBIT) |
|
|
2,938 |
|
|
|
3,484 |
|
|
|
(546 |
) |
|
|
(15.7 |
%) |
Net finance costs |
|
|
520 |
|
|
|
440 |
|
|
|
80 |
|
|
|
18.2 |
% |
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
2,418 |
|
|
|
3,044 |
|
|
|
(626 |
) |
|
|
(20.6 |
%) |
Income tax expense |
|
|
706 |
|
|
|
902 |
|
|
|
(196 |
) |
|
|
(21.7 |
%) |
|
|
|
|
|
|
|
Profit for the period |
|
|
1,712 |
|
|
|
2,142 |
|
|
|
(430 |
) |
|
|
(20.1 |
%) |
Minority interests in net (profits)/loss |
|
|
(8 |
) |
|
|
1 |
|
|
|
(9 |
) |
|
|
n/m |
|
|
|
|
|
|
|
|
Profit for the period available to Telstra Entity shareholders |
|
|
1,704 |
|
|
|
2,143 |
|
|
|
(439 |
) |
|
|
(20.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
29.2 |
% |
|
|
29.6 |
% |
|
|
|
|
|
|
(0.4 |
) |
EBITDA margin on sales revenue |
|
|
42.3 |
% |
|
|
46.3 |
% |
|
|
|
|
|
|
(4.0 |
) |
EBIT margin on sales revenue |
|
|
25.3 |
% |
|
|
30.5 |
% |
|
|
|
|
|
|
(5.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
cents |
|
|
cents |
|
|
cents |
|
|
% change |
|
Basic earnings per share (i) |
|
|
13.8 |
|
|
|
17.3 |
|
|
|
(3.5 |
) |
|
|
(20.2 |
%) |
Diluted earnings per share (i) |
|
|
13.7 |
|
|
|
17.3 |
|
|
|
(3.6 |
) |
|
|
(20.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid or declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend paid |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend paid with interim dividend |
|
|
|
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Basic and diluted earnings per share are impacted by the effect of shares held in trust for
employee share plans and instru ments held under executive remuneration plans. |
n/m not meaningful
6
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Cash flow summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Receipts from customers (inclusive of GST) |
|
|
12,736 |
|
|
|
12,417 |
|
|
|
319 |
|
|
|
2.6 |
% |
Payments to suppliers/employees (inclusive of GST) |
|
|
(8,339 |
) |
|
|
(7,466 |
) |
|
|
(873 |
) |
|
|
11.7 |
% |
|
|
|
|
|
|
|
Net cash generated from operations |
|
|
4,397 |
|
|
|
4,951 |
|
|
|
(554 |
) |
|
|
(11.2 |
%) |
Income taxes paid |
|
|
(966 |
) |
|
|
(1,003 |
) |
|
|
37 |
|
|
|
(3.7 |
%) |
|
|
|
|
|
|
|
Net cash provided by operating activities (i) |
|
|
3,431 |
|
|
|
3,948 |
|
|
|
(517 |
) |
|
|
(13.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for property, plant and equipment |
|
|
(2,114 |
) |
|
|
(1,761 |
) |
|
|
(353 |
) |
|
|
20.0 |
% |
Payments for intangibles |
|
|
(395 |
) |
|
|
(282 |
) |
|
|
(113 |
) |
|
|
40.1 |
% |
|
|
|
|
|
|
|
Capital expenditure before investments |
|
|
(2,509 |
) |
|
|
(2,043 |
) |
|
|
(466 |
) |
|
|
22.8 |
% |
Investment expenditure |
|
|
(337 |
) |
|
|
(19 |
) |
|
|
(318 |
) |
|
|
1673.7 |
% |
|
|
|
|
|
|
|
Capital expenditure |
|
|
(2,846 |
) |
|
|
(2,062 |
) |
|
|
(784 |
) |
|
|
38.0 |
% |
Receipts from asset sales/other proceeds/dividends |
|
|
247 |
|
|
|
36 |
|
|
|
211 |
|
|
|
586.1 |
% |
Interest received |
|
|
30 |
|
|
|
34 |
|
|
|
(4 |
) |
|
|
(11.8 |
%) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(2,569 |
) |
|
|
(1,992 |
) |
|
|
(577 |
) |
|
|
29.0 |
% |
|
|
|
|
|
|
|
Operating cash flows less investing cash flows |
|
|
862 |
|
|
|
1,956 |
|
|
|
(1,094 |
) |
|
|
(55.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements in borrowings/finance leases |
|
|
1,179 |
|
|
|
229 |
|
|
|
950 |
|
|
|
414.8 |
% |
Staff repayments of share loans |
|
|
11 |
|
|
|
11 |
|
|
|
|
|
|
|
0.0 |
% |
Dividends paid |
|
|
(1,739 |
) |
|
|
(2,485 |
) |
|
|
746 |
|
|
|
(30.0 |
%) |
Finance costs paid |
|
|
(540 |
) |
|
|
(470 |
) |
|
|
(70 |
) |
|
|
14.9 |
% |
Purchase of shares for employee share plans |
|
|
|
|
|
|
(6 |
) |
|
|
6 |
|
|
|
- |
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(1,089 |
) |
|
|
(2,721 |
) |
|
|
1,632 |
|
|
|
(60.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(227 |
) |
|
|
(765 |
) |
|
|
538 |
|
|
|
(70.3 |
%) |
|
|
|
|
|
|
|
|
|
|
(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 31 December 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. |
7
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Balance sheet summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as at |
|
|
31-Dec-06 |
|
|
30-Jun-06 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Current assets |
|
|
5,027 |
|
|
|
4,930 |
|
|
|
97 |
|
|
|
2.0 |
% |
Intangibles |
|
|
6,265 |
|
|
|
6,122 |
|
|
|
143 |
|
|
|
2.3 |
% |
Property, plant and equipment |
|
|
23,413 |
|
|
|
23,503 |
|
|
|
(90 |
) |
|
|
(0.4 |
%) |
Total non-current assets |
|
|
31,525 |
|
|
|
31,261 |
|
|
|
264 |
|
|
|
0.8 |
% |
Total liabilities |
|
|
(23,436 |
) |
|
|
(23,368 |
) |
|
|
(68 |
) |
|
|
0.3 |
% |
Net assets/shareholders equity |
|
|
13,116 |
|
|
|
12,823 |
|
|
|
293 |
|
|
|
2.3 |
% |
Gross debt |
|
|
(14,930 |
) |
|
|
(13,783 |
) |
|
|
(1,147 |
) |
|
|
8.3 |
% |
Net debt |
|
|
(14,473 |
) |
|
|
(13,094 |
) |
|
|
(1,379 |
) |
|
|
10.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA interest cover (times) |
|
|
9.4 |
|
|
|
10.3 |
|
|
|
(0.9 |
) |
|
|
(8.7 |
%) |
Net debt to EBITDA |
|
|
1.5 |
|
|
|
1.4 |
|
|
|
0.1 |
|
|
|
7.1 |
% |
Return on average assets |
|
|
16.4 |
% |
|
|
15.7 |
% |
|
|
|
|
|
|
0.7 |
% |
Return on average equity |
|
|
26.8 |
% |
|
|
24.1 |
% |
|
|
|
|
|
|
2.7 |
% |
Return on average investment |
|
|
22.0 |
% |
|
|
21.4 |
% |
|
|
|
|
|
|
0.6 |
% |
Net debt to capitalisation |
|
|
52.5 |
% |
|
|
50.5 |
% |
|
|
|
|
|
|
2.0 |
% |
8
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Segment information
Segment information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
Segment EBIT |
|
|
|
Half-year ended 31 December |
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
$m |
|
|
$m |
|
|
% |
|
|
Telstra Consumer, Marketing and Channels |
|
|
4,679 |
|
|
|
4,481 |
|
|
|
4.4 |
% |
|
|
2,763 |
|
|
|
3,041 |
|
|
|
(9.1 |
%) |
Telstra Business |
|
|
1,608 |
|
|
|
1,597 |
|
|
|
0.7 |
% |
|
|
1,299 |
|
|
|
1,302 |
|
|
|
(0.2 |
%) |
Telstra Enterprise and Government |
|
|
2,214 |
|
|
|
2,248 |
|
|
|
(1.5 |
%) |
|
|
1,291 |
|
|
|
1,302 |
|
|
|
(0.8 |
%) |
Telstra Wholesale |
|
|
1,487 |
|
|
|
1,427 |
|
|
|
4.2 |
% |
|
|
1,451 |
|
|
|
1,318 |
|
|
|
10.1 |
% |
Sensis |
|
|
885 |
|
|
|
1,012 |
|
|
|
(12.5 |
%) |
|
|
365 |
|
|
|
509 |
|
|
|
(28.3 |
%) |
Telstra International |
|
|
820 |
|
|
|
709 |
|
|
|
15.7 |
% |
|
|
26 |
|
|
|
32 |
|
|
|
(18.8 |
%) |
Telstra Operations |
|
|
115 |
|
|
|
123 |
|
|
|
(6.5 |
%) |
|
|
(1,912 |
) |
|
|
(1,785 |
) |
|
|
7.1 |
% |
Other (i) |
|
|
52 |
|
|
|
50 |
|
|
|
4.0 |
% |
|
|
(2,343 |
) |
|
|
(2,266 |
) |
|
|
3.4 |
% |
Eliminations |
|
|
(215 |
) |
|
|
(232 |
) |
|
|
(7.3 |
%) |
|
|
(2 |
) |
|
|
31 |
|
|
|
(106.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telstra (ii) |
|
|
11,645 |
|
|
|
11,415 |
|
|
|
2.0 |
% |
|
|
2,938 |
|
|
|
3,484 |
|
|
|
(15.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Results for the Other segment consists primarily of business unit results that do not
qualify as segments in their own right. The Asset Accounting Group is the main contributor to the
segment EBIT for this segment, which is primarily depreciation and amortisation charges.
(ii) For segment reporting purposes, certain items are disclosed or may be reallocated between
business units as required by the applicable accounting standard, and as a result may differ from
our internal reporting framework. Where no reasonable basis for reallocation exists the following
should be noted:
|
|
As 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 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. These allocations reflect managements accounting framework and internal
reporting system and accordingly no reasonable basis for reallocation exists. |
9
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Statistical data summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
% change |
|
|
Billable traffic data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls (number of calls) |
|
|
3,390 |
|
|
|
3,882 |
|
|
|
(492 |
) |
|
|
(12.7 |
%) |
National long distance minutes (i) |
|
|
3,594 |
|
|
|
3,666 |
|
|
|
(72 |
) |
|
|
(2.0 |
%) |
Fixed to mobile minutes |
|
|
2,339 |
|
|
|
2,234 |
|
|
|
105 |
|
|
|
4.7 |
% |
International direct minutes |
|
|
264 |
|
|
|
273 |
|
|
|
(9 |
) |
|
|
(3.3 |
%) |
Mobile voice telephone minutes (ii) |
|
|
4,147 |
|
|
|
3,611 |
|
|
|
536 |
|
|
|
14.8 |
% |
Inbound calling products B party minutes |
|
|
1,339 |
|
|
|
1,482 |
|
|
|
(143 |
) |
|
|
(9.6 |
%) |
Inbound calling products A party calls |
|
|
510 |
|
|
|
502 |
|
|
|
8 |
|
|
|
1.6 |
% |
Number of short messaging service (SMS) sent |
|
|
2,227 |
|
|
|
1,318 |
|
|
|
909 |
|
|
|
69.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network and operations data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service (iii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.47 |
|
|
|
5.52 |
|
|
|
(0.05 |
) |
|
|
(0.9 |
%) |
Business |
|
|
2.27 |
|
|
|
2.37 |
|
|
|
(0.10 |
) |
|
|
(4.2 |
%) |
|
|
|
|
|
|
|
Total retail customers |
|
|
7.74 |
|
|
|
7.89 |
|
|
|
(0.15 |
) |
|
|
(1.9 |
%) |
Domestic wholesale |
|
|
2.12 |
|
|
|
2.14 |
|
|
|
(0.02 |
) |
|
|
(0.9 |
%) |
|
|
|
|
|
|
|
Total basic access lines in services |
|
|
9.86 |
|
|
|
10.03 |
|
|
|
(0.17 |
) |
|
|
(1.7 |
%) |
|
|
= |
|
|
|
|
ISDN access (basic lines equivalents) (in thousands) (iv) |
|
|
1,226 |
|
|
|
1,205 |
|
|
|
21 |
|
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services in operation (SIO) (in thousands) (v) (vi) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3GSM |
|
|
1,024 |
|
|
|
20 |
|
|
|
1,004 |
|
|
|
n/m |
|
2GSM |
|
|
6,210 |
|
|
|
6,955 |
|
|
|
(745 |
) |
|
|
(10.7 |
%) |
CDMA |
|
|
1,658 |
|
|
|
1,607 |
|
|
|
51 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
Mobile services in operation |
|
|
8,892 |
|
|
|
8,582 |
|
|
|
310 |
|
|
|
3.6 |
% |
|
|
|
|
|
|
|
Total wholesale mobile SIOs (in thousands) |
|
|
129 |
|
|
|
101 |
|
|
|
28 |
|
|
|
27.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online subscribers (in thousands) (vi) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband subscribers retail |
|
|
1,839 |
|
|
|
1,188 |
|
|
|
651 |
|
|
|
54.8 |
% |
Broadband subscribers wholesale (vii) |
|
|
1,621 |
|
|
|
1,164 |
|
|
|
457 |
|
|
|
39.3 |
% |
|
|
|
|
|
|
|
Total broadband subscribers |
|
|
3,460 |
|
|
|
2,352 |
|
|
|
1,108 |
|
|
|
47.1 |
% |
Narrowband subscribers |
|
|
819 |
|
|
|
1,143 |
|
|
|
(324 |
) |
|
|
(28.3 |
%) |
|
|
|
|
|
|
|
Total online subscribers |
|
|
4,279 |
|
|
|
3,495 |
|
|
|
784 |
|
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FOXTEL subscribers (in thousands) |
|
|
1,182 |
|
|
|
1,074 |
|
|
|
108 |
|
|
|
10.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full time staff (viii) |
|
|
36,184 |
|
|
|
39,115 |
|
|
|
(2,931 |
) |
|
|
(7.5 |
%) |
Full time staff and equivalents (ix) |
|
|
43,989 |
|
|
|
45,456 |
|
|
|
(1,467 |
) |
|
|
(3.2 |
%) |
Total workforce (x) |
|
|
48,991 |
|
|
|
51,057 |
|
|
|
(2,066 |
) |
|
|
(4.0 |
%) |
|
|
|
(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) |
|
Includes wireless broadband SIOs (EVDO & HSDPA) |
|
(vii) |
|
Within Broadband, retail products include cable, satellite, BigPond Wireless, ADSL and mobile
data CDMA, 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. |
|
(viii) |
|
Excludes offshore, casual and part time employees. December 2005 has been restated, refer to
Labour section for further information. |
|
(ix) |
|
Includes all domestic and offshore employees, including controlled entities. December 2005 has
been restated, refer to Labour expense section for further information. |
|
(x) |
|
Includes all domestic
and offshore employees, including controlled entities, as well as contractors and agency staff. December 2005 has been restated, refer to Labour expense section for further information. |
10
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Operating revenues
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Fixed telephony |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
1,663 |
|
|
|
1,657 |
|
|
|
6 |
|
|
|
0.4 |
% |
Local calls |
|
|
432 |
|
|
|
553 |
|
|
|
(121 |
) |
|
|
(21.9 |
%) |
PSTN value added services |
|
|
125 |
|
|
|
123 |
|
|
|
2 |
|
|
|
1.6 |
% |
National long distance calls |
|
|
408 |
|
|
|
471 |
|
|
|
(63 |
) |
|
|
(13.4 |
%) |
Fixed to mobile |
|
|
749 |
|
|
|
761 |
|
|
|
(12 |
) |
|
|
(1.6 |
%) |
International direct |
|
|
94 |
|
|
|
106 |
|
|
|
(12 |
) |
|
|
(11.3 |
%) |
Fixed interconnection |
|
|
144 |
|
|
|
160 |
|
|
|
(16 |
) |
|
|
(10.0 |
%) |
|
|
|
|
|
|
|
Total PSTN products |
|
|
3,615 |
|
|
|
3,831 |
|
|
|
(216 |
) |
|
|
(5.6 |
%) |
|
|
|
|
|
|
|
ISDN products |
|
|
383 |
|
|
|
420 |
|
|
|
(37 |
) |
|
|
(8.8 |
%) |
Inbound calling products |
|
|
203 |
|
|
|
208 |
|
|
|
(5 |
) |
|
|
(2.4 |
%) |
Payphones |
|
|
48 |
|
|
|
54 |
|
|
|
(6 |
) |
|
|
(11.1 |
%) |
Customer premises equipment |
|
|
151 |
|
|
|
135 |
|
|
|
16 |
|
|
|
11.9 |
% |
Intercarrier access services |
|
|
87 |
|
|
|
69 |
|
|
|
18 |
|
|
|
26.1 |
% |
Other fixed telephony |
|
|
156 |
|
|
|
163 |
|
|
|
(7 |
) |
|
|
(4.3 |
%) |
|
|
|
|
|
|
|
Total fixed telephony |
|
|
4,643 |
|
|
|
4,880 |
|
|
|
(237 |
) |
|
|
(4.9 |
%) |
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services retail |
|
|
1,925 |
|
|
|
1,794 |
|
|
|
131 |
|
|
|
7.3 |
% |
Mobile services wholesale |
|
|
26 |
|
|
|
16 |
|
|
|
10 |
|
|
|
62.5 |
% |
Mobile services interconnection |
|
|
296 |
|
|
|
318 |
|
|
|
(22 |
) |
|
|
(6.9 |
%) |
Mobile services international roaming |
|
|
157 |
|
|
|
131 |
|
|
|
26 |
|
|
|
19.8 |
% |
Mobile services other |
|
|
37 |
|
|
|
32 |
|
|
|
5 |
|
|
|
15.6 |
% |
|
|
|
|
|
|
|
Total mobile services |
|
|
2,441 |
|
|
|
2,291 |
|
|
|
150 |
|
|
|
6.5 |
% |
|
|
|
|
|
|
|
Mobile handsets |
|
|
357 |
|
|
|
211 |
|
|
|
146 |
|
|
|
69.2 |
% |
|
|
|
|
|
|
|
Total mobiles |
|
|
2,798 |
|
|
|
2,502 |
|
|
|
296 |
|
|
|
11.8 |
% |
|
|
|
|
|
|
|
Internet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband |
|
|
79 |
|
|
|
117 |
|
|
|
(38 |
) |
|
|
(32.5 |
%) |
Retail broadband |
|
|
497 |
|
|
|
331 |
|
|
|
166 |
|
|
|
50.2 |
% |
Wholesale broadband |
|
|
279 |
|
|
|
209 |
|
|
|
70 |
|
|
|
33.5 |
% |
Other |
|
|
10 |
|
|
|
9 |
|
|
|
1 |
|
|
|
11.1 |
% |
|
|
|
|
|
|
|
Total internet |
|
|
865 |
|
|
|
666 |
|
|
|
199 |
|
|
|
29.9 |
% |
|
|
|
|
|
|
|
IP & data access |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet direct |
|
|
81 |
|
|
|
70 |
|
|
|
11 |
|
|
|
15.7 |
% |
Specialised data |
|
|
404 |
|
|
|
451 |
|
|
|
(47 |
) |
|
|
(10.4 |
%) |
IP access |
|
|
193 |
|
|
|
152 |
|
|
|
41 |
|
|
|
27.0 |
% |
Wholesale internet & data |
|
|
111 |
|
|
|
100 |
|
|
|
11 |
|
|
|
11.0 |
% |
|
|
|
|
|
|
|
Total IP & data access |
|
|
789 |
|
|
|
773 |
|
|
|
16 |
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
Business services and applications |
|
|
501 |
|
|
|
507 |
|
|
|
(6 |
) |
|
|
(1.2 |
%) |
Advertising and directories |
|
|
824 |
|
|
|
944 |
|
|
|
(120 |
) |
|
|
(12.7 |
%) |
CSL New World |
|
|
519 |
|
|
|
373 |
|
|
|
146 |
|
|
|
39.1 |
% |
TelstraClear |
|
|
286 |
|
|
|
321 |
|
|
|
(35 |
) |
|
|
(10.9 |
%) |
Offshore services revenue |
|
|
173 |
|
|
|
139 |
|
|
|
34 |
|
|
|
24.5 |
% |
Pay TV bundling |
|
|
164 |
|
|
|
156 |
|
|
|
8 |
|
|
|
5.1 |
% |
Other minor items |
|
|
136 |
|
|
|
175 |
|
|
|
(39 |
) |
|
|
(22.3 |
%) |
Elimination for wireless broadband |
|
|
(68 |
) |
|
|
(31 |
) |
|
|
(37 |
) |
|
|
119.4 |
% |
|
|
|
|
|
|
|
Sales revenue |
|
|
11,630 |
|
|
|
11,405 |
|
|
|
225 |
|
|
|
2.0 |
% |
Other revenue |
|
|
15 |
|
|
|
10 |
|
|
|
5 |
|
|
|
50.0 |
% |
|
|
|
|
|
|
|
Total revenue |
|
|
11,645 |
|
|
|
11,415 |
|
|
|
230 |
|
|
|
2.0 |
% |
Other income |
|
|
152 |
|
|
|
129 |
|
|
|
23 |
|
|
|
17.8 |
% |
|
|
|
|
|
|
|
Total income |
|
|
11,797 |
|
|
|
11,544 |
|
|
|
253 |
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
11
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
In the following discussion, we analyse revenue for each of our major products and services. The principal areas of operating revenue growth for the half-year ended 31 December 2006
were:
|
|
mobiles reflecting the continued growth in the number of subscribers, increased demand for 3GSM
services and higher minutes of use offset by continued pricing pressures; |
|
|
|
broadband due to a significant increase in our subscriber base partially due to migration from
narrowband products but also due to overall growth in the online market; |
|
|
CSL New World due to additional revenue received as a result of the merger between Hong Kong
CSL and New World PCS in fiscal 2006; and |
|
|
IP access driven primarily by the increased use of IP services by business customers (small
to medium enterprises), the introduction of new products to meet customer needs and the
increased use of the internet by businesses at greater bandwidth; |
offset by a decline in:
|
|
PSTN products revenue as customers continue to move towards new products and services to
satisfy their requirements and competition intensifies in the market,
although the decline in
retail lines in service has slowed considerably as has the revenue rate of decline; |
|
|
|
advertising and directories due to the deferral of the Melbourne Yellow print directory revenue
to January 2007 due to changes in printing contracts to reduce costs; |
|
|
|
specialised data as a result of products entering the mature phase of the product lifecycle with
customers moving to better business solutions in IP access products; |
|
|
|
narrowband mainly due to migration to broadband; and |
|
|
|
ISDN due to a reduction in voice calls revenue as a result of pricing pressures and lower
minutes of use, and decreased data calls revenue due to migration to alternative products such
as ADSL and symmetrical HDSL. |
We continue to see a 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). In the
latter area we have had two significant launches in this half-year with the release to the market
of our Next G and ADSL 2+ product offerings. In the second half of fiscal 2006, we also 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 rolled
out market based management throughout our business to enable us to better serve our customers as
we better understand their needs. These initiatives are showing positive signs in our revenue
results.
12
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Fixed telephony
Fixed telephony
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
PSTN products |
|
|
3,615 |
|
|
|
3,831 |
|
|
|
(216 |
) |
|
|
(5.6 |
%) |
ISDN products |
|
|
383 |
|
|
|
420 |
|
|
|
(37 |
) |
|
|
(8.8 |
%) |
Inbound calling products |
|
|
203 |
|
|
|
208 |
|
|
|
(5 |
) |
|
|
(2.4 |
%) |
Payphones |
|
|
48 |
|
|
|
54 |
|
|
|
(6 |
) |
|
|
(11.1 |
%) |
Customer premises equipment |
|
|
151 |
|
|
|
135 |
|
|
|
16 |
|
|
|
11.9 |
% |
Intercarrier access services |
|
|
87 |
|
|
|
69 |
|
|
|
18 |
|
|
|
26.1 |
% |
Other fixed telephony |
|
|
156 |
|
|
|
163 |
|
|
|
(7 |
) |
|
|
(4.3 |
%) |
|
|
|
|
|
|
|
Total fixed telephony revenue |
|
|
4,643 |
|
|
|
4,880 |
|
|
|
(237 |
) |
|
|
(4.9 |
%) |
|
|
|
|
|
|
|
PSTN products
PSTN products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Basic access revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Retail |
|
|
1,278 |
|
|
|
1,308 |
|
|
|
(30 |
) |
|
|
(2.3 |
%) |
- Domestic wholesale |
|
|
385 |
|
|
|
349 |
|
|
|
36 |
|
|
|
10.3 |
% |
Total basic access revenue |
|
|
1,663 |
|
|
|
1,657 |
|
|
|
6 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
Local call revenue |
|
|
432 |
|
|
|
553 |
|
|
|
(121 |
) |
|
|
(21.9 |
%) |
PSTN value added services revenue |
|
|
125 |
|
|
|
123 |
|
|
|
2 |
|
|
|
1.6 |
% |
National long distance call revenue |
|
|
408 |
|
|
|
471 |
|
|
|
(63 |
) |
|
|
(13.4 |
%) |
Fixed to mobile revenue |
|
|
749 |
|
|
|
761 |
|
|
|
(12 |
) |
|
|
(1.6 |
%) |
International direct revenue |
|
|
94 |
|
|
|
106 |
|
|
|
(12 |
) |
|
|
(11.3 |
%) |
Fixed interconnection |
|
|
144 |
|
|
|
160 |
|
|
|
(16 |
) |
|
|
(10.0 |
%) |
|
|
|
|
|
|
|
Total PSTN products revenue |
|
|
3,615 |
|
|
|
3,831 |
|
|
|
(216 |
) |
|
|
(5.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.47 |
|
|
|
5.52 |
|
|
|
(0.05 |
) |
|
|
(0.9 |
%) |
Business |
|
|
2.27 |
|
|
|
2.37 |
|
|
|
(0.10 |
) |
|
|
(4.2 |
%) |
|
|
|
|
|
|
|
Total retail |
|
|
7.74 |
|
|
|
7.89 |
|
|
|
(0.15 |
) |
|
|
(1.9 |
%) |
Domestic wholesale |
|
|
2.12 |
|
|
|
2.14 |
|
|
|
(0.02 |
) |
|
|
(0.9 |
%) |
|
|
|
|
|
|
|
Total access lines in service |
|
|
9.86 |
|
|
|
10.03 |
|
|
|
(0.17 |
) |
|
|
(1.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of local calls (in millions) |
|
|
3,390 |
|
|
|
3,882 |
|
|
|
(492 |
) |
|
|
(12.7 |
%) |
National long distance minutes (in millions)(i) |
|
|
3,594 |
|
|
|
3,666 |
|
|
|
(72 |
) |
|
|
(2.0 |
%) |
Fixed to mobile minutes (in millions) |
|
|
2,339 |
|
|
|
2,234 |
|
|
|
105 |
|
|
|
4.7 |
% |
International direct minutes (in millions) |
|
|
264 |
|
|
|
273 |
|
|
|
(9 |
) |
|
|
(3.3 |
%) |
|
|
|
|
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. |
13
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Total PSTN products revenue was $3,615 million, which declined by 5.6% or $216 million
during the half-year. This decline has slowed when compared with the 7.6% decline in the December
2005 half.
There has been a general reduction in PSTN volumes, with a decline in retail and wholesale basic
access lines for the half-year, although the decline in retail lines has slowed considerably.
Volumes have reduced 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 and
higher demand for alternative products.
During the second half of fiscal 2006, 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 have begun to impact positively
on our PSTN performance for the current half-year.
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.
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 continues to be affected by competition. However
the decline in retail lines in service has slowed considerably from 4.1% in the December 2005 half
and 3.4% for fiscal 2006. For the half-year 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. In the retail segment, we saw a 1.7% decline in lines in service, mainly
driven by the migration to other technologies which is underpinning the retail trend across PSTN
revenues. Retail churn results in recent months have shown positive trends. Wholesale access line s
in service have declined by 0.9% which is the first decline in a number of years.
Overall our operating revenue from basic access services increased. In the prior year, we
introduced various basic access packages, which reduced the decline in yield in this area, despite
an over all decrease in basic access lines in service.
The rental revenue decline has slowed 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, has contributed positively.
Partly offsetting this was an increase in the discounts to Whole of Business customers and
pensioners. Price increases for new service connections have also contributed to increased revenue.
14
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
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 21.9% or $121 million, 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 that have been heavily promoted
by competitors. Substitution of data local calls continues to occur due to the migration of dial-up
internet customers to broadband.
Generally, call volumes have continued to fall with a reduction in call volumes by 12.7%,
reflecting the impact of customers migrating to other products, such as mobiles, fixed to mobile,
and broadband products. Call volumes again declined at a faster rate than the decline in the number
of lines in service. Prices have fallen due to ongoing discounting and the impact of subscription
based pricing plans.
PSTN value added services
PSTN value added services revenue consists of a range of residential and business call
completion products such as MessageBank®, silent lines, calling number display and call return.
Our revenue from PSTN value added services increased by 1.6% or $2 million during the half-year.
Messaging and call completion products increased by 5.6% or $5 million. Calling number display
continued to grow due to attractive packaging discounts resulting in subscriber numbers increasing
by 7%. Easycall revenue grew reflecting higher revenue per call impacted by subscription pricing
plans.
Complex products declined by $3 million driven by a reduction in revenue for 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.
15
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
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.
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 13.4% or $63 million in the
half-year. 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 declined 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.
Revenue per minute has declined and is the main contributor to the reduction in revenues year on
year. There have been significant pricing and package changes in the last half-year which have
impacted results. Despite a flagfall increase for all Homeline plans, national long distance has
been impacted by the take up of subscription plans, one of which, Homeline Ultimate, has proven to
be popular as it offers free STD calls. Changes to rates between distance bands have also
contributed.
We continue to respond to competition offering a range of packages assisted by our market based
management approach. 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
growth of subscription pricing plans.
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 and subscription
pricing plans. 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 to mobiles. 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.
16
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
During the half-year, fixed to mobile revenue declined by 1.6% or $12 million. The decline
was driven by lower revenue per minute resulting from higher discounts associated with ongoing
competitive pressure, including incorporating fixed to mobile calls in reward offerings. 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 was due to both a
higher number of 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, international events, 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 11.3% or $12 million 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. International direct minutes declined 3.3% for the half-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
telecommunications market.
Our operating revenue from fixed interconnection decreased by 10.0% or $16 million driven mainly
by a reduction in volumes. Volume declines are in line with cross company trends in PSTN traffic
and have been particularly impacted by migration to mobiles and, to a small degree, ULL
(unconditioned local loop) build.
17
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
ISDN products
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 products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Access revenue |
|
|
212 |
|
|
|
211 |
|
|
|
1 |
|
|
|
0.5 |
% |
Data calls |
|
|
47 |
|
|
|
65 |
|
|
|
(18 |
) |
|
|
(27.7 |
%) |
Voice calls |
|
|
124 |
|
|
|
144 |
|
|
|
(20 |
) |
|
|
(13.9 |
%) |
|
|
|
|
|
|
|
Total calls revenue |
|
|
171 |
|
|
|
209 |
|
|
|
(38 |
) |
|
|
(18.2 |
%) |
|
|
|
|
|
|
|
Total ISDN products revenue |
|
|
383 |
|
|
|
420 |
|
|
|
(37 |
) |
|
|
(8.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN access
lines (basic access line equivalents) (in thousands) (i) |
|
|
1,226 |
|
|
|
1,205 |
|
|
|
21 |
|
|
|
1.7 |
% |
|
|
|
|
Note: statistical data represents managements best estimates. |
|
(i) |
|
Statistical data consistent with 30 June 2006 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 increased marginally by $1 million to $212 million. ISDN 2 has
improved by $5 million on December 2005 due to reduced discounting offset by a decline in SIOs due
to promotion and growth in Broadband and the number of DSL enabled exchanges. ISDN 10/20/30
declined by $4 million as a result of a yield reduction associated with the acquisition of new
services and whole of business deals.
ISDN data calls revenue declined by 27.7% or $18 million as Local and National Calls decreased by
$11 million and $7 million respectively. This result is due to customer migration to alternative
products such as ADSL and symmetrical HDSL, which offer higher bandwidths at reduced prices,
together with lower minutes of use.
ISDN voice calls comprising local voice, national voice and international voice calls made on the
Integrated Services Digital Network (ISDN), declined by 13.9% or $20 million, mainly due to the
decline in Local and National Calls by $13 million and $7 million respectively. Revenue from ISDN
Local voice is impacted by a revenue re-classification of Priority® One3 and 1300 A Party products
from ISDN to Inbound calling and lower minutes of use. Both Local and National Voice Calls have
experienced a fall in price due to pricing pressure.
18
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 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. |
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.
Inbound calling products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Inbound calling products revenue |
|
|
203 |
|
|
|
208 |
|
|
|
(5 |
) |
|
|
(2.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B party minutes (in millions) |
|
|
1,339 |
|
|
|
1,482 |
|
|
|
(143 |
) |
|
|
(9.6 |
%) |
A party calls (in millions) |
|
|
510 |
|
|
|
502 |
|
|
|
8 |
|
|
|
1.6 |
% |
|
|
|
|
Note: statistical data represents managements best estimates. |
Revenue from inbound calling products declined 2.4% to $203 million for the half-year ended
31 December 2006 mainly due to a decline in revenue from Freecall 1800 as a result of ongoing
price competition and substitution to 1300 services.
Our revenue from Priority®One3 and 1300 B Party products declined in the half-year due to very
competitive market pressures resulting in lower prices. Minutes of use and services in operation
have declined by 11.1% in this category of calls after the loss of some large volume customers.
This is offset by higher call volumes by 5% on our Priority® One3 and 1300 A Party products after
calls from our ISDN and Siteline products to these numbers were reclassified in September 2005 to
inbound calling. The volume increase is representative of a full 6 months of ISDN and Siteline
revenue being classified in Priority® One3 and 1300 A Party products for the half-year ending
December 2006.
In addition, there was revenue growth due to call charges for ISDN and Siteline calls made to One3
services increasing from a cost of a local call to 27.5 cents. Offsetting these increases is the
continuing trend of calls to these numbers being made from mobile phones resulting in mobiles
revenue being recorded.
19
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Payphones
Payphones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Payphone revenue |
|
|
48 |
|
|
|
54 |
|
|
|
(6 |
) |
|
|
(11.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra owned and operated payphones (thousands) |
|
|
27 |
|
|
|
31 |
|
|
|
(4 |
) |
|
|
(12.9 |
%) |
Privately owned and operated payphones (thousands) |
|
|
26 |
|
|
|
28 |
|
|
|
(2 |
) |
|
|
(7.1 |
%) |
|
|
|
|
|
|
|
Total number of payphones (in thousands) |
|
|
53 |
|
|
|
59 |
|
|
|
(6 |
) |
|
|
(10.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates. |
Payphone revenue declined by 11.1% to $48 million in the half-year ended 31 December 2006.
This is a result of substitution to other products, particularly prepaid mobile phones and
competitors prepaid calling cards. We removed a number of low usage phones resulting in a
reduction in the number of Telstra owned and operated payphones due to this migration. There has
also been a decline in privately owned and operated payphones of 7.1% as private operators removed
their support for unprofitable payphones, again due to increased mobile phone usage.
Customer premises equipment
Customer premises equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Customer premises equipment |
|
|
151 |
|
|
|
135 |
|
|
|
16 |
|
|
|
11.9 |
% |
|
|
|
|
|
|
|
Customer premises equipment (CPE) revenue increased by 11.9% to $151 million. This increase
was mainly driven by growth in Enhanced CPE products and PBX Products, offset by a decline in first
and extension phones.
Enhanced CPE Products grew after Telstra Business Systems (TBS) packages increased in volume by 58%
as a result of strong marketing activity and process improvements to support tools and processes.
PBX Products have increased mainly due to the half-year ended 31 December 2006 including revenue
from acquired entities Converged Networks Pty Ltd ($3 million) which was acquired in April 2006,
and Touchbase Avaya ($2 million) acquired in July 2006.
These increases were offset by a decline in revenues from first and extension phones due to ongoing
substitution to mobiles.
20
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Intercarrier access services
Our operating revenue from intercarrier fixed access products consists of revenue from
facilities access, unconditioned local loop, switch ports and interconnect network services,
wholesale operator services, local number portability and other wholesale access.
Intercarrier access services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Intercarrier access services |
|
|
87 |
|
|
|
69 |
|
|
|
18 |
|
|
|
26.1 |
% |
Intercarrier fixed access revenue increased by 26.1% or $18 million during the half-year
ended 31 December 2006. The main driver in the growth has been facilities access which has grown by
35.0% or $13 million due to other carrier/ service providers expanding their infrastructure by
using TEBA (Telstra Equipment and Building Access). TEBA sites have increased year on year as
service providers seek to extend DSL capability and prepare to build their own infrastructure.
Unconditioned local loop has increased by 25.2% or $4 million due to competitors building their
own networks. SIOs have increased by 100% but revenue is not reflective of this as regulatory
pressure has led to a downward pricing adjustment. Local number portability has increased by 79.5%
as our wholesale area of the business has increased their customers. This product allows customers
to offer their end users the option of keeping their existing number when taking up either a
wholesale local call or mobile service. Offsetting this growth is a decline in other wholesale
access products revenue by $2 million due to a reduction in commercial and pre-selection churn
charges and wholesale billing service charges.
Other fixed telephony
Other fixed telephony
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Telstra information and connection services |
|
|
62 |
|
|
|
60 |
|
|
|
2 |
|
|
|
3.3 |
% |
Virtual private network |
|
|
6 |
|
|
|
9 |
|
|
|
(3 |
) |
|
|
(33.3 |
%) |
International freecall |
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
0.0 |
% |
Card services |
|
|
22 |
|
|
|
27 |
|
|
|
(5 |
) |
|
|
(18.5 |
%) |
Satellite products |
|
|
8 |
|
|
|
7 |
|
|
|
1 |
|
|
|
14.3 |
% |
Customnet and spectrum |
|
|
54 |
|
|
|
56 |
|
|
|
(2 |
) |
|
|
(3.6 |
%) |
|
|
|
|
|
|
|
Total other fixed telephony revenue |
|
|
156 |
|
|
|
163 |
|
|
|
(7 |
) |
|
|
(4.3 |
%) |
|
|
|
|
|
|
|
In the half-year ended 31 December 2006 operating revenue from other fixed telephony
decreased by 4.3% or $7 million mainly due to a decline in card services, virtual private networks
and customnet and spectrum offset by an increase in Telstra information and connection services.
Card services includes postpaid card services, such as Homelink, Telecard and OneNumber, and
prepaid card services, such as Prepaid Home, Phoneaway, and say Gday. The decline in card services
revenue reflects an overall decline in the number of services due to substitution to cheaper and
more convenient calling products such as mobiles and because products such as Telecard and Homelink
1800 have entered the mature phase of the product lifecycle.
21
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Virtual private network enables multi location customers to link premises in Australia and
overseas to an integrated system without the use of leased lines. Virtual private network revenue
has decreased due to the discounting of call rates arising from competitive pressures.
Customnet and spectrum is a fully managed telephone system that provides a premium voice
communication application. The decrease in revenue is mainly due to declining local call revenue
caused by substitution to products such as fixed to mobile and lower prices offered to customers.
Telstra information and connection services includes operator assisted calls, directory assistance,
Sensis 1234 call connect and emergency reporting services. Sensis 1234 call connect is a premium
directory service for residential and business information including
most telephone numbers, addresses, business operating hours and URLs (where available). The
increase in Telstra information and connection services revenue is due to increased Sensis 1234
call connect revenues arising from longer average handling times of calls as a result of additional
content on offer, including updates on the weather, sporting events and film schedules. This is
offset by a decline in usage of directory assistance as customers move to the Sensis 1234 product
and a decline in international operator assisted calls.
Mobiles
Our operating revenue from mobiles consists of revenue from access fees and call charges, as
well as other services comprising international roaming, mobile MessageBank®, Short message service
(SMS) and other mobile data. Mobile data includes mobile wireless broadband products such as EVDO
and HSDPA which work off our CDMA and 3GSM 850 networks respectively. Operating mobiles revenue
includes revenue from the sale of mobile handsets and interconnection charges where calls from
other carriers customers terminate on our network.
In October 2006 we launched the Next GTM network, a new 3GSM network operating on the
850 megahertz spectrum. We provided services over four primary mobile technologies, CDMA, 2GSM,
3GSM 850 and 3GSM 2100. We have had large amounts of our current subscribers migrating from our old
networks onto our 3GSM networks and these account for 61.0% of current 3GSM SIOs. The new 3GSM 850
network is intended to reduce our level of network costs and complexity once our CDMA network is
closed, and has enabled 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 3GSM services to our customers over our existing 3GSM 2100 network through our joint venture
with Hutchison Telecommunication (Australia) Limited (Hutchison).
22
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Mobiles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Access fees and call charges |
|
|
1,375 |
|
|
|
1,387 |
|
|
|
(12 |
) |
|
|
(0.9 |
%) |
|
|
|
|
|
|
|
International roaming |
|
|
157 |
|
|
|
131 |
|
|
|
26 |
|
|
|
19.8 |
% |
Mobile messagebank |
|
|
106 |
|
|
|
94 |
|
|
|
12 |
|
|
|
12.8 |
% |
Mobile data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Short message service (SMS)(i) |
|
|
304 |
|
|
|
240 |
|
|
|
64 |
|
|
|
26.7 |
% |
- Non SMS data (ii) |
|
|
176 |
|
|
|
105 |
|
|
|
71 |
|
|
|
67.6 |
% |
|
|
|
|
|
|
|
Total mobile data |
|
|
480 |
|
|
|
345 |
|
|
|
135 |
|
|
|
39.1 |
% |
|
|
|
|
|
|
|
Total mobile services revenue retail |
|
|
2,119 |
|
|
|
1,957 |
|
|
|
162 |
|
|
|
8.3 |
% |
Mobile services revenue wholesale |
|
|
26 |
|
|
|
16 |
|
|
|
10 |
|
|
|
62.5 |
% |
Mobile services revenue mobiles interconnection |
|
|
296 |
|
|
|
318 |
|
|
|
(22 |
) |
|
|
(6.9 |
%) |
|
|
|
|
|
|
|
Total mobile services revenue |
|
|
2,441 |
|
|
|
2,291 |
|
|
|
150 |
|
|
|
6.5 |
% |
Mobile handset sales |
|
|
357 |
|
|
|
211 |
|
|
|
146 |
|
|
|
69.2 |
% |
|
|
|
|
|
|
|
Total mobile revenue (iii) |
|
|
2,798 |
|
|
|
2,502 |
|
|
|
296 |
|
|
|
11.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3GSM mobile SIO (thousands)(iv) |
|
|
1,024 |
|
|
|
20 |
|
|
|
1,004 |
|
|
|
n/m |
|
2GSM mobile SIO (thousands) |
|
|
6,210 |
|
|
|
6,955 |
|
|
|
(745 |
) |
|
|
(10.7 |
%) |
CDMA mobile SIO (thousands) |
|
|
1,658 |
|
|
|
1,607 |
|
|
|
51 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
Total mobile SIO (thousands) |
|
|
8,892 |
|
|
|
8,582 |
|
|
|
310 |
|
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless broadband SIO (thousands) (included in CDMA SIO & 3GSM above) |
|
|
204 |
|
|
|
47 |
|
|
|
157 |
|
|
|
334.0 |
% |
|
Prepaid mobile SIO (thousands) |
|
|
3,626 |
|
|
|
3,839 |
|
|
|
(213 |
) |
|
|
(5.5 |
%) |
Postpaid mobile SIO (thousands) |
|
|
5,266 |
|
|
|
4,743 |
|
|
|
523 |
|
|
|
11.0 |
% |
|
|
|
|
|
|
|
Total mobile SIO (thousands) |
|
|
8,892 |
|
|
|
8,582 |
|
|
|
310 |
|
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
CDMA wholesale mobile SIO (thousands) |
|
|
71 |
|
|
|
68 |
|
|
|
3 |
|
|
|
4.4 |
% |
GSM wholesale mobile SIO (thousands) |
|
|
58 |
|
|
|
33 |
|
|
|
25 |
|
|
|
75.8 |
% |
|
|
|
|
|
|
|
Total wholesale mobile SIO (thousands) |
|
|
129 |
|
|
|
101 |
|
|
|
28 |
|
|
|
27.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of SMS sent (in millions)(i) |
|
|
2,227 |
|
|
|
1,318 |
|
|
|
909 |
|
|
|
69.0 |
% |
Deactivation rate |
|
|
10.4 |
% |
|
|
8.7 |
% |
|
|
|
|
|
|
1.7 |
% |
Mobile voice telephone minutes (in millions)(v) |
|
|
4,147 |
|
|
|
3,611 |
|
|
|
536 |
|
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue per user per month $s (vi) |
|
|
40.55 |
|
|
|
38.79 |
|
|
|
1.76 |
|
|
|
4.5 |
% |
Average revenue per user per month excluding wireless broadband $s (vi) |
|
|
39.94 |
|
|
|
38.28 |
|
|
|
1.66 |
|
|
|
4.3 |
% |
Average prepaid revenue per user per month $s (vi) |
|
|
11.71 |
|
|
|
10.81 |
|
|
|
0.90 |
|
|
|
8.3 |
% |
Average postpaid revenue per user per month $s(vi) |
|
|
60.98 |
|
|
|
60.84 |
|
|
|
0.14 |
|
|
|
0.2 |
% |
Average mobile data revenue per user per month $s (vii) |
|
|
9.19 |
|
|
|
6.76 |
|
|
|
2.43 |
|
|
|
35.9 |
% |
|
|
|
|
Note: statistical data represents managements best estimates. |
|
(i) |
|
Includes short messaging service (SMS) and multimedia messaging services (MMS) |
|
(ii) |
|
Includes $68 million of revenue (December 2005: $31 million) relating to wireless
broadband services (EVDO & HSDPA) |
|
(iii) |
|
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. |
|
(iv) |
|
Total third generation (3G) SIOs include 3GSM SIOs and our EVDO wireless broadband SIOs included in CDMA. The number of 3G SIOs are 1,182k (3GSM: 1,024k plus EVDO: 158k). |
|
(v) |
|
Includes all calls made from mobile telephones including long distance and international calls,
excludes data, messagebank, international roaming and CSL New World. |
|
(vi) |
|
Average retail revenue per user per month is calculated using average retail SIOs and includes
mobile data, messagebank and roaming revenues. It excludes interconnection and wholesale revenue. |
|
(vii) |
|
Includes mobile & broadband wireless revenues (EVDO & HSDPA). |
23
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
As at the half-year ended 31 December 2006, mobile services revenue increased due to the
continued growth in the number of mobile telephone subscribers. The demand was particularly for
3GSM services as SIOs, which reached over the 1 million mark along with
expanding minutes of use, offset by continued pressure on prices. In addition, we experienced
strong growth in data products including SMS, Blackberry, EVDO and HSDPA.
Mobile revenues have continued to grow during the half-year driven by the increase in capped price
plans, heightened campaign activity particularly around Next G services, and the increasing use of
mobile data services such as Blackberry, EVDO and HSDPA. The large growth in EVDO and HSDPA has
been highlighted by an increase in SIOs of 157k for the half-year. The EVDO increase in SIOs of
109k is also the key reason for CDMA SIOs growing year on year. While voice continues to be the
largest contributor to mobiles revenue, mobile data, international roaming and messagebank are the
fastest growing, now representing 30.4% of mobile services revenue for the half-year.
Access fees and call charges revenue declined by 0.9% to $1,375 million in the half-year
reflecting a decrease in CDMA and 2GSM. Results have been impacted during the year by the growth in
capped price plans which has directly impacted revenue per minute. CDMA prepaid revenue per minute
was impacted by a promotion which gave CDMA subscribers half price calls for a year and was
included in prior half results. We moved from 4.8% of our mobile customers on capped plans in
December 2005 to 10.3% in December 2006. Call minutes generally increased for each technology, but
these benefits did not outweigh the negative impact on price for the period.
SIOs increased overall, but it was 3GSM 850 (net of 2GSM and 3GSM 2100) that drove the growth with
a 259k or a 3.7% increase in SIOs. In addition, CDMA increased by 51k or 3.2% in SIOs due to higher
EVDO SIOs. The GSM revenues benefited from an increased emphasis on 3GSM after the launch of Next GTM in October and the availability of new 3GSM handsets.
Revenue from international roaming grew by 19.8% to $157 million in the half-year ended 31 December
2006. The rise was due to an increase in both outbound and inbound. Outbound roaming minutes and
revenue per call have increased revenue. The increase in inbound roaming revenue is in line with
world wide mobile growth trends and the increase of travellers to Australia using their own mobile
phones.
Revenue from MessageBank® increased by 12.8% to $106 million in half-year primarily due to growth
in minutes resulting from higher mobile usage.
SMS and Multimedia Messaging Services (MMS) revenues increased by 26.7% to $304 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 half-year.
Non SMS data growth was also experienced mainly in the corporate segment through the Blackberry and
Telstra Mobile Broadband products on the EVDO and 3GSM networks. Arriving with the launch of Next
G was also the education of the market of new data services and that a higher speed network
makes data use better which has led to a previously non-active data population now using data. This
is reflected in the average overall mobile data revenue per user per month increasing by $2.43 or
35.9%. Mobile data (excluding messaging) is now 8.3% of mobile ARPU.
Wholesale mobile service revenue increased for the half-year ended 31 December 2006 by 62.5% or $10
million due to growth in the Wholesale GSM resale product.
Average revenue per user (ARPU) increased by $1.76 to $40.55 for the half-year ended 31 December on
a blended basis. This has been driven by higher ARPUs experienced on our
3GSM base compared with those experienced on the other 2GSM technologies with an approximate $20
per month ARPU premium being maintained. Data usage has been a key product driver of this increase.
Volumes have increased by 76.0%.
24
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Mobiles interconnection revenue has declined 6.9% to $296 million. The main product driving
this is mobiles terminating revenue which has been impacted by a retrospective regulatory pricing
adjustment made on the mobiles terminating access (MTA) rate. The rate has dropped from 18 cents
per call minute in 2005 to 15 cents per call minute in 2006. This was despite a 12.3% increase in
termination volumes resulting from growth across the entire market. GSM wholesale domestic roaming
grew in the half by $22 million which corresponds directly to a $7 million drop in CDMA roaming due
to migration towards Hutchisons 3GSM products as an alternative to CDMA. SMS interconnect has
grown by $14 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.
Revenue from handset sales increased by 69.2% to $357 million in the half-year ending 31 December
2006 primarily due to growth in the number of 3GSM mobile handsets sold. This growth is attributed
to an increase in marketing campaign activity focusing on the launch of Next G network and the
sale of 3GSM handsets. The move away from CDMA and 2GSM to higher priced 3GSM handsets has had the
effect of increasing the average revenue of handsets sold.
The deactivation rate has increased in the half-year by 1.7% due to a decline in prepaid mobile
SIOs of 213k as a result of pricing pressures of the market and introduction in May 2006 of a
shorter access period for recharge.
25
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Internet
Revenue from internet services is driven primarily by:
|
|
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; |
|
|
|
demand for greater bandwidth services such as broadband; and |
|
|
|
the increased need to access broadband services on a mobile basis. |
While internet markets have been experiencing growth, competition has put pressure on our prices.
We expect that these trends will continue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Narrowband |
|
|
79 |
|
|
|
117 |
|
|
|
(38 |
) |
|
|
(32.5 |
%) |
Retail broadband |
|
|
497 |
|
|
|
331 |
|
|
|
166 |
|
|
|
50.2 |
% |
Wholesale broadband |
|
|
279 |
|
|
|
209 |
|
|
|
70 |
|
|
|
33.5 |
% |
Other |
|
|
10 |
|
|
|
9 |
|
|
|
1 |
|
|
|
11.1 |
% |
|
|
|
|
|
|
|
Total internet revenue |
|
|
865 |
|
|
|
666 |
|
|
|
199 |
|
|
|
29.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband subscribers retail (in thousands) (i)(ii) |
|
|
1,839 |
|
|
|
1,188 |
|
|
|
651 |
|
|
|
54.8 |
% |
Broadband subscribers wholesale (in thousands) |
|
|
1,621 |
|
|
|
1,164 |
|
|
|
457 |
|
|
|
39.3 |
% |
|
|
|
|
|
|
|
Total broadband subscribers (in thousands) |
|
|
3,460 |
|
|
|
2,352 |
|
|
|
1,108 |
|
|
|
47.1 |
% |
Narrowband subscribers retail (in thousands) |
|
|
819 |
|
|
|
1,143 |
|
|
|
(324 |
) |
|
|
(28.3 |
%) |
|
|
|
|
|
|
|
Total online subscribers |
|
|
4,279 |
|
|
|
3,495 |
|
|
|
784 |
|
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue per retail broadband subscriber per month ($s) |
|
|
49.49 |
|
|
|
54.32 |
|
|
|
(4.83 |
) |
|
|
(8.9 |
%) |
Average revenue per retail broadband subscriber per month before wireless broadband ($s) |
|
|
46.96 |
|
|
|
50.42 |
|
|
|
(3.46 |
) |
|
|
(6.9 |
%) |
|
|
|
|
Note: statistical data represents managements best estimates. |
|
(i) |
|
Telstra internet direct (Retail ADSL) are not included in retail broadband revenue and
subscriber numbers. |
|
(ii) |
|
Our broadband subscribers include 204k subscribers relating to our wireless broadband products
for December 2006 and 47k for December 2005. |
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. During the
half-year there was continued demand for capacity combined with competitive pricing which 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.
There are a range of internet products and packages offered 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 (including ADSL 2+),
satellite and wireless on the Next G and CDMA networks.
For the half-year ended 31 December 2006, our internet revenue grew by 29.9% or $199 million to
$865 million. The subscriber base for our broadband products grew significantly, partially due to
migration from narrowband products
26
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
but also due to growth in the overall online market. As at 31 December 2006, we
had approximately 3.5 million broadband customers with over 1.8 million of these being retail
customers. There has been a significant rise in demand resulting from competitive pricing
strategies.
Narrowband revenue decreased by 32.5% to $79 million for the half-year. Home subscribers have
declined by 30% to approximately 684k and business subscribers by 21% to approximately 135k. The
decline in narrowband revenue highlights the growing impact of dial-up to broadband migration. 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 50.2% to $497 million for the half-year, mainly due to strong
increases in SIOs, although overall ARPU declined half on half. Broadband ARPUs have however been
maintained compared with the second half of fiscal 2006. ADSL, cable and wireless have been key
drivers of the SIO growth, with ADSL increasing by 51.4% to 1,303k subscribers and cable increasing
by 19.8% to 308k subscribers. Wireless contributed to overall subscriber growth with BigPond EVDO
launched in August 2005 and HSDPA on the Next G network launched in October 2006. These products
contributed 157k to the increase in our subscribers over the last 12 months. BigPond marked its
10th anniversary in November with the launch of national high speed broadband network.
The network delivers significantly increased speeds from exchanges offering ADSL 2+ services. The
introduction of a number of key price and value campaigns has also stimulated broadband take up
including, high-speed cable plans, price/value offers which included a combination of discounting
access and installation offers, various sales channel and marketing initiatives and competitive
differentiation such as appealing and popular content offers.
As our customers migrate from narrowband to broadband our overall blended ARPU has increased from
December 2005 to December 2006. This result is due to broadband subscribers increasing at a greater
rate than narrowband migration. Broadband subscribers have a substantially higher APRU than
narrowband and the proportional mix of customers has changed.
Wholesale broadband revenue increased by 33.5% to $279 million for the half-year ended 31 December
2006, driven by a continuing strong market demand for high bandwidth services stimulated by retail
competition. Wholesale DSL internet grade has grown by 33.7% to $251 million driven by SIO growth
of 29.6% to 1,391k, combined with delayed ULL build activity and a stable average revenue per user.
Spectrum sharing services has also contributed to revenue growth, after strong SIO growth from 90k
to 230k.
Other revenue, which is made up of media content and BigPond webhosting services, increased by
11.1% or $1 million over the half-year. BigPond webhosting services primarily relates to the
hosting of fully functional personal or business websites for customers, however the majority of
the revenue growth can be attributed to media content with movie, music, games and sport content
all growing over the period.
27
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
IP & data access
IP & data access
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Internet direct |
|
|
81 |
|
|
|
70 |
|
|
|
11 |
|
|
|
15.7 |
% |
Specialised data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Frame relay |
|
|
136 |
|
|
|
157 |
|
|
|
(21 |
) |
|
|
(13.4 |
%) |
- ATM |
|
|
40 |
|
|
|
46 |
|
|
|
(6 |
) |
|
|
(13.0 |
%) |
- Digital data services |
|
|
82 |
|
|
|
104 |
|
|
|
(22 |
) |
|
|
(21.2 |
%) |
- Leased lines |
|
|
114 |
|
|
|
112 |
|
|
|
2 |
|
|
|
1.8 |
% |
- International private lines |
|
|
14 |
|
|
|
14 |
|
|
|
|
|
|
|
0.0 |
% |
- Other specialised data |
|
|
18 |
|
|
|
18 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
Total specialised data |
|
|
404 |
|
|
|
451 |
|
|
|
(47 |
) |
|
|
(10.4 |
%) |
IP access |
|
|
193 |
|
|
|
152 |
|
|
|
41 |
|
|
|
27.0 |
% |
Wholesale internet & data |
|
|
111 |
|
|
|
100 |
|
|
|
11 |
|
|
|
11.0 |
% |
|
|
|
|
|
|
|
Total IP & data access revenue |
|
|
789 |
|
|
|
773 |
|
|
|
16 |
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Frame access ports (in thousands) |
|
|
29 |
|
|
|
33 |
|
|
|
(4 |
) |
|
|
(12.1 |
%) |
|
|
|
Note: statistical data represents managements best estimates. |
Our operating revenue from IP and data access products consists of revenue from Internet
direct, specialised data, IP Access and Wholesale internet and data. This product suite is used
primarily by small to large enterprise customers. IP and data access
has increased by 2.1% or $16 million driven mainly by IP access, internet direct and wholesale internet and data.
IP access has grown due to newer technology attracting a migration of small business and enterprise
customers from mature products in specialised data.
Internet direct has increased by 15.7% to $81 million due mainly to Telstra Virtual ISP where a
commercial deal signed has helped increase SIOs by 38k or 100%. The Telstra Virtual ISP product
brings together our MegaPoP national dial-IP platform with our wholesale internet solution to
provide dedicated dial-up ports that customers can on-sell to end users.
Specialised data has declined by 10.4% to $404 million in revenue due to the maturing nature of the
products in this category with most customers moving to IP Access products which provide better
business solutions. Digital Data Services (DDS), is a maturing product with majority of customers
now opting for symmetrical HDSL solutions. Digital data access has declined as wholesale customers
are leaving this product and building their own networks. The maturity in DDS products has lead to
a decline in revenue of 21.2% or $22 million.
Frame revenue has declined by 13.4% to $136 million due to frame products maturing and customers
migrating to newer technologies particularly Symmetrical HDSL. ATM has declined 13.0% to $40
million due to customers moving to other leased lines, IP MAN and IP WAN. The migration of ATM
customers to other leased lines has resulted in a revenue increase in this category, offset by
voice graded dedicated lines due to customers migrating to DSL based or wireless technologies like
IP MAN and IP WAN.
Our operating revenue from IP access is driven primarily by the increased use of IP services by
business customers (small to medium enterprises), the introduction of new products to meet customer
needs and the increased use of the internet by businesses at greater bandwidth. IP access has grown
by 27.0% to $193 million due to new subscribers in
28
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Symmetrical HDSL, IPWAN and IPMAN/Ethernet. Symmetrical HDSL has increased SIOs by 52.0%
with increased revenue of $18 million underlining the growth phase of this product due to the
demand for broadband/VPN networks.
IPMAN/Ethernet and IP WAN have increased revenue in the IP access category by $25 million. IP
MAN/Ethernet products have increased volume by 49.0% due to the capability to provide next
generation data access services with high-speed IP and Ethernet access solutions respectively for
large to medium corporate enterprises. This is particularly underlined by the government sectors
demand for wideband intern et protocol. IP WAN growth can be attributed to increased discounting
and the beneficial impact of being part of bundled solutions such as Connect IP.
Wholesale internet and data has increased by 11.0% or $11 million mainly due to wholesale leased
transmission increasing revenue by $11 million driven by transmission growth. Main reasons behind
the growth include an increase in end user bandwidth demand driven by
corporate networks, internet usage, ISPs growing DSL network coverage and requiring backhaul and
mobile providers requiring additional backhaul to support bandwidth requirements for their 3GSM
networks. The SIOs for transmission have increased by 3k or 26.0%. Wholesale VPN (virtual private
networks) also grew by $4 million as wholesale customers found an attractive alternative to deliver better internet solutions, offset by our wholesale internet products which have declined by $6
million due to pricing pressures in the market place.
Business services and applications
Our operating revenue from business services and applications 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 CPE
management, radio networks and new wireless based technologies; |
|
|
|
IT services which is managed customer infrastructure (e.g. desktop and end user devices),
hosting and application development. In addition, IT services also includes professional consulting
and deployment services; |
|
|
|
business applications including IP telephony, end to end conferencing
solutions and products that support transaction services; and |
|
|
|
our eBusiness and global data
centre. |
|
|
|
|
|
|
|
|
|
Business services and applications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Managed network services |
|
|
136 |
|
|
|
154 |
|
|
|
(18 |
) |
|
|
(11.7 |
%) |
IT services |
|
|
279 |
|
|
|
298 |
|
|
|
(19 |
) |
|
|
(6.4 |
%) |
Business applications |
|
|
61 |
|
|
|
54 |
|
|
|
7 |
|
|
|
13.0 |
% |
Other |
|
|
25 |
|
|
|
1 |
|
|
|
24 |
|
|
|
n/m |
|
|
|
|
|
|
|
|
Total business services and applications revenue |
|
|
501 |
|
|
|
507 |
|
|
|
(6 |
) |
|
|
(1.2 |
%) |
|
|
|
|
|
|
|
For the half-year ended 31 December 2006, business services and applications revenue declined 1.2% to $501 million mainly due to lower managed network services and IT services
revenue.
The decrease in managed network services revenue of 11.7% or $18 million was driven by reductions
in managed voice and data products, together with managed WAN and radio. Managed voice and managed
data declined due to reduced project activity, lower CPE leasing and product substitution to IP
telephony. Managed WAN and managed radio was lower across a number of customers and also
experienced lower construction activity.
29
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
IT services revenue declined by $19 million to $279 million for the half-year mainly due to
the sale of Australian Administration Services (AAS) in August 2006. The half-year to December 2005
included a full 6 months of revenue compared to only 2 months in the current half-year. This
decline was partially offset by revenue earned from a number of new government contracts signed,
along with the Department of Defences Central Office IT Infrastructure Support Services contract
signed in December 2005 which is a five-year contract for an estimated $200 million.
Business applications has primarily grown due to IP telephony as customers transition from
traditional systems to converged voice and data platforms, together with improved contact solutions
revenues, particularly network computer telephony integration (CTI).
Other revenues have increased due to the recognition of managed industrial network services being
reported separately from the external construction product this half-year. Overall the revenue from
this product has remained flat after an increase in sales offset by a change in the recognition
policy for project losses. Previously losses were recognised over the life of the project whereas
this now occurs up front.
Advertising and directories
Our advertising and directories revenue is predominantly derived from our wholly owned
company, Sensis, and its controlled entities. The Sensis group provides innovative advertising and
search solutions through a print, online, voice, wireless and satellite navigation network.
The majority of Advertising and Directories revenue is derived from our print and online
directories Yellow and White Pages® which have grown steadily overall due to the introduction
of new print and directory advertising initiatives.
Advertising and directories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Advertising and directories revenue |
|
|
824 |
|
|
|
944 |
|
|
|
(120 |
) |
|
|
(12.7 |
%) |
|
|
|
|
|
|
|
The half-year revenue result was impacted by the deferral of the Melbourne Yellow print
directory production from December 2006 to January 2007. Excluding the impact of the revenue
deferral of $174 million from our prior year results, our Advertising and Directories revenue grew
by 7.0%. The acquisition of SouFun has also contributed $24 million to the Advertising and
Directories revenue during the half-year.
For a detailed description of the performance in this area, please refer to the Sensis financial
summary on page 44.
30
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 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, until March 2006 when this entity
merged with Hong Kong based mobile company New World PCS. As a 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
CSL New World |
|
|
519 |
|
|
|
373 |
|
|
|
146 |
|
|
|
39.1 |
% |
TelstraClear |
|
|
286 |
|
|
|
321 |
|
|
|
(35 |
) |
|
|
(10.9 |
%) |
Other offshore controlled entities |
|
|
173 |
|
|
|
139 |
|
|
|
34 |
|
|
|
24.5 |
% |
|
|
|
|
|
|
|
Total offshore controlled entities revenue |
|
|
978 |
|
|
|
833 |
|
|
|
145 |
|
|
|
17.4 |
% |
|
|
|
|
|
|
|
Consolidated revenue from offshore controlled entities increased for the half-year ended 31
December 2006 by 17.4% to $978 million. This growth was primarily due to the following factors:
|
|
CSLNW revenue growth of 39.1% to $519 million was driven by strong growth in mobile services
revenue and mobile handset revenue. This growth was mainly due to additional revenue of $121
million being generated as a result of the merger between Hong Kong CSL and New World PCS in
March 2006. Mobile services revenue was driven by rising data, international voice and prepaid
revenue. However this was offset by declining local voice revenue due to the impact of
sustained pricing pressure. Mobile handset revenue growth was mainly due to the merger and
handset promotions being well received by the market. Revenue growth was also effected by a $9
million unfavourable foreign exchange rate impact. |
|
|
TelstraClear experienced a net decline in revenue of 10.9% to $286 million. There were
significant declines in calling revenues largely due to lower usage and falls in the customer
base along with a decline due to fewer one-off implementation charges. Internet revenue
declined due to market led price erosion and a smaller customer base mainly in the business
segment. Revenue was also negatively impacted by the NZ$ exchange rate, with a $20 million
foreign exchange impact. Access revenue growth partially offset the other categories of
decline, mainly due to increased gateway revenue in the business segment. |
31
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
|
|
The 24.5% growth to $173 million growth in other offshore controlled entities revenue was
mainly due
to growth in Asia, US and Europe. The Asian market business grew by $14 million mainly due to
continued strong sales growth in the established Telstra Singapore and Telstra Hong Kong
businesses. The KAZ business also exhibited strong growth in the same region. The US business grew
by $10 million mainly as a result of a major contract to provide telecommunications solutions over
an integrated global IP-based network. Predominantly the growth resulted from the Service Provider
Channel in the USA, particularly Global Crossing and to a lesser degree Broadwing. Revenue growth
in Europe of $9 million was mainly due to increases in data and hosting revenue growth through
PSINet. This growth was partly offset by the continued erosion of the Powergen and Cable Telecom
customer bases. |
For further detail regarding the performance of our major offshore subsidiaries CSLNW and
TelstraClear, refer to the business summaries on pages 46 and 47.
Pay TV bundling
Pay TV bundling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Pay TV bundling revenue |
|
|
164 |
|
|
|
156 |
|
|
|
8 |
|
|
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Pay TV bundling subscribers (thousands) |
|
|
309 |
|
|
|
287 |
|
|
|
22 |
|
|
|
7.7 |
% |
Austar Pay TV bundling subscribers (thousands) |
|
|
38 |
|
|
|
54 |
|
|
|
(16 |
) |
|
|
(29.6 |
%) |
|
|
|
|
|
|
|
Total Pay TV bundling subscribers (thousands) |
|
|
347 |
|
|
|
341 |
|
|
|
6 |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates.
Total pay TV bundling revenue grew by 5.1% to $164 million for the half-year ended 31 December
2006, with FOXTEL revenue growing $11 million, offset by a decline in AUSTAR revenue of $3 million.
FOXTEL bundled services revenue grew by 8.6% to $145 million after an increase in subscribers by
7.7%, largely due to the FOXTEL conversion campaign during the half-year targeting both new
customers and existing analogue customers. Higher revenue per user and a reduction in discounts
also contributed to the revenue growth. FOXTEL on the Next G handsets was made available in
October 2006 and as a result it is yet to have any significant impact on revenue growth.
At 31 December 2006, analogue services in operation represented approximately 1% of FOXTEL
subscribers compared with 21.4% at the same time last year. We are in the process of closing the
analogue network and as a result analogue services remaining will be minimal.
The AUSTAR bundled services revenue decline for the half-year of 14.1% to $19 million was mainly
due to a declining subscriber base, as a result of limited marketing activity undertaken throughout
the period.
32
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Other minor items
Other minor items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
HFC cable usage |
|
|
40 |
|
|
|
41 |
|
|
|
(1 |
) |
|
|
(2.4 |
%) |
Commercial and recoverable works |
|
|
14 |
|
|
|
25 |
|
|
|
(11 |
) |
|
|
(44.0 |
%) |
External construction |
|
|
18 |
|
|
|
59 |
|
|
|
(41 |
) |
|
|
(69.5 |
%) |
Other |
|
|
64 |
|
|
|
50 |
|
|
|
14 |
|
|
|
28.0 |
% |
|
|
|
|
|
|
|
Total other minor items revenue |
|
|
136 |
|
|
|
175 |
|
|
|
(39 |
) |
|
|
(22.3 |
%) |
|
|
|
|
|
|
|
Operating revenue from other minor items decreased by 22.3% to $136 million for the half-year
ended 31 December 2006. The revenue decline was mainly due to lower external construction and
commercial and recoverable works.
External construction revenue decreased by 69.5% to $18 million. External construction revenue,
which is generated by the delivery of communications network infrastructure solutions, declined
mainly due to a $24 million reclassification of revenue into managed industrial networks, part of
business services and applications, and a decrease in revenue from carrier customers. All carrier
customer projects are progressively being wound down as we move out of this business. These
decreases were marginally offset by an increase in activity relating to the construction of the
3GSM 2100 network in conjunction with our joint venture partner, Hutchison.
Commercial and recoverable works revenue declined 44.0% to $14 million mainly due to the conclusion
of certain contracts, the discontinuing of network build projects for our competitors and the shift
from using full-time staff to contractors for recoverable work, thereby reducing expenditure, but
also reducing revenue on this activity.
HFC cable usage is made up of revenue received from FOXTEL for cable installations and service
calls. Revenue decreased marginally as a result of a decline in cable field works as FOXTEL are
taking up their own installation activity. This decrease was partially offset by an increase in
revenue share due to higher subscriber numbers and continuing migration from analogue to digital.
Other revenue increased by 28.0% to $64 million mainly due to increases in overdue account payments
revenue as a result of a $4 increase for overdue bills $200 and higher, and pricing plan
adjustments revenue increasing due to incorrect pricing based on some of our plans.
33
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Other revenue
Other revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Rental Income |
|
|
15 |
|
|
|
10 |
|
|
|
5 |
|
|
|
50.0 |
% |
|
|
|
|
|
|
|
Rental income growth was mainly due to changes to some of our data centre leases, along with a
sublease agreement relating to the office space Australian Administrative Services (AAS) continues
to occupy.
Other income
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Proceeds from sale of property, plant and equipment |
|
|
15 |
|
|
|
17 |
|
|
|
(2 |
) |
|
|
(11.8 |
%) |
Proceeds from sale of investments |
|
|
242 |
|
|
|
|
|
|
|
242 |
|
|
|
|
|
|
|
|
|
|
|
|
Asset/investment sales |
|
|
257 |
|
|
|
17 |
|
|
|
240 |
|
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of property, plant & equipment |
|
|
(11 |
) |
|
|
(8 |
) |
|
|
(3 |
) |
|
|
37.5 |
% |
Cost of investment |
|
|
(194 |
) |
|
|
|
|
|
|
(194 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cost of asset / investment sale |
|
|
(205 |
) |
|
|
(8 |
) |
|
|
(197 |
) |
|
|
n/m |
|
|
|
|
|
|
|
|
Net gain/loss on assets/investment sale |
|
|
52 |
|
|
|
9 |
|
|
|
43 |
|
|
|
477.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO levy receipts |
|
|
25 |
|
|
|
28 |
|
|
|
(3 |
) |
|
|
(10.7 |
%) |
Government subsidies |
|
|
51 |
|
|
|
63 |
|
|
|
(12 |
) |
|
|
(19.0 |
%) |
Miscellaneous income |
|
|
24 |
|
|
|
29 |
|
|
|
(5 |
) |
|
|
(17.2 |
%) |
|
|
|
|
|
|
|
Other income |
|
|
100 |
|
|
|
120 |
|
|
|
(20 |
) |
|
|
(16.7 |
%) |
|
|
|
|
|
|
|
Total other income |
|
|
152 |
|
|
|
129 |
|
|
|
23 |
|
|
|
17.8 |
% |
|
|
|
|
|
|
|
Total other income increased by 17.8% to $152 million for the half-year ended 31 December
2006.
Income growth in this area was driven by proceeds from sale of investments of $242 million. This
mainly related to the sale of Australian Administration Services (AAS) in August 2006, the
superannuation administration business of our KAZ Group, for $231 million, recognising a net gain
on sale of approximately $44 million. We also sold Platefood Limited, which provided search
marketing software and search results to directories and media companies, in November 2006.
Proceeds from this sale were $10 million, with a net gain on sale of $4 million.
The decline in revenue for the half-year ending 31 December 2006 was mainly due to less revenue
being received in relation to the Broadband Connect Australia scheme compared with the prior year.
Also contributing to the decline was the timing of the final Esten scheme payment, which is not due
until the second half of 2007. The Esten scheme provides funding for mobile coverage in designated
rural areas.
34
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Labour expense |
|
|
1,996 |
|
|
|
2,053 |
|
|
|
(57 |
) |
|
|
(2.8 |
%) |
Goods and services purchased |
|
|
2,566 |
|
|
|
2,195 |
|
|
|
371 |
|
|
|
16.9 |
% |
Other expenses |
|
|
2,318 |
|
|
|
2,011 |
|
|
|
307 |
|
|
|
15.3 |
% |
|
|
|
|
|
|
|
|
|
|
6,880 |
|
|
|
6,259 |
|
|
|
621 |
|
|
|
9.9 |
% |
Share of net loss from jointly controlled and associated entities |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
6,881 |
|
|
|
6,260 |
|
|
|
621 |
|
|
|
9.9 |
% |
Depreciation and amortisation |
|
|
1,978 |
|
|
|
1,800 |
|
|
|
178 |
|
|
|
9.9 |
% |
|
|
|
|
|
|
|
Total operating expenses |
|
|
8,859 |
|
|
|
8,060 |
|
|
|
799 |
|
|
|
9.9 |
% |
|
|
|
|
|
|
|
In the half-year ended 31 December 2006, our total operating expenses (including share of net
loss from jointly controlled and associated entities) was $8,859 million, compared with $8,060
million in the prior corresponding period. Our operating expenses have been impacted by the
following factors:
|
|
higher goods and services purchased mainly relating to cost of mobile sales as a result of
increased market campaign activity, especially following the launch of the Next GTM
network; |
|
|
|
costs associated with transformational initiatives, mainly related to service contracts and other
agreements, amounting to $137 million; |
|
|
|
growth in depreciation on our communications plant asset base along with the impact of a service
life review of our asset base as part of transformation activities. The impact of this service life
review increased depreciation expense by $148 million in the current half-year; |
|
|
|
additional operating expenses of $152 million in the half year ended 31 December 2006 from our
acquisition activity including the SouFun acquisition, as well as the inclusion of a full six
months of expenses relating to entities we acquired in the second half of fiscal 2006. This
included expenses relating to Adstream and New World PCS. Offsetting this increase is a reduction to our expenses of $33 million, attributable to our
divestment of Australian Administrative Services (AAS) in August 2006; |
|
|
|
lower labour expenses as a result of reduced staff numbers and the utilisation of the
restructuring and redundancy provision raised at the end of fiscal 2006, which has the effect of
lowering our redundancy expense compared with the prior half-year; and |
|
|
|
lower network payment costs as a result of reduced mobile terminating access rates and lower net
costs flowing through from REACH, resulting in lower offshore outpayments. |
35
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 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 casual and part time employees or employees in our offshore
subsidiary entities. 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 undertook a comprehensive review of the sources of our workforce numbers and
this resulted in a restatement of our workforce figure for the half-year ended 31 December 2005.
For 31 December 2005, we previously reported domestic full time employees of 39,406, full time
employees and employed equivalents of 45,876 and total workforce of 52,705. We have revised these
numbers for the half-year 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 our reported staff
balances to enable us to better manage the business.
Labour expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Labour expense |
|
|
1,996 |
|
|
|
2,053 |
|
|
|
(57 |
) |
|
|
(2.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full time employees (whole numbers) (i) |
|
|
36,184 |
|
|
|
39,115 |
|
|
|
(2,931 |
) |
|
|
(7.5 |
%) |
Full-time employees and employed equivalents (whole numbers) (ii) |
|
|
43,989 |
|
|
|
45,456 |
|
|
|
(1,467 |
) |
|
|
(3.2 |
%) |
Total workforce , including contractors and agency staff (whole numbers) (iii) |
|
|
48,991 |
|
|
|
51,057 |
|
|
|
(2,066 |
) |
|
|
(4.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in total workforce in fiscal 2006 excluding impact of the New World merger |
|
|
(3,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in total workforce since June 2006 excluding acquisition/divestment activity (iv) |
|
|
(737 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total reduction in workforce |
|
|
(4,596 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates.
|
|
|
(i) |
|
Excludes offshore, casual and part time employees. 31 December 2005 balance has been restated,
refer to details above. |
|
(ii) |
|
Includes all domestic and offshore employees, including those of our subsidiary entities. 31
December 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. 31 December 2005 balance has been restated, refer to details above. |
|
(iv) |
|
The reduction in total workforce since June 2006 excludes the impact of our divestment in
Australian Administration Services Pty Ltd and our acquisition of SouFun Holdings Ltd, both of
which occurred in August 2006. |
36
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
During the half-year ended 31 December 2006, our total workforce decreased by 0.9% or 453 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
transformation initiatives take effect. During the half-year, we also acquired SouFun Holdings
Limited which contributed 1,194 full time equivalent staff and we sold Australian Administration
Services, which reduced staff numbers by 910. As highlighted in the above table, excluding the
impact of these investment changes, total workforce numbers have declined 737 from 30 June 2006.
Our labour expense decreased by 2.8% to $1,996 million mainly due to:
|
|
increased levels of redundancy resulting in lower staff levels and therefore a reduction in
salary costs; |
|
|
|
a reduction in redundancy costs; |
|
|
|
lower overtime payments partially offset by
higher contractor and agency payments; and |
|
|
|
a reduction of workers compensation costs based on a
decrease due to a lower number of claims and claim payments and an increase in the bond rate. |
We incurred redundancy expenses of $51 million for the half-year ended 31 December 2006 compared
with $96 million for the comparable period last year. As part of the business restructure, we
raised a provision for restructuring and redundancy at the end of fiscal 2006 which has been
utilised in line with the level of transformational redundancy activity that has taken place in the
current half-year.
The above decreases in labour expense were partially offset by an increase due to pay rises
resulting from Enterprise Agreement increases for award staff and contract staff rate increases,
together with higher pension costs (due to an adjustment for additional curtailment costs) and the
impact of lower labour costs capitalised.
37
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 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 include 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 contracts, sub-contractors and leases),
service fees (predominantly in relation to our pay television services) and paper purchases and
printing costs.
Goods and services purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Cost of goods sold handset subsidies |
|
|
417 |
|
|
|
211 |
|
|
|
206 |
|
|
|
97.6 |
% |
Cost of goods sold other |
|
|
610 |
|
|
|
406 |
|
|
|
204 |
|
|
|
50.2 |
% |
Usage commissions |
|
|
159 |
|
|
|
130 |
|
|
|
29 |
|
|
|
22.3 |
% |
Network payments |
|
|
887 |
|
|
|
1,005 |
|
|
|
(118 |
) |
|
|
(11.7 |
%) |
Service fees |
|
|
171 |
|
|
|
154 |
|
|
|
17 |
|
|
|
11.0 |
% |
Managed services |
|
|
106 |
|
|
|
91 |
|
|
|
15 |
|
|
|
16.5 |
% |
Dealer performance commissions |
|
|
59 |
|
|
|
35 |
|
|
|
24 |
|
|
|
68.6 |
% |
Paper purchases and printing |
|
|
64 |
|
|
|
86 |
|
|
|
(22 |
) |
|
|
(25.6 |
%) |
Other |
|
|
93 |
|
|
|
77 |
|
|
|
16 |
|
|
|
20.8 |
% |
|
|
|
|
|
|
|
Total goods and services purchased |
|
|
2,566 |
|
|
|
2,195 |
|
|
|
371 |
|
|
|
16.9 |
% |
|
|
|
|
|
|
|
Our goods and services purchased increased in the half-year mainly due to higher mobile
handset subsidies and cost of goods sold, offset by lower network payments. This expense category
increased by 16.9% to $2,566 million due to the following factors:
|
|
an increase of $49 million due to the inclusion of a full six months of expenses relating to New
World PCS, which was merged with CSL in the second half of the prior fiscal year. The increase is
mainly seen in cost of goods sold handset subsidies and network payments. Offsetting this
increase is our divestment of Australian Administrative
Services in August 2006, contributing to a decline of $6 million; |
|
|
|
a rise in cost of goods sold mobile handset subsidies of $206 million, attributable to an
increase in the take up of handsets on subsidised plans as well as higher average subsidies
offered. This is mainly due to the launch of the
Next GTM network in October 2006 and a significant campaign extending into the first
quarter of the fiscal year. As a result, we have seen a larger range of handsets being subsidised.
Our average subscriber acquisition and retention cost is $183 for the current half-year, up from
$121 in the prior corresponding period, as we invest in our subscriber base to drive growth. In
addition, the CSL New World Mobility Group has implemented a more aggressive handset subsidy
policy in order to increase handset sales; |
|
|
|
a rise in other cost of goods sold is mainly due to higher sales volumes for mobile handsets and
a higher average cost per handset. This is primarily driven by increased market campaign activity,
especially following the launch of the
Next GTM network. Strong BigPond broadband demand and sales growth in other product
categories such as CPE for small business customers have also driven the increase. Additionally,
payments made to Brightstar, which started in the second half of fiscal 2006, also contributed.
These payments were made in accordance with our procurement agreement with them to centrally
source wireless devices from global suppliers with a view to achieving cost savings. Significant
costs have been avoided as a result of the Brightstar arrangement, inclusive of the above
payments; |
38
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
|
|
usage commissions increased by 22.3% to $159 million, largely driven by higher
commissionable mobile revenue in the half-year, as well as increased uptake of non-mobile related
products such as BigPond products; |
|
|
|
growth in dealer performance commissions, mainly attributable to a higher number of new mobile
activations and re-contracts through external dealer channels as a result of increased market
campaign activity and the launch of the Next GTM network. These commission payments are
contract payments based on specific performance targets; |
|
|
|
service fees increased by 11.0% to $171 million in the half-year led by a rise in bundling of pay
television services due to growth in bundled FOXTEL subscribers, price increases and payments to
vendors for content supplied on 3GSM mobile phones. Other drivers for the increase are variable
costs related to Blackberry and Mobile Content; and |
|
|
|
our managed services costs grew by 16.5% to $106 million in the half-year ended 31 December 2006,
mainly attributed to increased project management professional service costs by third party
suppliers for the support of the major customer contracts growth. |
The increases were partially offset by a decrease in other goods and services expenses such as
network payments and paper purchases and printing costs.
Our network payments declined by $118 million to $887 million largely due to:
|
|
a reduction in the mobile terminating access rate to 15 cents per minute, which was backdated to
January 2006 based on an ACCC determination. Hence, $61 million of the reduction in our domestic
network outpayments relates to the second half of fiscal 2006; and |
|
|
lower payments made to REACH for international capacity and termination costs due to lower net
costs flowing through from REACH, which in turn reduces our share of expenses. |
The decrease in network payments has been partly offset by volume increases of domestic mobile and
SMS traffic terminating on other carriers networks. Our offshore outpayments have also grown due
to higher outbound roaming revenue, as well as growth in our UK, USA and Asian operations and the
consolidation of expenses from New World PCS.
Paper purchase and printing costs decreased by 25.6% to $64 million in the half-year ended 31
December 2006 largely due to the shift of production of the Melbourne Yellow print directory from
December 2006 to January 2007 this fiscal year, due to the renegotiation of a printing contract.
Our divestment of Australian Administrative Services in August 2006 has also contributed to the
cost reduction.
Other goods and services purchased has increased by $16 million mainly as a result of an increase
in commercial project payments, which increased by $10 million in the half-year ended 31 December.
This is mainly due to an accounting adjustment related to previously deferred expenses in relation
to several customer contracts.
39
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Other expenses
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Property, motor vehicle and IT rental expense |
|
|
307 |
|
|
|
292 |
|
|
|
15 |
|
|
|
5.1 |
% |
Net foreign currency conversion losses/(gains) |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
0.0 |
% |
Audit fees |
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
0.0 |
% |
Service contracts and other agreements |
|
|
1,047 |
|
|
|
892 |
|
|
|
155 |
|
|
|
17.4 |
% |
Promotion and advertising |
|
|
212 |
|
|
|
154 |
|
|
|
58 |
|
|
|
37.7 |
% |
General and administration |
|
|
452 |
|
|
|
398 |
|
|
|
54 |
|
|
|
13.6 |
% |
Other operating expenses |
|
|
197 |
|
|
|
188 |
|
|
|
9 |
|
|
|
4.8 |
% |
Impairment and diminution expenses |
|
|
102 |
|
|
|
86 |
|
|
|
16 |
|
|
|
18.6 |
% |
|
|
|
|
|
|
|
Total other expenses |
|
|
2,318 |
|
|
|
2,011 |
|
|
|
307 |
|
|
|
15.3 |
% |
|
|
|
|
|
|
|
Our other expenses were $2,318 million in the half-year ended 31 December 2006, a 15.3%
increase. Our other expenses in the current half-year include $48 million relating to a full six
months of expenses, attributable to the merger of CSL with New World PCS, the consolidation of
expenses from SouFun, and Adstream which was acquired in the second half of the prior fiscal year.
This increase is partially offset by the divestment of Australian Administrative Services in August
2006 of $4 million.
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 by 17.4% to $1,047 million in the half-year ended 31 December 2006, mainly driven
by the following factors:
|
|
costs associated with transformational initiatives largely associated with the IP enablement of
our network and IT transformation of $80 million; |
|
|
payments to Brightstar for management of our Channel Logistics Operations centre, which did not
exist in the prior corresponding period. A payment is made to Brightstar based on the volumes of
handsets shipped out from the centre to the various sales channels; |
|
|
volume based increases including increased activations, billing enquiries and content related
payments for BigPond products due to product growth; and |
|
|
a rise in consultancy costs associated with the company transformation activity. |
Our promotion and advertising costs increased by 37.7% to $212 million during the half-year mainly
due to increased spend related to the launch of the Next GTM network, as well as more
marketing activity to stimulate growth of Broadband and wireless products.
General and administration expenses increased by 13.6% to $452 million in the half-year ended 31
December 2006. This is mainly driven by changes in booking practices following improved invoicing
procedures, which has seen costs previously booked to Service Contracts and Agreements now
reclassified as accommodation and information technology costs. Also contributing to the increase
is higher building maintenance costs, as well as electricity costs associated with running the new
Next GTM network. Our training costs have also increased due to our focus on training
and equipping our field staff in order to better service and satisfy customer needs, which is an
important part of the transformation. Legal costs have risen during the half-year due to increased
litigation and other legal work, including
40
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
the Crazy Johns Mobile World litigation, Optus Home Access litigation, Shareholder class
action and the IT transformation. The increases have been partially offset by lower IT costs
arising out of the re-negotiation of an IT vendor contract as part of the transformation strategy.
Our impairment and diminution expense has increased by 18.6% to $102 million in the half-year ended
31 December 2006. This is mainly attributable to increased bad and doubtful debt expenses and
higher inventory write down expenses. Our doubtful debt expense has risen due to increased aged
debt associated with broadband customers, as well as a large decrease in the prior corresponding
period, which related to a provision for doubtful debts no longer required. Our inventory write
down expense has increased in our construction business due to the transformation, as well as the
impact of extra mobile handsets, causing slow moving stock to be written off more quickly.
Partially offsetting these increases was lower non-inventory impairment costs largely due to the
retirement of several IT assets in the prior fiscal year. The prior corresponding period has also
included costs associated with the cancellation of partially completed capital projects, which were
not required in the current half-year.
Property, Motor Vehicle and IT rental expense increased by $15 million to $307 million, mainly due
to the consolidation of expenses from New World PCS, which was merged with CSL in the second half
of the prior fiscal year. This is partly offset by lower IT rental expense as a result of the
purchase, instead of the lease, of a number of new servers.
Other operating expenses increased by $9 million during the half-year primarily due to lower
capitalised costs resulting in higher labour costs being expensed. The increases have been offset
by reductions in miscellaneous purchases and material usage due to a lower level of activity
compared to the prior corresponding period.
Share of net loss from jointly controlled and associated entities
Share of net loss from jointly controlled and associated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Share of net loss from jointly controlled and associated entities |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
Our share of net loss from jointly controlled and associated entities includes our share of
both profits and losses from equity accounted investments.
Prior year results included the net position of payments made to REACH and FOXTEL, offset by equity
profits in Xantic. We have since sold the Xantic business and no equivalent payments have been made
to REACH or FOXTEL in the current year. Our net loss from jointly controlled and associated
entities is minimal.
There were no significant unrecognised profits/losses in either FOXTEL or REACH. As the carrying
value of our investment in both REACH and Foxtel has been written down to nil, any share of
profits/losses from these entities will not be recognised. These entities will resume equity
accounting once the accumulated losses have been fully offset by our share of profits derived from
these entities.
41
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Depreciation |
|
|
1,592 |
|
|
|
1,437 |
|
|
|
155 |
|
|
|
10.8 |
% |
Amortisation |
|
|
386 |
|
|
|
363 |
|
|
|
23 |
|
|
|
6.3 |
% |
|
|
|
|
|
|
|
Total depreciation and amortisation |
|
|
1,978 |
|
|
|
1,800 |
|
|
|
178 |
|
|
|
9.9 |
% |
|
|
|
|
|
|
|
Our depreciation and amortisation expense has risen by 9.9% to $1,978 million for the
half-year ended 31 December 2006.
During the second half of last fiscal year, as part of the transformation strategy we undertook a
strategic review of the service lives of our assets. The result of this was an acceleration of
depreciation and amortisation of certain CDMA network, switching and software assets, which has
contributed $148 million to the year on year increase. We have not accelerated the depreciation and
amortisation of CDMA assets where those assets are deemed to have alternative future uses (i.e. the
CDMA spectrum will continue to be used with the Next GTM network).
Excluding this impact, depreciation grew by 1.7% to $1,830 million. Contributing to this increase
were:
|
|
further growth in our communications plant; and |
|
|
|
the acquisitions of Adstream (February 2006), the merging of New World PCS with Hong Kong CSL
(March 2006) and SouFun (August 2006) (contributing a total of $33 million). |
Net finance costs
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Borrowing costs |
|
|
511 |
|
|
|
481 |
|
|
|
30 |
|
|
|
6.2 |
% |
Finance leases |
|
|
6 |
|
|
|
1 |
|
|
|
5 |
|
|
|
500.0 |
% |
(Gain)/loss in fair value hedge instruments |
|
|
12 |
|
|
|
(21 |
) |
|
|
33 |
|
|
|
(157.1 |
%) |
Unwinding of discount on liabilities recognised at present value |
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
Finance costs |
|
|
549 |
|
|
|
481 |
|
|
|
68 |
|
|
|
14.1 |
% |
Finance income |
|
|
(29 |
) |
|
|
(41 |
) |
|
|
12 |
|
|
|
(29.3 |
%) |
|
|
|
|
|
|
|
Net finance costs |
|
|
520 |
|
|
|
440 |
|
|
|
80 |
|
|
|
18.2 |
% |
|
|
|
|
|
|
|
Our finance costs are influenced by:
|
|
our debt level; |
|
|
|
interest rates; |
|
|
|
our debt maturity profile; |
|
|
|
movements in our borrowing cost margins; |
|
|
|
our interest payment profile; and |
|
|
|
our level of cash assets (affects net debt). |
42
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Our net debt levels increased from $12,776 million as at 31 December 2005 to $14,473 million
as at 31
December 2006. This increase was driven by lower net cash produced from the ongoing operations of
the business and higher capital cash demands from our transformation investment.
Total finance costs have increased by 14.1% to $549 million due to increased borrowing costs and a
movement in gains/losses on fair value hedge instruments. The increase in borrowing costs of 6.2%
is primarily as a result of increased net debt levels combined with the impact of increased
interest rates in the half-year. The gain/loss on fair value of hedge instruments moved from a gain
of $21 million for the half-year ending 31 December 2005 to a loss of $12 million in the current
half due to a decrease in our borrowing credit margins.
Income tax expense
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Income tax expense |
|
|
706 |
|
|
|
902 |
|
|
|
(196 |
) |
|
|
(21.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
29.2 |
% |
|
|
29.6 |
% |
|
|
|
|
|
|
(0.4 |
%) |
Income tax expense decreased by $196 million in the half-year ended 31 December 2006, mainly
as a result of the decrease in operating profit before income tax expense.
The effective tax rate in the current half-year is 29.2% compared with the prior half-year of
29.6%. The effective tax rate is consistent with the commonwealth statutory income tax rate of
30.0%. Our effective tax rate was affected by the non taxable profit on sale of the Australian
Administration Services Group as it was offset by carried forward capital losses.
43
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 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
We are a leading provider of advertising and search services through our advertising business
Sensis and its controlled entities. Sensis provides innovative advertising and search solutions
through a print, online, voice, wireless and satellite navigation network.
Sensis financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
Change |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
% |
|
Sales revenue |
|
|
885 |
|
|
|
1,002 |
|
|
|
(117 |
) |
|
|
(11.7 |
%) |
Total income |
|
|
889 |
|
|
|
1,002 |
|
|
|
(113 |
) |
|
|
(11.3 |
%) |
Total expenses (including depreciation and amortisation) |
|
|
496 |
|
|
|
477 |
|
|
|
19 |
|
|
|
4.0 |
% |
EBITDA |
|
|
448 |
|
|
|
562 |
|
|
|
(114 |
) |
|
|
(20.3 |
%) |
EBIT |
|
|
393 |
|
|
|
525 |
|
|
|
(132 |
) |
|
|
(25.1 |
%) |
CAPEX |
|
|
68 |
|
|
|
45 |
|
|
|
23 |
|
|
|
51.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin |
|
|
50.6 |
% |
|
|
56.1 |
% |
|
|
|
|
|
|
(5.5 |
%) |
Amounts included for Sensis represent the contribution included in Telstras consolidated result.
The half-year result was impacted by the deferral of the Melbourne Yellow print directory
production from December 2006 to January 2007. Excluding the impact of this result of $174 million
in revenue and $15 million in expenses from the prior year, total income grew by 7.4% and EBITDA
11.2%, whilst EBIT grew 7.4%. On this basis, EBITDA margin was 48.7% in the prior year and has
grown to 50.6% in the current year.
Sensis total income is split into the following categories:
Sensis total income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
Change |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
% |
|
- YellowTM revenue |
|
|
526 |
|
|
|
692 |
|
|
|
(166 |
) |
|
|
(24.0 |
%) |
- WhitePages revenue |
|
|
146 |
|
|
|
135 |
|
|
|
11 |
|
|
|
8.1 |
% |
- Classified revenue |
|
|
65 |
|
|
|
71 |
|
|
|
(6 |
) |
|
|
(8.5 |
%) |
- Emerging business |
|
|
63 |
|
|
|
46 |
|
|
|
17 |
|
|
|
37.0 |
% |
- SouFun revenue |
|
|
24 |
|
|
|
|
|
|
|
24 |
|
|
|
n/m |
|
|
|
|
|
|
|
|
Total advertising and directories |
|
|
824 |
|
|
|
944 |
|
|
|
(120 |
) |
|
|
(12.7 |
%) |
Voice |
|
|
55 |
|
|
|
52 |
|
|
|
3 |
|
|
|
5.8 |
% |
Other |
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
Total Sensis sales revenue |
|
|
885 |
|
|
|
1,002 |
|
|
|
(117 |
) |
|
|
(11.7 |
%) |
Other income |
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
n/m |
|
|
|
|
|
|
|
|
Total Sensis external income |
|
|
889 |
|
|
|
1,002 |
|
|
|
(113 |
) |
|
|
(11.3 |
%) |
|
|
|
|
|
|
|
44
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Excluding $174 million of revenue earned relating to Melbourne Yellow print in the prior
fiscal year, Yellow revenue grew by 1.5% to $526 million, driven by strong online usage and new
initiatives such as Home@Yellow. Home@Yellow is a new website that offers people thinking of renovating their home all the
information, advice and online tools they need to make an informed choice before contacting a
supplier.
White Pages® revenue grew by 8.1% to $146 million. This was driven by continued strong advertiser
support and new advertiser products such as In-Column Screen Highlighter, a new option for
advertisers seeking to stand out in the White Pages® print directories.
Classifieds revenue declined largely as a result of competitive factors in print, although online
growth continues to be strong.
Emerging businesses delivered 37.0% growth to $63 million. Location & Navigation experienced strong
double digit growth driven by accelerating satellite navigation demand, while demand for MediaSmart
online solutions also grew strongly.
In August 2006, we acquired 55% (on an undiluted basis) of the issued capital of SouFun, a leading
real estate and home improvement website in China, for a total cash consideration of US$254
million. SouFun provides an entry point into China, allowing Sensis to leverage core capabilities
into a larger, faster growing and less mature market than Australia. SouFun has contributed $24
million in revenue for the half-year ended 31 December 2006.
Total expenses increased by 4.0% due mainly to the following:
|
|
labour expenses grew by $11 million due to organic growth of the workforce and through the
acquisition of Adstream in February 2006 and SouFun; |
|
|
|
excluding the $15 million impact of the production shift of Melbourne Yellow print from December
2006 to January 2007, cost of goods sold decreased by $1m as a result of lower negotiated printing
costs; |
|
|
|
other costs increased by $5 million due to increased promotion and advertising spend and
acquisitions; and |
|
|
|
depreciation and amortisation expense grew by $18m due to a change in software amortisation
policy and investment in emerging business. |
45
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
CSL New World Mobility Group financial summary
The CSL New World Mobility Group (CSLNW) is our Hong Kong based mobile group. It was formed in
March 2006 when we merged the CSL entity with New World PCS to form CSLNW. This transaction
involved us exchanging a 23.6% share in CSL and receiving a controlling interest in the merged
group of 76.4%.
CSLNW operates in the highly competitive Hong Kong mobile market, with the CSL part of entity being
one of Hong Kongs premium providers of mobile voice and data services and New World PCS targeting
value conscious customers with a low cost business model. The merged entity provides a broad
customer base for growth.
CSL New World Mobility Group
financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year ended 31 December |
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
|
A$m |
|
|
A$m |
|
|
% |
|
|
HK$m |
|
|
HK$m |
|
|
% |
|
|
Total income |
|
|
519 |
|
|
|
375 |
|
|
|
38.4 |
% |
|
|
3,085 |
|
|
|
2,189 |
|
|
|
40.9 |
% |
Total expense (including depreciation & amortisation) |
|
|
484 |
|
|
|
338 |
|
|
|
43.2 |
% |
|
|
2,752 |
|
|
|
1,847 |
|
|
|
49.0 |
% |
EBITDA |
|
|
140 |
|
|
|
108 |
|
|
|
29.6 |
% |
|
|
835 |
|
|
|
628 |
|
|
|
33.0 |
% |
EBIT |
|
|
35 |
|
|
|
37 |
|
|
|
(5.4 |
%) |
|
|
333 |
|
|
|
342 |
|
|
|
(2.6 |
%) |
CAPEX |
|
|
35 |
|
|
|
51 |
|
|
|
(31.4 |
%) |
|
|
211 |
|
|
|
296 |
|
|
|
(28.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin |
|
|
27.0 |
% |
|
|
28.9 |
% |
|
|
(1.9 |
%) |
|
|
27.1 |
% |
|
|
28.9 |
% |
|
|
(1.8 |
%) |
Note: Amounts presented in HK$ 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.
Operating expenses in the current year include depreciation and amortisation. The previously
reported operating expense exclusive of depreciation and amortisation for the half-year ended 31
December 2005 was AUD$267 million/ HK$1,561 million.
Total income increased by 40.9% to HK$3,085 million in the half-year to 31 December 2006,
largely due to the additional revenue generated as a result of the inclusion of the New World PCS
business from March 2006. New World PCS contributed 80% or HK$719 million to the revenue growth of
HK$896 million. Revenue growth was also driven by rising data, international voice, mobile virtual
network operator (MVNO) 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 expenses increased by 49.0% to HK$2,752 million mainly due to the following:
|
|
inclusion of operating expenses of HK$722 million relating to New World
PCS; |
|
|
|
increased subsidies mainly due to aggressive marketing offers; and |
|
|
depreciation and amortisation expense increased mainly due to the inclusion of the New World PCS
business and carrying higher network assets due to the roll out of their 3GSM network. |
EBITDA increased by 33.0% to HK$835 million whilst EBIT decreased by 2.6% to HK$333 million due to
the impact of higher depreciation, which resulted mainly from the inclusion of the New World PCS
business.
46
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
TelstraClear financial summary
TelstraClear is the second largest full service carrier in New Zealand and has been operating
in its current form since December 2001. TelstraClear is a voice and data company, providing
innovative market leading products, services and customer focus to the business, government,
wholesale and residential sectors.
TelstraClear financial summary
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Half-year ended 31 December |
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Half-year ended 31 December |
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2006 |
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2005 |
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Change |
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2006 |
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2005 |
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Change |
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A$m |
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|
A$m |
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% |
|
|
NZ$m |
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|
NZ$m |
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% |
|
|
Total income |
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286 |
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|
321 |
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|
(10.9 |
%) |
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|
335 |
|
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|
349 |
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|
(4.0 |
%) |
Total expense (including depreciation & amortisation) |
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|
306 |
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|
339 |
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|
(9.7 |
%) |
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354 |
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|
365 |
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|
(3.0 |
%) |
EBITDA |
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43 |
|
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|
51 |
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|
(15.7 |
%) |
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|
50 |
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56 |
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|
(10.7 |
%) |
EBIT |
|
|
(20 |
) |
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|
(18 |
) |
|
|
11.1 |
% |
|
|
(19 |
) |
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(16 |
) |
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18.8 |
% |
CAPEX |
|
|
63 |
|
|
|
58 |
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|
|
8.6 |
% |
|
|
74 |
|
|
|
63 |
|
|
|
17.5 |
% |
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EBITDA margin |
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|
15.0 |
% |
|
|
15.9 |
% |
|
|
(0.9 |
%) |
|
|
14.9 |
% |
|
|
16.0 |
% |
|
|
(1.1 |
%) |
Note: Amounts presented in NZ$ 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.
Operating expenses in the current year include depreciation and amortisation. The previously
reported operating expense exclusive of depreciation and amortisation for the half-year ended 31
December 2005 was AUD$270 million/ NZ$293 million.
For the half year ended 31 December 2006, revenue declined by 4.0% to NZ$335 million as a
result of:
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a decline in calling revenues due to lower usage and competitor-led price erosion; |
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|
internet product competition resulting in price erosion, specifically in the small business and
consumer segments; and |
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mobile revenues declining due to fewer customers in the business segment. |
This reduction was offset by:
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an increase in access revenue due to increased gateway revenues; and |
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|
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an increase in data revenue in the wholesale segment. |
Total operating expense including depreciation and amortisation decreased by 3.0% to NZ$354 million
as a result of:
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a decrease in labour expenses due to a restructure of the business as a result of a Strategy &
Structure review; and |
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a decrease in outpayments due to lower revenues and leased data tail
savings. |
This reduction in expenses was offset by an increase in promotion and advertising due to increased
activity to improve brand awareness.
The NZ$ exchange rate had an unfavourable impact on revenues by AUD$20 million and expenses by
AUD$22 million.
Capex has increased by 17.5% to NZ$74 million due to:
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core network expansion; and |
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preparing to take advantage of local loop unbundling. |
47
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Cash flow
Cash flow data
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|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Receipts from customers (inclusive of GST) |
|
|
12,736 |
|
|
|
12,417 |
|
|
|
319 |
|
|
|
2.6 |
% |
Payments to suppliers/employees (inclusive of GST) |
|
|
(8,339 |
) |
|
|
(7,466 |
) |
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|
(873 |
) |
|
|
11.7 |
% |
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|
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|
|
Net cash generated from operations |
|
|
4,397 |
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|
4,951 |
|
|
|
(554 |
) |
|
|
(11.2 |
%) |
Income taxes paid |
|
|
(966 |
) |
|
|
(1,003 |
) |
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|
37 |
|
|
|
(3.7 |
%) |
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|
|
Net cash provided by operating activities |
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|
3,431 |
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|
3,948 |
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(517 |
) |
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(13.1 |
%) |
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Net cash used in investing activities |
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|
(2,569 |
) |
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|
(1,992 |
) |
|
|
(577 |
) |
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|
29.0 |
% |
|
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|
|
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|
|
Operating cash flows less investing cash flows |
|
|
862 |
|
|
|
1,956 |
|
|
|
(1,094 |
) |
|
|
(55.9 |
%) |
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|
|
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|
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|
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Movements in borrowings/finance leases |
|
|
1,179 |
|
|
|
229 |
|
|
|
950 |
|
|
|
414.8 |
% |
Staff payments of share loans |
|
|
11 |
|
|
|
11 |
|
|
|
|
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|
|
0.0 |
% |
Dividends paid |
|
|
(1,739 |
) |
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|
(2,485 |
) |
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|
746 |
|
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|
(30.0 |
%) |
Finance costs paid |
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|
(540 |
) |
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|
(470 |
) |
|
|
(70 |
) |
|
|
14.9 |
% |
Purchase of shares for employee share plans |
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(6 |
) |
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|
6 |
|
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|
- |
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|
|
Net cash used in financing activities |
|
|
(1,089 |
) |
|
|
(2,721 |
) |
|
|
1,632 |
|
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|
(60.0 |
%) |
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Net decrease in cash |
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|
(227 |
) |
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|
(765 |
) |
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|
538 |
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|
(70.3 |
%) |
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|
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 the half-year ended 31 December 2006, net cash provided by operating activities decreased by
13.1% to $3,431 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,
as well as increased revenue from our acquisition activities. Our higher expense payments were
mainly due to higher cost of mobile sales as we continue to invest in our subscriber base to drive
future growth, as well as an increase in expenditure relating to the transformation.
In addition, our cash paid to the Australian Taxation Office was $37 million lower in the current
half-year mainly due to a higher final tax payment in the prior year arising from a low instalment
rate in fiscal 2005. Offsetting this position were tax refunds in fiscal 2005 relating to
amendments of previous tax returns, together with a higher fourth instalment payment in the current
half-year arising from a higher instalment rate in fiscal 2006.
48
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 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
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|
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|
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|
|
|
Half-year ended 31 December |
|
|
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2006/2005 |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
Switching |
|
|
340 |
|
|
|
187 |
|
|
|
153 |
|
|
|
81.8 |
% |
Transmission |
|
|
299 |
|
|
|
186 |
|
|
|
113 |
|
|
|
60.8 |
% |
Customer access |
|
|
297 |
|
|
|
423 |
|
|
|
(126 |
) |
|
|
(29.8 |
%) |
Mobile telecommunications networks |
|
|
566 |
|
|
|
486 |
|
|
|
80 |
|
|
|
16.5 |
% |
International assets |
|
|
221 |
|
|
|
179 |
|
|
|
42 |
|
|
|
23.5 |
% |
Capitalised software |
|
|
395 |
|
|
|
212 |
|
|
|
183 |
|
|
|
86.3 |
% |
Specialised network functions |
|
|
88 |
|
|
|
86 |
|
|
|
2 |
|
|
|
2.3 |
% |
Other |
|
|
303 |
|
|
|
226 |
|
|
|
77 |
|
|
|
34.1 |
% |
|
|
|
|
|
|
|
Operating capital expenditure |
|
|
2,509 |
|
|
|
1,985 |
|
|
|
524 |
|
|
|
26.4 |
% |
Other intangibles |
|
|
|
|
|
|
58 |
|
|
|
(58 |
) |
|
|
n/m |
|
|
|
|
|
|
|
|
Capital expenditure before investments |
|
|
2,509 |
|
|
|
2,043 |
|
|
|
466 |
|
|
|
22.8 |
% |
Add: investment expenditure |
|
|
337 |
|
|
|
19 |
|
|
|
318 |
|
|
|
n/m |
|
|
|
|
|
|
|
|
Capitalised expenditure and investments |
|
|
2,846 |
|
|
|
2,062 |
|
|
|
784 |
|
|
|
38.0 |
% |
Sale of property, plant and equipment |
|
|
(25 |
) |
|
|
(20 |
) |
|
|
(5 |
) |
|
|
25.0 |
% |
Sale of shares in controlled entities (net of cash disposed) |
|
|
(222 |
) |
|
|
(16 |
) |
|
|
(206 |
) |
|
|
n/m |
|
Interest received |
|
|
(30 |
) |
|
|
(34 |
) |
|
|
4 |
|
|
|
(11.8 |
%) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
2,569 |
|
|
|
1,992 |
|
|
|
577 |
|
|
|
29.0 |
% |
|
|
|
|
|
|
|
During the half-year, our expenditure on operating capital, intangibles and investments
amounted to $2,846 million, an increase of 38.0% on the previous half-year, largely driven by our
transformation program.
The increases in our operating capital expenditure were across most capital expenditure categories,
with the exception of a decrease in customer access. The drivers of our operating capital
expenditure for the half-year were as follows:
|
|
higher domestic switching as a result of our wireline transformation program, which involves
transforming our existing voice, data, IP and DSL networks into a single internet (IP) based
network. Most of the expenditure relates to IP enablement of our network. Further expenditure was
also incurred to cater for increased demand for broadband multi-media services and replacement of
redundant technology; |
|
|
higher transmission expenditure due to increased transmission installation to cater for increased
IP traffic, as well as additional capacity to support the roll out of the new Next GTM
network. Another driver is the increased demand for broadband and other high speed products, which
necessitates higher transmission capacity; |
|
|
lower expenditure on customer access due to the achievement of operational and technology
efficiencies in the access network through the deployment of a new generation of Digital Subscriber
Line (DSL) equipment, increased utilisation of available network capacity, and other alternative
technology solutions. This is partly offset by increased expenditure to provide increased broadband
capacity and higher speed internet services; |
49
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
|
|
higher expenditure on our mobile networks primarily due to the Next GTM network
which was deployed ahead of schedule. At the half-year, the Next GTM network comprised
over 5,100 base stations. Offsetting the increase is a reduction in spend related to our 2GSM and
CDMA networks, as well as higher payments to Hutchison in the prior period related to the purchase
of a 50% share of their 3GSM 2100 MHZ network; |
|
|
|
higher expenditure on international assets, predominantly related to the purchase of additional
international transmission capacity to facilitate increased internet traffic with the United States
and Japan; |
|
|
|
significantly higher expenditure on capitalised software as we embark on a 5 year program to
transform our IT environment through deployment of new capabilities and reduction in the number of
systems. We have exited over 140 systems, and finalised all planned product and systems integrator contracts; |
|
|
|
consistent expenditure on specialised network functions. Expenditure increased to improve the
reliability and robustness of the network and BigPond rebuild program. This was offset by the
completion of significant work undertaken in fiscal 2006 in relation to the deployment of the ADSL
core network infrastructure; and |
|
|
|
higher other expenditure predominantly driven by the Next GTM network related
expenditure, including various programs such as land and buildings and other network related
expenditure. |
Our expenditure on investments amounted to $337 million during the half-year, compared with $19
million in the prior corresponding period. Investment expenditure is significantly higher in the
half-year predominantly due to our acquisitions of SouFun, together with a cash price adjustment
relating to the merger of CSL and New World Mobility. Our other intangibles expenditure has reduced
by $58 million to nil during the half-year, as the expenditure in the prior half-year related to
the acquisition of customer bases from Keycorp relating to their payment transaction network
carriage services business.
During the half year, our cash payments for investments and intangibles largely resulted from the
following items:
|
|
$314 million for the acquisition of 55% (on an undiluted basis) of the issued capital of SouFun
(net of cash acquired); |
|
|
|
$21 million for a price adjustment to New World Mobility, representing an
adjustment to the $44 million cash received in fiscal 2006; and |
|
|
|
other minor investments totalling
$2 million. |
Our cash proceeds from asset sales in the half-year ended 31 December 2006 included the following:
|
|
the sale of our investment in the Australian Administrative Services group for consideration of
$212 million net of cash disposed; |
|
|
|
the sale of our investment in Platefood for a total
consideration of $10 million; and |
|
|
|
sale of property, plant and equipment for cash receipts of $25
million. |
50
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Net cash used in financing activities
Our net cash used in financing activities decreased by 60.0% to $1,089 million for the
half-year ended 31 December 2006.
During the half-year to December 2006 we received $3,183 million in borrowed funds and repaid
$2,004 million. This resulted in net proceeds from repayments of borrowings and finance leases of
$1,179, and an increase of $950 million compared with December 2005. This increase was driven by
lower net cash produced from the ongoing operations of the business combined with higher capital
cash demands from transformation investment, partly offset by a reduction in liquidity.
The final dividend for fiscal 2006 was paid in September 2006. Dividends paid in the half-year to
December 2005 were higher than the current half-year due to shareholders receiving a special
dividend of 6c each per share in September 2005.
The increase in finance costs paid was mainly the result of higher average debt levels in
comparison to the previous half-year, in conjunction with marginally higher interest rates.
51
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Balance sheet
Balance Sheet
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-06 |
|
|
30-Jun-06 |
|
|
Change |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
(% change) |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
457 |
|
|
|
689 |
|
|
|
(232 |
) |
|
|
(33.7 |
%) |
Other current assets |
|
|
4,570 |
|
|
|
4,241 |
|
|
|
329 |
|
|
|
7.8 |
% |
|
|
|
|
|
|
|
Total current assets |
|
|
5,027 |
|
|
|
4,930 |
|
|
|
97 |
|
|
|
2.0 |
% |
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
23,413 |
|
|
|
23,503 |
|
|
|
(90 |
) |
|
|
(0.4 |
%) |
Intangibles goodwill |
|
|
6,265 |
|
|
|
6,122 |
|
|
|
143 |
|
|
|
2.3 |
% |
Other non current assets |
|
|
1,847 |
|
|
|
1,636 |
|
|
|
211 |
|
|
|
12.9 |
% |
|
|
|
|
|
|
|
Total non current assets |
|
|
31,525 |
|
|
|
31,261 |
|
|
|
264 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
Total assets |
|
|
36,552 |
|
|
|
36,191 |
|
|
|
361 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
3,033 |
|
|
|
1,982 |
|
|
|
1,051 |
|
|
|
53.0 |
% |
Other current liabilities |
|
|
5,108 |
|
|
|
5,908 |
|
|
|
(800 |
) |
|
|
(13.5 |
%) |
|
|
|
|
|
|
|
Total current liabilities |
|
|
8,141 |
|
|
|
7,890 |
|
|
|
251 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
11,280 |
|
|
|
11,434 |
|
|
|
(154 |
) |
|
|
(1.3 |
%) |
Other non current liabilities |
|
|
4,015 |
|
|
|
4,044 |
|
|
|
(29 |
) |
|
|
(0.7 |
%) |
|
|
|
|
|
|
|
Total non current liabilities |
|
|
15,295 |
|
|
|
15,478 |
|
|
|
(183 |
) |
|
|
(1.2 |
%) |
|
|
|
|
|
|
|
Total liabilities |
|
|
23,436 |
|
|
|
23,368 |
|
|
|
68 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
Net assets |
|
|
13,116 |
|
|
|
12,823 |
|
|
|
293 |
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity available to Telstra entity shareholders |
|
|
12,862 |
|
|
|
12,577 |
|
|
|
285 |
|
|
|
2.3 |
% |
Minority interests |
|
|
254 |
|
|
|
246 |
|
|
|
8 |
|
|
|
3.3 |
% |
|
|
|
|
|
|
|
Total equity |
|
|
13,116 |
|
|
|
12,823 |
|
|
|
293 |
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
We continue to maintain a strong financial position with net assets of $13,116 million as at
31 December 2006, compared with $12,823 million at 30
June 2006. The increase in net
assets of $293 million comprised an increase in total assets of $361 million offset by an increase
in total liabilities of $68 million.
The movement in total assets of $361 million was primarily due to:
|
|
Cash and cash equivalents decreasing by $232 million to $457 million, due mainly to a
reduction in bank deposits and bills of exchange < 90 days to meet a long-term loan
repayment in December 2006; |
|
|
Other current assets increased by $329 million to $4,570 million, driven by trade debtors
increasing consistent with revenue activity, increases in accrued interest revenue on our
interest rate swaps and increases in inventory primarily driven by increased stock on hand to
support the Next network launch This was offset by a decline in receivables associated with
the timing of collections in our Sensis business; |
|
|
Property, plant and equipment decreased $90 million mainly due to depreciation exceeding any
additions as we accelerated depreciation as part of the transformation program; |
|
|
Intangibles increased due to goodwill acquired on acquisition of 55% (on an undiluted basis)
of the issued capital of SouFun Holdings Ltd in August 2006, partially offset by intangibles
removed from the balance sheet on divestment of Australian Administration Services Pty Ltd,
which also occurred in August 2006; |
52
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
|
|
Other non-current assets increased by $211 million to $1,847 million, due mainly to an
increase in the actuarially determined value of our defined benefit pension asset and an
increase in finance lease debtors arising from our solutions management business offset by a
decrease in our cross currency swap receivables in line with currency movements and our
hedging requirements; |
The movement in total liabilities of $68 million was primarily due to:
|
|
Total current and non-current borrowings increasing by $897 million to $14,313 million,
mainly as a result of an increase in unsecured promissory notes and increases in Telstra Bonds
due to two new issues taking place in August and December 2006 arising from payment of the
final dividend; |
|
|
Other current liabilities decreased $800 million, mainly after lower accruals and payables
due to lower levels of construction activity undertaken in the half-year, compared to the
levels that occurred towards the end of the 2006 fiscal year The decrease was also
attributable to lower tax payable, offset by higher derivative liabilities; and |
|
|
Other non-current liabilities declined mainly due to a deferred tax liability decrease,
partially offset by changes in our cross currency swap position. |
53
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Glossary
1xRTT (One Time Radio Transmission Technology): a 3G development of CDMA technology for high
speed packet switched data.
2G GSM: Second Generation Global System for mobile communications refers to the initial group of
wireless technology standards that were digital instead of analogue.
3GSM: 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.
3GSM 850:
Third generation mobile technology operating on 850Mhz spectrum.
3GSM 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.
ADSL 2+: Our upgraded national high speed broadband network offering improved fixed line ADSL
speeds.
ARPU: Average Revenue Per User
CDMA: Code Division Multiple Access a mobile standard that provides voice, data, fax and short
messaging services.
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.
HDSL: High bit rate Digital Subscriber Line.
HSDPA: High speed downlink packet access.
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.
54
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
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.
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
55
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
Restatement of previously reported results
The following tables show the impact on the Telstra Group of adopting UIG 4 and of amending
the impact of adopting A-IFRS to our previously reported income statement and balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
|
|
|
|
|
|
|
|
|
|
|
|
reported |
|
|
|
|
|
|
Defined |
|
|
Restated |
|
Income Statement |
|
31 Dec 2005 |
|
|
UIG 4 |
|
|
benefit tax |
|
|
31 Dec 2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
11,449 |
|
|
|
(34 |
) |
|
|
|
|
|
|
11,415 |
|
Other income |
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
129 |
|
|
|
|
|
|
|
11,578 |
|
|
|
(34 |
) |
|
|
|
|
|
|
11,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
2,053 |
|
|
|
|
|
|
|
|
|
|
|
2,053 |
|
Goods and services purchased |
|
|
2,214 |
|
|
|
(19 |
) |
|
|
|
|
|
|
2,195 |
|
Other expenses |
|
|
2,011 |
|
|
|
|
|
|
|
|
|
|
|
2,011 |
|
|
|
|
|
|
|
6,278 |
|
|
|
(19 |
) |
|
|
|
|
|
|
6,259 |
|
Share of net loss from jointly controlled and associated entities |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
6,279 |
|
|
|
(19 |
) |
|
|
|
|
|
|
6,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation
(EBITDA) |
|
|
5,299 |
|
|
|
(15 |
) |
|
|
|
|
|
|
5,284 |
|
Depreciation and amortisation |
|
|
1,810 |
|
|
|
(10 |
) |
|
|
|
|
|
|
1,800 |
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
3,489 |
|
|
|
(5 |
) |
|
|
|
|
|
|
3,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
36 |
|
|
|
5 |
|
|
|
|
|
|
|
41 |
|
Finance costs |
|
|
479 |
|
|
|
2 |
|
|
|
|
|
|
|
481 |
|
|
|
|
Net finance costs |
|
|
443 |
|
|
|
(3 |
) |
|
|
|
|
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
3,046 |
|
|
|
(2 |
) |
|
|
|
|
|
|
3,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
907 |
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
2,139 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
2,142 |
|
|
|
|
Minority interests in net loss |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
Profit for the period available to Telstra Entity shareholders |
|
|
2,140 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
2,143 |
|
|
|
|
56
Telstra Corporation Limited and controlled entities
Half-year results and operations review December 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
|
|
|
|
|
|
|
|
|
reported |
|
|
|
|
|
|
Restated |
|
Balance Sheet |
|
30 June 2006 |
|
|
UIG 4 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
689 |
|
|
|
|
|
|
|
689 |
|
Trade and other receivables |
|
|
3,701 |
|
|
|
51 |
|
|
|
3,752 |
|
Inventories |
|
|
224 |
|
|
|
|
|
|
|
224 |
|
Derivative financial assets |
|
|
21 |
|
|
|
|
|
|
|
21 |
|
Prepayments |
|
|
244 |
|
|
|
|
|
|
|
244 |
|
|
|
|
Total current assets |
|
|
4,879 |
|
|
|
51 |
|
|
|
4,930 |
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
87 |
|
|
|
85 |
|
|
|
172 |
|
Inventories |
|
|
20 |
|
|
|
|
|
|
|
20 |
|
Investments accounted for
using the equity method |
|
|
23 |
|
|
|
|
|
|
|
23 |
|
Property, plant and
equipment |
|
|
23,622 |
|
|
|
(119 |
) |
|
|
23,503 |
|
Intangibles |
|
|
6,123 |
|
|
|
(1 |
) |
|
|
6,122 |
|
Deferred tax asset |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Derivative financial assets |
|
|
391 |
|
|
|
|
|
|
|
391 |
|
Defined benefit assets |
|
|
1,029 |
|
|
|
|
|
|
|
1,029 |
|
|
|
|
Total non current assets |
|
|
31,296 |
|
|
|
(35 |
) |
|
|
31,261 |
|
|
|
|
Total assets |
|
|
36,175 |
|
|
|
16 |
|
|
|
36,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
3,570 |
|
|
|
|
|
|
|
3,570 |
|
Borrowings |
|
|
1,969 |
|
|
|
13 |
|
|
|
1,982 |
|
Current tax liabilities |
|
|
428 |
|
|
|
|
|
|
|
428 |
|
Provisions |
|
|
737 |
|
|
|
|
|
|
|
737 |
|
Derivative financial
liabilities |
|
|
12 |
|
|
|
|
|
|
|
12 |
|
Revenue received in advance |
|
|
1,170 |
|
|
|
(9 |
) |
|
|
1,161 |
|
|
|
|
Total current liabilities |
|
|
7,886 |
|
|
|
4 |
|
|
|
7,890 |
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
197 |
|
|
|
|
|
|
|
197 |
|
Borrowings |
|
|
11,409 |
|
|
|
25 |
|
|
|
11,434 |
|
Deferred tax liabilities |
|
|
1,704 |
|
|
|
(4 |
) |
|
|
1,700 |
|
Provisions |
|
|
974 |
|
|
|
|
|
|
|
974 |
|
Derivative financial
liabilities |
|
|
768 |
|
|
|
|
|
|
|
768 |
|
Revenue received in advance |
|
|
405 |
|
|
|
|
|
|
|
405 |
|
|
|
|
Total non current
liabilities |
|
|
15,457 |
|
|
|
21 |
|
|
|
15,478 |
|
|
|
|
Total liabilities |
|
|
23,343 |
|
|
|
25 |
|
|
|
23,368 |
|
|
|
|
Net assets |
|
|
12,832 |
|
|
|
(9 |
) |
|
|
12,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
5,569 |
|
|
|
|
|
|
|
5,569 |
|
Reserves |
|
|
(160 |
) |
|
|
|
|
|
|
(160 |
) |
Retained profits |
|
|
7,177 |
|
|
|
(9 |
) |
|
|
7,168 |
|
|
|
|
Equity available to Telstra
Entity Shareholders |
|
|
12,586 |
|
|
|
(9 |
) |
|
|
12,577 |
|
Minority interest |
|
|
246 |
|
|
|
|
|
|
|
246 |
|
|
|
|
Total equity |
|
|
12,832 |
|
|
|
(9 |
) |
|
|
12,823 |
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Corporation Limited (ABN 033 051 775 556)
|
|
|
Product reconciliation to align comparative figures
with the current year reported presentation Half-year
ended 31 December 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
Previously |
|
|
|
Reported |
|
|
|
|
|
|
released |
|
|
|
new hierarchy |
|
Movement since Dec- |
|
|
Product hierarchy as released Dec- |
|
Dec-05 |
|
New product hierarchy based on Dec-06 |
|
Dec-05 |
|
05 release |
|
|
05 |
|
$m |
|
structure |
|
$m |
|
$m |
|
Description of Change from Old Product Hierachy as Released in Dec-05 |
Total PSTN products |
|
|
3,818 |
|
|
Total PSTN products |
|
|
3,831 |
|
|
|
13 |
|
|
Global Linx moved from Intercarrier services $l4m into PSTN Interconnect; Reduction to revenue of ($1m) due to impact of UIG4. |
|
|
|
|
|
|
ISDN products |
|
|
420 |
|
|
|
(1 |
) |
|
Moved from own category into Fixed Telephony; Reduction to revenue of ($1m) due to impact of UIG4. |
|
|
|
|
|
|
Inbound calling products |
|
|
208 |
|
|
|
(17 |
) |
|
Moved from own category into Fixed Telephony; $5m moved into Business services & applications (Contact Solutions); $l2m moved into mobiles services (Infocall) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payphones |
|
|
54 |
|
|
|
|
|
|
Moved from own category into Fixed Telephony $54m |
|
|
|
|
|
|
Customer premises equipment |
|
|
135 |
|
|
|
|
|
|
Moved from own category into Fixed Telephony $l35m |
|
|
|
|
|
|
Intercarrier access services |
|
|
69 |
|
|
|
69 |
|
|
Moved from Intercarrier Services $69m |
|
|
|
|
|
|
Other fixed telephony |
|
|
163 |
|
|
|
163 |
|
|
Moved from Other Sales &
Services: Telstra Information & Connection Services $60m, Virtual Private Network $9m, International Freecall $4m, Card Services $27m, Customer net & Spectrum $56m, Satellite Products $7m |
|
|
|
|
|
|
Total fixed telephony |
|
|
4,880 |
|
|
|
|
|
|
New Subtotal |
Mobile services |
|
|
2,275 |
|
|
Mobile services |
|
|
2,291 |
|
|
|
16 |
|
|
Moved from Inbound calling products $l2m (Infocall); $4m relates to the inclusion of wireless Broadband in the new product hierarchy. |
Mobile handsets |
|
|
211 |
|
|
Mobile handsets |
|
|
211 |
|
|
|
|
|
|
|
Total Mobiles |
|
|
2,486 |
|
|
Total Mobiles |
|
|
2,502 |
|
|
|
16 |
|
|
|
Internet and IP solutions |
|
|
|
|
|
Internet |
|
|
|
|
|
|
|
|
|
|
Narrowband |
|
|
117 |
|
|
Narrowband |
|
|
117 |
|
|
|
|
|
|
|
Broadband |
|
|
330 |
|
|
Retail broadband |
|
|
331 |
|
|
|
1 |
|
|
($26m) moved to IP Access under IP & Data Access ($5m for Hyperconnect and $2lm for Symmetrical HDSL); $27m of increase relates to the inclusion of mobile wireless broadband in the new product hierarchy, which is eliminated later on. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Broadband |
|
|
204 |
|
|
Wholesale broadband |
|
|
209 |
|
|
|
5 |
|
|
$5m moved from Intercarrier Services (Dial-up internet access revenue) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
9 |
|
|
|
9 |
|
|
New category. Media Content of $6m
and Webhosting & VAS of $3m moved from Other under Total Internet and IP solutions |
|
|
|
|
|
|
Total Internet |
|
|
666 |
|
|
|
|
|
|
New Subtotal |
|
|
|
|
|
|
IP & Data Access |
|
|
|
|
|
|
|
|
|
|
Internet direct |
|
|
70 |
|
|
Internet direct |
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialised data |
|
|
451 |
|
|
|
(2 |
) |
|
Argent of ($l5m) moved to Business Services and Applications; Security Products of $l8m moved in from Other Sales & Services; reduction to revenue of ($5m) due to UIG4 adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IP solutions |
|
|
134 |
|
|
IP access |
|
|
152 |
|
|
|
18 |
|
|
Moved from Retail Broadband ($5m for Hyperconnect and $2lm for Symmetrical HDSL); reduction to revenue of ($8m) due to UIG4 adjustments. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
33 |
|
|
|
|
|
|
|
|
|
(33 |
) |
|
Wholesale Internet & broadband ($22m) moved to IP& Data Access; Media Content and Webhosting & VAS moved to Other under Total Internet ($9m); Telstra eTrading Solutions and Telstra e-Commerce Merchant Billpay (totalling $2m) moved to Business services and applications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale internet & broadband |
|
|
100 |
|
|
|
100 |
|
|
Moved from Other under Total Internet and IP solutions ($22m); moved from Intercarrier Services ($78m)- mainly Wholesale Transmission Products. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Internet and IP solutions |
|
|
888 |
|
|
Total IP & data access |
|
|
773 |
|
|
|
|
|
|
New Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialised Data |
|
|
453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN Products |
|
|
421 |
|
|
|
|
|
|
|
|
|
|
|
|
Moved into Fixed Telephony |
|
|
|
|
|
|
Business services and applications |
|
|
507 |
|
|
|
507 |
|
|
New category - Moved from Solutions Management $480m (entire category); Inbound calling $5m (Contact Solutions); Specialised Data $l5m (Argent); Other Sales & Services $24m (Conferlink); Other under Internet & IP Solutions $2m (Telstra eTrading Solutions and Telstra e-Commerce Merchant Billpay); Impact of revenue reduction of ($l9m) due to prior year adjustments relating to UIG4. |
Advertising and directories |
|
|
944 |
|
|
Advertising and directories |
|
|
944 |
|
|
|
|
|
|
|
Intercarrier services |
|
|
166 |
|
|
|
|
|
|
|
|
|
(166 |
) |
|
Moved to: PSTN Fixed Connection
$l4m (Global Linx); Intercarrier Access Services $69m (various
products); Wholesale broadband $5m (Dial-up Internet Access); IP & Data Access $78m (mainly due to Wholesale Transmission Products) |
Solutions management |
|
|
480 |
|
|
|
|
|
|
|
|
|
(480 |
) |
|
Moved to Business services and applications |
CSL New World |
|
|
373 |
|
|
CSL New World |
|
|
373 |
|
|
|
|
|
|
|
TelstraClear |
|
|
321 |
|
|
TelstraClear |
|
|
321 |
|
|
|
|
|
|
|
Offshore services revenue |
|
|
139 |
|
|
Offshore services revenue |
|
|
139 |
|
|
|
|
|
|
|
Inbound calling products |
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
Moved into Fixed Telephony |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay TV bundling |
|
|
156 |
|
|
Pay TV bundling |
|
|
156 |
|
|
|
|
|
|
|
Customer premises equipment |
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
|
Moved to Fixed Telephony |
Payphones |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
Moved to Fixed Telephony |
Other sales & service |
|
|
|
|
|
Other sales & service |
|
|
175 |
|
|
|
(205 |
) |
|
Moved to Other under Fixed Telephony: Telstra Information & Connection Services ($60m), Virtual Private Network ($9m), International Freecall ($4m), Card Services ($27m), Customer net & Spectrum ($56m), Satellite Products ($7m); Moved to Business Services and Applications: Conferlink |
|
|
|
380 |
|
|
|
|
|
|
|
|
|
|
|
|
($24m); Moved to Specialised Data: Security Products ($l8m); |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination for wireless broadband |
|
|
(31 |
) |
|
|
(31 |
) |
|
Elimination for the mobile wireless broadband and BigPond wireless broadband gross up. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
revenue |
|
|
11,439 |
|
|
Sales revenue |
|
|
11,405 |
|
|
|
(34 |
) |
|
Reduction to revenue of ($34m) due to the impact of UIG4. |
58
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Corporation Limited (ABN 033 051 775 556)
|
|
|
Full Year Comparison
Year ended 31 December 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Reported(i) Half |
|
|
Half 1 |
|
Half 1 |
|
|
|
|
|
|
Half 2 |
|
|
|
|
|
|
Full Year |
|
|
|
|
|
|
Half 1 |
|
|
|
|
|
|
Half 2 |
|
|
|
|
|
|
Full Year |
|
|
|
|
|
|
Half 1 |
|
|
|
|
|
|
Half 2 |
|
|
|
|
|
|
Full Year |
|
|
|
|
|
|
Half 1 |
|
|
Yearly Data ($ millions) |
|
|
Dec-02 |
|
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 |
|
|
Dec-06 |
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSTN products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
|
1,556 |
|
|
|
1,609 |
|
|
|
3.4 |
% |
|
|
|
1,629 |
|
|
|
6.6 |
% |
|
|
|
3,238 |
|
|
|
5.0 |
% |
|
|
|
1,701 |
|
|
|
5.7 |
% |
|
|
|
1,661 |
|
|
|
2.0 |
% |
|
|
|
3,362 |
|
|
|
3.8 |
% |
|
|
|
1,657 |
|
|
|
(2.6 |
%) |
|
|
|
1,660 |
|
|
|
(0.1 |
%) |
|
|
|
3,317 |
|
|
|
(1.3 |
%) |
|
|
|
1,663 |
|
|
|
0.4 |
% |
Local calls |
|
|
|
796 |
|
|
|
779 |
|
|
|
(2.1 |
%) |
|
|
|
725 |
|
|
|
(6.0 |
%) |
|
|
|
1,504 |
|
|
|
(4.0 |
%) |
|
|
|
689 |
|
|
|
(11.6 |
%) |
|
|
|
595 |
|
|
|
(17.9 |
%) |
|
|
|
1,284 |
|
|
|
(14.6 |
%) |
|
|
|
553 |
|
|
|
(19.7 |
%) |
|
|
|
470 |
|
|
|
(21.0 |
%) |
|
|
|
1,023 |
|
|
|
(20.3 |
%) |
|
|
|
432 |
|
|
|
(21.9 |
%) |
PSTN value added services |
|
|
|
141 |
|
|
|
134 |
|
|
|
(5.0 |
%) |
|
|
|
125 |
|
|
|
(10.1 |
%) |
|
|
|
259 |
|
|
|
(7.5 |
%) |
|
|
|
125 |
|
|
|
(6.7 |
%) |
|
|
|
125 |
|
|
|
0.0 |
% |
|
|
|
250 |
|
|
|
(3.5 |
%) |
|
|
|
123 |
|
|
|
(1.6 |
%) |
|
|
|
123 |
|
|
|
(1.6 |
%) |
|
|
|
246 |
|
|
|
(1.6 |
%) |
|
|
|
125 |
|
|
|
1.6 |
% |
National long distance calls |
|
|
|
582 |
|
|
|
579 |
|
|
|
(0.5 |
%) |
|
|
|
542 |
|
|
|
(6.6 |
%) |
|
|
|
1,121 |
|
|
|
(3.5 |
%) |
|
|
|
527 |
|
|
|
(9.0 |
%) |
|
|
|
486 |
|
|
|
(10.3 |
%) |
|
|
|
1,013 |
|
|
|
(9.6 |
%) |
|
|
|
471 |
|
|
|
(10.6 |
%) |
|
|
|
442 |
|
|
|
(9.1 |
%) |
|
|
|
913 |
|
|
|
(9.9 |
%) |
|
|
|
408 |
|
|
|
(13.4 |
%) |
Fixed to mobile |
|
|
|
753 |
|
|
|
808 |
|
|
|
7.3 |
% |
|
|
|
789 |
|
|
|
3.3 |
% |
|
|
|
1,597 |
|
|
|
5.3 |
% |
|
|
|
806 |
|
|
|
(0.2 |
%) |
|
|
|
760 |
|
|
|
(3.7 |
%) |
|
|
|
1,566 |
|
|
|
(1.9 |
%) |
|
|
|
761 |
|
|
|
(5.6 |
%) |
|
|
|
729 |
|
|
|
(4.1 |
%) |
|
|
|
1,490 |
|
|
|
(4.9 |
%) |
|
|
|
749 |
|
|
|
(1.6 |
%) |
International direct |
|
|
|
162 |
|
|
|
139 |
|
|
|
(14.2 |
%) |
|
|
|
127 |
|
|
|
(12.4 |
%) |
|
|
|
266 |
|
|
|
(13.4 |
%) |
|
|
|
124 |
|
|
|
(10.8 |
%) |
|
|
|
110 |
|
|
|
(13.4 |
%) |
|
|
|
234 |
|
|
|
(12.0 |
%) |
|
|
|
106 |
|
|
|
(14.5 |
%) |
|
|
|
95 |
|
|
|
(13.6 |
%) |
|
|
|
201 |
|
|
|
(14.1 |
%) |
|
|
|
94 |
|
|
|
(11.3 |
%) |
Fixed Interconnect |
|
|
|
193 |
|
|
|
182 |
|
|
|
(5.7 |
%) |
|
|
|
164 |
|
|
|
(11.4 |
%) |
|
|
|
346 |
|
|
|
(8.5 |
%) |
|
|
|
172 |
|
|
|
(5.5 |
%) |
|
|
|
163 |
|
|
|
(0.6 |
%) |
|
|
|
335 |
|
|
|
(3.2 |
%) |
|
|
|
160 |
|
|
|
(7.0 |
%) |
|
|
|
149 |
|
|
|
(8.6 |
%) |
|
|
|
309 |
|
|
|
(7.8 |
%) |
|
|
|
144 |
|
|
|
(10.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PSTN products |
|
|
|
4,183 |
|
|
|
4,230 |
|
|
|
1.1 |
% |
|
|
|
4,101 |
|
|
|
(0.3 |
%) |
|
|
|
8,331 |
|
|
|
0.4 |
% |
|
|
|
4,144 |
|
|
|
(2.0 |
%) |
|
|
|
3,900 |
|
|
|
(4.9 |
%) |
|
|
|
8,044 |
|
|
|
(3.4 |
%) |
|
|
|
3,831 |
|
|
|
(7.6 |
%) |
|
|
|
3,668 |
|
|
|
(5.9 |
%) |
|
|
|
7,499 |
|
|
|
(6.8 |
%) |
|
|
|
3,615 |
|
|
|
(5.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN Products |
|
|
|
489 |
|
|
|
473 |
|
|
|
(3.3 |
%) |
|
|
|
454 |
|
|
|
0.2 |
% |
|
|
|
927 |
|
|
|
(1.6 |
%) |
|
|
|
453 |
|
|
|
(4.2 |
%) |
|
|
|
437 |
|
|
|
(3.7 |
%) |
|
|
|
890 |
|
|
|
(4.0 |
%) |
|
|
|
420 |
|
|
|
(7.3 |
%) |
|
|
|
386 |
|
|
|
(11.7 |
%) |
|
|
|
806 |
|
|
|
(9.4 |
%) |
|
|
|
383 |
|
|
|
(8.8 |
%) |
Inbound calling products |
|
|
|
229 |
|
|
|
220 |
|
|
|
(3.9 |
%) |
|
|
|
219 |
|
|
|
(0.9 |
%) |
|
|
|
439 |
|
|
|
(2.4 |
%) |
|
|
|
216 |
|
|
|
(1.8 |
%) |
|
|
|
204 |
|
|
|
(6.8 |
%) |
|
|
|
420 |
|
|
|
(4.3 |
%) |
|
|
|
208 |
|
|
|
(3.7 |
%) |
|
|
|
206 |
|
|
|
1.0 |
% |
|
|
|
414 |
|
|
|
(1.4 |
%) |
|
|
|
203 |
|
|
|
(2.4 |
%) |
Payphones |
|
|
|
75 |
|
|
|
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 |
%) |
|
|
|
48 |
|
|
|
(11.1 |
%) |
Customer premises equipment(vi) |
|
|
|
105 |
|
|
|
94 |
|
|
|
(10.5 |
%) |
|
|
|
93 |
|
|
|
(3.1 |
%) |
|
|
|
187 |
|
|
|
(7.0 |
%) |
|
|
|
108 |
|
|
|
14.9 |
% |
|
|
|
123 |
|
|
|
32.3 |
% |
|
|
|
231 |
|
|
|
23.5 |
% |
|
|
|
135 |
|
|
|
25.0 |
% |
|
|
|
139 |
|
|
|
13.0 |
% |
|
|
|
274 |
|
|
|
18.6 |
% |
|
|
|
151 |
|
|
|
11.9 |
% |
Intercarrier access services |
|
|
|
51 |
|
|
|
52 |
|
|
|
2.0 |
% |
|
|
|
41 |
|
|
|
(24.1 |
%) |
|
|
|
93 |
|
|
|
(11.4 |
%) |
|
|
|
50 |
|
|
|
(3.8 |
%) |
|
|
|
58 |
|
|
|
41.5 |
% |
|
|
|
108 |
|
|
|
16.1 |
% |
|
|
|
69 |
|
|
|
38.0 |
% |
|
|
|
83 |
|
|
|
43.1 |
% |
|
|
|
152 |
|
|
|
40.7 |
% |
|
|
|
87 |
|
|
|
26.1 |
% |
Other fixed telephony |
|
|
|
206 |
|
|
|
174 |
|
|
|
(15.5 |
%) |
|
|
|
172 |
|
|
|
(1.7 |
%) |
|
|
|
346 |
|
|
|
(9.2 |
%) |
|
|
|
177 |
|
|
|
1.7 |
% |
|
|
|
164 |
|
|
|
(4.7 |
%) |
|
|
|
341 |
|
|
|
(1.4 |
%) |
|
|
|
163 |
|
|
|
(7.9 |
%) |
|
|
|
155 |
|
|
|
(5.5 |
%) |
|
|
|
318 |
|
|
|
(6.7 |
%) |
|
|
|
156 |
|
|
|
(4.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fixed Telephony |
|
|
|
5,338 |
|
|
|
5,315 |
|
|
|
(0.4 |
%) |
|
|
|
5,149 |
|
|
|
(0.7 |
%) |
|
|
|
10,464 |
|
|
|
(0.6 |
%) |
|
|
|
5,211 |
|
|
|
(2.0 |
%) |
|
|
|
4,944 |
|
|
|
(4.0 |
%) |
|
|
|
10,155 |
|
|
|
(3.0 |
%) |
|
|
|
4,880 |
|
|
|
(6.4 |
%) |
|
|
|
4,687 |
|
|
|
(5.2 |
%) |
|
|
|
9,567 |
|
|
|
(5.8 |
%) |
|
|
|
4,643 |
|
|
|
(4.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services Retail |
|
|
|
1,539 |
|
|
|
1,639 |
|
|
|
6.5 |
% |
|
|
|
1,622 |
|
|
|
7.0 |
% |
|
|
|
3,261 |
|
|
|
6.7 |
% |
|
|
|
1,755 |
|
|
|
7.1 |
% |
|
|
|
1,713 |
|
|
|
5.6 |
% |
|
|
|
3,468 |
|
|
|
6.3 |
% |
|
|
|
1,794 |
|
|
|
2.2 |
% |
|
|
|
1,755 |
|
|
|
2.5 |
% |
|
|
|
3,549 |
|
|
|
2.3 |
% |
|
|
|
1,925 |
|
|
|
7.3 |
% |
Mobile services Wholesale |
|
|
|
6 |
|
|
|
8 |
|
|
|
33.3 |
% |
|
|
|
7 |
|
|
|
16.7 |
% |
|
|
|
15 |
|
|
|
25.0 |
% |
|
|
|
11 |
|
|
|
37.5 |
% |
|
|
|
13 |
|
|
|
85.7 |
% |
|
|
|
24 |
|
|
|
60.0 |
% |
|
|
|
16 |
|
|
|
45.5 |
% |
|
|
|
20 |
|
|
|
53.8 |
% |
|
|
|
36 |
|
|
|
50.0 |
% |
|
|
|
26 |
|
|
|
62.5 |
% |
Mobile services Interconnection |
|
|
|
253 |
|
|
|
258 |
|
|
|
2.0 |
% |
|
|
|
257 |
|
|
|
8.4 |
% |
|
|
|
515 |
|
|
|
5.1 |
% |
|
|
|
283 |
|
|
|
9.7 |
% |
|
|
|
264 |
|
|
|
2.7 |
% |
|
|
|
547 |
|
|
|
6.2 |
% |
|
|
|
318 |
|
|
|
12.4 |
% |
|
|
|
305 |
|
|
|
15.5 |
% |
|
|
|
623 |
|
|
|
13.9 |
% |
|
|
|
296 |
|
|
|
(6.9 |
%) |
Mobile services International roaming |
|
|
|
83 |
|
|
|
85 |
|
|
|
2.4 |
% |
|
|
|
90 |
|
|
|
28.6 |
% |
|
|
|
175 |
|
|
|
14.4 |
% |
|
|
|
118 |
|
|
|
38.8 |
% |
|
|
|
126 |
|
|
|
40.0 |
% |
|
|
|
244 |
|
|
|
39.4 |
% |
|
|
|
131 |
|
|
|
11.0 |
% |
|
|
|
135 |
|
|
|
7.1 |
% |
|
|
|
266 |
|
|
|
9.0 |
% |
|
|
|
157 |
|
|
|
19.8 |
% |
Mobile services Other |
|
|
|
27 |
|
|
|
20 |
|
|
|
(25.9 |
%) |
|
|
|
25 |
|
|
|
(7.4 |
%) |
|
|
|
45 |
|
|
|
(16.7 |
%) |
|
|
|
23 |
|
|
|
15.0 |
% |
|
|
|
21 |
|
|
|
(16.0 |
%) |
|
|
|
44 |
|
|
|
(2.2 |
%) |
|
|
|
32 |
|
|
|
39.1 |
% |
|
|
|
34 |
|
|
|
61.9 |
% |
|
|
|
66 |
|
|
|
50.0 |
% |
|
|
|
37 |
|
|
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mobile Services |
|
|
|
1,908 |
|
|
|
2,010 |
|
|
|
5.3 |
% |
|
|
|
2,001 |
|
|
|
7.8 |
% |
|
|
|
4,011 |
|
|
|
6.6 |
% |
|
|
|
2,190 |
|
|
|
9.0 |
% |
|
|
|
2,137 |
|
|
|
6.8 |
% |
|
|
|
4,327 |
|
|
|
7.9 |
% |
|
|
|
2,291 |
|
|
|
4.6 |
% |
|
|
|
2,249 |
|
|
|
5.2 |
% |
|
|
|
4,540 |
|
|
|
4.9 |
% |
|
|
|
2,441 |
|
|
|
6.5 |
% |
Mobile handsets |
|
|
|
172 |
|
|
|
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 |
% |
|
|
|
357 |
|
|
|
69.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mobiles |
|
|
|
2,080 |
|
|
|
2,196 |
|
|
|
5.6 |
% |
|
|
|
2,167 |
|
|
|
4.7 |
% |
|
|
|
4,363 |
|
|
|
5.1 |
% |
|
|
|
2,388 |
|
|
|
8.7 |
% |
|
|
|
2,320 |
|
|
|
7.1 |
% |
|
|
|
4,708 |
|
|
|
7.9 |
% |
|
|
|
2,502 |
|
|
|
4.8 |
% |
|
|
|
2,505 |
|
|
|
8.0 |
% |
|
|
|
5,007 |
|
|
|
6.4 |
% |
|
|
|
2,798 |
|
|
|
11.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband |
|
|
|
147 |
|
|
|
144 |
|
|
|
(2.0 |
%) |
|
|
|
151 |
|
|
|
3.4 |
% |
|
|
|
295 |
|
|
|
0.7 |
% |
|
|
|
142 |
|
|
|
(1.4 |
%) |
|
|
|
133 |
|
|
|
(11.9 |
%) |
|
|
|
275 |
|
|
|
(6.8 |
%) |
|
|
|
117 |
|
|
|
(17.6 |
%) |
|
|
|
103 |
|
|
|
(22.6 |
%) |
|
|
|
220 |
|
|
|
(20.0 |
%) |
|
|
|
79 |
|
|
|
(32.5 |
%) |
Retail Broadband |
|
|
|
97 |
|
|
|
120 |
|
|
|
23.7 |
% |
|
|
|
150 |
|
|
|
30.4 |
% |
|
|
|
270 |
|
|
|
27.4 |
% |
|
|
|
197 |
|
|
|
64.2 |
% |
|
|
|
241 |
|
|
|
60.7 |
% |
|
|
|
438 |
|
|
|
62.2 |
% |
|
|
|
331 |
|
|
|
68.0 |
% |
|
|
|
398 |
|
|
|
65.1 |
% |
|
|
|
729 |
|
|
|
66.4 |
% |
|
|
|
497 |
|
|
|
50.2 |
% |
ONLINE Broadband Wholesale |
|
|
|
17 |
|
|
|
62 |
|
|
|
264.7 |
% |
|
|
|
88 |
|
|
|
166.7 |
% |
|
|
|
150 |
|
|
|
200.0 |
% |
|
|
|
109 |
|
|
|
75.8 |
% |
|
|
|
159 |
|
|
|
80.7 |
% |
|
|
|
268 |
|
|
|
78.7 |
% |
|
|
|
209 |
|
|
|
91.7 |
% |
|
|
|
260 |
|
|
|
63.5 |
% |
|
|
|
469 |
|
|
|
75.0 |
% |
|
|
|
279 |
|
|
|
33.5 |
% |
Other |
|
|
|
1 |
|
|
|
1 |
|
|
|
0.0 |
% |
|
|
|
1 |
|
|
|
(66.7 |
%) |
|
|
|
2 |
|
|
|
(50.0 |
%) |
|
|
|
3 |
|
|
|
200.0 |
% |
|
|
|
9 |
|
|
|
800.0 |
% |
|
|
|
12 |
|
|
|
500.0 |
% |
|
|
|
9 |
|
|
|
200.0 |
% |
|
|
|
9 |
|
|
|
0.0 |
% |
|
|
|
18 |
|
|
|
50.0 |
% |
|
|
|
10 |
|
|
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Internet |
|
|
|
262 |
|
|
|
327 |
|
|
|
24.8 |
% |
|
|
|
390 |
|
|
|
31.3 |
% |
|
|
|
717 |
|
|
|
28.3 |
% |
|
|
|
451 |
|
|
|
37.9 |
% |
|
|
|
542 |
|
|
|
39.0 |
% |
|
|
|
993 |
|
|
|
38.5 |
% |
|
|
|
666 |
|
|
|
47.7 |
% |
|
|
|
770 |
|
|
|
42.1 |
% |
|
|
|
1,436 |
|
|
|
44.6 |
% |
|
|
|
865 |
|
|
|
29.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet Direct |
|
|
|
59 |
|
|
|
61 |
|
|
|
3.4 |
% |
|
|
|
56 |
|
|
|
7.7 |
% |
|
|
|
117 |
|
|
|
5.4 |
% |
|
|
|
61 |
|
|
|
0.0 |
% |
|
|
|
62 |
|
|
|
10.7 |
% |
|
|
|
123 |
|
|
|
5.1 |
% |
|
|
|
70 |
|
|
|
14.8 |
% |
|
|
|
73 |
|
|
|
17.7 |
% |
|
|
|
143 |
|
|
|
16.3 |
% |
|
|
|
81 |
|
|
|
15.7 |
% |
Specialised Data |
|
|
|
548 |
|
|
|
517 |
|
|
|
(5.7 |
%) |
|
|
|
519 |
|
|
|
(5.5 |
%) |
|
|
|
1,036 |
|
|
|
(5.6 |
%) |
|
|
|
501 |
|
|
|
(3.1 |
%) |
|
|
|
461 |
|
|
|
(11.2 |
%) |
|
|
|
962 |
|
|
|
(7.1 |
%) |
|
|
|
451 |
|
|
|
(10.0 |
%) |
|
|
|
424 |
|
|
|
(8.0 |
%) |
|
|
|
875 |
|
|
|
(9.0 |
%) |
|
|
|
404 |
|
|
|
(10.4 |
%) |
IP Access |
|
|
|
56 |
|
|
|
72 |
|
|
|
28.6 |
% |
|
|
|
91 |
|
|
|
40.0 |
% |
|
|
|
163 |
|
|
|
34.7 |
% |
|
|
|
100 |
|
|
|
38.9 |
% |
|
|
|
132 |
|
|
|
45.1 |
% |
|
|
|
232 |
|
|
|
42.3 |
% |
|
|
|
152 |
|
|
|
52.0 |
% |
|
|
|
175 |
|
|
|
32.6 |
% |
|
|
|
327 |
|
|
|
40.9 |
% |
|
|
|
193 |
|
|
|
27.0 |
% |
Wholesale Interent & Data |
|
|
|
94 |
|
|
|
74 |
|
|
|
(21.3 |
%) |
|
|
|
84 |
|
|
|
(3.4 |
%) |
|
|
|
158 |
|
|
|
(12.7 |
%) |
|
|
|
83 |
|
|
|
12.2 |
% |
|
|
|
96 |
|
|
|
14.3 |
% |
|
|
|
179 |
|
|
|
13.3 |
% |
|
|
|
100 |
|
|
|
20.5 |
% |
|
|
|
115 |
|
|
|
19.8 |
% |
|
|
|
215 |
|
|
|
20.1 |
% |
|
|
|
111 |
|
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IP & Data Access |
|
|
|
757 |
|
|
|
724 |
|
|
|
(4.4 |
%) |
|
|
|
750 |
|
|
|
(0.4 |
%) |
|
|
|
1,474 |
|
|
|
(2.4 |
%) |
|
|
|
745 |
|
|
|
2.9 |
% |
|
|
|
751 |
|
|
|
0.1 |
% |
|
|
|
1,496 |
|
|
|
1.5 |
% |
|
|
|
773 |
|
|
|
3.8 |
% |
|
|
|
787 |
|
|
|
4.8 |
% |
|
|
|
1,560 |
|
|
|
4.3 |
% |
|
|
|
789 |
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Services and Applications |
|
|
|
291 |
|
|
|
290 |
|
|
|
(0.3 |
%) |
|
|
|
311 |
|
|
|
1.3 |
% |
|
|
|
601 |
|
|
|
0.5 |
% |
|
|
|
513 |
|
|
|
76.9 |
% |
|
|
|
517 |
|
|
|
66.2 |
% |
|
|
|
1,030 |
|
|
|
71.4 |
% |
|
|
|
507 |
|
|
|
(1.2 |
%) |
|
|
|
544 |
|
|
|
5.2 |
% |
|
|
|
1,051 |
|
|
|
2.0 |
% |
|
|
|
501 |
|
|
|
(1.2 |
%) |
Advertising and Directories(ii) |
|
|
|
724 |
|
|
|
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 |
% |
|
|
|
824 |
|
|
|
(12.7 |
%) |
CSL New
World (iv) |
|
|
|
484 |
|
|
|
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 |
% |
|
|
|
519 |
|
|
|
39.1 |
% |
TelstraClear |
|
|
|
273 |
|
|
|
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 |
%) |
|
|
|
286 |
|
|
|
(10.9 |
%) |
Offshore Services Revenue(v) |
|
|
|
38 |
|
|
|
58 |
|
|
|
52.6 |
% |
|
|
|
92 |
|
|
|
268.0 |
% |
|
|
|
150 |
|
|
|
138.1 |
% |
|
|
|
119 |
|
|
|
105.2 |
% |
|
|
|
133 |
|
|
|
44.6 |
% |
|
|
|
252 |
|
|
|
68.0 |
% |
|
|
|
139 |
|
|
|
16.8 |
% |
|
|
|
156 |
|
|
|
17.3 |
% |
|
|
|
295 |
|
|
|
17.1 |
% |
|
|
|
173 |
|
|
|
24.5 |
% |
PayTV Bundling |
|
|
|
|
|
|
|
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 |
% |
|
|
|
164 |
|
|
|
5.1 |
% |
Other minor items |
|
|
|
221 |
|
|
|
58 |
|
|
|
(73.8 |
%) |
|
|
|
114 |
|
|
|
(39.4 |
%) |
|
|
|
172 |
|
|
|
(57.9 |
%) |
|
|
|
155 |
|
|
|
167.2 |
% |
|
|
|
165 |
|
|
|
44.7 |
% |
|
|
|
320 |
|
|
|
86.0 |
% |
|
|
|
175 |
|
|
|
12.9 |
% |
|
|
|
185 |
|
|
|
12.1 |
% |
|
|
|
360 |
|
|
|
12.5 |
% |
|
|
|
136 |
|
|
|
(22.3 |
%) |
Eliminate for wireless broadband |
|
|
|
|
|
|
|
|
|
|
|
n/m |
|
|
|
|
|
|
|
|
n/m |
|
|
|
|
|
|
|
|
n/m |
|
|
|
|
|
|
|
|
n/m |
|
|
|
|
|
|
|
|
n/m |
|
|
|
|
|
|
|
|
n/m |
|
|
|
|
(31 |
) |
|
|
n/m |
|
|
|
|
(43 |
) |
|
|
n/m |
|
|
|
|
(74 |
) |
|
|
n/m |
|
|
|
|
(68 |
) |
|
|
119.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Revenue |
|
|
|
10,468 |
|
|
|
10,456 |
|
|
|
(0.1 |
%) |
|
|
|
10,281 |
|
|
|
2.5 |
% |
|
|
|
20,737 |
|
|
|
1.2 |
% |
|
|
|
11,275 |
|
|
|
7.8 |
% |
|
|
|
10,886 |
|
|
|
5.9 |
% |
|
|
|
22,161 |
|
|
|
6.9 |
% |
|
|
|
11,405 |
|
|
|
1.2 |
% |
|
|
|
11,278 |
|
|
|
3.6 |
% |
|
|
|
22,683 |
|
|
|
2.4 |
% |
|
|
|
11,630 |
|
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue |
|
|
|
19 |
|
|
|
13 |
|
|
|
(31.6 |
%) |
|
|
|
11 |
|
|
|
(26.7 |
%) |
|
|
|
24 |
|
|
|
(29.4 |
%) |
|
|
|
11 |
|
|
|
(15.4 |
%) |
|
|
|
9 |
|
|
|
(18.2 |
%) |
|
|
|
20 |
|
|
|
(16.7 |
%) |
|
|
|
10 |
|
|
|
(9.1 |
%) |
|
|
|
12 |
|
|
|
33.3 |
% |
|
|
|
22 |
|
|
|
10.0 |
% |
|
|
|
15 |
|
|
|
50.0 |
% |
Other income |
|
|
|
287 |
|
|
|
269 |
|
|
|
(6.3 |
%) |
|
|
|
137 |
|
|
|
(0.7 |
%) |
|
|
|
406 |
|
|
|
(4.5 |
%) |
|
|
|
74 |
|
|
|
(72.5 |
%) |
|
|
|
187 |
|
|
|
36.5 |
% |
|
|
|
261 |
|
|
|
(35.7 |
%) |
|
|
|
129 |
|
|
|
74.3 |
% |
|
|
|
199 |
|
|
|
6.4 |
% |
|
|
|
328 |
|
|
|
25.7 |
% |
|
|
|
152 |
|
|
|
17.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income |
|
|
|
10,774 |
|
|
|
10,738 |
|
|
|
(0.3 |
%) |
|
|
|
10,429 |
|
|
|
2.4 |
% |
|
|
|
21,167 |
|
|
|
1.0 |
% |
|
|
|
11,360 |
|
|
|
5.8 |
% |
|
|
|
11,082 |
|
|
|
6.3 |
% |
|
|
|
22,442 |
|
|
|
6.0 |
% |
|
|
|
11,544 |
|
|
|
1.6 |
% |
|
|
|
11,489 |
|
|
|
3.7 |
% |
|
|
|
23,033 |
|
|
|
2.6 |
% |
|
|
|
11,797 |
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected statistical data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile voice telephone minutes (millions) |
|
|
|
2,594 |
|
|
|
3,011 |
|
|
|
16.1 |
% |
|
|
|
3,134 |
|
|
|
17.8 |
% |
|
|
|
6,145 |
|
|
|
16.9 |
% |
|
|
|
3,404 |
|
|
|
13.1 |
% |
|
|
|
3,342 |
|
|
|
6.6 |
% |
|
|
|
6,746 |
|
|
|
9.8 |
% |
|
|
|
3,611 |
|
|
|
6.1 |
% |
|
|
|
3,700 |
|
|
|
10.7 |
% |
|
|
|
7,311 |
|
|
|
8.4 |
% |
|
|
|
4,147 |
|
|
|
14.8 |
% |
Number of short messaging service (SMS)
sent |
|
|
|
637 |
|
|
|
928 |
|
|
|
45.7 |
% |
|
|
|
1,016 |
|
|
|
28.8 |
% |
|
|
|
1,944 |
|
|
|
36.3 |
% |
|
|
|
1,142 |
|
|
|
23.1 |
% |
|
|
|
1,147 |
|
|
|
12.9 |
% |
|
|
|
2,289 |
|
|
|
17.7 |
% |
|
|
|
1,318 |
|
|
|
15.4 |
% |
|
|
|
1,700 |
|
|
|
48.2 |
% |
|
|
|
3,019 |
|
|
|
31.9 |
% |
|
|
|
2,227 |
|
|
|
69.0 |
% |
Mobile services in operation (thousands) |
|
|
|
6,098 |
|
|
|
6,985 |
|
|
|
14.5 |
% |
|
|
|
7,604 |
|
|
|
15.8 |
% |
|
|
|
7,604 |
|
|
|
15.8 |
% |
|
|
|
7,983 |
|
|
|
14.3 |
% |
|
|
|
8,227 |
|
|
|
8.2 |
% |
|
|
|
8,227 |
|
|
|
8.2 |
% |
|
|
|
8,582 |
|
|
|
7.5 |
% |
|
|
|
8,529 |
|
|
|
3.7 |
% |
|
|
|
8,529 |
|
|
|
3.7 |
% |
|
|
|
8,892 |
|
|
|
3.6 |
% |
Broadband Retail subscribers
(thousands) |
|
|
|
187 |
|
|
|
285 |
|
|
|
52.4 |
% |
|
|
|
423 |
|
|
|
77.0 |
% |
|
|
|
423 |
|
|
|
77.0 |
% |
|
|
|
616 |
|
|
|
116.1 |
% |
|
|
|
842 |
|
|
|
99.1 |
% |
|
|
|
842 |
|
|
|
99.1 |
% |
|
|
|
1,188 |
|
|
|
92.9 |
% |
|
|
|
1,508 |
|
|
|
79.1 |
% |
|
|
|
1,508 |
|
|
|
79.1 |
% |
|
|
|
1,839 |
|
|
|
54.8 |
% |
Broadband Wholesale subscribers
(thousands) |
|
|
|
57 |
|
|
|
220 |
|
|
|
286.0 |
% |
|
|
|
379 |
|
|
|
213.2 |
% |
|
|
|
379 |
|
|
|
213.2 |
% |
|
|
|
611 |
|
|
|
177.7 |
% |
|
|
|
888 |
|
|
|
134.3 |
% |
|
|
|
888 |
|
|
|
134.3 |
% |
|
|
|
1,164 |
|
|
|
90.5 |
% |
|
|
|
1,427 |
|
|
|
60.7 |
% |
|
|
|
1,427 |
|
|
|
60.7 |
% |
|
|
|
1,621 |
|
|
|
39.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Broadband subscribers (thousands) |
|
|
|
244 |
|
|
|
505 |
|
|
|
107.0 |
% |
|
|
|
802 |
|
|
|
122.8 |
% |
|
|
|
802 |
|
|
|
122.8 |
% |
|
|
|
1,227 |
|
|
|
143.0 |
% |
|
|
|
1,731 |
|
|
|
115.8 |
% |
|
|
|
1,731 |
|
|
|
115.8 |
% |
|
|
|
2,352 |
|
|
|
91.7 |
% |
|
|
|
2,935 |
|
|
|
69.6 |
% |
|
|
|
2,935 |
|
|
|
69.6 |
% |
|
|
|
3,460 |
|
|
|
47.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband subscribers (thousands) |
|
|
|
1,103 |
|
|
|
1,178 |
|
|
|
6.8 |
% |
|
|
|
1,194 |
|
|
|
3.1 |
% |
|
|
|
1,194 |
|
|
|
3.1 |
% |
|
|
|
1,201 |
|
|
|
2.0 |
% |
|
|
|
1,205 |
|
|
|
0.9 |
% |
|
|
|
1,205 |
|
|
|
0.9 |
% |
|
|
|
1,143 |
|
|
|
(4.8 |
%) |
|
|
|
1,027 |
|
|
|
(14.8 |
%) |
|
|
|
1,027 |
|
|
|
(14.8 |
%) |
|
|
|
819 |
|
|
|
(28.3 |
%) |
Total retail customers (millions) |
|
|
|
8.98 |
|
|
|
8.64 |
|
|
|
(3.8 |
%) |
|
|
|
8.44 |
|
|
|
(4.2 |
%) |
|
|
|
8.44 |
|
|
|
(4.2 |
%) |
|
|
|
8.21 |
|
|
|
(5.0 |
%) |
|
|
|
8.05 |
|
|
|
(4.6 |
%) |
|
|
|
8.05 |
|
|
|
(4.6 |
%) |
|
|
|
7.89 |
|
|
|
(3.9 |
%) |
|
|
|
7.78 |
|
|
|
(3.4 |
%) |
|
|
|
7.78 |
|
|
|
(3.4 |
%) |
|
|
|
7.74 |
|
|
|
(1.9 |
%) |
Domestic wholesale (millions) |
|
|
|
1.40 |
|
|
|
1.71 |
|
|
|
22.1 |
% |
|
|
|
1.84 |
|
|
|
18.7 |
% |
|
|
|
1.84 |
|
|
|
18.7 |
% |
|
|
|
1.98 |
|
|
|
15.8 |
% |
|
|
|
2.07 |
|
|
|
12.5 |
% |
|
|
|
2.07 |
|
|
|
12.5 |
% |
|
|
|
2.14 |
|
|
|
8.1 |
% |
|
|
|
2.16 |
|
|
|
4.3 |
% |
|
|
|
2.16 |
|
|
|
4.3 |
% |
|
|
|
2.12 |
|
|
|
(0.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic access lines in services
(millions) |
|
|
|
10.38 |
|
|
|
10.35 |
|
|
|
(0.3 |
%) |
|
|
|
10.28 |
|
|
|
(0.8 |
%) |
|
|
|
10.28 |
|
|
|
(0.8 |
%) |
|
|
|
10.19 |
|
|
|
(1.5 |
%) |
|
|
|
10.12 |
|
|
|
(1.6 |
%) |
|
|
|
10.12 |
|
|
|
(1.6 |
%) |
|
|
|
10.03 |
|
|
|
(1.6 |
%) |
|
|
|
9.94 |
|
|
|
(1.8 |
%) |
|
|
|
9.94 |
|
|
|
(1.8 |
%) |
|
|
|
9.86 |
|
|
|
(1.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls (number of calls) (millions) |
|
|
|
5,019 |
|
|
|
4,831 |
|
|
|
(3.7 |
%) |
|
|
|
4,566 |
|
|
|
(4.4 |
%) |
|
|
|
9,397 |
|
|
|
(4.1 |
%) |
|
|
|
4,412 |
|
|
|
(8.7 |
%) |
|
|
|
4,057 |
|
|
|
(11.1 |
%) |
|
|
|
8,469 |
|
|
|
(9.9 |
%) |
|
|
|
3,882 |
|
|
|
(12.0 |
%) |
|
|
|
3,550 |
|
|
|
(12.5 |
%) |
|
|
|
7,432 |
|
|
|
(12.2 |
%) |
|
|
|
3,390 |
|
|
|
(12.7 |
%) |
National long distance minutes (millions) |
|
|
|
4,656 |
|
|
|
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 |
%) |
|
|
|
3,594 |
|
|
|
(2.0 |
%) |
Fixed to mobile minutes (millions) |
|
|
|
1,955 |
|
|
|
2,099 |
|
|
|
7.4 |
% |
|
|
|
2,127 |
|
|
|
6.9 |
% |
|
|
|
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 |
% |
|
|
|
2,339 |
|
|
|
4.7 |
% |
International direct minutes (millions) |
|
|
|
387 |
|
|
|
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 |
%) |
|
|
|
264 |
|
|
|
(3.3 |
%) |
ISDN access (basic lines equivalents)
(thousands) (vii) |
|
|
|
1,190 |
|
|
|
1,108 |
|
|
|
(6.9 |
%) |
|
|
|
1,169 |
|
|
|
(3.6 |
%) |
|
|
|
1,169 |
|
|
|
(3.6 |
%) |
|
|
|
1,200 |
|
|
|
8.3 |
% |
|
|
|
1,208 |
|
|
|
3.3 |
% |
|
|
|
1,208 |
|
|
|
3.3 |
% |
|
|
|
1,205 |
|
|
|
0.4 |
% |
|
|
|
1,214 |
|
|
|
0.5 |
% |
|
|
|
1,214 |
|
|
|
0.5 |
% |
|
|
|
1,226 |
|
|
|
1.7 |
% |
Pay TV bundling (thousands) |
|
|
|
13 |
|
|
|
208 |
|
|
|
1500.0 |
% |
|
|
|
257 |
|
|
|
102.4 |
% |
|
|
|
257 |
|
|
|
102.4 |
% |
|
|
|
308 |
|
|
|
48.1 |
% |
|
|
|
335 |
|
|
|
30.4 |
% |
|
|
|
335 |
|
|
|
30.4 |
% |
|
|
|
341 |
|
|
|
10.7 |
% |
|
|
|
343 |
|
|
|
2.4 |
% |
|
|
|
343 |
|
|
|
2.4 |
% |
|
|
|
347 |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 business services & applications 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. |
59
|
|
|
|
|
|
Media Release
|
|
|
|
|
|
|
|
|
15 February 2007
|
|
023/2007 |
Telstra reaches pivot point: Delivers earnings ahead of guidance
Wins where it
matters in broadband and mobiles and slows PSTN decline
Telstra today announced earnings before interest and tax (EBIT) ahead of guidance for the half
year ended 31 December 2006 a decline of 15.7% or $546 million to $2.9 billion, better than the
expected 17 to 20% fall detailed in the T3 prospectus and previous guidance Profit after tax was
$1.7 billion, down $430 million or 20.1% on the prior
corresponding half year. As expected, these
results were affected by transformation costs and other one-off factors that will be more than made
up in the second half.
Telstra Chief Executive Officer, Mr Sol Trujillo, said: We are only 13 months into our five year
transformation. However, with 47 months to go, we have reached the pivot point , with positive
earnings growth to recommence in the second half. We are on or ahead of our transformation plan on
all fronts. Our financial performance is ahead of guidance. We are winning where it matters in 3G,
broadband and digital online offerings. We have slowed the PSTN
decline. We are improving service and
operational performance. We are creating new opportunities by
investing for competitive advantage.
The first half has seen us break new ground and deliver a string of firsts , including:
|
|
|
in mobiles, we have topped one million 3G subscribers in a record 16 months and total
Next G subscribers reached 415,000 this week while keeping average revenue per user (ARPU)
$20 per month higher than for 2G customers; |
|
|
|
|
in broadband, we have held ARPU from the second
half of fiscal 2006 while continuing to win broadband market share; |
|
|
|
|
in service, we have
reduced ADSL broadband held orders by more than 80% from 19,300 in September 2005, despite
increasing order volumes; and |
|
|
|
|
in fixed lines, we have been gaining residential market share
since October 2006, the first time since the advent of competition we have had positive
residential churn from competitors. |
As expected, transformation expenses this half year affected comparisons with the fiscal 2006 first
half, which had no transformation spend. In addition, the booking of Melbourne Yellow directories
revenue has been delayed to the second half of fiscal 2007, unlike previous years.
In line with guidance, the one-off factors influencing the first half result will be more than
outweighed in the second half. We expect that second half EBIT will grow by between 37 and 40%, Mr
Trujillo said.
Mr Trujillo said that following the companys strong first half revenue growth, Telstra had lifted
full year reported revenue guidance to growth of 2.5 to 3% (up from previous guidance of a 1.5 to
2% rise) and reported EBIT guidance to growth of 3 to 5% (up from a previously expected rise of 2
to 4%).
Total income grew by 2.2% or $253 million to $11.8 billion mainly due to increases in mobiles and
retail broadband, with Sensis new media revenues also growing
strongly. This was partly offset by
lower PSTN revenues. Sales revenue grew 3.6%, normalised for
Melbourne Yellow directories revenue.
Total expenses increased by 9.9% or $799 million to $8.9 billion, driven by transformation related
costs and higher cost of goods sold and handset subsidies due to increased market campaign
activity, as Telstra focuses on winning in the key 3G and broadband markets.
1
Depreciation and amortisation also increased due to a reduction in the service lives of certain
networks, platforms and applications as a result of the
transformation. Network termination payments
and labour expenses declined.
Mr
Trujillo said: Top line growth was strong. While costs increased, this expenditure is an
investment in the future revenue and margin growth of the company, reflecting our focus on key
growth markets, including mobiles and broadband.
Total mobile revenue grew 11.8% or $296 million to $2.8 billion, reflecting our strong competitive
advantage with Next G driving continued subscriber growth. Telstra added 12 and 13 times as many
postpaid SIOs in the second quarter as Vodafone and Singtel Optus respectively, helping mobile
services revenues to grow at 6.5%. Telstra added 707,000 3G SIOs in the half, including 280,000 Next
G customers despite the network only being launched in
October 2006. Total mobile SIOs stand at
8.89 million, up 363,000 in the half. Driven by significant use of applications and content since
the Next G launch, mobile data revenues strengthened with
non-SMS data ARPU rising 74%.
Mr Trujillo said that Telstra was using the Next G network to drive for 3G leadership
With
the launch of our Next G network we have the best offer in the market. Customers are flocking
to Telstras new Next G network and we are on track to
lead the market in 3G SIOs by May 2007.
Attracting 3G customers who are high-value, special-feature consumers is vital given the ARPU
premiums we are achieving compared to 2G customers, he said.
Retail
broadband revenue grew $166 million to $497 million, for market-leading growth of 50.2%. The
number of retail broadband customers grew to
1.84 million, with 331,000 added in the half.
Our broadband market share has increased again, up one percentage point to 45%, and we have
continued to add retail customers at three times the rate of our
nearest competitor. We are growing
market share while holding ARPUs, Mr Trujillo said.
Sensis grew sales revenue by 6.9% or $57 million to $885 million on a normalised basis, driven by a
68% increase in new media revenue, with a 21% increase in online
usage helping to expand margins.
Sensis is on track for double digit revenue and double digit EBIT growth in the full year.
Yellow
online revenue grew 32%. But Sensis is now much more than Yellow, and its emerging
business revenue grew 37%. Its Chinese online business SouFun maintained triple digit revenue and
EBIT growth. Together with BigPond and Foxtel, Sensis stable of new media assets is core to our
evolution into a media communications company, Mr Trujillo said.
PSTN products revenue fell $216 million to $3.6 billion, a decline of 5.6% for the half compared
with a 7.6% drop in the first half of fiscal 2006. Telstra has held residential fixed line SIOs
steady since June 2006, and total fixed line SIOs fell just 80,000 or 0.8% in the half to 9.86
million, a best-in-class performance.
There
has been a change in momentum in the fixed line business. We have contained line losses and
continued to slow the decline of PSTN revenues using market based management initiatives such as
subscription pricing and integrated offerings tailored for customer
segments. Telstras PSTN decline
is lower than for many of our global peers, Mr Trujillo said.
Total offshore controlled entities revenue increased by 17.4% or $145 million to $978 million for
the half. In local currency terms, CSL New World income increased 40.9% assisted by the merger
between Hong Kong CSL and New World PCS in March 2006, while in New Zealand TelstraClear income
fell 4% due to declining call revenues. Revenue from other offshore controlled entities grew by
24.5%.
2
Other key financial outcomes included:
|
|
|
Compared with the half year ended 31 December 2005, EBITDA margin decreased 4.0 percentage
points to 42.3%. However, on an underlying basis (normalised for Melbourne Yellow
directories revenue and transformation costs), EBITDA margins improved 1.7 percentage
points sequentially from the second half of fiscal 2006 (from 42.5% at 30 June 2006 to
44.2% at 31 December) as the transformation gains momentum. |
|
|
|
|
Operating cash capital expenditure tracked to full year guidance, increasing 22.8% to $2.5
billion driven primarily by the IP enablement of our network, IT transformation and the
rollout of the Next G network. Total transformation capex was $1.75 billion in the half,
while business as usual capex is steadily declining. Fiscal 2007 is the peak
transformation spend year. |
|
|
|
|
Free cash flow declined 55.9% to $862 million, from $1.96 billion in the prior half. This
position and our borrowings program will support our ongoing activities within our capital
management parameters. |
Mr Trujillo said key transformation achievements in the half included:
|
|
|
Next G network built and launched in a record 10 months, offering 100 times the coverage
of competitor 3G networks and worlds best peak network speed of 14.4 Mbps.
|
|
|
|
|
Launch of ADSL 2+, with 25% of new broadband sales in December and January for plans
faster than 1.5Mbps. |
|
|
|
|
Telstras IT transformation is on track, with important capabilities already delivered and
the first major release expected late in calendar 2007. |
|
|
|
|
Total workforce is down 2,066 versus first half fiscal 2006 and by 4,596 since 1 July 2005
(pre acquisitions and investments), placing Telstra on track to meet target workforce
reductions by fiscal 2008 and fiscal 2010. |
|
|
|
|
Improved service, with 97% of PSTN service calls completed right the first time.
|
|
|
|
|
Market based management driving a 13% rise in customers using three or more Telstra
products. |
|
|
|
|
Investment in improved service in the field, on the phone and online, with more than 6,400
staff participating in the Telstra Learning Academy. |
Mr Trujillo said regulation remained a significant risk, but that Telstra would continue to defend
the interests of its shareholders and the nation by seeking appropriate regulation reform and
through the constitutional challenge initiated in the High Court.
Mr Trujillo said that, apart from lifting full year revenue and EBIT guidance , previous guidance
on the companys fiscal 2007 outlook and long-term management objectives remained unchanged.
The Telstra Board of Directors declared a fully franked interim ordinary dividend of 14 cents per
share, representing a total payment of $1.74 billion. The record date for the dividend will be 2
March 2007 with payment to be made on 30 March 2007. Telstra shares will commence trading excluding
entitlement to the dividend on 26 February 2007.
Telstra Media Contact: Andrew Maiden Tel: 0428 310 700.
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
Half-Year Financial Report
for the half-year ended 31 December 2006
|
|
|
|
|
|
|
Page |
|
|
|
number |
|
Half-Year Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
3 |
|
|
|
|
4 |
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
7 |
|
|
|
|
11 |
|
|
|
|
12 |
|
|
|
|
13 |
|
|
|
|
15 |
|
|
|
|
17 |
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
21 |
|
Telstra Corporation Limited and controlled entities
Income Statement
for the half-year ended 31 December 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
Half-year ended |
|
|
|
|
|
|
31 December |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
|
|
|
|
11,645 |
|
|
|
11,415 |
|
Other income |
|
|
|
|
|
|
152 |
|
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,797 |
|
|
|
11,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
1,996 |
|
|
|
2,053 |
|
Goods and services purchased |
|
|
|
|
|
|
2,566 |
|
|
|
2,195 |
|
Other expenses |
|
|
|
|
|
|
2,318 |
|
|
|
2,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,880 |
|
|
|
6,259 |
|
Share of net loss from jointly controlled and associated entities |
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,881 |
|
|
|
6,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) |
|
|
|
|
|
|
4,916 |
|
|
|
5,284 |
|
Depreciation and amortisation |
|
|
|
|
|
|
1,978 |
|
|
|
1,800 |
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
2,938 |
|
|
|
3,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
29 |
|
|
|
41 |
|
Finance costs |
|
|
|
|
|
|
549 |
|
|
|
481 |
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
520 |
|
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
2,418 |
|
|
|
3,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
706 |
|
|
|
902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
|
|
1,712 |
|
|
|
2,142 |
|
|
|
|
|
|
|
|
Minority interests in net (profit)/loss |
|
|
|
|
|
|
(8 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
Profit for the period available to Telstra Entity shareholders |
|
|
|
|
|
|
1,704 |
|
|
|
2,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (cents per share) |
|
|
|
|
|
cents |
|
|
cents |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
13.8 |
|
|
|
17.3 |
|
Diluted |
|
|
|
|
|
|
13.7 |
|
|
|
17.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interim dividends declared (cents per share) |
|
|
4 |
|
|
|
14.0 |
|
|
|
20.0 |
|
|
|
|
|
|
|
|
The notes following the half-year financial statements form part of the half-year financial report.
2
Telstra Corporation Limited and controlled entities
Balance Sheet
as at 31 December 2006
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
as at |
|
|
31 Dec |
|
|
30 June |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
457 |
|
|
|
689 |
|
Trade and other receivables |
|
|
3,952 |
|
|
|
3,752 |
|
Inventories |
|
|
371 |
|
|
|
224 |
|
Derivative financial assets |
|
|
26 |
|
|
|
21 |
|
Prepayments |
|
|
221 |
|
|
|
244 |
|
|
|
|
Total current assets |
|
|
5,027 |
|
|
|
4,930 |
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
221 |
|
|
|
172 |
|
Inventories |
|
|
17 |
|
|
|
20 |
|
Investments accounted for using the equity method |
|
|
23 |
|
|
|
23 |
|
Property, plant and equipment |
|
|
23,413 |
|
|
|
23,503 |
|
Intangibles |
|
|
6,265 |
|
|
|
6,122 |
|
Deferred tax assets |
|
|
2 |
|
|
|
1 |
|
Derivative financial assets |
|
|
286 |
|
|
|
391 |
|
Defined benefit assets |
|
|
1,298 |
|
|
|
1,029 |
|
|
|
|
Total non current assets |
|
|
31,525 |
|
|
|
31,261 |
|
|
|
|
Total assets |
|
|
36,552 |
|
|
|
36,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
2,781 |
|
|
|
3,570 |
|
Borrowings |
|
|
3,033 |
|
|
|
1,982 |
|
Current tax liabilities |
|
|
324 |
|
|
|
428 |
|
Provisions |
|
|
694 |
|
|
|
737 |
|
Derivative financial liabilities |
|
|
97 |
|
|
|
12 |
|
Revenue received in advance |
|
|
1,212 |
|
|
|
1,161 |
|
|
|
|
Total current liabilities |
|
|
8,141 |
|
|
|
7,890 |
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
201 |
|
|
|
197 |
|
Borrowings |
|
|
11,280 |
|
|
|
11,434 |
|
Deferred tax liabilities |
|
|
1,679 |
|
|
|
1,700 |
|
Provisions |
|
|
901 |
|
|
|
974 |
|
Derivative financial liabilities |
|
|
832 |
|
|
|
768 |
|
Revenue received in advance |
|
|
402 |
|
|
|
405 |
|
|
|
|
Total non current liabilities |
|
|
15,295 |
|
|
|
15,478 |
|
|
|
|
Total liabilities |
|
|
23,436 |
|
|
|
23,368 |
|
|
|
|
Net assets |
|
|
13,116 |
|
|
|
12,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Share capital |
|
|
5,590 |
|
|
|
5,569 |
|
Reserves |
|
|
(142 |
) |
|
|
(160 |
) |
Retained profits |
|
|
7,414 |
|
|
|
7,168 |
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
12,862 |
|
|
|
12,577 |
|
Minority interests |
|
|
254 |
|
|
|
246 |
|
|
|
|
Total equity |
|
|
13,116 |
|
|
|
12,823 |
|
|
|
|
The notes following the half-year financial statements form part of the half-year financial report.
3
Telstra Corporation Limited and controlled entities
Statement of Recognised Income and Expense
for the half-year ended 31 December 2006
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Half-year ended |
|
|
31 December |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
Equity accounting our interest in jointly controlled and associated entities |
|
|
|
|
|
|
1 |
|
Translation of financial statements of non-Australian controlled entities |
|
|
(12 |
) |
|
|
81 |
|
Transfer to profit for the period on sale of jointly controlled and associated entities |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
Net hedging gains/(losses) recognised directly in equity |
|
|
(60 |
) |
|
|
75 |
|
Net hedging gains/(losses) removed from equity and included in profit for the period |
|
|
107 |
|
|
|
(129 |
) |
|
|
|
|
|
|
|
|
|
Retained profits |
|
|
|
|
|
|
|
|
Actuarial gain on our defined benefit plans |
|
|
399 |
|
|
|
298 |
|
|
|
|
|
|
|
433 |
|
|
|
326 |
|
Income tax on equity items |
|
|
(133 |
) |
|
|
(71 |
) |
|
|
|
Net income recognised directly in equity |
|
|
300 |
|
|
|
255 |
|
Profit for the period |
|
|
1,712 |
|
|
|
2,142 |
|
|
|
|
Total recognised income for the period |
|
|
2,012 |
|
|
|
2,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
2,004 |
|
|
|
2,398 |
|
Minority interest |
|
|
8 |
|
|
|
(1 |
) |
|
|
|
|
|
|
2,012 |
|
|
|
2,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of changes in accounting policy attributable to Telstra Entity |
|
|
|
|
|
|
76 |
|
|
|
|
The notes following the half-year financial statements form part of the half-year financial report.
4
Telstra Corporation Limited and controlled entities
Statement of Cash Flows
for the half-year ended 31 December 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
Half-year ended |
|
|
|
|
|
|
|
31 December |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Receipts from customers (inclusive of goods and services tax (GST)) |
|
|
|
|
|
|
12,736 |
|
|
|
12,417 |
|
Payments to suppliers and to employees (inclusive of GST) |
|
|
|
|
|
|
(8,339 |
) |
|
|
(7,466 |
) |
|
|
|
|
|
|
|
Net cash generated from operations |
|
|
|
|
|
|
4,397 |
|
|
|
4,951 |
|
Income taxes paid |
|
|
|
|
|
|
(966 |
) |
|
|
(1,003 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
3,431 |
|
|
|
3,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Payments for: |
|
|
|
|
|
|
|
|
|
|
|
|
- property, plant and equipment |
|
|
|
|
|
|
(2,114 |
) |
|
|
(1,761 |
) |
- intangibles |
|
|
|
|
|
|
(395 |
) |
|
|
(282 |
) |
|
|
|
|
|
|
|
Capital expenditure (before investments) |
|
|
|
|
|
|
(2,509 |
) |
|
|
(2,043 |
) |
- shares in controlled entities (net of cash acquired) |
|
|
6 |
|
|
|
(314 |
) |
|
|
(7 |
) |
- adjustment to net proceeds from CSL New World Mobility Group merger |
|
|
6 |
|
|
|
(21 |
) |
|
|
|
|
- payments for other investments |
|
|
|
|
|
|
(2 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
Total capital expenditure |
|
|
|
|
|
|
(2,846 |
) |
|
|
(2,062 |
) |
Proceeds from: |
|
|
|
|
|
|
|
|
|
|
|
|
- sale of property, plant and equipment |
|
|
|
|
|
|
25 |
|
|
|
20 |
|
- sale of shares in controlled entities (net of cash disposed) |
|
|
6 |
|
|
|
222 |
|
|
|
|
|
Proceeds from share buy-back by jointly controlled and associated entities |
|
|
|
|
|
|
|
|
|
|
16 |
|
Interest received |
|
|
|
|
|
|
30 |
|
|
|
34 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(2,569 |
) |
|
|
(1,992 |
) |
|
|
|
|
|
|
|
Operating cash flows less investing cash flows |
|
|
|
|
|
|
862 |
|
|
|
1,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
|
|
|
|
2,810 |
|
|
|
3,869 |
|
Proceeds from Telstra bonds |
|
|
|
|
|
|
373 |
|
|
|
|
|
Repayment of borrowings |
|
|
|
|
|
|
(1,987 |
) |
|
|
(3,623 |
) |
Repayment of Telstra bonds |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
Repayment of finance lease principal amounts |
|
|
|
|
|
|
(17 |
) |
|
|
(4 |
) |
Staff repayments of share loans |
|
|
|
|
|
|
11 |
|
|
|
11 |
|
Purchase of shares for employee share plans |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
Finance costs paid |
|
|
|
|
|
|
(540 |
) |
|
|
(470 |
) |
Dividends paid |
|
|
4 |
|
|
|
(1,739 |
) |
|
|
(2,485 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
|
|
|
|
(1,089 |
) |
|
|
(2,721 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
|
|
|
|
(227 |
) |
|
|
(765 |
) |
Foreign currency translation on opening balances |
|
|
|
|
|
|
(5 |
) |
|
|
4 |
|
Cash at the beginning of the period |
|
|
|
|
|
|
689 |
|
|
|
1,534 |
|
|
|
|
|
|
|
|
Cash at the end of the period |
|
|
6 |
|
|
|
457 |
|
|
|
773 |
|
|
|
|
|
|
|
|
The notes following the half-year financial statements form part of the half-year financial report.
5
Telstra Corporation Limited and controlled entities
Notes to the Half-Year 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 half-year financial report is a general purpose financial report and is to be read in
conjunction with our Annual Financial Report as at 30 June 2006. This should also be read together
with any public announcements made by us in accordance with the continuous disclosure obligations
arising under Australian Stock Exchange listing rules and the Corporations Act 2001, up to the date
of the Directors Declaration.
1.1 Basis of preparation of the financial report
This half-year financial report has been prepared in accordance with the requirements of the
Australian Corporations Act 2001 and Accounting Standards applicable in Australia, including AASB
134: Interim Financial Reporting.
Our half-year financial report does not include all notes of the type normally included in the
Annual Financial Report. Therefore, it cannot be expected to provide as full an understanding of
the income statement, balance sheet and cash flows of the Telstra Group as the full financial
report.
This half-year 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 half-year financial report, we are required to make judgments and estimates that
impact:
|
|
income and expenses for the half-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.
For the purpose of preparing this half-year financial report, each half-year has been treated as a
discrete reporting period.
1.2 Further 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.
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 ordinary activities 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 3.
1.3 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.
6
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
2. Summary of accounting policies
2.1 Accounting policies
Our accounting policies are consistent with
those disclosed in the Annual Financial Report as
at 30 June 2006, with the exception of those
detailed below.
2.2 Change in accounting policies
The following accounting policy changes
occurred during the half-year ended 31 December
2006.
(i) Financial guarantees
AASB 2005-9: Amendments to Australian Accounting
Standards became applicable to annual reporting
periods beginning on or after 1 January 2006. We have
applied 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. The amendments have
resulted in no impact on our balance sheet, income
statement or statement of cash flows.
(ii) Lease arrangements
UIG 4: Determining Whether an Arrangement Contains a Lease (UIG 4) became applicable to annual
reporting periods beginning on or after 1 January 2006. We have applied this interpretation in our
financial report for the half-year ended 31 December 2006 including the restatement of our
comparative information.
UIG 4 requires entities to assess whether 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 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.
Some of our solutions management and outsourcing arrangements that we enter into as a service
provider meet the requirements of UIG 4 as we provide the customer with the right to use dedicated
equipment. We have applied this new accounting policy to these arrangements in existence at the
start of our comparative period (1 July 2005). We have assessed that all embedded leases in
existence at 1 July 2005 were finance leases in accordance with our current accounting policy for
leases and AASB 117: Leases as substantially all of the risks and benefits incidental to
ownership of this equipment are transferred to the customer. This required property, plant and
equipment identified as part of an UIG 4 arrangement to be transferred to finance lease receivable
and for lease accounting to be applied post this date.
The following impacts were recorded on the transition to UIG 4:
|
|
|
|
|
|
Telstra Group |
|
|
Adjustments |
|
|
as at |
|
|
1 July 2005 |
|
|
$m |
|
|
Assets |
|
|
|
|
Trade and other receivables (current) |
|
|
25 |
|
Trade and other receivables (non current) |
|
|
93 |
|
Property, plant and equipment |
|
|
(102 |
) |
Intangibles |
|
|
(1 |
) |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Borrowings (current) |
|
|
8 |
|
Revenue received in advance (current) |
|
|
(15 |
) |
Borrowings (non current) |
|
|
25 |
|
Deferred tax liability |
|
|
(1 |
) |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Retained profits |
|
|
(2 |
) |
|
|
|
|
Before UIG 4 applied, we did not separately account
for embedded leases within our service agreements.
Fixed and leased assets were previously recognised in
our balance sheet and these assets were depreciated
or amortised over their economic lives. Revenue
associated with the entire service agreement was
accounted for in accordance with our accounting
policy on service revenue.
Details of the UIG 4 adjustments required to our
comparative information is shown in 2.4 below.
2.3 Amendments to A-IFRS transition
adjustments disclosed at 31 December 2005
During the second half of fiscal 2006, we made
certain amendments to the impacts of adopting A-IFRS on
the Telstra Group. These
amendments impacted our comparatives for the half-year
ended 31 December 2005 as set out below:
(i) 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 a decrease in
income tax expense of $4 million and a decrease in net
income recognised directly in equity of $13 million
associated with the defined benefit asset for the six
months ended 31 December 2005.
7
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
2. Summary of accounting policies (continued)
2.4 Impact of our changes in accounting
policies and amendments to A-IFRS transition
adjustments
The following tables show the impact of our
changes in accounting policies and amendments to
A-IFRS transition adjustments to our previously
reported income statements and balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Previously |
|
|
|
|
|
|
|
|
|
|
|
|
|
reported |
|
|
|
|
|
|
Defined |
|
|
Restated |
|
|
|
31 Dec 2005 |
|
|
UIG 4 |
|
|
benefit tax |
|
|
31 Dec 2005 |
|
Income Statement |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
11,449 |
|
|
|
(34 |
) |
|
|
|
|
|
|
11,415 |
|
Other income |
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
129 |
|
|
|
|
|
|
|
11,578 |
|
|
|
(34 |
) |
|
|
|
|
|
|
11,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
2,053 |
|
|
|
|
|
|
|
|
|
|
|
2,053 |
|
Goods and services purchased |
|
|
2,214 |
|
|
|
(19 |
) |
|
|
|
|
|
|
2,195 |
|
Other expenses |
|
|
2,011 |
|
|
|
|
|
|
|
|
|
|
|
2,011 |
|
|
|
|
|
|
|
6,278 |
|
|
|
(19 |
) |
|
|
|
|
|
|
6,259 |
|
Share of net loss from jointly controlled and associated entities |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
6,279 |
|
|
|
(19 |
) |
|
|
|
|
|
|
6,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and
amortisation
(EBITDA) |
|
|
5,299 |
|
|
|
(15 |
) |
|
|
|
|
|
|
5,284 |
|
Depreciation and amortisation |
|
|
1,810 |
|
|
|
(10 |
) |
|
|
|
|
|
|
1,800 |
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
3,489 |
|
|
|
(5 |
) |
|
|
|
|
|
|
3,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
36 |
|
|
|
5 |
|
|
|
|
|
|
|
41 |
|
Finance costs |
|
|
479 |
|
|
|
2 |
|
|
|
|
|
|
|
481 |
|
|
|
|
Net finance costs |
|
|
443 |
|
|
|
(3 |
) |
|
|
|
|
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
3,046 |
|
|
|
(2 |
) |
|
|
|
|
|
|
3,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
907 |
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
2,139 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
2,142 |
|
|
|
|
Minority interests in net loss |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
Profit for the period available to Telstra Entity shareholders |
|
|
2,140 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
2,143 |
|
|
|
|
There has been no impact on basic and diluted earnings
per share for the half-year ended 31 December 2005 as
a result of the adoption of UIG 4.
8
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
2. Summary of accounting policies (continued)
2.4 Impact of our changes in accounting
policies and amendments to A-IFRS transition
adjustments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Previously |
|
|
|
|
|
|
|
|
|
|
reported |
|
|
|
|
|
|
Restated |
|
|
|
30 June 2006 |
|
|
UIG 4 |
|
|
30 June 2006 |
|
Income Statement |
|
$m |
|
|
$m |
|
|
$m |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
22,772 |
|
|
|
(68 |
) |
|
|
22,704 |
|
Other income |
|
|
328 |
|
|
|
|
|
|
|
328 |
|
|
|
|
|
|
|
23,100 |
|
|
|
(68 |
) |
|
|
23,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
4,364 |
|
|
|
|
|
|
|
4,364 |
|
Goods and services purchased |
|
|
4,730 |
|
|
|
(33 |
) |
|
|
4,697 |
|
Other expenses |
|
|
4,427 |
|
|
|
|
|
|
|
4,427 |
|
|
|
|
|
|
|
13,521 |
|
|
|
(33 |
) |
|
|
13,488 |
|
Share of net gain from jointly controlled and associated entities |
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
13,516 |
|
|
|
(33 |
) |
|
|
13,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and
amortisation (EBITDA) |
|
|
9,584 |
|
|
|
(35 |
) |
|
|
9,549 |
|
Depreciation and amortisation |
|
|
4,087 |
|
|
|
(20 |
) |
|
|
4,067 |
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
5,497 |
|
|
|
(15 |
) |
|
|
5,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
66 |
|
|
|
9 |
|
|
|
75 |
|
Finance costs |
|
|
1,002 |
|
|
|
4 |
|
|
|
1,006 |
|
|
|
|
Net finance costs |
|
|
936 |
|
|
|
(5 |
) |
|
|
931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
(10 |
) |
|
|
4,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
1,380 |
|
|
|
(3 |
) |
|
|
1,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
3,181 |
|
|
|
(7 |
) |
|
|
3,174 |
|
|
|
|
There has been no impact on basic earnings per share
for the year ended 30 June 2006 as a result of the
adoption of UIG 4. Diluted earnings per share for the
year ended 30 June 2006 has decreased by 0.1 cents.
9
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
2. Summary of accounting policies (continued)
2.4 Impact of our changes in accounting
policies and amendments to A-IFRS transition
adjustments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Previously |
|
|
|
|
|
|
|
|
|
|
reported |
|
|
|
|
|
|
Restated |
|
|
|
30 June 2006 |
|
|
UIG 4 |
|
|
30 June 2006 |
|
Balance Sheet |
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
689 |
|
|
|
|
|
|
|
689 |
|
Trade and other receivables |
|
|
3,701 |
|
|
|
51 |
|
|
|
3,752 |
|
Inventories |
|
|
224 |
|
|
|
|
|
|
|
224 |
|
Derivative financial assets |
|
|
21 |
|
|
|
|
|
|
|
21 |
|
Prepayments |
|
|
244 |
|
|
|
|
|
|
|
244 |
|
|
|
|
Total current assets |
|
|
4,879 |
|
|
|
51 |
|
|
|
4,930 |
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
87 |
|
|
|
85 |
|
|
|
172 |
|
Inventories |
|
|
20 |
|
|
|
|
|
|
|
20 |
|
Investments accounted for using the equity method |
|
|
23 |
|
|
|
|
|
|
|
23 |
|
Property, plant and equipment |
|
|
23,622 |
|
|
|
(119 |
) |
|
|
23,503 |
|
Intangibles |
|
|
6,123 |
|
|
|
(1 |
) |
|
|
6,122 |
|
Deferred tax asset |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Derivative financial assets |
|
|
391 |
|
|
|
|
|
|
|
391 |
|
Defined benefit assets |
|
|
1,029 |
|
|
|
|
|
|
|
1,029 |
|
|
|
|
Total non current assets |
|
|
31,296 |
|
|
|
(35 |
) |
|
|
31,261 |
|
|
|
|
Total assets |
|
|
36,175 |
|
|
|
16 |
|
|
|
36,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
3,570 |
|
|
|
|
|
|
|
3,570 |
|
Borrowings |
|
|
1,969 |
|
|
|
13 |
|
|
|
1,982 |
|
Current tax liabilities |
|
|
428 |
|
|
|
|
|
|
|
428 |
|
Provisions |
|
|
737 |
|
|
|
|
|
|
|
737 |
|
Derivative financial liabilities |
|
|
12 |
|
|
|
|
|
|
|
12 |
|
Revenue received in advance |
|
|
1,170 |
|
|
|
(9 |
) |
|
|
1,161 |
|
|
|
|
Total current liabilities |
|
|
7,886 |
|
|
|
4 |
|
|
|
7,890 |
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
197 |
|
|
|
|
|
|
|
197 |
|
Borrowings |
|
|
11,409 |
|
|
|
25 |
|
|
|
11,434 |
|
Deferred tax liabilities |
|
|
1,704 |
|
|
|
(4 |
) |
|
|
1,700 |
|
Provisions |
|
|
974 |
|
|
|
|
|
|
|
974 |
|
Derivative financial liabilities |
|
|
768 |
|
|
|
|
|
|
|
768 |
|
Revenue received in advance |
|
|
405 |
|
|
|
|
|
|
|
405 |
|
|
|
|
Total non current liabilities |
|
|
15,457 |
|
|
|
21 |
|
|
|
15,478 |
|
|
|
|
Total liabilities |
|
|
23,343 |
|
|
|
25 |
|
|
|
23,368 |
|
|
|
|
Net assets |
|
|
12,832 |
|
|
|
(9 |
) |
|
|
12,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
5,569 |
|
|
|
|
|
|
|
5,569 |
|
Reserves |
|
|
(160 |
) |
|
|
|
|
|
|
(160 |
) |
Retained profits |
|
|
7,177 |
|
|
|
(9 |
) |
|
|
7,168 |
|
|
|
|
Equity available to Telstra Entity Shareholders |
|
|
12,586 |
|
|
|
(9 |
) |
|
|
12,577 |
|
Minority interest |
|
|
246 |
|
|
|
|
|
|
|
246 |
|
|
|
|
Total equity |
|
|
12,832 |
|
|
|
(9 |
) |
|
|
12,823 |
|
|
|
|
10
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
3. Items requiring specific disclosure
Our profit for the period has been calculated
after charging specific expense items from our
continuing operations as detailed below:
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Half-year ended |
|
|
31 December |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
- accelerated amortisation of intangibles |
|
|
14 |
|
|
|
|
|
- accelerated depreciation of property, plant and equipment |
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
(44 |
) |
|
|
|
|
|
|
|
Net items after income tax benefit |
|
|
104 |
|
|
|
|
|
|
|
|
As part of our transformation a decision was made last
financial year to shut down certain networks,
platforms and applications. This has resulted in the
accelerated depreciation and amortisation of certain
assets that, while currently in use, will be
decommissioned.
11
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
4. Dividends
Our dividends provided for and paid during the half-year are listed below:
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Half-year ended |
|
|
31 December |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Dividends paid |
|
|
|
|
|
|
|
|
Final dividends for the financial year ended 30
June provided for and paid during the
interim period
Final dividend |
|
|
1,739 |
|
|
|
1,739 |
|
Special dividend paid with the final dividend |
|
|
|
|
|
|
746 |
|
|
|
|
|
|
|
1,739 |
|
|
|
2,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per ordinary share paid |
|
|
¢ |
|
|
|
¢ |
|
|
|
|
Final dividends for the financial year ended 30
June provided for and paid during the
interim period |
|
|
|
|
|
|
|
|
Final dividend |
|
|
14.0 |
|
|
|
14.0 |
|
Special dividend paid with the final dividend |
|
|
|
|
|
|
6.0 |
|
|
|
|
|
|
|
14.0 |
|
|
|
20.0 |
|
|
|
|
Our dividends provided for and paid during the interim
period are fully franked at a tax rate of 30%.
Dividends per ordinary share declared
Our dividends declared per share in respect of the
half-year as disclosed on the face of our income
statement is detailed below:
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Half-year ended |
|
|
|
31 December |
|
|
2006 |
|
|
2005 |
|
|
|
¢ |
|
|
¢ |
|
|
Dividends declared per ordinary share |
|
|
|
|
|
|
|
|
Interim dividend (a) |
|
|
14.0 |
|
|
|
14.0 |
|
Special dividend paid with the interim dividend |
|
|
|
|
|
|
6.0 |
|
|
|
|
|
|
|
14.0 |
|
|
|
20.0 |
|
|
|
|
(a) As the interim dividend for the half-year ended 31
December 2006 was not declared, determined or publicly
recommended by the Board as at 31 December 2006, no
provision for dividend was raised prior to, or as at,
that date in the balance sheet. The declaration of the
interim dividend is reported as an event after balance
date (refer to note 8 for further information).
12
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
5. Segment information
Business segments
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.
During the half-year ended 31 December 2006
there were no adjustments to our business
segments.
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. |
Segment financial results
For segment reporting purposes, we have reallocated
certain items between the respective business segments
pursuant to the definitions of segment revenues and
segment expenses 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 and segment expenses do not reflect
actual operating results achieved for our business
segments in certain circumstances.
The following narrative explains our segment
results for those individual items where no
reasonable allocation basis exists:
|
|
Sales revenue associated with mobile handsets for Telstra Consumer Marketing and
Channels (TC&C), Telstra Business (TB) and Telstra Enterprise and Government (TE&G) are
allocated totally to the TC&C segment, with the exception of some products sold which are
allocated to TB and TE&G. 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. |
These allocations reflect managements accountability
framework and internal reporting system and
accordingly no reasonable basis for reallocation to
the respective business segments exists.
In addition, revenue derived from our BigPond Internet
products 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. 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.
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.
13
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
5. Segment information (continued)
The following tables detail the results of our
business segments, based on the reporting structure as
at 31 December 2006:
Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
Enterprise |
|
|
Telstra |
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
& |
|
|
Telstra |
|
|
& Govern- |
|
|
Inter- |
|
|
Opera- |
|
|
Telstra |
|
|
|
|
|
|
Other |
|
|
Elimina- |
|
|
of all |
|
|
|
Channels |
|
|
Business |
|
|
ment |
|
|
national |
|
|
tions |
|
|
Wholesale |
|
|
Sensis |
|
|
(a) |
|
|
tions |
|
|
segments |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Half-year ended 31
December 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from
external
customers |
|
|
4,679 |
|
|
|
1,608 |
|
|
|
2,185 |
|
|
|
807 |
|
|
|
93 |
|
|
|
1,337 |
|
|
|
885 |
|
|
|
51 |
|
|
|
|
|
|
|
11,645 |
|
Inter-segment
revenue |
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
13 |
|
|
|
22 |
|
|
|
150 |
|
|
|
|
|
|
|
1 |
|
|
|
(215 |
) |
|
|
|
|
|
|
|
Total segment
revenue |
|
|
4,679 |
|
|
|
1,608 |
|
|
|
2,214 |
|
|
|
820 |
|
|
|
115 |
|
|
|
1,487 |
|
|
|
885 |
|
|
|
52 |
|
|
|
(215 |
) |
|
|
11,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
|
2,763 |
|
|
|
1,299 |
|
|
|
1,247 |
|
|
|
26 |
|
|
|
(1,912 |
) |
|
|
1,451 |
|
|
|
362 |
|
|
|
(2,343 |
) |
|
|
(2 |
) |
|
|
2,891 |
|
Share of equity
accounted net losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Net gain on sale of
investment |
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
48 |
|
|
|
|
Earnings before
interest
and income tax
expense
(EBIT) |
|
|
2,763 |
|
|
|
1,299 |
|
|
|
1,291 |
|
|
|
26 |
|
|
|
(1,912 |
) |
|
|
1,451 |
|
|
|
365 |
|
|
|
(2,343 |
) |
|
|
(2 |
) |
|
|
2,938 |
|
|
|
|
Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
Enterprise |
|
|
Telstra |
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
& |
|
|
Telstra |
|
|
& Govern- |
|
|
Inter- |
|
|
Opera- |
|
|
Telstra |
|
|
|
|
|
|
Other |
|
|
Elimina- |
|
|
of all |
|
|
|
Channels |
|
|
Business |
|
|
ment |
|
|
national |
|
|
tions |
|
|
Wholesale |
|
|
Sensis |
|
|
(a) |
|
|
tions |
|
|
segments |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Half-year ended
31 December 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from
external
customers |
|
|
4,481 |
|
|
|
1,597 |
|
|
|
2,219 |
|
|
|
694 |
|
|
|
92 |
|
|
|
1,281 |
|
|
|
1,002 |
|
|
|
49 |
|
|
|
|
|
|
|
11,415 |
|
Inter-segment
revenue |
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
15 |
|
|
|
31 |
|
|
|
146 |
|
|
|
10 |
|
|
|
1 |
|
|
|
(232 |
) |
|
|
|
|
|
|
|
Total segment
revenue |
|
|
4,481 |
|
|
|
1,597 |
|
|
|
2,248 |
|
|
|
709 |
|
|
|
123 |
|
|
|
1,427 |
|
|
|
1,012 |
|
|
|
50 |
|
|
|
(232 |
) |
|
|
11,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
|
3,041 |
|
|
|
1,302 |
|
|
|
1,302 |
|
|
|
27 |
|
|
|
(1,785 |
) |
|
|
1,318 |
|
|
|
509 |
|
|
|
(2,260 |
) |
|
|
31 |
|
|
|
3,485 |
|
Share of equity
accounted net
profits/
(losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
Earnings before
interest
and income tax
expense
(EBIT) |
|
|
3,041 |
|
|
|
1,302 |
|
|
|
1,302 |
|
|
|
32 |
|
|
|
(1,785 |
) |
|
|
1,318 |
|
|
|
509 |
|
|
|
(2,266 |
) |
|
|
31 |
|
|
|
3,484 |
|
|
|
|
|
|
|
(a) |
|
The Asset Accounting Group is the main contributor to the segment result for this segment,
which is primarily depreciation and amortisation charges. |
14
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
6. Notes to the statement of cash flows
Reconciliation of cash balances
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Half-year ended |
|
|
31 December |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Cash and cash equivalents |
|
|
457 |
|
|
|
817 |
|
Bank overdraft |
|
|
|
|
|
|
(44 |
) |
|
|
|
|
|
|
457 |
|
|
|
773 |
|
|
|
|
Acquisitions and disposals
During the half-year ended 31 December 2006 we made
the following significant acquisitions and disposals
of investments:
Acquisitions
SouFun Holdings Limited (SouFun)
On 31 August 2006, we acquired 55% (on an undiluted
basis) of the issued capital of SouFun for a total
consideration of $337 million including acquisition
costs.
SouFun is Chinas largest online real estate, home
furnishings and home improvements portal.
Our accounting for the acquisition and the assignment
of fair values to SouFuns identifiable assets,
liabilities and contingent liabilities has not been
finalised and has been determined on a provisional
basis as the completion balance sheet has not been
finalised.
|
|
|
|
|
|
|
|
|
|
SouFun |
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
Consideration for acquisition |
|
|
|
|
|
|
|
|
Cash consideration for acquisition |
|
|
333 |
|
|
|
|
|
Costs of acquisition |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash balances acquired |
|
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Outflow of cash on acquisition |
|
|
314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
Assets/(liabilities) at acquisition date
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
23 |
|
|
|
23 |
|
Trade and other receivables |
|
|
9 |
|
|
|
9 |
|
Property, plant and equipment |
|
|
1 |
|
|
|
1 |
|
Intangible assets |
|
|
38 |
|
|
|
|
|
Other assets |
|
|
1 |
|
|
|
1 |
|
Deferred tax assets |
|
|
1 |
|
|
|
1 |
|
Trade and other payables |
|
|
(9 |
) |
|
|
(9 |
) |
Current tax liabilities |
|
|
(2 |
) |
|
|
(2 |
) |
Deferred tax liabilities |
|
|
(9 |
) |
|
|
|
|
Revenue received in advance |
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
Net assets |
|
|
47 |
|
|
|
18 |
|
Adjustment to reflect minority interests
acquired |
|
|
(21 |
) |
|
|
|
|
Goodwill on acquisition |
|
|
311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from acquisition date until 31
December 2006 |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
We have recognised good will of $311 million on
acquisition of SouFun. The following factors
contributed to the recognition of goodwill:
|
|
forecast revenues and profitability of SouFun; 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 SouFun.
If the SouFun acquisition had occurred on 1 July 2006, our adjusted consolidated income and
consolidated profit after minority interests for the half-year ended 31 December 2006 for the
Telstra Group would have been $11,807 million and
$1,706 million respectively.
15
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
6. Notes to the statement of cash flows (continued)
CSL New World Mobility Group
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 (NWMHL) 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%.
Following finalisation of the subscription amount, we were required to make a cash payment of $21
million to NWMHL during fiscal 2007, which represented an adjustment to the $44 million cash
received in fiscal 2006. In accordance with the terms of the merger, this adjustment was primarily
based on the final working capital position of the New World Mobility Group at the completion
date.
Disposals
Australian Administration Services Group Pty Ltd (AAS)
On 31 August 2006, our controlled entity Kaz Group Pty Limited sold its 100% shareholdings in
controlled entities Australian Administration Services Pty Ltd and Atune Financial Solutions Pty
Ltd for a total consideration of $235 million.
The sale of AAS included the following controlled entities:
|
|
|
Australian Administration Services Pty Ltd; |
|
|
|
|
AAS Superannuation Services Pty Ltd; and |
|
|
|
|
Atune Financial Solutions Pty Ltd. |
It also included AASs 50% shareholding in a jointly controlled entity Money Solutions Pty
Ltd.
|
|
|
|
|
|
|
AAS |
|
|
|
2006 |
|
|
|
$m |
|
|
Consideration on disposal |
|
|
|
|
Cash consideration for disposal |
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents disposed of |
|
|
(23 |
) |
|
|
|
|
|
Inflow of cash on disposal |
|
|
212 |
|
|
|
|
|
|
Platefood Limited (Platefood)
On 28 November 2006, our controlled entity Sensis Pty Ltd sold its 61% shareholdings in controlled entity
Platefood for a total consideration of $10 million.
16
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
7. Contingent liabilities, contingent assets and expenditure commitments
Contingent liabilities
There have been no significant changes from 30 June 2006 to guarantees, indemnities and support
provided by us, or to legal actions we are involved in, apart from:
FOXTEL
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. As a result
of the refinancing, we no longer have a contingent liability under the ECD, which amounted to $100
million as at 30 June 2006.
Unconditioned Local Loop Service (ULLS) and Line Sharing Service (LSS)
ULLS is a declared service by which competitors effectively rent the copper pairs or loops
connecting Telstra exchanges to almost all residential and business premises in Australia. The
ULLS is connected to Telstras competitors equipment in Telstras exchanges allowing them to
provide voice and broadband services to retail customers. Once connected, no Telstra services
can be provided over the ULLS. The ACCC has indicated that Telstra should charge different
prices in different areas for ULLS, despite the fact that it is required to charge the same
residential and business retail prices for a basic line rental service throughout Australia.
In December 2005, Telstra submitted an ULLS access undertaking with a single (or averaged)
price of $30 per month for all areas. In August 2006 the ACCC issued a final decision,
rejecting the undertaking on the basis that it was not satisfied that Telstras estimate of its
costs and the averaging of those costs were reasonable. Telstra appealed that rejection to the
Australian Competition Tribunal.
A number of Telstras competitors have notified access disputes in relation to ULLS. In August
2006, the ACCC made binding interim decisions in several of these arbitrations that prices
remain deaveraged and that the price in band 2 (the metropolitan area where the greatest
number of ULLS services will be provided) be reduced from $22 to $17.70 per month.
On 14 September 2006, Telstra lodged an appeal to the Australian Competition Tribunal. The
Tribunal is required to make its decision by 14 March 2007, or if it extends the decision
making period, by 14 June 2007. There is also a risk of the ACCC making final determinations in
the access disputes at a lower price.
LSS is a service whereby the copper wire connecting our exchanges to almost all residential and
business premises in Australia is shared with a Telstra competitor. Telstra will typically
provide voice services to the customer while the competitor will provide broadband services
over the same copper wire.
In December 2004, Telstra submitted a LSS access undertaking at $9 per month. This was rejected
by the ACCC in December 2005, with the Australian Competition Tribunal upholding the ACCCs
rejection in June 2006.
A number of Telstra competitors have notified access disputes in relation to LSS. On 21 December
2006, the ACCC made an interim decision in these disputes that the access charge for LSS be set at
$3.20 per month.
When the ACCC make their final determination on these ULLS and LSS access disputes, they may find
that it is reasonable for Telstra to reimburse the access seekers for the difference in the access
price charged from the date in which the various access seekers lodged their access dispute or from
a point prior to that time when negotiations between Telstra and the access seeker commenced.
Telstra made submissions to the ACCC on the appropriate course of action going forward with the
ULLS and LSS access
disputes having regard to the Constitutional Challenge which Telstra has recently commenced. The
ACCC has subsequently advised that it will be proceeding with the access disputes notwithstanding
this challenge. Refer to note 8 for further details regarding the Constitutional Challenge.
Competition Notice
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.
17
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
7. Contingent liabilities, contingent assets and expenditure commitments (continued)
Contingent liabilities (continued)
Competition Notice (continued)
The ACCC has yet to commence enforcement proceedings against us but, should the ACCC elect to
commence such proceedings and should they be successful, the maximum potential penalties which
had accrued as at 31 December 2006 exceed $760 million (30 June 2006: exceeded $200 million) and
continue to accrue at $3 million per day. Optus has issued proceedings against Telstra 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 future enforcement proceedings should they,
be commenced 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. This challenge was heard by the Federal Court in
August 2006. Judgement was
reserved.
Expenditure commitments
There have been no significant changes from 30 June 2006 to our expenditure commitments, apart from:
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FOXTEL no longer has commitments relating to digital set top box units, which
reduced our share of the commitments by $141 million; |
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we entered into a contract with IBM Australia Ltd for procurement, operational and
accounts payable functions for $370 million expiring in August 2013. The commitment
remaining at 31 December 2006 was $366 million; |
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Sensis entered into a contract for IT services for $165 million with AMDOCS USA
Inc. This commitment expires in June 2011. The amount of the commitment outstanding at 31
December 2006 was $138 million; and |
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we have entered into a contract for fixed line transformation with Alcatel
Australia Ltd for $461 million. This commitment expires in June 2007. The amount of this
commitment remaining at 31 December 2006 was $265 million. |
18
Telstra Corporation Limited and controlled entities
Notes to the Half-Year Financial Statements (continued)
8. Events after balance date
The directors are not aware of any matter or circumstance that has occurred since 31 December 2006
that, in their opinion, has significantly affected or may significantly affect in future years:
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our operations; |
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the results of those operations; or |
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the state of our affairs; |
other than:
Dividends declaration
On 15 February 2007, the directors of Telstra Corporation Limited declared a fully franked interim
dividend of 14 cents per ordinary share. The record date for the interim dividend is 2 March 2007
with payment to be made on 30 March 2007. Shares will trade excluding entitlement to the dividends
on 26 February 2007.
A provision for dividend payable has been raised as at the date of declaration, amounting to
$1,740 million. The interim 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 31 December 2006.
Constitutional Challenge
On 24 January 2007, Telstra commenced proceedings in the High Court against the Commonwealth, the
ACCC and eleven access seekers who had, prior to 24 January 2007, notified access disputes in
respect of ULLS and/or LSS. Telstra is seeking declarations from the High Court that Part XIC of
the Trade Practices Act is invalid as it applies to ULLS and LSS, together with administrative
relief directed at each of the specific access disputes. The matter was heard (for first
directions only) on 8 February 2007 and orders were made for the filing of pleadings and
particulars. The matter has been relisted on 20 March 2007.
19
Telstra Corporation Limited and controlled entities
Directors Declaration
The directors of Telstra Corporation Limited have made a resolution that declared:
(a) |
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the financial statements and notes, set out on pages 2 to 19, of the Telstra Group: |
(i) comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations
Regulations 2001;
(ii) give a true and fair view of the financial position as at 31 December 2006 and
performance, as represented by the results of the operations and cash flows, for the half-year
ended 31 December 2006; and
(iii) in the directors opinion, have been made out in accordance with the Corporations Act
2001.
(b) |
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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. |
This declaration is made in accordance with a resolution of the Directors.
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Donald G McGauchie AO
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Solomon D Trujillo |
Chairman
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Chief Executive Officer |
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15 February 2007 |
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Melbourne, Australia |
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20
Telstra Corporation Limited and controlled entities
Independent Review Report
To the members of Telstra Corporation Limited
Report on the Half-Year Financial Report
We have reviewed the accompanying half-year financial report of the Telstra Group (Telstra
Corporation Limited and the entities it controlled during the period), which comprises the balance
sheet as at 31 December 2006, and the income statement, statement of recognised income and expense
and cash flow statement for the half-year ended on that date, a summary of accounting policies,
other selected explanatory notes and the directors declaration.
Directors Responsibility for the Half-Year Financial Report
The directors of the Telstra Group are responsible for the preparation and fair presentation of the
half-year financial report in accordance with Australian Accounting Standards (including the
Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes
designing, implementing and maintaining internal controls relevant to the preparation and fair
presentation of the half-year financial report that is free from material misstatement, whether due
to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our
review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE
2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in
order to state whether, on the basis of the procedures described, we have become aware of any
matter that makes us believe that the financial report is not in accordance with the Corporations
Act 2001 including: giving a true and fair view of the Telstra Groups financial position as at 31
December 2006 and its performance for the half-year ended on that date; and complying with
Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and
other mandatory financial reporting requirements in Australia. As the auditor of the Telstra Group,
ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual
financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with
Australian Auditing Standards and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations
Act 2001. We have given to the directors of the company a written Auditors Independence
Declaration, a copy of which is included in the Directors Report.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us
believe that the interim financial report of the Telstra Group is not in accordance with:
(a) |
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the Corporations Act 2001, including: |
(i) giving a true and fair view of the financial position of the Telstra Group at 31 December
2006 and of its performance for the half-year ended on that date; and
(ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corp
orations Regulations 2001; and
(b) |
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other mandatory financial reporting requirements in Australia. |
Ernst & Young
Mirco Bardella
Partner
15 February 2007
Melbourne, Australia
21
Telstra Corporation Limited and controlled entities
Directors Report
For the half-year ended 31 December 2006
1
Directors report
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 half-year ended 31 December 2006.
Financial comparisons used in this report are of results for the half-year ended 31
December 2006 compared with the half-year ended 31 December 2005.
Results of operations
As previously indicated to shareholders, the fiscal 2007 year is the high spend year of
our major transformation on the business. Our earnings for the first half of fiscal 2007
have been impacted by these one-off costs but are slightly better than our guidance. We
are thirteen months into our five year transformation and have reached a turning point,
with positive earnings growth to recommence in the second half.
Telstras net profit after minority interests for the half-year was $1,704 million (2005:
$2,143 million). This result was after deducting:
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net finance costs of $520 million (2005: $440 million); and |
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income tax expense of $706 million (2005: $902 million). |
Earnings before interest and income tax expense was $2,938 million, representing a 15.7%
or $546 million decrease on the prior corresponding period result of $3,484 million.
Basic earnings per share decreased by 20.2% from 17.3 cents per share in the half-year
ended 31 December 2005 to 13.8 cents per share in the current half-year. The lower
earnings per share were due to the decrease in net profit.
Review of operations
Our achievements in the past half-year, as we execute our five year transformation
strategy, are:
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built our national Next G network in ten months; |
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launched 3GSM 850 nationwide wireless broadband network; |
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upgraded the networks speeds to 14.4 megabits per second (Mbps) nationwide
-worlds fastest wireless broadband network; |
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extended Next G network range up to 200 kilometres (at selected sites); |
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reached one million 3GSM customers in sixteen months, nearly 40% 3G market share; |
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launched national high-speed ADSL with network speeds up to 20Mbps; |
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maintained retail broadband average revenue per user (ARPU) while growing market
share to 45% (increase of 1% from June 2006); and |
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achieved increase in residential fixed line market share for the first time since
1992. |
Other highlights over the last six months include the following:
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improved service ratings and increased revenues were achieved while reducing the
total workforce by 4,596 (pre acquisitions and investments) since 1 July 2005. We are on
track to achieve our target reduction of 6,000 to 8,000 by 30 June 2008; |
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increased scheduling flexibility for our customers, meeting more than 90% of our
appointments and completing 97% of PSTN service calls on the first attempt; and |
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6,400-plus staff participating in the Telstra Learning Academy to advance their
product knowledge, customer service and technical skills. |
2
Our total income for the half-year (excluding finance income) increased by 2.2% or
$253 million to $11,797 million (2005: $11,544 million).
The growth in total income was mainly attributable to:
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mobiles revenue $296 million or 11.8%; and |
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broadband revenue $236 million or 43.7%. |
Mobile goods and services revenue increased largely due to the continued growth in the
number of mobile telephone subscribers, as well as growth in mobile data revenue and
international roaming revenue. We also experienced increased revenue from mobile handset
sales.
Retail and wholesale broadband subscribers increased by 47.1% in the half-year to 3.5
million subscribers.
Offsetting the sales growth was a decline in PSTN product revenues of $216 million or 5.6%
as the market continues to move towards mobile and broadband products. This decline has
slowed when compared with the 7.6% decline in the first half of fiscal 2006. The rate of
loss of retail basic access lines has slowed to 1.7% this half due to competitive offers in
the market. In particular, we have experienced a slight increase in the number of retail
lines since October 2006.
Our advertising and directories revenue decreased 12.7% compared with the prior
corresponding period due to the deferred Melbourne Yellow print directory production
causing a one month delay in distribution into the second half of fiscal 2007. Excluding
the impact of the revenue deferral, advertising and directories revenue increased by
7.0%.
Total operating expenses (before depreciation and amortisation, finance costs and income
tax expense) increased by 9.9% or $621 million to $6,881 million for the half-year
(2005: $6,260 million). This growth was mainly attributable to:
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goods and services purchased increased by $371 million or 16.9%; and |
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other expenses grew by $307 million or 15.3%. |
Goods and services purchased increased due to:
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higher handset subsidies from a rise in the take up of handsets on subsidised
plans as well as higher subsidies offered associated with our marketing and campaign for
Next G mobile; |
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cost of goods sold other, increased mainly due to higher sales volumes for
mobile handsets and a higher average cost per handset again associated with strong Next G
take up; |
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partially offset by lower network payments as a result of a reduced mobile
terminating access rate, and lower payments for international capacity and termination
costs due to lower net costs from Reach Ltd, our jointly controlled entity. |
Other expenses increased largely due to higher service contracts and other agreements as
a result of costs associated with transformational initiatives.
This was offset by a decrease in labour expenses of $57 million or 2.8%. Labour costs
decreased mainly due to lower staff levels, a lower charge in redundancy costs, and
lower overtime payments partially offset by higher contractor and agency payments.
Depreciation and amortisation costs increased by 9.9% to $1,978 million, primarily due to
accelerated depreciation and amortisation associated with our transformation strategy and
planned closure of the CDMA network, upgrade of switching systems and software, and growth
in communications plant.
3
Net finance costs increased by 18.2% to $520 million, primarily due to higher borrowings
to fund capital expenditure and the dividend payments, combined with the impact of
increased interest rates in the half-year.
Income tax expense decreased by $196 million to $706 million as a result of the lower net
profit. The effective tax rate of 29.2% was marginally lower than the rate in the prior
corresponding period of 29.6% mainly due to the non taxable profit on sale of the
Australian Administration Services Group which was offset by carried forward CGT losses.
Cash flow
Our cash flow before financing activities (free cash flow) position remains strong
despite declining to $862 million in the half-year from $1,956 million in the prior
corresponding period. This position combined with our borrowing program will continue
to support our ongoing operating and investing activities within our target debt
ratios.
Our cash flow from operating activities decreased to $3,431 million for the current
half-year compared with $3,948 million in the half-year ended 31 December 2005. The
decrease primarily due to:
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the 7.0% decline in earnings before interest, income tax expense, depreciation
and amortisation; and |
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lower tax payments. |
Cash used in investing activities was $2,569 million, representing an increase of $577
million over the prior corresponding period. The increase was mainly attributable to:
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our payments for property, plant and equipment as we continue to improve and
invest in our core infrastructure; |
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the payment for SouFun Holdings Limited; |
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offset by the proceeds received from the sale of Australian Administration Services Group. |
Our cash used in financing activities was $1,089 million for the half-year, which
represents a decrease of $1,632 million over the prior corresponding period. The decrease
was mainly due to the reduced payment of dividends as the half-year ended 31 December 2005
included a special dividend of 6 cents per share and an increase in borrowings.
Dividends
The directors have declared an interim ordinary dividend of 14 cents per share ($1,740
million). The dividends will be fully franked at a tax rate of 30%. The record date for
the interim dividend will be 2 March 2007 with payment to be made on 30 March 2007.
Shares will trade excluding entitlement to the dividends on 26 February 2007.
Our final ordinary dividend for the financial year ended 30 June 2006 of 14 cents per
share ($1,739 million) was provided for and paid during the half-year ending 31 December
2006. These dividends were fully franked at a tax rate of 30%. The final dividend paid
had a record date of 25 August 2006 and payment was made on 22 September 2006.
It is the current intention of the Board to declare fully franked ordinary dividends of 28
cents per share for fiscal 2007. This assumes that we continue to be successful in
implementing our transformation strategy and there are no further material adverse
regulatory outcomes during the course of fiscal 2007. The amount of dividends (including
the level of franking) is a decision for the Board to make twice a year in its normal
cycle having regard to our earnings, cash flows and the position as well as future
regulatory impacts and all other factors that affect our operations.
4
Sale of the Commonwealths remaining interest in Telstra
The Commonwealth proceeded with the sale of its 51.8% ownership interest in Telstra in
the half-year ended 31 December 2006 where it sold 34.2% of its ownership interest
through a public sale. The Commonwealths remaining 17.6% interest in Telstra is expected
to be transferred to the Commonwealth Future Fund by 24 February 2007.
The final public sale of Telstra shares was a success with the level of interest from
investors, both retail and institutional, much higher than expected resulting in 4.25
billion shares sold. Retail investors were sold 2.5 billion shares at a price of $3.60 and
institutional investors were sold 1.7 billion shares at a price of $3.70. The total offer
size was $15.5 billion making it the second biggest share offering in Australian history.
Directors
Directors who held office during the half-year and until the date of this report were:
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Donald G McGauchie
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- chairman, non-executive director |
Solomon D Trujillo
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- chief executive officer |
Geoffrey Cousins
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- non-executive director (elected 14 November 2006) |
Belinda J Hutchinson
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- non-executive director |
Catherine B Livingstone
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- non-executive director |
Charles Macek
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- non-executive director |
John W Stocker
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- non-executive director |
Peter Willcox
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- non-executive director |
John Zeglis
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- non-executive director |
Auditors independence declaration
The independence declaration of our auditors is on page 6 and forms part of this report.
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.
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Donald G McGauchie AO
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Solomon D Trujillo |
Chairman
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Chief Executive Officer |
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15 February 2007 |
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Melbourne, Australia |
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5
Independence Declaration
Auditors Independence Declaration to the Directors of Telstra Corporation Limited
In relation to our review of the financial report of the Telstra Group (the Telstra Entity
and the entities it controlled during the period) for the half-year ended 31 December 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.
Ernst & Young
Mirco Bardella
Partner
15 February 2007
Melbourne, Australia
6
15 February 2007
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
Analyst Briefing Half year results presentation pack
In accordance with the listing rules, I attach a copy of a presentation to be made
today, for release to the market.
This Announcement has been released simultaneously to the New Zealand Stock Exchange.
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 |
1
Telstra Corporation Limited
1H 2007 Results |
2
These presentations include certain forward-looking statements that are based on information
and assumptions known to date and 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 A-IFRS. 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.
Disclaimer |
3
1H 2007 Results
Trujillo
Chief Executive Officer
Telstra Corporation Limited
$ billions (except margins & DPS)
- 14.0 14.0 Ordinary DPS (cents) 2
55.9 0.9 2.0 Free Cash Flow
22.8 2.5 2.0 Cash Operating Capex
20.1 1.7 2.1 NPAT 1
15.7 2.9 3.5 EBIT
4.0 42.3 46.3 EBITDA Margin (%)
7.0 4.9 5.3 EBITDA
9.9 6.9 6.3 Operating Expenses
2.0 11.6 11.4 Sales Revenue
% 1H07 1H06
1H07 Financial results (reported)
Beat Earnings Guidance ...Earnings pivot point reached whilst continuing to invest
(1) Before minority interests
(2) 1H06 excludes 6 cent per share special dividend
3.6%
Sales
Revenue*
*normalised for
Melbourne Yellow book
1.7%
EBITDA
Margin**
**1H07 v 2H06 (normalised for
Melbourne Yellow book and
transformation costs) |
3
1H 2007 Results
Sol Trujillo
Chief Executive Officer
Telstra Corporation Limited
$ billions (except margins & DPS)
- 14.0 14.0 Ordinary DPS (cents) 2
55.9 0.9 2.0 Free Cash Flow
22.8 2.5 2.0 Cash Operating Capex
20.1 1.7 2.1 NPAT 1
15.7 2.9 3.5 EBIT
4.0 42.3 46.3 EBITDA Margin (%)
7.0 4.9 5.3 EBITDA
9.9 6.9 6.3 Operating Expenses
2.0 11.6 11.4 Sales Revenue
% 1H07 1H06
1H07 Financial results (reported)
Beat Earnings Guidance ...Earnings pivot point reached whilst continuing to invest
(1) Before minority interests
(2) 1H06 excludes 6 cent per share special dividend
3.6%
Sales
Revenue*
*normalised for
Melbourne Yellow book
1.7%
EBITDA
Margin**
**1H07 v 2H06 (normalised for
Melbourne Yellow book and
transformation costs) |
9
The best the competition can do...
Next GTM competition still years away... Competitors
faced with substantial execution risks in rollout
RECORD TIME
Next GTM built and operating in record time
of 10 months
WIDEST
Breadth: 1.9M sq km & 98.8% population
Better depth: in buildings etc
NEW: Range extension from 80km to 200km in
certain locations
AVAILABLE NOW
Already 1.2m+ 3G customers, including
415k Next GTM
SUPERIOR
NEW: 14.4Mbps first nationwide upgrade
at highest speed in the world
PLUS: HSUPA1.9Mbps upload
....staying global leader
Status
Speed
Coverage
Time for
Rollout
No 2 competitor
LIMITED
650,000 sq km & 96% population
900MHz explored only, limited depth
with 2,500 sites at 2100 MHz
NOT YET AVAILABLE
Yet to make final technology
(frequency) choice and mix risks of
delay
INFERIOR
Once installed, speeds of up to
3.6Mbps initially
YEARS
3 year rollout...risks of delay |
6
Winning where it matters Mobiles
Entrenching mobiles leadership
Holding
$20 ARPU
Premium
Strong
growth in
3G SIOs
Improving
Subscriber
Mix
&
&
Approaching 40% market
share in 3G On track for
market leadership by May 07
3G
2G Next G driving content
and applications -
Non SMS data ARPU +74%.
MBM benefits: CRM strike
rates increasing across the
board. eg. Postpaid
recontracting doubled
59%
55%
+183%
745k
280k
156k
Next GTM 3G 2100 EVDO
Dec 06 Jun 06
Estimated to have captured
around 60% of 3G SIO net adds
317k
100k
1.2m
0.4m
Postpaid (as a % of total
customer base)
Dec 06 Dec 05 |
7
Data
driving
more
than half
of $20 3G
ARPU
uplift
Changing the game in customer behaviour...leading the market
Telstras Competitive Advantage -
Next GTM SIOs
31 Dec 30 Nov 13 Feb Voice/roaming/messaging SMS Non-SMS data
65%
17%
18%
3G
81%
16%
3%
2G
In Dec, 3G
customers spent
$12 more on
non SMS data
and $4 more on
SMS than 2G
customers
ARPU Breakdown
415k
280k
155k
50k
31 Oct
$20
$20
$20
$20
$20
$65
$20
Month 1 Month 2 Month 3 Month 4
3-4 month payback
FY06
Incremental
postpaid SARC
Month 5 Month 6
Monthly
incremental
ARPU
Economics of accelerated 3G growth
$100
$50 |
8 Changing the game in customer behaviour...leading the market
Telstras Competitive Advantage -
FOXTEL by Mobile: 7%
Mobile Music: 24%
Video Streams: 53%
Penetration of base: Next GTM v 3G 2100
3G 2100
FOXTEL by Mobile: 0.8%
Mobile Music: 5%
Video Streams: 11%
4 new channels recently
launched driving an increase in
streaming minutes and
customer take up
Most popular channels are Fox
8, Comedy Channel and Disney
Channel
Increase in channel content:
Simple Life & Jerry Springer
(FOX8); MAD TV (Comedy
Channel)
Next GTM v 3G 2100 Usage (Oct Dec)
Music
3.3X
1.0X
Games
2.1X
1.0X
Video
Streams
7.4X
1.0X
Video Calls
11.3X
1.0X
Next GTM
2100 |
9
The best the competition can do...
Next GTM competition still years away... Competitors
faced with substantial execution risks in rollout
RECORD TIME
Next GTM built and operating in record time
of 10 months
WIDEST
Breadth: 1.9M sq km & 98.8% population
Better depth: in buildings etc
NEW: Range extension from 80km to 200km in
certain locations
AVAILABLE NOW
Already 1.2m+ 3G customers, including
415k Next GTM
SUPERIOR
NEW: 14.4Mbps first nationwide upgrade
at highest speed in the world
PLUS: HSUPA1.9Mbps upload
....staying global leader
Status
Speed
Coverage
Time for
Rollout
No 2 competitor
LIMITED
650,000 sq km & 96% population
900MHz explored only, limited depth
with 2,500 sites at 2100 MHz
NOT YET AVAILABLE
Yet to make final technology
(frequency) choice and mix risks of
delay
INFERIOR
Once installed, speeds of up to
3.6Mbps initially
YEARS
3 year rollout...risks of delay |
10
Winning where it matters Retail Broadband
Growing market share while holding ARPUs
Strong
growth in
market
share
Beating
nearest
competitor
Holding ARPU
sequentially
for the first
time
3
1 v
&
&
Rated #1 in survey for email and
telephone customer experience across
all industries
Approximately one third of entry level
customers migrate within 12 months
25% of new broadband sales in
December and January were for plans
faster than 1.5Mbps
45%
44%
$49 $49
Delivering enhanced services with
upgraded networks Fixed,
Wireless, Satellite and Cable
Wireless broadband subscribers
over 200,000
1H07 2H06
1H07 2H06 |
11
Winning where it matters PSTN
Important pivot points passed
Slowing
Revenue
Decline
Smallest
retail line
loss in five
years
&
Consumer SIOs
flat on June -
world class
performance
-5.6%
-7.6%
41% of
consumer base
of 2 or more
products
1H07 1H06
2H 05 1H 06 2H 06 1H 07 |
12
Winning where it matters Sensis
Now much more than Yellow
33% of new
customers
taking up print and
online bundles
Telstra/BigPond
referrals
up 30%
250% growth in Satellite
Navigation unit sales
Over 60m maps
served per month
New media
% of
revenues
increasing
(normalised)
33% of
revenue
growth from
emerging
businesses
15%
10%
Online
usage +21%
Monthly unique browsers
6.5m
7.9m
Dec 06 Dec 05
1H07 1H06
Emerging
businesses |
13
SouFun: Expanding the footprint
Strong growth in
SouFun performance
SouFun is continuing its aggressive organic expansion
Dec
2008
Offices in a further 44 cities
planned by end CY08
Total : 100 Cities by end CY08
Feb
2007
Offices in another 16 cities
opened post Telstra
acquisition of 51%
Aug
2006
Offices in 40 cities opened
prior to Telstra acquisition
of 51%*
Revenue up 107% YOY
EBIT up 131% YOY
Strong organic growth in
SouFun footprint:
* On a fully diluted basis |
14
3,376
2,484
2,691
2,919
3,131
Construction fuelling
Chinas economic boom
Real estate investment -
24% growth in 2006
Residential building area
Jan to Nov 06 + 19.2% YoY
China: GDP Value
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2006E 2007E 2008E 2009E 2010E
US$ Bn
Online advertising forecast
to quadruple from 2006-
2010 to US$3.2bn
Forecast online real estate
advertising CAGR of 66% to
US$1bn in 2010
Chinas #1 online real estate
advertising web site
44m unique users per month
1.3bn page views per month
Chinese Online Real Estate
Advertising Market: US$ m
SouFun Performance Measures:
Page views per month
0
200
400
600
800
1,000
1,200
1,400
Jan05 Jul 05 Nov06 Apr 06
Page views
monthly
(millions)
SouFun operating in a booming market
SouFun is continuing to grow strongly with the market
CAGR: 8.2%
85
180
297
480
719
1,067
0
200
400
600
800
1000
1200
2005 2006e 2007e 2008e 2009e 2010e
CAGR: 66%
CAGR: 109% |
15
IP/MPLS Core and Multi Service
Edge turn up nearing
completion
Migrations of Internet backbone
IP traffic (Telstra Internet Direct)
to Core completed early Feb 07
Migrations of Routed Data
Network (RDN) underway
Ethernet Aggregation and
Transport deployments on track
to carry traffic by end of June 07
IP DSLAM ports on track to meet
full year deployment target of
887k ports
Transformation...
driving Capex improvements
Next GTM peak network
download speeds increased to
14.4Mbps
Additional 400 base stations
being rolled out in FY07
- Deeper coverage,
- More capacity
1800 more Next G base
stations compared to CDMA
Moving to one consolidated
network
200km range extension
completed at selected sites
Trial of home based wireless
broadband service
On track to meet key milestones over calendar 2007
On track
- 1st release at the end of
calendar 2007
- 2nd release in late calendar
2008
Delivered important capabilities
- Integrated desktop
- Telstra Service Delivery
Platform
- Telstra Retail Integrated
Campaign Systems (TRICS)
- Enterprise Program
Management
- Network Planning
Wireline IT Wireless |
16
Transformation driving service improvements
Driving improvements in both service and quality
Getting it right
first time...
Enterprise &
Government
BigPond cycle
times
ADSL Held
orders
Getting there
on time...
Over 90%
of the time Over 96% of the time Best results on record
Over 80% reduction
since Sep 2005 Down 19% |
17
Transformation driving
productivity improvements
One factory increasing efficiency and delivering
benefits...headcount down 4,596 since June 2005
Investing in
our people Vehicles with GPS Incentive Based
Compensation
Higher productivity
and vehicle visibility
and more efficient
scheduling
Over 6,900 vehicles Over 6,400
participants
More than 80%
front of house
Improved front-ofhouse
and field
workforce skills
Improved staff
performance |
18
Summary
On or ahead of plan on all fronts
13 months into a 5 year transformation plan
Broadband, 3G, Online, Integration
Winning where it matters
Evolution to MediaComms
Creating new opportunities
Churn, 3G/Broadband Market share, Productivity
Improving operational performance
Momentum continues across all business units |
1
1H 2007 Results
John Stanhope
Chief Financial Officer
Telstra Corporation Limited |
2
Mobile revenue growth of 12%
Retail broadband revenue growth of 50%
PSTN revenue decline slowed to -5.6%
Normalised sales revenue +3.6%
1H07 Financial Highlights (Reported)
Sales
revenue
Operating
expense
Earnings
(EBIT)
Transformation
Labour down 3%
Goods and Services +17%
Other expenses +15%
Transformation costs of $285 million in first half
Cash operating capex at $2.5 billion
Beat 1H07 guidance
2.0%
9.9%
15.7%
On
track
Better than guidance |
3 Beat earnings guidance ...Earnings pivot point reached whilst continuing to invest
1H07 Financial Results (Reported)
$ billions (except margins & DPS)
- 14.0 14.0 Ordinary DPS (cents) 2
55.9 0.9 2.0 Free Cash Flow
22.8 2.5 2.0 Cash Operating Capex
20.1 1.7 2.1 NPAT 1
15.7 2.9 3.5 EBIT
4.0 42.3 46.3 EBITDA Margin (%)
7.0 4.9 5.3 EBITDA
9.9 6.9 6.3 Operating Expenses
2.0 11.6 11.4 Sales Revenue
% 1H07 1H06
(1) Before minority interests
(2) 1H06 excludes 6 cent per share special dividend
3.6%
Sales
Revenue*
*normalised for
Melbourne Yellow book
1.7%
EBITDA
Margin**
**1H07 v 2H06 (normalised for
Melbourne Yellow book and
transformation costs) |
4
Sales Revenue Drivers: $11.6b +$225m
1H07 Movement
($m)
Drivers of
Revenue Growth
Actual
1H07
($m)
1H07
Growth %
296 Total mobiles 2,798 11.8
70 Wholesale broadband 279 33.5
(47) Specialised data 404 (10.4)
Retail broadband 497 50.2 166
(117) Sensis 885 (11.7)
PSTN products 3,615 (5.6) (216)
41 IP access 193 27.0
Mix change continues...growing in key markets
2,441 6.5 Mobile services 150
357 69.2 Mobile handsets 146
2%
+57*
* Normalised for deferral of Melbourne Yellow book +7% |
5
-$117m (Normalised * ) Sensis: $885m
5th year of strong 1H growth
New media revenue +68%
(Yellow +32% to $78m)
Online usage +21%
Approx. 33% of new
customers bundle print &
online (vs 20% historically)
SouFun 100+% growth
Normalised Sales Revenue
On track to achieve FY07 double digit revenue and EBIT growth
1H06 1H07
7% $828m
$885m Now more than
Yellow:
Emerging
businesses +37%
revenue growth
Normalised EBITDA Margins
1H06 1H07
1.9% 48.7%
50.6% Margin
expansion
driven by usage
growth and cost
management
* Normalised for Melbourne YP of $174m
*
12% 7% |
6
Retail Broadband: $497m +$166m
25% of new broadband sales in
December and January were for plans
faster than 1.5Mbps
Adding customers at the ratio of 3:1
compared to nearest competitor
Customer service stats
- ADSL cycle times improved by 19%
- Top rated email and telephone
customer experience provider
Growing market share and holding ARPUs
Market Share and SIOs
Subscribers
861k 1,188k 1,508k 1,839k
1H06 2H05 2H06 1H07
41%
43%
44%
45%
Retail Broadband ARPU
1H04 2H04 1H05 2H05 1H06 2H06 1H07
100
80
60
40
20
50%
Includes retail broadband, mobile broadband
and internet direct (retail ADSL) customers
Retail market share |
7
Mobiles: $2.8b +$296m
3GSM SIOs exceed 1 million added over
700k in 1H, of which 280k were Next GTM
Mobile data revenue 22% of mobile services
revenue (up from 19% in 2H06)
Non SMS Data ARPU up 74%
Q2 Post paid adds 12x Voda, 13x Optus
On track to become 3G market leader by May 2007
2G v 3G ARPU
Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06
417k
3G
2G
3G SIOs
1H06 3G 2G Other CDMA 1H07 Handsets
$2,502m (7.4%)
11.0%
1.7% 0.7%
5.9% $2,798m +11.8%
Revenue
$20 ARPU uplift
driving 3G revenue
growth and
improving churn. 1,180k
12%
EVDO
3GSM |
8
Mobiles SARCs/Margins
Higher ARPUs reducing average payback to around 3 4 months
Strong focus on
Next GTM to drive 3G
leadership
Higher subsidies to
migrate and acquire
customers on Next GTM
3G subscribers generate $20 ARPU uplift
over 2G subscribers
Reducing postpaid churn to best in class
(less than 1% per month)
- 54% of postpaid base contracted for
at least the next 12 months
- Introduced 36 month contracts
Net Ports positive for Postpaid
- (36k for 1H07)
However...
EBITDA Margin
2H06 1H06 1H07
30%
40%
50%
MNP Trend (Ports In less Ports Out)
Dec-05 Oct-06
-7k
7k |
9
PSTN: $3.6b -$216m
Positive churn from competitors driving revenue improvement
Revenue Growth
1H04 2H04 1H05 2H05 1H06 2H06 1H07
2%
0%
-2%
-4%
-6%
-8%
Closing Subscribers
2H05 1H06 2H06 1H07
8.1
8
7.9
7.8
7.7
7.6
Smallest line loss since June 2002
- Momentum change in residential
SIOs net gains since December
MBM led initiatives reducing churn
and slowing revenue decline
- 3+ Multi-product customers up 13%
- Subscription pricing plans ~300k
- Improving churn trend
5.6% |
10
Revenue Growth: 4.4% to $4.7bn
- Reduced PSTN decline: organic positive net churn from competitors first time since
competition
- Continued success in migrating customers to 3G and Broadband
Increasing competitive advantage and reducing churn:
- Continued growth in bundling of products: 41% of customers
- Strong growth in postpaid SIO share; growth in ARPU; and non messaging data up
94% world class performance
- World class churn performance in Fixed, Mobiles and Internet
Revenue Growth: 0.7% to $1.6bn
- Successful performance turnaround following prior period revenue decline
- Strong mobiles performance with 8.6% total revenue growth (8.4% mobile services
growth)
- PSTN decline reduced with 40% improvement on previous year: churn improvement,
stabilisation of yield and segment targeting
Future opportunities for growth from Mobile data and Broadband & IP services
Normalised revenue growth of 0.3% to $2.2bn- second consecutive positive half
Highest customer satisfaction performance ever
Growth in IP Access Products: 27%
Solutions and Services Revenue increased by more than 7% (higher than IT services
market growth of 4.7% IDC estimate).
Enterprise &
Government
Segment Highlights
Segments benefiting from Next GTMs competitive advantage and MBM segmenting
Consumer
Marketing &
Channels
Business |
11
Operating Expenses: $6.9bn +$621m
Cost growth driven by peak transformation and 3G focus
Mobiles
5.0%
Acquisitions/
Divestments
1.3%
Transformation
(ex D&A)
2.2%
Business
as usual
1.4%
+9.9%
1H06
$6,259m
1H07
$6,880m
9.9% |
12
Labour : $2.0bn -$57m
Headcount reduction driving ongoing labour savings
Target Headcount Reductions
(pre-acquisitions & divestments)
FY06 1H07 FY07 1H08 FY08
8,000
6,000
4,000
On track to achieve objectives:
FY08: 6,000 8,000 reduction
FY10: 12,000 reduction
(46)
Salary
Redundancy
(24) Total workforce down
Lower amount expensed as most of 1H
cash redundancy paid out of provision
4,596
2.8%
Description Movement ($m) |
13
Goods and Services: $2.6bn +$371m
Investment in key 3G market...in sight of market leadership
3G:
- volume growth
- higher average SARC
Lower mobile terminating rates
offsetting higher volumes
Lower Reach payments
206
(118)
Handset subsidies
Network Payments
3G:
- volume growth
- higher average SARC
BigPond volumes
Transformation driven:
- handset costs paid to
Brightstar
17%
204
53
COGS
Usage & Dealer
Commissions
Description Movement ($m) |
14
Other Expenses: $2.3bn +$307m
Peak transformation spend year...material benefits to flow from FY08
155
69
58
Service contracts &
other agreements
Promotion &
Advertising
Rental expense,
General & Administration
25 Other
Transformation driven:
- IT build $30m
- Wireline $25m
- Supply chain $11m
- Consultancy $11m
FoH volumes $48m
Growth focus Next GTM, BigPond
New World PCS accomm $23m
Renewed focus on training $12m
Temporary duplicated networks -
Next GTM + CDMA
Doubtful Debt $16m increase in
BigPond customer base
15%
Description Movement ($m) |
15
Cost take-out
Significant
expense
reduction on
reaching
Transformation
Milestones
IT transformation
Increase in momentum as key milestones achieved
Operational improvement
Network fixes
FY06 FY07 FY08 FY09 FY10
Organisation redesign
Cost take outs already being achieved:
- Labour (Org redesign, Operations productivity, Corp centre)
- Reach
Platform rationalisation |
16
Depreciation & Amortisation: $2.0b +$178m
148 Total accelerated D & A
14 Software
134 Network related
Strategic review
service life changes
1H07
($m)
Accelerated depreciation and
amortisation (D & A)
Underlying growth +1.7%
- Mix change toward higher
software amortisation charge
Tracking to FY07 guidance
$148m
$372m
$363m
Depreciation
Accelerated
D&A
Amortisation
$1,437m
$1,458m
1H06 1H07
$1,800m
$1,978m +9.9%
9.9%
+2.5%
+1.5% |
17
$1,925m
118
$661m
1,745
103 International
Transformation
Business
as usual
Cash Capital Expenditure
1,745 Total Transformation Capex
108 Other (including network
improvements)
230 OSS / BSS (IT transformation)
597 Wireless (Next G TM roll-out)
810 Wireline (IP Core, IP DSLAMS, MSE
nodes)
Peak Transformation spend in FY07
Key initiatives in 1H07 ($m) :
Peak transformation spend year...on track for FY07 guidance of $5.4 $5.7 billion
Business as usual steadily declining,
driving a lower Capex/sales ratio post
transformation.
Over $1bn Capex spend over last 5 years
on CDMA/SDN alone
1H06 1H07
$2,043m
$2,509m
23% |
18
Cash Flow and Financial Parameters
Investing in transformation and growth
9.4 times 7 times Interest cover
52.5% 55% 75%
Gearing
- net debt
1.5 1.7 2.1 Debt Servicing
Current
1H07
Target
Financial Parameters
Cash Flow
$1,956m
Total
Reported
1H06
$862m
Total
Reported
1H07
$111m
Acquisitions/
Divestments
$466m
Investing
$517m
Operating
55.9% |
19
Growing on-net business
Have not participated in
broadband price war
Regulatory change may deliver
a more open market and
present opportunities
Meeting integration plan
milestones
Churn improving
Returned to SIO growth in
December
International
(2.6) 342 333 EBIT
33.0 628 835 EBITDA
40.9 2,189 3,085 Income
% Ä 1H06 1H07 HK$
(18.8) (16) (19) EBIT
(10.7) 56 50 EBITDA
(4.0) 349 335 Income
% Ä 1H06 1H07 NZ$
New World
New dimension to international portfolio
6m EBIT
9m EBITDA
22m Income
1H07 AU$
Triple digit top
line growth of
107% and bottom
line growth of
131% |
20
FY2007 Guidance
Guidance on Reported Numbers
Growth of +2.5% to +3.0% Revenue
D & A similar to FY06 incl accelerated
D & A of $300m to $350m
Depreciation &
Amortisation
Growth in range of +3% to +5% EBIT
Range $5.4bn to $5.7bn due to transformation
Cash
operating
capex
Intention to pay 14c final dividend Dividend
Top line momentum continues...revenue and earnings guidance increased
Growth in range of +37% to +40% EBIT (2H07) |
21
Addressing Key Misperceptions PSTN
New focus on integration and retention leading to slower revenue declines
Slowed decline in PSTN to 5.6%
Churn trend improving with positive
PSTN churn from competitors since
October 06
Subscription pricing positive impact
(4.2% of base)
FY06 is only the beginning of a long
period where fixed line will decline
at high single digit rates
Maintain strong focus on PSTN
while also aggressively pushing
Next GTM
Integration continues to benefit
PSTN
Telstras change in strategy to focus
more on its 850MHz mobile network
over its fixed line network is a
concern ... The rate of PSTN decline
could accelerate
Perception Facts |
22 3G network performing better than predicted by analysts
Mobile service revenue growth 6.5%, best
result since 2H05
The launch of Telstras Next GTM network
will offer a long-term competitive
advantage but may take some years to
help lift mobile revenue growth above GDP
growth
Addressing Key Misperceptions Next GTM
Network operating very well, all material
technical issues resolved
Now added 415,000 Next GTM subscribers
since launch with current handset range
Next GTM could deliver significant benefits
over time. However, this is dependent on
resolution of launch-related technical
issues such as handset availability
Next GTM peak network speed increased to
14.4Mbps (next best is still only 3.6Mbps
on less than 1% of the coverage area)
Other carriers are expected to launch
HSDPA shortly, offering similar speeds to
Telstra potentially eliminating any
competitive advantage
13 Next GTM handsets and 13 data devices
to be available by March 07. On average
Next GTM handsets cheaper than 2100
handsets
Telstra will have a lower range of more
expensive handsets than its competitors in
the foreseeable future given the limited
deployment of 3G at 850MHz globally
Perception Facts |
23
Addressing Key Misperceptions Other
ADSL2+ launched & in guidance
ADSL 1 speeds to 8Mbps opened
up
At the strategy day Telstra hardly
discussed its FTTN or ADSL2+
plans...this is a risk...
Capex program on track.
Projects abandoned were not
aligned to strategy
Telstra has already postponed a
number of capex programs into 2007
and abandoned other capex projects
FY07 EBIT guidance +3% to +5%
an improvement from FY06
EBIT -7%
The inflexion point in Telstras earnings
is still some way off
Final price $3.70, offer size
doubled, strong performance in
after market
Domestic institutional demand for T3 is
between $2.80 to $3.00
Perception Facts
Disconnect between perceptions and strategy |
24
Addressing Key Misperceptions -
Property Rationalisation
Potential to close
and sell between
3,000-5,000
exchanges as they
wont be needed
under the new
network
architecture
No plans for rationalisation
Savings to flow post CDMA closure from
removal of duplicate network equipment
Next GTM network has a lower total cost of
ownership
Potential to sell and
lease back over
5,000 mobile towers
Within the 5 City Footprint, 200 of the 450
exchange buildings may fit criteria for
potential sale these are considered on a
case by case basis
Any potential benefits will materialise
towards the end of the transformation
period and beyond (2010+)
Perception Facts
No immediate plans for major exchange rationalisations |
25
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Addressing Key Misperceptions Margins
Telstra objective to maintain margins to FY10 is around mid point of peer group
Analysts forecasting positive EBITDA
margin growth for over half global telcos
Analysts forecasting negative
EBITDA margin growth for Telstra
Consensus Forecast EBITDA Margin Growth to FY10*
Rogers
Telenor
TeliaSonera
AT&T
KPN
Sprint
KDDI
Bell Canada
Swisscom
Deutsche Telekom
China Telecom
NTTDoCoMo
Telstra
Telecom Italia
France Telecom
Verizon
Telefonica
Vodafone
Nippon
Singtel
TCNZ
China Mobile
BT Group
Perception
Telco margin expansion inherently
challenging and not supported by
any precedents internationally
Fact
International analysts predict it
is possible...
* Existing EBITDA Margin based on historic 5 year average |
26
Regulation Key Issues
Telstra has lodged a
constitutional
challenge in High
Court to protect
shareholder interest
Telstra appealed ACCCs
rejection of Telstras $30
average undertaking to the ACT
- decision expected early 2007
ACCC issued revised interim
determinations in Dec 06
containing Band 2 price of
$17.70 p/m
Status Recent developments
Interim determination issued in
two LSS arbitrations at the rate
of $3.20/month.
Final ACCC pricing
determination expected in first
half of 2007
ULL
LSS
High Court challenge lodged |
27
Guidance on Reported Numbers
Long Term Management Objectives unchanged*
2.0% to 2.5% pa to FY10 Revenue
Growth
In excess of 30% sales revenue FY10 New product
revenue
2.0% to 3.0%pa to FY10 Cost growth
* Based on no FTTN and ULL Band 2 price of $17.70 p/m with 100% flow on to
retail prices and no further adverse regulatory outcomes
2.0% to 2.5%pa growth to FY10 EBITDA ($)
46% to 48%pa by FY10 EBITDA
margin
Down 12,000 by FY10 Workforce
10% to 12% of revenue by FY10 Capex
$6b to $7b by FY10 Free cash flow |
|
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15 February 2007
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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
CEO letter to shareholders, half-year review and BACK Telstra brochure
In accordance with the listing rules, attached are copies of documents to be sent to shareholders.
Yours sincerely
Douglas
Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Office
of the CEO
242 Exhibition
Street
MELBOURNE
VIC 3000
Mail to:
Locked Bag 5639
MELBOURNE VIC 3001
15 February 2007
Financial results better than guidance for half-year ended 31 December 2006
Dear shareholder
I am writing today to keep you informed, as a shareholder, about the progress we are making in
the transformation of Telstras business and, specifically, to share our half-year results
directly with you. I continue to be encouraged by the progress we are making.
Today we announced important achievements in our performance:
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earnings results that are ahead of market guidance; |
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market share gains especially where it matters (e.g. broadband and mobiles); |
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gains in fixed-line residential market share and a slowdown in PSTN (fixed line) decline; |
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a highly-successful launch of our wireless broadband Next G platform; |
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strong revenue growth in directories and online content; and |
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improved service-level ratings across the board. |
These achievements reflect the impact of our transformation process, which is on or ahead of
plan on all fronts, touching every element of our businesseven though we are only 13 months
into a fiveyear transformation and much remains to be done. Following the recent Telstra share
offer (T3), we welcomed tens of thousands of new shareholders. Since that time we have seen
institutional investors embrace our commitment and, increasingly, our ability, to deliver on
plan including improvement in long-term shareholder value a result already reflected in the
share price. Our record continues to show a consistent alignment between words and deeds,
between promises and performance.
The results we released today are a reflection of competing hard, winning where it matters and
improving our operational metrics. We have maintained momentum in the past halfyear, notching up
a string of firsts as we execute our fiveyear transformation strategy:
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First: launched Next G, our 3GSM 850 nationwide wireless broadband network reaching 98% of the people in Australia; |
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First: built a Next G national network in record time 10 months; |
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First: upgraded the networks speeds to 14.4 Mbps giving Australia the worlds fastest nationwide wireless broadband
network; |
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First: extended Next G network range up to 200km (at selected sites); |
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First: reached one million 3G customers in a record-setting 16 months; |
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First: launched national highspeed ADSL with network speeds up to 20Mbps; |
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First: maintained retail broadband average revenue per user (ARPU) at second half financial year 2006 levels while growing
market share to 45% (up 1%); |
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First: achieved positive PSTN (fixed line) residential churn (gaining more fixed-line customers from competitors than we
lost) since October 2006 first time since the advent of competition; |
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First: achieved increase in residential fixed-line market share first time since the advent of competition; |
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First: achieved highest customer satisfaction performance on record for Telstra Enterprise and Government; and |
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First: achieved a reduction of more than 80% in unsatisfied demand for ADSL broadband (called held orders) from
19,300 in September 2005, despite increasing order volumes. |
Telstra Corporation Limited ABN 33 051 775 556
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We have broken new ground with these firsts. Other highlights over the last six months include the following: |
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Improving productivity: improved service ratings and increasing revenues were achieved while reducing the total workforce
by 4,596 (pre acquisitions and investments) since 1 July 2005. We are on track to achieve our target reduction of 6,000 to
8,000 by 30 June 2008. Labour costs are down 2.8%; |
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Improving service: we increased scheduling flexibility for our customers, meeting more than 90% of our appointments and
completing 97% of PSTN service calls completed on the first attempt; |
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Improving the customer experience in the field, on the phone and online with 6,400-plus staff participating in the Telstra
Learning Academy to advance their product knowledge, customer service and technical skills; and |
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Expanding new revenue where online businesses at Sensis and BigPond continue to fuel growth. |
Financial Results
Our sales revenue grew 3.6% (adjusted for deferral in distribution of Melbourne Yellow book)
which continues the strong run rate of the second half of the previous financial year and also
better than our guidance for the full year of 1.5% to 2%.
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On mobiles, for example, we added more than 700,000 3GSM customers in the half, a growth rate
of 223% on June 2006. This
included 280,000 customers to the Next G network between October 6 and December 31. This
resulted in revenue growth
of 11.8% to $2.8 billion as our 3G customers generate $20 per month more ARPU than our 2G
customers, from higher use of
video calling and data services; |
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On Retail broadband, our customer growth rate was 55% and
revenue was up 50% to $497 million;
broadband customers
and market share gains continued to drive growth in a very competitive market; |
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Our online usage at Sensis grew 21% with sales revenue up 7% to $885 million (on a normalised
basis): Sensis is now much
more than Yellow and White Pages, with emerging new media revenues growing 68%. |
At the full year results in August 2006 and in the T3 prospectus, we forecast half-year earnings
before interest and tax (EBIT) to decline between 17% and 20%. Our actual result beat this
forecast, with EBIT declining by 15.7% or $546 million to $2.9 billion.
We
recorded positive residential churn volumes each month since October, as we gained fixed line
customers from competitors. We continued to slow the decline in
ourtraditional fixed line (PSTN)
revenues. We improved the rate of retail line loss by 2% as the first half revenue decline slowed
to 5.6%, compared with 7.6% in the prior corresponding period.
Given the fact that our top line growth was strong, it was operating expenses transformation
related costs along with marketing, subscriber acquisition and recontracting costs that
contributed to the EBIT decline. However, by incurring these costs now we lay the foundation to
improve earnings in the future.
Dividend Status
As a result of our strong revenue performance and increased spend in our transformation, we
announced a profit after tax today of $1.7 billion for
the half, down $430 million or 20.1% on the
prior corresponding period. Telstras Board of Directors
declared a fully franked interim ordinary
dividend of 14 cents per share, payable on 30th March 2007. Please refer to the attached new look
half-year review for a more detailed analysis of the first half financial results.
Outlook... Guidance
We are raising our financial year 2007 revenue and earnings guidance to reflect trends evident
in the first half. Apart from this change we have not changed our financial year 2007 guidance
from those published in the T3 prospectus, and you should expect1:
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Full year revenue growth of between plus 2.5% to plus 3.0% (up from plus 1.5% to plus 2%); |
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Second half EBIT growth of between plus 37% to plus 40%; |
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Full year EBIT growth of between plus 3% and plus 5% (up from plus 2% to plus 4%); |
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Full year cash operating capital expenditure of between $5.4 to $5.7 billion; and |
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Dividends the Board intends to declare a fully franked final ordinary dividend of 14 cents a share. |
As we
continue to transform our networks and systems, we are well positioned to take advantage of
new media communications opportunities in the coming years due to our portfolio of integrated
assets especially emerging and online businesses within Sensis
and BigPond. To maintain the
momentum in executing our transformation, significant investment is required for the remainder of
the financial year the peak transformation spend year.
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1 |
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Assumes: no FTTN build; a Band 2 ULL price of $17.70 applying for wholesale customers for the remainder of financial year 2007;
no additional redundancy and restructuring provision; and, financial year 2007 being the largest transformational spend year. |
However, we have reached a pivot point in our earnings with positive earnings growth to resume
in the second half. I am
proud of the management team and the entire employee base whose tireless work is making it
possible for us to execute on our aggressive transformation plan. Our substantial achievements
reflect their many talents and their dedication to the tasks before us.
Fixing the regulatory environment
Regulations continue to have a negative effect on our results and create a less-than-friendly
investor environment - not only for Telstra but for the industry as a whole. For example, decisions
by the regulator taken in August on the Unbundled Local Loop (ULL) and in December on Line Sharing
Service (LSS) cut our wholesale prices more than 20% despite the rising costs of copper, fuel,
labour and vehicles.
The backward looking regulations limit our ability to make investments in high-speed fixed
broadband that can create new assets for consumers, businesses, communities and the nation, while
at the same time permitting a competitive return for shareholders. Thats why we are seeking
regulatory reform and why it is so important.
Our reform initiatives include:
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a High Court challenge to protect the interests of shareholders; |
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a Broadband Australia Campaign (called BACK Telstra) to educate the public about these issues; and |
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the establishment of Telstra Active Supporters to enable shareholders and the public to join together to express their views
about the need for high-speed broadband so that Australia will not be left behind. |
I invite you to learn more about these reform issues and their impact on Telstras financial
performance. An interesting and convenient way is to visit our website,
www.nowwearetalking.com.au, where you can register your interest, receive regular updates on
important reform issues, and find out about ways you can actively help.
The Board and I remain committed to keeping you informed about Telstras transformation with
regular updates, special notices when appropriate, and through periodic emails. If you have not
already done so, please send us your email address. We promise to use it sparingly and only for the
most important notices.
For more information visit our Investor Relations website at
www.telstra.com.au/abouttelstra/investor where you will find share price details and other
shareholder services; or www.nowwearetalking.com.au where you can learn more about the
digital revolution and engage with others to bring the benefits of high-speed broadband and the
digital age to all Australians; or investor.relations@team.telstra.com where you can easily
send us your email address so we can communicate with you faster with less postage.
Please
contact us with any questions or comments at
investor.relations@team.telstra.com or
write to me directly.
Yours sincerely
Sol Trujillo
Chief Executive Officer
Telstra Corporation Limited ABN 33 051 775 556
Telstras
$1.1 billion Next G network, is now the worlds fastest national wireless
broadband network. The Next G network brings video calling, content and features on wireless
broadband to more Australians than ever before, including many
Australians in regional, rural and remote areas who can now
access broadband for the first time.
Ahead of schedule, Telstra increased peak network download speeds from 3.6 megabits per second
(Mbps) to 14.4 Mbps. The higher peak network speeds mean quicker average speeds for customers, with
the typical user download speeds increasing to between 550 kilobits
per second (kbps) and 3 Mbps
up from the previous range of between 550 kbps and 1.5 Mbps.
We expect to further improve on this
achievement by early 2009 with peak network speeds of 40 Mbps.
In another world first, and ahead of schedule, the Next G network range has been extended up to
160km nationwide on 15 February 2007 and up
120km since the launch of the Next G network in October 2006.
Im stunned with the speed and reliability of the broadband in a place as remote as
Jamieson. Its magic.
CFA Staging Manager
More than 400,000 Australians have said hello to
the next generation of speed and content since
the launch of the Next G network.
The Next G network allows customers to do
more things in more places. Customers are using
Whereis® on their mobiles to find directions,
e.g. the nearest restaurants, maps ...
Customers are using their Next G mobiles to catch
the latest news or sports results on FOXTEL by
mobile in real-time, and now four new channels
have been added to the Telstra exclusive service:
Eurosport News, TV1, Cartoon Network and
National Geographic.
Customers are using their Next G mobile phones
and laptop wireless cards to download music,
check emails and connect to the internet. Using
mobiles has never been easier with just one-click
on the My Place icon, only available on Telstras
Next G phones.
Although the Next G network has only been in
operation for a few months, customers are already
experiencing the benefits of the Next G network
first hand.
Using
Next G network coverage and speed
to fight bushfires
During the Christmas bush fires in Victoria, the
volunteers of the Country Fire Authority (CFA) were
impressed with the speed and reliability of the Next
G wireless cards. The cards provided real time
access to fire information from the Department
of Sustainability and Environment and weather
information from the Bureau of Meteorology. This
information helped the firefighters on the front
line fight the fires in the most effective way while
minimising the threat to people and property from
the rapidly moving flames.
The Telstra Next G network using mobiles and turbo
wireless laptop cards opens the door to new business applications and
is making Australian businesses globally competitive:
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Transport and logistics companies are managing
their fleet real-time; |
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Architects and engineers can get video updates
of progress from construction sites; |
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Real estate agents can show clients interiors and
upload the video websites remotely; and |
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Car assessors can take pictures of damaged
vehicles and order the necessary parts at the
same time while on the road. |
Next
G is fast and reliable and with just one click our people have secure access to our
private corporate network
Brodstreet
Motor Groups lT Manager, Newcastle
The Next G network has already caused a paradigm shift in how Telstras
customers live, work
and play and is only limited to your imagination.
The Next G network is: faster, simpler, real
time, and everywhere you need it.
NEXT G NETWORK FAST FACTS
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Over $1 billion investment |
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98.8% population coverage and
1.9 million square kms covered |
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Over 5,000 mobile base stations |
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415,000 customers at
13 February 2007 |
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More than 100 times bigger
than any 3GSM network in
Australia |
NEXT G NETWORk FIRSTS
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Launched 3GSM 850 national
wireless broadband network |
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Network built in a record
10 months |
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Nationwide upgrade to peak
network download speeds of
14.4 Mbps |
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Network range extended from
80kms to 200kms at selected
sites |
To learn more about the Next G network and how
you can experience the benefits of the superior
coverage, speed and content visit:
www.telstra.com.au/NextG
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15 February 2007 |
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Transformation: on or ahead of plan
The transformation is on or
ahead of plan on all fronts; we
are winning where it matters in
3G, broadband, Sensis and fixed
line products; we are improving
operational performance; and we
are investing for competitive
advantage.
IN BRIEF
Launched Next G network
Upgraded peak speeds on
Next G network to 14.4 Mbps
IP/MPLS core and Multi
Service Edge turn up nearing
completion
80% out-of-the-box
requirements achieved
Exited 148 IT systems
MBM driving improvements in
sales and customer experience
6,900 Telstra vehicles fitted with
GPS devices
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STATUS |
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PROGRESS |
Next G network
Completed construction of
Australias largest and fastest
national wireless broadband
network in record timeof 10
months.
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Launched in October 2006
Upgraded peak network download speeds to
14.4 Mbps on 15 February 2007
Coverage extended to up to 200km at selected
sites on 15 February 2007 (up from 80km at
launch)
Already more than 415,000 customers on the
Next G network
Around 400 more base stations being built to
improve breadth and depth of coverage |
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Next Generation Network
Constructing IP core network to
improve network reliability and
increase the services offered to
customers.
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IP/MPLS core and Multi Service Edge turn up
nearing completion
Migration of internet backbone IP traffic
(Telstra internet direct) to core completed early
February 2007 |
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Simpler systems
Reducing and simplifying
systems will deliver improved
customer experience and lead
to cost savings and efficiencies.
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80% out-of-the-box requirements achieved
Deployed new campaign management system
Integrated desktop deployed allowing a single
log-in and real time use of MBM data
Exited 148 IT systems since November 2005, on
track to achieve 75% target reduction by end of
fiscal 2008 |
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Market Based Management
MBM puts the customer at the
centre of everything we do and
helps Telstra tailor products and
services to customer needs.
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MBM initiatives (e.g. subscription pricing plans)
helped reduce fixed line (PSTN) churn and slow
PSTN revenue decline
Customer knowledge helping front-of-house
staff up / cross sell, maximising every customer
contact
Online purchase process reduced from 14 to
8 steps simplifying ordering for customers
Simplified online navigation and self-service |
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Workforce excellence
Investing in our people to better
serve our customers needs.
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Over 6,900 Telstra vehicles fitted with GPS
devices to improve customer scheduling and
drive productivity
Over 6,400 employee participants in the Telstra
Learning Academy, across 70 locations in
Australia since its launch in August 2006
Time for broadband instalment from point of
order down 19% to an average of around 6 days |
Telstra plans to Broadband Australia
Telstra is firmly committed to providing highspeed broadband across Australia.
Telstras commitment to providing high-speed broadband across Australia at the earliest possible
date is already reflected in the following two milestones in the half-year:
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The October 2006 launch of the worlds leading
Next G wireless broadband network; and |
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The November 2006 launch of BigPonds
broadband upgrade a nationwide high-speed
fixed line ADSL broadband network offering
speeds up to 8 Mbps or 20 Mbps, depending on location. |
Telstra is currently seeking $600 million in funding under the Australian Governments Broadband
Connect. Infrastructure program to bring broadband to the nations under served areas. Telstras
proposal would extend fixed broadband coverage from the current 91% of the population to 95% of the
population.
Telstra has demonstrated its the only operator in Australia with the vision, leadership, know-how
and willingness to invest billions of dollars in building new networks. However, because of
regulatory constraints, the up to 20 Mbps service is
limited to exchanges where competitors are also offering those higher speeds and the
Fibre-to-the-Node (FTTN) network build cannot proceed without regulatory reform safeguards to
protect shareholders investments required to build FTTN.
Without regulatory reform, Australia will
continue to trail other leading OECD countries in broadband penetration and speeds. For Australia
to join the critical next wave of broadband infrastructure investment, the regulatory regime must
enable Telstra to earn a competitive return on the
investments it makes on behalf of shareholders.
To kick-start the high-speed broadband debate,
Telstra has launched the Broadband Australia Campaign (BACK Telstra). We have also established the
Telstra Active Supporters (TAS) group to enable all Australians who share Telstras concerns to
become active and support the BACK Telstra
campaign.
To learn more about BACK Telstra and find out
about ways you can actively help, and to register
as a Telstra Active Supporter, visit our website,
www.nowwearetalking.com.au
Authorised by L McGregor, Telstra Corporation Limited,
242 Exhibition Street, Melbourne, VIC 3000
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2 www.nowwearetalking.com.au
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15 February 2007
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Revenue up, earnings pivot point reached
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6 months to |
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6 months to |
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Selected items from the |
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Dec 2006 |
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Dec 2005 |
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change |
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INCOME STATEMENT |
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$m |
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$m |
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% |
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Sales revenue |
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11,630 |
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11,405 |
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2.0 |
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Total
income (excluding finance income)1 |
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11,797 |
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11,544 |
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2.2 |
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Operating
expenses2 |
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6,881 |
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6,260 |
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9.9 |
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Earnings before interest, income tax expense,
depreciation and amortisation (EBITDA) |
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4,916 |
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5,284 |
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(7.0 |
) |
Earnings before interest and tax (EBIT) |
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2,938 |
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3,484 |
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(15.7 |
) |
Net finance costs |
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520 |
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440 |
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18.2 |
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Profit before income tax expense |
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2,418 |
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3,044 |
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(20.6 |
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Income
tax expense3 |
|
|
706 |
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|
|
902 |
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(21.7 |
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Net profit |
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1,712 |
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2,142 |
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(20.1 |
) |
Outside equity interests in net (profit)/Loss |
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(8 |
) |
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1 |
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n/m |
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Net profit
available to Telstra Entity shareholders |
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1,704 |
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2,143 |
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(20.5 |
) |
Basic earnings per share |
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13.8 |
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17.3 |
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(20.2 |
) |
Interim
dividend declared pershare (cents)4 |
|
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14.0 |
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14.0 |
|
|
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Special dividend declared per share (cents) |
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|
|
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6.0 |
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n/m |
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1 |
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Total income (excluding finance income) increased by 2.2% or $253 million to $11,797
million, due to: |
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sales revenue increasing by 2.0% or $225 million to $11,630 million mainly due
to growth in mobiles, broadband and IP access. The market continues to move
towards mobile and broadband products to satisfy their telecommunications
requirements; |
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other revenue/other income grew by 20.1% or $28 million to $167 million
largely due to the sale of Australian Administration Services Group; and |
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revenue growth was negatively impacted by a decline in PSTN revenue,
specialised data, narrowband and advertising and directories (due to
deferral of Melbourne Yellow print directory production to January 2007).
If $174 million from the prior period relating to this print directory is removed,
total in come grew by 3.8%. |
2 Operating expenses increased by 9.9% or $621 million to $6,881 million,
due to:
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increased goods and services purchased of 16.9% or $371 million, attributable
to higher handset subsidies from both the take up of handsets on subsidised
plans and higher subsidies offered as part of our aggressive marketing
campaign for Next G mobile. This was offset by decreased network
payments largely as a result of the reduced mobile terminating access rate; |
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an increase in other expenses of 15.3% or $307 million, largely due to higher
service contracts and other agreements as a result of costs associated with
transformation initiatives; |
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a decrease in labour expense of 2.8% or $57 million, due to lower staff levels,
a reduction in redundancy costs and lower overtime payments. This was
partially offset by higher contractor and agency payments; and |
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higher depreciation and amortisation expense of 9.9% or $178 million,
primarily due to accelerated depreciation and amortisation associated with
our transformation strategy and planned closure of the CDMA network,
upgrade of switching systems and software, and growth in communications
plant. |
3 Income tax expense decreased by 21.7% or $196 million to $706 million,
giving an effective tax rate of 29.2%. The lower income tax expense was
primarily due to the reduction in profit before income tax.
4 |
|
Interim dividend of 14 cents per ordinary share declared by the directors
of Telstra Corporation Limited, fully franked. The record date for the interim
dividend is 2 March 2007 with payment to be made on 30 March 2007. Shares
and instalment receipts will trade excluding entitlement to the dividends on
26 February 2007. |
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|
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As at |
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As at |
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|
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|
Selected items from the |
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31 Dec 2006 |
|
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30 June |
|
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change |
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BALANCE SHEET |
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$m |
|
|
2006 $m |
|
|
% |
|
Cash assets |
|
|
457 |
|
|
|
689 |
|
|
|
(33.7 |
) |
Other current assets |
|
|
4,570 |
|
|
|
4,241 |
|
|
|
7.8 |
|
Total
current assets5 |
|
|
5,027 |
|
|
|
4,930 |
|
|
|
2.0 |
|
Property, plant and equipment |
|
|
23,413 |
|
|
|
23,503 |
|
|
|
(0.4 |
) |
Intangibles |
|
|
6,265 |
|
|
|
6,122 |
|
|
|
2.3 |
|
Other non current assets |
|
|
1,847 |
|
|
|
1,636 |
|
|
|
12.9 |
|
Total non
current assets6 |
|
|
31,525 |
|
|
|
31,261 |
|
|
|
0.8 |
|
Total assets |
|
|
36,552 |
|
|
|
36,191 |
|
|
|
1.0 |
|
Current borrowings |
|
|
3,033 |
|
|
|
1,982 |
|
|
|
53.0 |
|
Other current liabilities |
|
|
5,108 |
|
|
|
5,908 |
|
|
|
(13.5 |
) |
Non current borrowings |
|
|
11,280 |
|
|
|
11,434 |
|
|
|
(1.3 |
) |
Other non current liabilities |
|
|
4,015 |
|
|
|
4,044 |
|
|
|
(0.7 |
) |
Total
liabilities7 |
|
|
23,436 |
|
|
|
23,368 |
|
|
|
0.3 |
|
Equity8 |
|
|
13,116 |
|
|
|
12,823 |
|
|
|
2.3 |
|
5 |
|
Total current assets increased by $97 million to $5,027 million due to: |
|
|
|
an increase in other current assets of $329 million predominantly due to
higher trade receivables impacted by the timing of cash receipts. In addition,
inventory of mobile handsets increased due to aggressive marketing for Next
G mobile driving higher inventory orders; offset by |
|
|
|
|
a decrease in cash assets of $232 million as our cash balances and net cash
flow generated from operations was used to fund our investing and financing
activities. |
6 Total non current assets increased by $264 million to $31,525 million due to:
|
|
|
an increase in other non current assets of $211 million largely due to the
actuarial gain on our defined benefit assets; |
|
|
|
|
a increase in intangibles of $143 million largely due to the acquisition
of SouFun Holdings Ltd and additions in our software assets offset by
amortisation expense; and |
|
|
|
|
a decrease in property, plant and equipment of $90 million as depreciation
more than offset the additions in our communications plant. |
7 |
|
Total liabilities increased by $68 million to $23,436 million due to: |
|
|
|
higher total borrowing of $897 million, mainly due to an increase in
borrowings primarily to fund capital expenditure and dividend payments; offset by |
|
|
|
|
a decrease in total other liabilities of $829 million, predominantly due to lower
trade and other payables as a result of payments made during the half-year
for capital expenditure as part of our transformation project. In addition, the
timing of cash payments contributed to the decrease in total other liabilities. |
8 |
|
Equity increased by $293 million to $13,116 million. This increase was largely due to the
inclusion of our net profit for the period, actuarial gain on our defined benefit assets,
partially offset by the payment of the fiscal 2006 final ordinary dividend. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 months to |
|
|
months to |
|
|
|
|
Selected items from the |
|
Dec 2006 |
|
|
Dec 2005 |
|
|
change |
|
STATEMENT OF CASH FLOWS |
|
$m |
|
|
$m |
|
|
% |
|
Net cash provided by operating activities |
|
|
3,431 |
|
|
|
3,948 |
|
|
|
(13.1 |
) |
Net cash used in investing activities |
|
|
(2,569 |
) |
|
|
(1,992 |
) |
|
|
29.0 |
|
Free cash flow9 |
|
|
862 |
|
|
|
1,956 |
|
|
|
(55.9 |
) |
Net cash used in financing activities10 |
|
|
(1,089 |
) |
|
|
(2,721 |
) |
|
|
(60.0 |
) |
Net decrease in cash |
|
|
(227 |
) |
|
|
(765 |
) |
|
|
(70.3 |
) |
9 |
|
Free cash flow decreased by $1,094 million to $862 million mainly due to
a reduction in net cash provided by operating activities as a result of lower
operating profit, and also increased cash used by investing activities mainly
attributable to our payments for property, plant and equipment, and the
payment for SouFun Holdings Ltd, partially offset by the proceeds received
from the sale of Australian Administration Services Group. |
10 |
|
Net cash used in financing activities decreased by $1,632 million to $1,089
million, mainly due to the reduced payment of dividends and an increase in
borrowings. |
|
|
|
|
|
|
|
15 February 2007
|
|
www.telstra.com 3 |
MediaComms evolution
As the line between telecommunications and media companies starts to blur,
Telstra has already started to evolve into a media communications
company through its small, but growing portfolio of new
media assets in Sensis and BigPond®.
Sensis digital online platform revenues
increased 68% in the first half drive by Sensis
new media businesses, including SouFun, Yellow. com.au,WhitePages.com.au,TradingPost. com.au,
whereis.com.au, GoStay.com.au and Citysearch.com.au.
Sensis is now much more than just Yellow. Australians are turning to Sensis to
find, buy and sell. In fact, more than 4.5 million Australians
turn to Sensis each day to search Sensis portfolio of around 400 products. Australians use Sensis online products almost 42
million times per month (up 20% on 2005) through Sensis ten websites and seven
mobile information services.
BigPonds customers can benefit from the recent increases in both fixed-line and
wireless broadband speeds. The increased speeds will make it easier for customers
to enjoy BigPonds content including the exclusive rights to AFL, V8 Supercars ,
NRL and a range of music, games
video and movie download services.
The future
is media communications.
Telstra continues to seek regulatory certainty
Following recent decisions by the Australian
Competition and Consumer Commission (ACCC) on
Unconditioned Local Loop (ULL) and Line Sharing
Services (LSS) prices, Telstra has launched High
Court proceedings challenging the constitutional
validity of the Telecommunications specific access
regime under clause 51 (xxxi) of the Australian
Constitution, which guarantees compensation on
just terms when property is compulsorily acquired.
This High Court challenge applies to both ULL
and LSS.
The last mile of copper between the exchange
and the consumer can be used by our competitors
to offer voice and/or data services using either ULL
or LSS services. In the case of ULL, competitors can
offer their customers both voice and data. In the
case of LSS, competitors only offer their customers
data services (ie broadband).
Unconditioned Local Loop (ULL)
The ACCC rejected our de-averaged monthly price
undertaking in December 2005. We subsequently resubmitted
a new $30 per month national average
undertaking in December 2005. This was rejected
in August 2006 by the ACCC, who issued a draft
determination of $17.70 in Band 2 (metropolitan
capital cities) well below our average cost of $30.
Status of ACT appeal We have appealed
to the Australian Competition Tribunal
(ACT), following the release of the ACCC draft
determination. A final decision is not expected
until early 2007. Separately, the ACCC is still to
issue a final determination on ULL.
Line Sharing Services (LSS)
The ACCC rejected Telstras LSS monthly undertaking
of $9 in December 2005, and we lost our
appeal to the ACT. In October 2006, the ACCC issued
an interim draft decision reducing the price to
$3.20 per month. The ACCC has ignored evidence
that Telstras cost of delivering these services has
increased as shown by increasing costs for fuel,
copper, labour and vehicles. This decision allows
our competitors to buy broadband below cost
for just $3.20 per month, and then re-sell it for up
to ten times that amount.
Status of high Court action In January 2007
we lodged a constitutional challenge in the
High Court relating to both ULL and LSS pricing.
Financial
Calendar
|
|
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|
|
|
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|
|
|
|
2007 |
|
|
2008 (Indicative) |
|
|
Half year results announcements |
|
15 Feb |
|
14 Feb |
Ex-dividend share trading commences |
|
26 Feb |
|
25 Feb |
Record date for interim dividend |
|
2 Mar |
|
29 Feb |
Interim dividend paid |
|
30 Mar |
|
28 Mar |
Annual results announcement |
|
9 Aug |
|
14 Aug |
Ex-dividend share trading commences |
|
20 Aug |
|
25 Aug |
Record date for final dividend |
|
24 Aug |
|
29 Aug |
Final dividend paid |
|
21 Sep |
|
26 Sep |
Annual General Meeting |
|
7 Nov |
|
TBA |
Note Timing of events may be subject to change. Any changes will be notified to the Australian Stock Exchange (ASX).
© Telstra Corporation Limited (ABN 33 051 775 556) 2007
® Registered trade mark of Telstra Corporation Limited
Trade mark of Telstra Corporation Limited
Mini glossary
3GSM 850 Third Generation mobile technology
operating on 850Mhz spectrum.
ADSL Asymmetric Digital Subscriber Line is a
broadband technology that provides access to the
Internet at fast speeds.
FTTN Fibre to the node infrastructure that delivers
fibre close to the customer premises. FTTN can deliver
broadband data and potentially television services to
customer premises.
IP 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.
IP core The core element of a network which carries
and logically splits voice, data and video using IP
technology.
Next G network Telstras trade mark name for its
3GSM 850 mobile network.
PSTN Public Switched Telephone Network standard
home telephone service, delivered over underground
copper wires.
ULL 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.
Contact details
Registered Office
Level 41, 242 Exhibition Street
Melbourne Victoria 3000 Australia
Douglas Gration
Company Secretary
email: companysecretary@team.telstra.com
General Enquiries Registered Office
Australia: 1300 368 387
All Other: +61(8) 8308 1721
Shareholder Enquiries
Australia: 1300 88 66 77
All Other: +61(2) 8280 7756
Fax: +61(2) 9287 0303
email: telstra@linkmarketservices.com.au
website: www.linkmarketservices.com.au
Telstra Corporation Limited
Incorporated in the Australian Capital Territory
Telstra is listed on Stock Exchanges in Australia,
New Zealand (Wellington) and the USA (New York)
Investor Relations
Level 36, 242 Exhibition Street
Melbourne Victoria 3000 Australia
Ph: +61(3) 9634 8014
email: investor.relations@team.telstra.com
The Telstra Share Registrar
Link Market Services Limited
PO Box A942
Sydney South NSW 1234 Australia
Websites
Telstras investor relations home page:
www.telstra.com.au/abouttelstra/investor
Telstras interactive advocacy website:
www.nowwearetalking.com.au
Become an electronic shareholder today!
Would you prefer to get this and other important
shareholder communications electronically rather
than in print? Becoming an electronic shareholder is
easy and you can assist the environment at the same
time. Telstra is proud to be associated with eTree,
an initiative of leading Australian companies and
Landcare Australia. Telstra will donate between $1
and $2 for every shareholder who chooses to receive
some or all of their shareholder communications
electronically. The choice is yours and if you are
interested in changing the way you receive your
shareholder communications you can email the share
registry at telstra@linkmarketservices.com.au who
will send you step by step instructions to making your
election online or you can call on 1300 88 66 77 for
assistance.
4 www.nowwearetalking.com.au
15 February
2007
INSTEAD OF ENCOURAGING BROADBAND INVESTMENT GOVERNMENT IS STIFLING IT.
The world is changing because of broadband internet. And Australia must do whatever
it takes to keep up.
If government and regulators dont allow the next wave of internet investment, Australia
will be left behind.... as our global competitors work even smarter
and faster.
LAGGING IN BROADBAND PENETRATION
BROADBAND SUBSCRIBERS PER 100 INHABITANTS, 2006
Source:
Mark Christensen, leading economic adviser and academic, December
2006.
THE
BENEFITS OF HIGH-SPEED BROADBAND
|
|
Economy an independent report to government has estimated high-speed broadband will bring economic benefits of
$12b to $30b* per year. |
|
|
|
Small business lower costs, fast 24 hour access to customers and suppliers worldwide. |
|
|
|
Regional eliminates the tyranny of distance, putting the bush on an equal footing. |
|
|
|
E-learning interactive remote education, online testing, sophisticated learning tools. |
|
|
|
Telehealth remote diagnosis and treatment. |
*Source: The Broadband Advisory Groups Report to Government, 2003.
Source:
Tim Hughes, investment- analyst, The Courier Mail, August 2006.
|
|
|
16 February 2007
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript
from Telstras Analyst briefing Half year results
Attached is a copy of the transcript from yesterdays Telstra Analyst briefing on the
half year results, 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
2006/2007 Half Yearly Results
Thursday, 15 February 2007
Analysts Briefing
ANTHONY OBRIEN: Good morning, ladies and gentlemen and welcome to Telstras first half fiscal year
2007 financial results.
My name is Anthony OBrien, the acting director of Investor Relations at Telstra. I would also
like to welcome those viewing by webcast today and those in Sydney, at the venue being hosted by
Ben Pitt, my colleague.
Last time we met, back in October, we introduced the launch of the Next G network. Today we want to
share with you a short video illustrating the real customer benefits Next G has delivered. After
this brief video, I will hand over to Sol Trujillo to take you through the first half results.
(Video shown)
MR TRUJILLO: Good morning, and I would like to welcome everyone to our half year results
announcement. The good news about today is pretty simple: We report half year results that are
better than guidance, and the results show that we are continuing to deliver on our key
transformation milestones and improve long-term shareholder value by growing and winning where it
matters.
I want to emphasise that because you heard it from me when I first got here; every time that you
have had a conversation with us at Telstra, it is all about winning where it matters, and, most
importantly, we are also continuing to build momentum in the marketplace, where, again, it matters.
Only 13 months into our transformation we are on or ahead of plan on virtually all fronts. We are
winning on the platforms that I said were our priority. So what we are going to do now is go into
some of the details.
Our earnings before interest and tax, EBIT, came in at $2.8 billion, a decline of 15.7 per cent,
which is better than the expected 17 per cent to 20 per cent decline detailed in our T3 Prospectus
and our previous guidance. Normalised sales revenue, which is a true reflection of performance, was
up 3.6 per cent, significantly ahead of guidance and in line with trends noted on investor day and
during the T3 process.
Again, I like to think about that as kind of the health metre of the business. Are we creating more
volumes, are we creating more growth? And the answer is we are ahead of plan.
EBITDA, $4.9 billion, down 7 per cent, again better than expectations. Transformation opex and
higher spending on mobiles were contributors to that decline, so again transformation and the
acceleration in the volumes in terms of the business. While reported EBITDA margins fell year on
year due to operating expenses in the half, on the underlying basis margins actually improved 1.7
per cent sequentially from second half 2006. This is important to note, simply because we are now
starting to see the real impact of the transformation starting to bear fruit. Our cash operating
capex, $2.5 billion, up 22.8 per cent, again, as planned, reflecting 2007 fiscal year as our
highest opex and capex expenditure. We declared this morning as a board the ordinary dividend of 14
cents fully franked; again, as expected and consistent with the statements provided and disclosures
made in the T3 prospectus.
Most importantly, however, we have now reached what I call the earnings inflection point, and maybe
more importantly, what I like to think about in a sports context is we have reached that pivot
point where we are turning, and from here on, going forward we are going to be reporting positive
earnings growth.
As a result, we have also increased our full year guidance, which John will deliver and cover in a
little more detail.
Let me tell you now why I am pleased with the results. We are winning in each of the key markets
that I have highlighted before, in terms of the importance for the business. This is really about
winning where the business is going to be, not where its been. I think that this is the key thing
that you will hear from us going forward, as we have outlined in our transformation plans.
The first area that I would like to talk about is 3G. We said we are going to win in the 3G game
and now lets talk about data. We have added more than 700,000 3G SIOs since June and we have now
surpassed 1.2 million 3G SIOs in total. Not only that, we have maintained our 3G ARPU uplift of $20
over 2G. Driven by data with non-SMS data, ARPU is up 74 per cent, which is really the future of 3G
and it is really what Next G is about.
It is about the changed behaviour, the changed use by our customers because the experience is
simpler, easier and much better.
In addition to 3G, you have heard me talk about broadband, that we are going to win in the
broadband game. We continue to take a disproportionate share. Our market share is up 1 per cent now
to 45 per cent, with customer growth of 55 per cent and revenue growth of 50 per cent. This is all
in spite of significant price reductions in the marketplace, literally as we speak.
I also said that we would manage the decline in our core PSTN business. Broadband, mobiles, 3G,
Next G, all positives, and they are growth variables for us going forward. The control variable
that we have in the business is around PSTN.
As you know, a year ago, the first half last year we had a revenue decline of 7.6 per cent. This
year our first half decline is 5.6 per cent. So again, a significant improvement.
But what are the underlying trends, more importantly? Our total line loss of 0.8 per cent since
June is a best in class performance as we benchmarked anywhere around the world. We have
held residential lines steady since June, or flat, as we posted positive competitor churn and
recorded market share gains for the first time since competition. Let me say that again: If you
look at the
volumes of customers leaving us versus customers we are winning back, we have now run at a positive
level in terms of the business for the first time ever since competition was introduced in
Australia.
I said we would grow our digital online platforms. Sensis new media revenues were up 68 per cent as
usage growth increased 21 per cent, as an example, whereas satellite navigation unit sales
recorded triple digit growth as part of the portfolio there in Sensis. Foxtel is also performing
strongly, with subscribers up 10 per cent and Foxtel subscriber revenue growth of 15 per cent.
Foxtel is now 100 per cent digital after closing its cable analogue network, which again from a
significant standpoint is important to us because now we can enhance and improve services and
capabilities and other things, as you will see over the coming months and coming years.
Let me give you some more detail as we think about mobiles in particular, because Next G is the
game. We have redefined the game here in Australia Next G is a powerful force in the marketplace.
It will be a growth opportunity for us and it is also driving for us what I would call the high
calorie ARPUs from the high calorie customers, and they are all correlated very well with Next G.
As I said earlier, we have now surpassed 1.2 million 3G subscribers, and as of Tuesday this week we
now have 415,000 Next G customers. We are on track to live up to our forecast of October of
becoming the market leader by May 2007 in the 3G space.
Given what has been announced so far by our competitors, we estimate that we have gained around 60
per cent of net 3G adds in the period and are nearing 40 per cent 3G market share. We are excited
by the fact that the $20 ARPU lift has been maintained as our base has continued to grow. Again, we
have had the conversations before about early adopters and they tend to spend more, et cetera, et
cetera. The punchline here for us is that ARPU growth is continuing in terms of our business.
We have increased our PostPaid percentage of the base to 59 per cent and we have improved our
churn.
Again, when I think about driver metrics, driver variables, these are key things that I look at, to
look at how we are doing versus our competitors, how we are doing in terms of driving long-term
profitability.
While there is initially increased expense to attract these high calorie Next G customers, which
John will get into in a little bit more detail later, the economics of this accelerated Next G
growth are truly attractive. Since June 2006 our incremental acquisition and retention costs for 3G
subscribers will be paid back in a little over three months; clearly an attractive return for our
shareholders. I only wish in our business we had more of these kinds of growth opportunities.
While we are excited about the $20 ARPU uplift, I want to be clear about this: More important is
the reason for the uplift. I think we all should understand this. It is all driven by an increase
in data usage. So the pivot point again is occurring in the marketplace. In December our 3G
customers spent $12 more on non-SMS data than our 2G customers. Our high calorie growth Next G
customers are driving the change in both usage patterns, migrating from voice to content-rich
applications and dramatically increasing network traffic.
Penetration of content and applications is higher for our Next G customers than what I would call
classic 3G customers. The penetration of Foxtel by mobile on Next G is nine times higher than that
on the 2100 network. Again, this is classic 3G versus Next G nine times different, that is 7 per
cent versus 0.8 per cent.
The penetration of mobile music on Next G is five times higher than 2100, or 24 per cent versus 0
per cent. The penetration of video streams on Next G is five times that of the 2100 network 53
per cent versus 11 per cent.
Our usage patterns show the overwhelming adoption of services on the Next G network and on average
each Next G customer makes 11 times more video calls than the 2100 customer three times more
music downloads, two times more games downloads and seven times more video streams than customers
on our 2100 network.
What this shows us is that this does make a significant difference with what we have been
describing as our realtime high-speed, one-touch, one-screen, one-click, one-button experience.
I believe that this will only accelerate further as we add more content and applications, such as
the recent addition of four new channels to our Foxtel line-up by mobile.
It is also important to acknowledge our abilities in terms of building the Next G footprint in the
period that we talked about last October, when we launched, of 10 months. I think we had true
validation of this task last week when one of our competitors announced the construction of what I
call a toeprint. It will take them three years to build a smaller, less capable and lower speed
network than what we built in 10 months. There is an issue here of capability.
Most importantly, however, is the fact that we are the global leader in this area. As we announced
in Barcelona earlier this week, as of today we have now upgraded the network to 14.4 megabits per
second, which really means a quadrupling of current capability. Again, we do not have devices yet
that are at 14.4, but that is not the important issue because what it really means is that we can
have four times as many simultaneous uses with the network that is now in place versus what we
launched in October. So we are on an unrelenting path for continued expansion of capabilities and
our ability to service customers wherever they might be in Australia.
In broadband or let me just continue here for one more second. In the case of our Next G, we also
announced earlier this week and as of today, we have extended the network range capability from
80km to 160km, everywhere that we have a site. In certain locations we have now halved the
capability to offer 200km to enable Australians to receive mobile coverage in
remote sites, such as on ships, oil rigs, flying doctors, and, as we have seen recently with the
bush firefighting efforts, we have enabled more capability in those kinds of situations and
locations. Again, not just assuming market leadership or continuing market leadership in Australia
but here in Australia, the citizens here, our customers here, have the best wireless broadband
network in the world.
In broadband, we continue to outgrow the competition again and extend our market lead. Our market
share was up another 1 per cent to 45 per cent. We are still beating our nearest competitor by 3 to
1. ARPU held for the first time since broadband launched, with first half ARPU of $49 flat on
second half 2006 and has grown since the launch of our high speed plans.
One third of entry level customers migrate within 12 months to faster speed or more capacity. Since
the launch of ADSL 2+ and HSDPA, 25 per cent of new customers have signed up to plans
faster than 1.5 megabits. We have surpassed 200,000 wireless broadband customers with growth of 30
per cent year on year. So if you want to talk about something thats hot, something thats selling
very fast in all of our stores and centres around the country, its basically our wireless turbo
card. It is making a difference, again, in our customers lives, actions you probably saw on the
video.
We have extended our broadband footprint, launching Bigponds high speed fixed service, covering 91
per cent of the Australian population with speeds up to 20 megabits from around 360 ADSL 2+ enabled
exchanges and up to 8 megabits from the remaining 2400 ADSL enabled exchanges. Our Bigpond digital
online assets are a key part of what you have heard me call our media comms strategy.
So, great growth, great acceleration, customers are voting, we are letting the marketplace work
well. But we also had this other negative in our business, which is PSTN. I again talked about some
of it a little bit earlier. We have some key pivot points there that I would like to detail for
your benefit.
We continue to tackle the decline of PSTN head on, we are slowing the revenue decline. We had 5.6
per cent in first half 2007 versus 7.6 per cent in first half 2006. But we are not stopping there.
Our strategies of integrating services, initiating customer winback programs and offering value
based subscription pricing plans are making a difference in the marketplace and ultimately in our
results going forward, because this has led to total line loss of 0.8 per cent since last June, a
best in class performance, consumer SIOs steady since June another best in class performance; and
positive consumer customer churn trends and actual market share gains for the first time since
competition was introduced.
Sensis maintained a very strong performance on a normalised basis as we think about our strategies
around the digital online businesses. Online usage was up 21 per cent on 2005, as Australians
continued to use Sensis online products almost 42 million times a month a very relevant set of
brands, a very relevant set of assets, as we think about continuing to grow our online businesses.
New media revenues grew by 68.3 per cent, with share of total revenue up from 9.8 per cent to 15.3
per cent normalised; 33 per cent of new customers taking up print and online bundles.
Yellow.com.au remains a major driver of growth in this business and emerging major growth drivers
account for 33 per cent of our H1 revenue growth. They include brands such as Whereis, which is our
satellite navigation business, 250 per cent growth in unit sales and 50 million maps served per
month and they have recently launched high resolution aerial photography.
Again, if you want to do a taste test or a comparison test, look at our product verses Google or
anybody else. Mediasmart is one of Australias largest online media sales businesses with almost 40
per cent growth in customer in the past year. It served up around 1 billion online add impressions
per month in November and December 2006. 1234 customers up 20 per cent since services simplified
in December 2006 1 million calls per month received with 85 per cent connected through to
businesses.
Sensis continues to innovate, with exciting online initiatives to be launched in auto and general
merchandise. For example, carshowroom.com.au has launched a beta with seven manufacturers and over
150 dealers who are already signed up. Approximately 60 per cent of costs growth will be invested
in revenue growth initiatives in the fiscal year only 11 per cent last year. Strong cost
governance has given Sensis the capability to invest in high revenue growth areas without the big
increase in costs.
Just as a reminder, Sensis is growing at the top line and growing margins at the same time. Again,
a very strong performance and full-year guidance remains a double digit revenue and double digit
EBIT growth.
Let us move offshore, where we should update all of you on Soufun. Soufun is continuing its
aggressive organic expansion since Telstra acquired its 51 per cent stake on a fully diluted basis,
where we have already added another 16 cities to the footprint that we have in China. We have an
objective of opening offices in 100 cities by the end of 2008. This is reflected in strong Soufun
performance, with triple digit revenue and triple digit EBIT growth.
Revenue is up 107 per cent year on year and EBIT is up 131 per cent year on year. Soufun continues
its phenomenal growth during the boom in Chinas real estate and online advertising sales.
Obviously, the marketplace there is booming. Construction is fueling a lot of Chinas economic
boom. Real estate investment was growing at 24 per cent in 2006. The increase in residential
building areas, when you look at whats happening just in China this year, 2006, it was similar in
size to recreating the city of Bangkok. Thats how much volume and activity is going on.
While I was last in China, there was a CNN report on China construction talking about over 125
million units of housing under construction. Where you see all those cranes and all the things that
are happening there, a lot is happening and we are right at the centre point of the force of
gravity in China.
When we look at this, this is going to be reflected on our online sales. Online advertising will
quadruple between 2006 and 2010 to over US$3.2 billion. Online real estate advertising is expected
to deliver over US$1 billion in 2010. Soufun is growing even faster and represents an incredible
opportunity. Its Chinas No. 1 real estate advertising website, it has 44 million
unique users per month, 1.3 billion page views per month, and we have more coming as we continue
to evolve the business.
So it is an online real estate business but we have extended now the business also into home
furnishings and we will have other opportunities to take that platform in more directions. So more
to come on Soufun.
In terms of cash operating capex, our investment this year is at peak levels, as we have described
before, and it is driven by the transformation. Telstra is on track to meet key milestones over the
calendar year 2007.
In the case of wireless, in addition to the announcements made earlier this week, today we are also
launching a trial of a home-based wireless broadband service using our Next G technology on our
14.4 platform. In Wireline, we are making good progress on our key objectives, with turn-up of our
IP MPLS core and multiservice edge both nearing completion. The IT transaction formation is on plan
and on track.
We have begun delivering a series of important capabilities to the business, including first, what
we call our integrated desktop, enabling a single log-in and realtime use of market based
management data. When we say single log-in, historically, if you looked at our business, it takes
our reps sometimes may be four or five minutes just to log on, given all the systems they have to
get into that are part of our legacy environment. Taking that down to matters of seconds is a big
deal in terms of our business.
Telstras service delivery platform, delivering content applications and live streaming over our
Next G network, all of that is happening. The volumes that are happening are all big and that is
because we, through our IT transformation work, have enabled now a new service delivery platform.
Telstra retail integrated campaign. As we have ratcheted up, basically doubling the volume in the
business, we had to have campaign management systems capabilities. We now have those employees to
enable us to integrate our processes and some of the technologies, again as part of how we think
about managing what we do in the business.
Our enterprise program management again, more enhancement for that part of our business.
In the case of our network planning, for those of you that know the business and know the
industry, you are going to see a major change or a delta happening for anybody that operates
networks. That delta is in a broadband environment, you have log linear change in terms of capacity
requirements, literally as you think about location by location.
Its a much different paradigm than for those of us that have dealt with this network management
over the last I have not been in the industry for the last 100 years, but it is a fundamentally
different paradigm.
So, having the network planning tools that can be dynamic, can be realtime, is clearly critical.
But even more important than that is our ability to leverage these planning tools across all the
platforms that we have, whether they be fixed line, wireless, HFC or whatever it is that we have
within our business. So the momentum on our IT transaction formation is continuing, starting to be
rolled out in terms of our business.
As we said in November 2005 and October 2006, we will deliver the first release of our major IT
capabilities at the end of calendar year 2007 with the second release to follow late in calendar
year 2008. Nothing has changed, other than we are now starting to get some of the fruits of our
labour.
While we talked about the transformation, we still need to focus on customer service. Again, I am a
zealot about this, I wont let it go, because when you have so many things going on in the business
it is always easy to let some things drop, and it cannot drop in front of the customer.
So we are staying focused, we are staying intent on enhancing and improving our customer
experience. So we are driving improvements in both service and quality in our business. We are
getting there on time over 90 per cent of the time and we are getting it right the first time over
96 per cent of the time. We have posted the highest customer satisfaction performance on record for
enterprise and government customer.
Our ADSL held orders have fallen by more than 80 per cent since the September 2005 level of 19,300
and our Bigpond cycle times are down 19 per cent to an average of 6.7 days, and you all get to see
the published information that is filed with the regulator and the government regarding our service
performances, which again are at all-time highs. These are the be st service improvements in
Telstras recorded history.
In addition here are some examples to show how we are driving productivity improvements, from
increasing efficiency and delivering benefits under a one factory approach. We now have more than
6,900 vehicles equipped with GPS, meaning higher productivity, more efficient scheduling
and ultimately greater safety. We are investing in our people. More than 6,400 front of house and
field staff have improved skills from training at our Telstra learning academy. We have more than
doubled the numbers of consumer staff on incentive based compensation. I have to tell you, this is
good for customers, good for shareholders and really good for employees.
Our headcount is down 4,596 since June 2005, excluding the impact of the New World merger and other
acquisitions and divestments. Maybe more importantly, it is important for me to state that we are
on track to hit our target reductions of 6,000 to 8,000 by fiscal 2008 and 12,000 by fiscal 2010.
We have a lot of momentum in the business. But, as I frequently remind everyone inside the company,
we are only 13 months into a five-year transformation. We have a lot more to do, but the good news
is we are on or ahead of plan on all fronts.
In summary, we have doubled our rate of topline growth, our labour costs are lower than a year ago,
we have great momentum in mobiles, broadband, digital online and the downward decline in terms of
PSTN. We will aggressively pursue convergent services as we evolve into what I call a media comms
business. As I said at the beginning, we are at that pivot point. From here on in its all about
accelerating the trends.
Now, thats essentially why we are raising our guidance on both the top line and bottom line for
the year. With that, Im going to hand it over to our CFO, John Stanhope, who is going to provide
you with a more detailed analysis of our first half results.
MR STANHOPE: Thank you, Sol, and good morning to everybody here in Melbourne and Sydney and those
who are viewing on the webcast.
Let me run through the financial highlights for the half in a little more detail. As Sol said,
sales revenue was up 2 per cent on a reported basis and up 3.6 per cent when you adjust for the
deferral of the Melbourne Yellow book revenue until the second half of this fiscal year. This
actually does reflect the true performance of the business.
Strong growth in mobiles and broadband revenues continued and our market-based management
initiatives have helped slow the decline in PSTN revenues to 5.6 per cent in the half just gone,
compared to the 7.6 per cent deadline in the first half of fiscal 2006; an improvement of 2
percentage points in one year. Our operating expenses were up 9.9 per cent, driven by
transformational related costs of $137 million, higher subscriber acquisition and retention costs
soared with our market leading growth in the 3G market; and an increase in our cost base following
the consolidation of some acquisitions, New World and the acquisition of Soufun during the half.
On an underlying basis, excluding the impact of the transaction formation costs, our operating
expenses grew 7.7 per cent. I will provide a little more detail on those expenses shortly.
The total transformation cost is $285 million for the half after you include the $148 million for
the accelerated depreciation and amortisation associated with the transformation.
It should be remembered that the first half of fiscal 2006 did not include any transformation
costs.
EBIT declined by 15.7 per cent in the half. This is ahead of our guidance of minus 17 to 20 per
cent. As a result, we have increased our full year guidance, as Sol has mentioned, and I will
update you a little later in the presentation on that.
We have performed better than guidance and we are at an earnings pivot point. EBITDA margins fell
from 46.3 per cent to 42.3 per cent on a year on year basis, so half on half basis. That was due to
the higher operating expenses in the half. However, on a normalised basis margins improved 1.7 per
cent, sequentially from the second half of 2006.
So what am I talking about is from 42.5 per cent at 30 June 2006 to 44.2 per cent at 31 December
2006, as the transformation gathers momentum. What is in that normalisation? Of course, the
transformation costs have been taken out and we have allowed for the Melbourne book being deferred.
Cash operating capex was up 22.8 per cent to $2.5 billion dollars, as we continue to invest in new
networks and systems as part of our five year transformation. Dont forget, the current fiscal year
is our peak transformation spend year for capex. We have declared an interim fully franked ordinary
dividend of 14 cent per share.
What are some of the sales revenue drivers? Mobiles and broadband delivered another strong half of
revenue growth, as the revenue mix in the business continues to change. Importantly, mobile
services or mobile usage has grown at 6.5 per cent. Retail broadband continues its strong growth at
50 per cent.
Sensis sales growth was also strong on a normalised basis, growing 7 per cent again that is
taking account of the Melbourne Yellow book.
IP access grew 27 per cent as our BigPond customers continue to use greater bandwidth and use our
new product set. As you can see from the slide, our growth in key markets is more than offsetting
declines in legacy products and we have again slowed the PSTN revenue decline.
On a reported basis, Sensis revenue declined 11.7 per cent but on a normalised basis, again, after
taking into account the Melbourne Yellow book deferral of $174 million revenue, Sensis sales grew 7
per cent another strong half revenue performance. On a normalised basis, Yellow revenue was up
1.5 per cent to $526 million. Yellow online revenue continued to grow strongly, up 32 per cent to
$78 million. Yellow print revenue declined 2.5 per cent to around $450 million, due to softer
economic conditions, particularly around Sydney, and that has affected the Sydney book. However,
the decline is more than offset by the increase in Yellow online.
Furthermore, around 33 per cent of new customers are taking both print and online bundles.
Multi-product customers mean higher yields and, of course, are more sticky than the single product
customers.
White Pages, its revenue grew 8 per cent to $146 million, driven by strong half performances in
both print and online revenue, as customers take up our feature options in White Pages.
New media revenues grew by 68 per cent in the half to $136 million as usage across all sites
increased 21 per cent, as Sol alluded to earlier. Emerging businesses such as Soufun, 1234,
MediaSmart and Whereis are driving much of the growth, along with yellow.com.au and the
whitepages.com.au, which represent exciting new growth rises in the media comms space that will
lock in future growth for the Sensis business.
Trading Post is continuing to reposition itself in the online space, where there are many
opportunities while experiencing ongoing competition in the print.
A strong costs focus and improving online sales and scale helped push EBITDA margins up almost 2
percentage points a fantastic result in the Sensis business.
Sensis is now much more than Yellow and is on track to achieve its fiscal 2007 guidance of double
digit revenue and double digit EBIT growth.
Let me now turn to retail broadband. Retail broadband revenue continued to grow at market leading
rates, up 50 per cent to $497 million. In November we launched ADSL 2 plus, offering speeds of up
to 20 megabits per second. In December and January, 25 per cent of new broadband sales were for
plans faster than 1.5 megabits per second. Migration of customers to higher speed plans has helped
maintain the retail broadband ARPU at second
half fiscal 2006 levels of $49. This is the first time broadband ARPU has not declined since its
launch.
Retail broadband customers continue to grow, up 650,000 year on year to 1.8 million. We changed our
wireless broadband subscriber report in the half and both broadband and wireless broadband numbers
of SIOs are included, and there are 204,000 wireless broadband customers included here.
Our retail market share increased to 45 per cent, a gain of 1 per cent, as we added customers, as
Sol mentioned, at three times the rate in the half compared to our nearest competitor.
Our Bigpond customer service continues to win awards and we remain the top rated e-mail and
telephone customer experience provider. In addition, our ADSL cycle times have improved by 19 per
cent. They are now equivalent to about six days, down from eight days in the first half of 2006 to
get an ADSL service.
Let us have a closer look at mobiles.
Total mobiles: We are on track to become the 3G market leader by May 2007. Total mobiles revenue
grew 11.8 per cent to $2.8 billion, made up of mobile service revenues, up 6.5 per cent to $2.4
billion, driven by strong data growth from wireless customers accessing data services and,
secondly, mobile handset sales revenue which grew at 69 per cent to $357 million, of course due to
the increased sales of 3G handsets as people flock to the Next G offering.
At December, total 3G mobile subscribers were approximately 1.2 million, with 415,000 Next G
customers added from launch up until Tuesday of this week.
We added 12 and 13 times PostPaid SIOs in quarter two, versus Vodafone and Optus respectively, as
we focus on higher ARPU customers who are paying for the extra value that Telstra provides.
Importantly, as Sol alluded to before, we maintained the $20 per month 3G ARPU premium over 2G on a
much higher customer base, so we think we are past the early adopters. Half of this premium is
driven by the uplift in data usage as our 3G customers take advantage of our superior speed and
content offerings on the Next G network, using video calling and data services such as Foxtel by
mobile, music, games and video downloads.
Mobile data revenue grew by 39 per cent and mobile data now accounts for 22 per cent of mobile
services revenue, and that is up from 19 per cent in the second half of the fiscal 2006. Non-SMS
data because it has in the past been dominated by SMS data ARPU is up 74 per cent to $3.10.
I do need to talk about mobiles acquisition costs. The strong mobiles revenue growth has resulted
in an increase in handset subsidies and subscriber acquisition and retention costs as we do
continue to compete hard and win in the key mobiles market. Our mobiles EBITDA margins have fallen
from the mid to high 40s range in the first half of fiscal 2006 to the low 30s in the half. Our
average PostPaid subscriber acquisition and retention cost increased by
50 per cent to $250. The blended, so PostPaid and prepaid, subscriber acquisition and retention
costs are $183, and they were up 51 per cent.
Handset subsidies did increase by 98 per cent to $417 million, driven by the higher volumes and the
higher average handset subsidies per plan, as we do continue our aggressive 3G push with Next G.
We saw in the previous slide, and what Sol said earlier, that the 3G PostPaid ARPU uplift has been
maintained. So this higher ARPU means the payback of the higher subscription acquisition retention
cost is around three to four months, which makes this a good investment.
PostPaid churn has remained positive since April 2006 as we sign up more PostPaid customers, with
59 per cent now of the mobiles base on a contract, up from 55 per cent in the prior corresponding
period. Our segments are working hard in signing customers to long-term contracts. Our progress has
been first-class, with 54 per cent of the PostPaid base now contracted for at least the next 12
months, and this is up from 51 per cent in June 2006. Our PostPaid capped plan percentage remains
low by industry standards at 10 per cent, in contrast to the mid 20s for our competitors.
As we lock in more of our base on higher ARPUs and we reduce handset costs, and we cash in, if you
like, on our competitive advantage in 3G, we expect to drive margin improvement over the
medium-term.
PSTN: As we said a couple of times, the PSTN revenue declined 5.6 per cent to $3.6 billion, which
represents the second consecutive half in which the PSTN revenue decline has slowed with a 5.8 per
cent decline in the second half of fiscal 2006 and a 7.6 per cent decline in the first half of
fiscal 2006, and 5.6 this half. The improving trend in churn has helped stem the line loss, the
smallest line loss since June 2002.
Our market base management research and resulting initiatives have led us to deliver a more
integrated and tailored customer experience, which has had a direct impact on the bottom line.
One of those initiatives, subscription pricing plans, have proved very popular, with approximately
300,000 customers choosing to move to the simplified pricing offers, the $89 plan being the most
popular. More and more customers are taking advantage of our integrated product offerings, with the
number of customers with three or more products increasing 13 per cen t. PSTN ARPUs are holding or
they just declined marginally by 4 per cent to $61, so there is no large impact from subscription
pricing plans.
Let me just touch quickly on some segment highlights here. I will have a brief look at some of our
segments. Our retail business unit have each enjoyed strong performances in the half, led by
consumer growth of 4.4 per cent. Business that is the focus on our small business has grown
because of a new focus on that segment. Enterprise and government, that group has grown again this
half after we normalise for the AAS divestment.
The improving operational metrics talked about by Sol earlier have been driven by a more focused,
more competitive presence leveraged off Telstras strengths which do provide a real competitive
advantage.
Let me get into a little more detail around operating expenses. Operating expenses have increased
9.9 per cent on a reported basis to $6.9 billion and overall there were three key drivers for that
increase in operating expenses, the first being mobiles and the increased subscriber access and
retention cost that I went into in some detail earlier; the acquisitions, that is, the inclusion of
a full six months of costs relating to New World, which merged with CSL, and four months costs
relating to the acquisition of Soufun, which occurred in August, offset, of course, by the
divestment of AAS from the KAZ Group; and thirdly, the transformation. This was mainly related to
our service and contracts, which means we continue to make sure we variablise the costs of the
transformation.
As I have said on a number of occasions, it is important to note we have not included any related
internal labour costs and transformation costs. So a lot of people inside the company are also
working on transformation.
After stripping out these costs, you see on the slide, business as usual expenses increased by 1.4
per cent. I thought it was important to step you through what the growth consisted of, and I have
done that on this slide.
I now look at the main expense lines, starting with labour. Labour costs declined 2.8 per cent to
$2 billion, and that is the first time labour costs have decreased since about 2003. Salary and
associated costs declined 1.3 per cent, and that has of course been driven by the overall reduction
in the workforce. Redundancy costs decreased by 47 per cent, as we now draw down on the $186
million provision for redundancy that we raised at the end of fiscal 2006.
We reduced our total labour force by a further 737 in the half and our workforce has reduced by
4,596 since the start of fiscal 2006. Of course, that excludes the impact of the New World merger,
the other acquisitions and the divestments, and that is the reference point that we made earlier
with our long-term objectives.
An over-busy Christmas period, and for the Next G launch we increased our short-term flexible staff
levels. So keep that in mind when you are trying to reconcile the investor day work force decline,
when we talked about the decline on investor day of 1,000 with a half decline of 737. We are on
track, as Sol said earlier, to achieve our 6,000 to 8,000 headcount reduction by the end of fiscal
2008 and 12,000 by the end of fiscal 2010.
The other costs elements, cost of goods and services, let me take you through that. There has been
investment in the mobile market as we compete aggressively in 3G. As a consequence, this category
of goods and services has increased by 16.9 per cent to $2.6 billion for the half. As I have
already discussed in the mobile section, the increase in handset subsidies cost of goods sold and
commissions was driven by an increase in volume and higher average subscriber acquisition and
retention costs as we support that 3G growth.
Of course, with the higher demand in Bigpond, the Bigpond volumes have also had an impact on our
cost of goods sold. Offsetting those increases was a decrease in network payments of 11.7 per cent
to a total of $887 million. That was due to a reduction in the mobile termination rates to 15 cents
per minute and that was backdated to January 2006 following an ACCC determination. The net outcome
of the backdating has been a $37 million EBIT benefit in the half for that fiscal period.
Lower payments to Reach also offset the increase, and that is our payments for operating and
maintaining our offshore cables and the terminating costs as we get more efficiencies in the Reach
business, and further offsetting, there was a slight increase in volumes of mobile and SMS traffic
terminating on other carriers networks.
The other expenses in the business I will just touch on. They increased 15.5 per cent to $2.3
billion. When you take out the transformation related costs, other expenses increased by 9.9 per
cent to $2.2 billion, so it is a big element of the growth. Service contracts and agreements
increased 17.4 per cent to $1 billion. They have been driven by transformation costs of $80
million relating to both the IT and Wireline components of the transformation.
As I said, that is the variablising of the transformation program. We did have an increase in the
front of house volumes associated with mobile and broadband demand contributing to $48 million of
the cost increase.
Rental costs were up. These accommodation rental costs were up because New World came into our
books, and in general administration costs increased 13.6 per cent, and that may alarm you, but it
is related to the transformation. It is an increased focus on training.
You will recall we said we were going to train more of our people, we are equipping the field staff
to better serve our customers. And there are some additional costs with th e establishment of Next
G as we are, for a short time, operating duplicate networks. So there are electricity costs, power
back-up costs and so on. That duplication of costs will only continue until the CDMA network is
switched off.
Promotions and advertising costs were up 38 percent to $212 million, that was due to increased
market campaign activity around the launch of the Next G network in October, the launch of ADSL 2+
in November and, of course, a busy Christmas season.
I wanted to show you this slide to give you some perspective on the timing of future cost
reductions because it is an often asked question. While this year is a big spend year on
transformation, costs take-out will be progressive as platforms are removed, product exits take
place and systems are decommissioned. This slide aims to show you the approximate timing of realising material benefits from the transformation.
However, cost reductions are also taking place now. The cost reductions to date have come from
organisational redesign and operational productivity improvements, and they will continue as well.
I want to just quickly look at depreciation and amortisation expenses. Depreciation and
amortisation increased 9.9 per cent to $2 billion, and this does include the $148 million of
accelerated depreciation and amortisation for the CDMA network, some switching systems and software
following the service life review we had as part of the transformation program.
Excluding the impact of that acceleration, D&A grew 1.7 per cent and that increase is consistent
with the growth in our asset base, the inclusion of Adstream, New World and Soufun assets.
Capital expenditure, our cash capital expenditure: Our total cash capital expenditure increased 23
per cent in the half to $2.5 billion. During the half, we spent $1.7 billion on
transformation-related programs, including $810 million on building and deploying the IP core
network in Melbourne and Sydney, deploying IP DSLAMs and installing Multi Service Edge nodes. We
spent $597 million on building and rolling out the Next G network and upgrading it to 14.4 megabits
per second, as Sol mentioned earlier today.
$230 million was spent on streamlining and improving customer care and billing solutions, while
decommissioning other IT systems, and $108 million was spent on transformation related programs,
including network improvements.
As expected, our business as usual capex declined as we divert our resource to the transformation.
We expect this decline to continue leading to a lower capex to sales ratio once the transformation
is complete in fiscal 2010. We are on track to achieve our full year cash capex guidance of $5.4 to
$5.7 billion.
Cash flow: As expected, our free cash flow declined 56 per cent to $862 million, due to the higher
opex, related to 3G growth and transformation, higher capex due to the transformation program and
the acquisition of Soufun, which was, you will recall, mostly offset by the sale of AAS.
Some of our financial parameters have increased, which we expect, since June, but we are still very
comfortable on all measures versus the financial parameters we have set for the company as at 31
December.
I will just touch on international here. CSL New World revenue grew 41 per cent to HK$3 billion,
largely due to the consolidation of New World PCS in the group results for the six months, which
contributed HK$720 million or 33 per cent of the growth. Without New World, CSL grew by 8 per cent,
so CSL is still growing. So I wanted to make sure you understood that.
Growth in data, international voice and mobile handset revenue also contributed to the strong
revenue performance. Expenses were up 49 per cent in CSL to HK$2.8 billion, driven only by the
inclusion of New World and increased subsidiaries as the group started to return to SIO growth and
improved churn.
Telstra Clear continues to grow revenue where we have infrastructure. However, total revenue
declined 4 per cent to NZ$335 million, and was driven by lower off-net usage impacting on calling
and mobile revenue and there has been competitor-led price erosion.
For the four months, Soufun reported triple digit earnings and revenue growth and is on track to
achieve full year triple digit revenue and earnings growth.
Let me turn to the guidance. Following our strong first half revenue growth, we have upgraded our
fiscal 2007, so full year revenue and earnings guidance. Previous revenue growth guidance was 1.5
to 2 per cent growth, and now we are giving guidance of 2.5 to 3 per cent growth. The previous
reported EBIT growth guidance was plus 2 to plus 4 per cent and now we are giving guidance of plus
3 per cent to plus 5 per cent.
This guidance has some assumptions behind it still no FTN build, ULL pricing still in band 2 at
$17.70 per month; the shared spectrum or line sharing at $3.20 per month; and, of course, that we
continue in this year to have the largest spend in our transformational activity, both capital and
operational expense; and that we do not raise an additional provision for redundancy and
restructuring in fiscal 2007.
We expect positive earnings growth to recommence in the second half of this fiscal year and we have
told you about this on previous occasions. Our second half EBIT growth guidance remains in the
range of plus 37 to plus 40 per cent.
I just want to very quickly address some key misperceptions that have been around the market. I
want to set the record straight here. I will start with PSTN, where there have been many
suggestions of large scale declines and a lack of focus. However, what we have witnessed has been
quite the opposite.
A new focus on the integration and retention has led to slower revenue declines and, as I have
said, the decline has been slowed and the churn trend is positive. As you can imagine, overall it
has had a very positive impact on company margins.
Next G: There has been much scepticism about our ability to execute on the Next G network, with
concerns around technical performance, limited competitive advantage and take-up of devices
resulting in a long period before delivery benefits. Well, again, the results are quite the
opposite: The network is performing very well. Breadth and depth is a real competitive advantage
being experienced by our customers.
We have entrenched that competitive advantage with the upgrade to 14.4 megabits per second, with
its associated extension of coverage. We have now added 415,000 SIOs on this perceived limited
handset range, which we are expanding in any event in March. All of this has helped drive strong
mobile services revenue growth of 6.5 per cent.
Some of the other misperceptions they range from a lack of understanding of our strategy, lack of
understanding of the regulatory environment, and some off the market estimates around payback
periods and investor sentiment. The facts are on the slide, and in the interests of time I will not
go through each, but I encourage you to read through the perception and what we believe to be the
facts.
There have also been this is what I want to address head on some wild estimates around the
value to us of our property rationalisation. While there will be opportunities to close and sell
some telephone exchanges, these will be on a much smaller scale than some suggest. So
we have given you some indications there of the likely outcomes and again I just wanted to correct
some misperceptions.
Turning to margin guidance, our margin guidance is one aspect which also receives enormous
coverage, with many believing there is not a precedent for such a target. In addition to ignoring
the unique differences that there are in Australia and Telstra versus global peers, this analysis
is based on recent, and therefore some historic, margin performance. In fact, many global telco
analysts are predicting healthy margin improvements to fiscal year 2010 for many in our peer group.
On this scale, Telstra is aiming to hold margins and we dont believe it is an extreme objective.
You will recall the long-term objective of 46 to 48 per cent margins, and that takes us back to
2004/2005 margin levels.
Regulation: I need to briefly touch on regulation. Our recent regulatory activity has been well
documented, with the launch of the constitutional challenge in the High Court to protect our
shareholders rights. This relates to the below cost determination from the regulator as we
continue to aim to at least recover the costs for our legacy network as we provide access to it for
others.
Lastly, at this stage, given our progress, 13 months into our strategy, we have no reason to change
our long-term objectives. I supply this slide to show you those long-term objectives and just to
remind you what they are.
So thank you and I will now pass back to Sol as we take your questions.
MR TRUJILLO: Thank you, John. As I understand it, we are going to go first for questions to Sydney
and then we will come back here to Melbourne.
Q: Justin Cameron, Credit Suisse. I want to touch on the market share side. From the strengths
today, we have seen improved market share on the fixed line, improved market share in broadband
and improved market share in mobile. Has that trend continued over the January period that you have
seen and do you expect that that strong momentum that you have had obviously in broadband and
mobile to continue for the next six to 12 months?
MR TRUJILLO: Justin, I wont give you any January specifics. But the punchline is yes, we have
momentum in the business and trends continue to look favourable. Again, it is going to be a
function of hard work, differentiation and focus on the part of our people.
Q: Maybe just a bit more clarity on the mobile side. The guidance that Telstra has historically had
on mobile is between 5 and 6 per cent growth at the top line. You delivered nearly 12 per cent
revenue growth in mobile. Will there be any change to that guidance at all?
MR TRUJILLO: We are not changing our guidance per se on any particular category, but suffice it to
say that our trends are staying strong and again we are always how should I say it cautious
about what our competitors might do, how they play their price plans and price caps and a lot of
other things in this space.
But we do
have an advantaged product in the market, customers are voting, and they are using. So
the good news here is not just share but its revenue share. And revenue share is not just driven
by SIOs, but also by usage. Again, when I think about an industry thought not just Telstra but
the industry this whole phenomenon of high speed services in a mobile space is going to drive a
different usage characteristic, which should drive ARPUs, for those who know how to play the game
right and smart.
Q: I am just wondering what happened to the previous underlying EBIT decline of minus 2 to minus 4
per cent? Has this changed in any way?
MR STANHOPE: No. If you take a normalised view of our half, it is about minus 2.9 per cent
normalised to the half, so on the same basis. But we have improved the reported guidelines, so the
reported sorry, the underlying level has also improved but we are not today issuing any guidance
on the underlying.
Q: Just on the 3.6 per cent underlying revenue growth, what would that number be if you excluded
the acquisition contribution from New World and Soufun?
MR STANHOPE: On a normalised basis, if you like, the best way probably to look at this is because
Soufun and New World are both offshore the domestic business growth, therefore, is about 2 per
cent.
Q: Can we expect to see a reversal of the CDMA trend for early next year? And the second question
is around margins and return on capital on some of your new products, like the mobile data products
you were talking about.
MR TRUJILLO: First of all, regarding the SACS trends, the SACS trends are actually better today
than they were in October when we met last and they will continue to get better as there is more
market knowledge and more capability, as product familiarity continues to occur in the marketplace.
So we are on an improvement path relative to SACS and also retention as we think about our
retention costs.
In terms of what we see happening going forward relative to CDMA migration, we are basically on
plan with what we intended to do. We are letting the market work, and the market is working
relatively well as we look at the volumes of what we are doing and what customers have migrated
already from CDMA to our Next G service in particular.
Finally, in terms of CDMA as it relates to SACS, that is partially built into some of the reserves
that we took last year and it will be used or leveraged as appropriate as we go forward. So there
are no issues in my mind at this stage.
Q: Any comments on margin on the new products?
MR TRUJILLO: In terms of margins on the new products, obviously as we have higher ARPU then the
margins will look more attractive. Our handset costs, our weighted average handset costs on our
Next G devices are lower than those on 2100. So as we roll out more Next G customers versus what I
call classic 3G customers, our margins only get better.
Obviously, with usage continuing to grow in terms of by customer that is already a customer, there
are no acquisition costs associated with that, it tends to be a much higher margin.
So the challenge for us, and I would say any player in what I would call the high speed game going
forward, is how well can we market the usage and the capabilities that the customers already have
on their devices? The good news for us is we made it one-click, one-button, one-touch key and we
will continue to do that.
I will move to Melbourne and open it up for questions.
Q: Christian Guerra, Goldman Sachs JB Were. I have four questions for you this morning. Firstly, it
is probably a question for Justin Milne on Bigpond: The business looks absolutely bulletproof at
the moment. I am wondering if there are any risks or other issues on the horizon that you are
focusing on? Secondly, a question on the transformation program opex. Could you give us a guide on
what you expect in fiscal 2008? You have obviously got another $500 million of
redundancies to come over the next two or three years, but just a comment on any other
restructuring or costs that you have coming up in 2008 and beyond.
Thirdly, just on cost of goods sold, we saw a growth of close to 20 per cent in the first half. I
am wondering if you could comment on the outlook for cost of goods sold in 2008.
Lastly, on the depreciation charge, excluding the accelerated depreciation, that was a little bit
lower than what was forecast. I am wondering if you have made any changes to useful lives or
anything like that in the period.
MR TRUJILLO: Regarding Bigpond and the broadband play, then I will ask John to talk about the
restructuring issues, then I will comment on the COGS view.
In terms of the broadband business, as you have probably seen in the last year and a half to two
years, we have fundamentally changed our value proposition to one of not just being a price player
pricing at the market, but adding real value.
Bigpond has evolved now into a truly differentiated broadband ISP/portal, and customers are finding
that value because not only does it deliver the best service experience and that is now judged
and gauged by third parties; we have won awards for it; but we have also been involved it in terms
of services and capabilities, including content, whether it be AFL or V8 supercars or whatever, you
can look at that and if youre a customer of Bigpond you get more and you get more value in the
sense of what we are doing.
When you use the term bulletproof, Im always cautious, because every day you have to re-earn your
value, is my opinion. Thats what I tell all the management in the bu siness: You are only as good
as tomorrow, not yesterday. So we are always going to continue to drive the value. Thats what I
said when I first came here: We are no longer going to be the old price player but we are going to
be a value player in the market, and we keep on adding value.
This is important also when people talk about regulatory issues and other things. Regulators may
want to reduce prices but we are going to continue to increase value, which means the cost to
compete is going to go up. So we are always going to have some insulation against price moves
because we are going to be a value player. So in the case of Bigpond, I think we are doing well, we
are going to continue to enhance and expand, and I think Justin and his team are doing a terrific
job of driving true difference in the marketplace.
In terms of COGS, how are we thinking about COGS? I am not going to give you 2008 guidance. We will
talk about guidance for 2008 when we announce the full year results. But the punchline here is we
are on a mission to keep on driving costs downwards and we are keeping focus on the suppliers as we
deal with them. Because, to be quite frank, Australia is not a big market for most handset players
and, Telstra being the biggest, we are still not big in the greater scheme of things, which is why
a year ago we signed the deal with Brightstar, so that they could aggregate volume, we could get
better prices, and it has worked out well for us so far.
We are going to continue to evolve our product line, we are going to continue to have more players
into our product space as we think about Next G and also as we think about Prepaid and Postpaid.
My sense is that we are going to continue to drive costs further down, so that as we look at our
cost of goods, is it better than SACS, we will get better on a relative basis over time.
John, do you want to talk about restructuring?
MR STANHOPE: Christian, I am not going to give you 2008 capex guidance either, but just suffice to
say that we have said it is a peak spend year this year. Business as usual capex will continue to
come down and transaction formation capex obviously, given this is the peak year, will come down
also. So we have given that guidance before. As Sol said, any specific numbers will come after full
year.
With respect to restructuring costs, though, yes, there is more restructuring costs to take place,
but let me remind you that the provision is more than a one-year provision, so it goes over into
the 2008 year, and the utilisation of that will take place in the 2008 year as well.
When I look at both redundancy and restructuring costs, we have had less use of the restructuring
element of that R & R because we are at the early days of the transformation. So more of that will
be utilised in the 2008 half. So there is no intention to provide any more. We do have a two-year
provision that we have taken up and there will be utilisation of that in 2008.
And your other question, depreciation: After the acceleration, you are right, it grew 1.7 per cent.
The other asset base, impact of service live review, $25 million very small.
Q: Sol, can I ask you a follow-up question on Bigpond. You have been talking about building
Australias leading media communications company for over six months now. You have four fantastic
content genres on the Bigpond site. I am wondering whether you are looking to
expand those or add new functionality, for example, broadband TV. We are seeing that probably 10
European companies have now rolled out IPTV, the two big players in the US have done that, PCCW and
recently SingTel have also announced plans for broadband TV. I just wanted your view on that.
MR TRUJILLO: The great news for us and for all Australians is the fact that we also own 50 per cent
of a business called Foxtel and we are working hard at leveraging the Foxtel asset, along with our
Bigpond asset, in terms of this media comms definition.
I am not going to get into specifics now of what we have on the drawing board but we do have plans
to continue to enhance the viewing experience, let us call it, for Australians, whether they are
currently a Foxtel customer today or whether they are an internet-based user and acquirer of
content.
So we do have plans, we will announce them at the appropriate time and we will stay on the path of
a true integrated strategy, because, as we are finding out with Next G, it really does make sense
to the customer and customers to use things more and better because it is an easier experience.
One more question here in Melbourne, then we will go back to Sydney.
Q: Patrick Russell. Just a few questions. Firstly on CDMA, I wanted to dig a little bit deeper as
to why we arent seeing the migration started to expedite in relation to the Next G network, I
guess just trying to get a handle on how quickly you can get that 1.6 million across, is the
provision within the 2006 restructuring provision sufficient enough to basically get it across
without an additional provision being struck? Just trying to get a little bit more on that.
Secondly, on labour, obviously it has ticked up a little bit since your previous comments. I am
just wondering, while you are in this land grab of Next G and you have this massive migration on
CDMA to occur and you are going very hard on broadband, is it likely that labour numbers will
remain pretty high and you are not going to see any step reduction over the next 12 to 18 months,
then we are looking more back into 2008/09 before we should be considering labour reductions?
Finally, on ULL, I am trying to get an understanding of the restrictions on the conversion rate ULL
on an exchange per state per day basis. There was actual caps on that, they have now been lifted,
and as a consequence we will see a significant step up in the ULL migration rate going forward.
MR TRUJILLO: Patrick, you have asked a lot here. Hopefully I have recorded it all in terms of the
questions.
You first started with a comment which says we are not seeing much CDMA migration. I am not sure
that I know what your data point is to support that.
Q: I am looking at the sub numbers, they are pretty flat around the 1.6 million, and most of the
migration seems to be occurring in GSM. I thought it might have been a little bit more the reverse.
MR TRUJILLO: Number 1, as you have probably noted, we launched Next G on 6 October and we did not
want to start migrating customers on to a platform that was not going to be the relevant platform
for the future, so we waited until Next G turn-up.
During the early month of Next G we had significant volume. The problem was that in some cases we
ran out of handsets and other things, so supply became an issue for us, otherwise our numbers would
be even higher, which is a nice problem to have, but it was a problem. So we now are plenty well
stocked in all locations.
One other issue for CDMA migration, a lot of customers out there now have the device that will work
but they want car kits and other things in order to be able to feel that they can adequately
migrate from the current experience that they have to the one that they want to have, taking
advantage of Next G. We are now at a point where we can supply the needs there as well and we are
stocking up for those capabilities.
The last
thing I just say is that the numbers that you see are through the end
of the year, so you are basically talking about a month and a half to
two months worth of activity. I assure you that I dont have any issues at this stage or concerns about our ability to migrate the CDMA customers over because there is significant volume, significant take-up from them already.
Secondly,
in terms of the reserve and the use of any reserves and will there be
an additional requirement at this stage, we think we are adequately reserved for all that we are going to do and there are no issues there.
In terms of the timing of labour and how you describe the transformation, I think you are
relatively close in the sense of we are going to meet our targets of 6,000 to 8,000 FTE take-out by
the end of fiscal year 2008. That is going to happen. But the more important part of your question,
I think, was how should everybody think about the continuation of the transformation?
This year I said that release 1 turns up at the end of 2007, and that will affect part of business
in
the sense of enhanced capabilities, replacing some old capabilities and it will be the next year or
the following year when we start pulling out all the legacy stuff, because now we have the new
capabilities.
Release 2, which affects our LSS it is kind of the backbone and billing systems, that turns up
again by the end of 2008. So once you have release 1 and release 2 done, thats when you really
start affecting our ability to take out costs and more additional headcount because we have a lot
of people still managing legacy systems.
When we turn up initially, we are essentially running two legacy systems, just like right now we
have an additional Next G network in addition to the CDMA. Part of the additional take-out, the
bigger back end will be when we start retiring the systems and taking them out of service. So that
timing will be in late calendar 2008 and 2009 and 2010 periods. That will also be affected as we
start turning up our soft switching capabilities in the metro markets that we described as part of
our operating plans.
I think you have characterised it right in the sense that there is going to be big backend labour
force reductions just simply because we will turn up the systems and withdraw them, but in the
meantime we will still get our targets of 6,000 to 8,000 by end of fiscal year 2008. Did I answer
your question?
Q: ULL?
MR STANHOPE: ULL restrictions. Part of the reason we have changed our guidance is that the
expectations that we had when we gave the last guidance on ULL take-up is smaller than we expected.
But let me also add that we think we are still yet to see the full impact, and I believe that the
take-up will increase over the next half. That is all I will say. I dont know any more details
about restrictions and the freeing up of them but I do know the take-up is starting to increase.
Q: Andrew Levy, Macquarie Equities. I wanted to ask you about your balance sheet. You pointed out
that you are pretty comfortably geared versus your target financial parameters. Is that reflective
of the risk you see to earnings over the next few years, or do you have a bit of a war chest that
you could use for acquisitions, and what are your views on capital management in the absence of
those opportunities?
MR STANHOPE: I have always said that we do reserve some flexibility in our balance sheet to be able
to do various things, be they small acquisitions or whatever. But we are on a path here towards
financial parameters as we spend more money to move towards the level that we have set out
ourselves as to what we think is an appropriate set of financial parameters to give us that
flexibility in our balance sheet going forward.
As I have said as I went through the announcement, we are comfortably below those parameters now,
but as we spend this year and you will see those parameters or those indicators go up as we
complete this fiscal year but we have no reason to change those parameters at this stage because
we do want to keep some flexibility in our balance sheet.
Q: Just as a follow-up, given that you stepped out of the Telecom New Zealand directory sale on
price issues, is there an ability to profiteer in some respects on the amount of private equity,
capital and money that people will pay for these businesses with your Sensis business?
MR TRUJILLO: We basically stepped out of that, as you said, because of price. We are on the same
mantra that Ive said over and over again with everything we do: we only do things that improve
shareholder value.
In the case of Sensis and the implied question about private equity, we are on a path here to
improve value, both in Sensis and the integrated whole via our integration strategy.
You can see by the results of Sensis we are outgrowing virtually any player in the market, both top
line and bottom line combined, and we will continue to do that in terms of increasing ultimate
shareholder value. Is it all recognised in the share price yet today?
Probably not. Could it be and will it be? I think so. But some of that yet remains to be worked and
delivered as we grow the business.
So at this stage we are on an integration path, we are staying on the integration path and I think
our shareholders will be well served in the aggregate for all that we do.
Q: Mark McDonnell from BBY. Firstly, congratulations on delivering a result better than guidance.
A couple of small revenue items that have not been touched on as yet, but where there are clearly
some areas for further work. Firstly, in New Zealand, Telstra Clear has gone from bad to worse, the
situation there is deteriorating. There have been revelations from a leaked memo over the Christmas
period, a very colourful memo relating to the state of the business there. Apart from corporate
transactions vis-à-vis Vodafone or Telecom NZ, operationally what scope is there for Telstra to
improve the performance of what seems to be a continuously deteriorating situation in that
business?
Secondly, in Australia there has also been a downturn in your IT services and managed business, and
I am just wondering if that is receiving enough management attention, if there are significant
initiatives there that can turn that around?
MR TRUJILLO: Mark, in terms of the two pieces, I may ask John to also comment on New Zealand after
I make my remarks.
Obviously I am not pleased with the deterioration in performance, full stop, no qualification to
that. So we are working on how we are going to improve that.
Clearly there is a major event that happened in New Zealand recently, which is the passing of
legislation that will, I guess, what I would call break the monopoly. It is probably one of the few
countries left in the world where unbundled local loops and access to network facilities and things
like that are not allowed for at what I would call market terms and conditions. So the government
has made a decision they are going to drive that way and now we are looking for clarity in terms of
how soon, how much and for what. And that is coming, as I understand it.
So New Zealand is a location where we have some opportunities if everything gets enacted that has
been discussed. Because so far we have been truly competing in a very limited fashion versus what
you might find in virtually every other country. So enough said there: We are looking to improve,
we will wait to see what the turnout is and we will deal with options at that point in time in
terms of how we go forward. John.
MR STANHOPE: The only thing I would add, Mark, is that there has been I did mention it in what I
said earlier a very intensive price-led competition occurring. Of the declining revenue, most of
it or at least half of it is access and call revenue, and Telecom New Zealand, the competitor, has
been very selective in their price points where Telstra Clear competes with them. So it is tough.
So what can we do about it? It is like Sol said: We do need offerings that we can provide into the
marketplace from a better regulatory environment, and you would be aware we are also
doing a sort of fixed mobile wireless broadband pilot in one of the small cities there, to see also
what opportunities that might provide for us as well.
MR TRUJILLO: In terms of the second part of your question regarding the enterprise base, the
business base, regarding integration and managed services and the focus there, that is a very
intense focus that we have in our Telstra enterprise business as well as our Telstra business. I
think you will see, Mark, some intensified initiatives in the second half of the year. I will not
say any more at this stage, other than to say it is important and we will continue to do better
going forward.
Q: Sachin Gupta from Morgan Stanley. A couple of questions: John, if I can clarify, your mobile
subscriptions at the end of December were 8.9 million and you have included 204,000 wireless
subscribers in there, and you have got the same numbers in wireless and broadband. Is it double
counting or am I missing something?
MR STANHOPE: Yes, it is double counting, and deliberately so. That is why I particularly said what
I said, to make it very clear to everybody who has our documentation and our half year
announcement. We think it is important that we do understand that broadband users and that wireless users are also broadband customers. So that is the
reason we have done it. Yes, it is double counting but we have explicitly stated that is why we
have done it that way.
Q: Where is the revenue booked, is it booked in mobiles?
MR STANHOPE: By the way, let me just add, our competitors also report the same way. So we are
consistent.
Q: Secondly, on your wireless side of it, your broadband side of it, the growth has been quite
strong. Can you give us an indication on the costs side of it how the costs are tracking in your
broadband side, what sort of subscriber acquisition costs are there?
MR STANHOPE: Only to say that the margins in the broadband business continue to improve. I many not
going to go into any more detail than that.
Q: If you look at domestic competitors, Vodafone, Hutch and SingTel, they have got pretty extensive
strategies overseas. Hutch is looking at X Series, Vodafone has HomePhone and SingTel Optus has
Generation plans. It is likely that they will bring those plans to Australia in the next six to 12
months. What sort of impact do you expect on Telstras business as a result of that?
MR
TRUJILLO: There are lots of things on paper that I have seen since I have been here, lots of
promises that have been made since I have been here, and all we focus on what we do is how we lead
the market, not follow the market. We have our own integrated strategy, it is very clear, very
obvious, it is in the market and customers are using it. What they do to catch up I am not going to
spend my time focusing on, I am going to spend my time focusing on how we stay in the lead.
Q: Ian Martin, ABN Amro. Sol, John mentioned quite a few perceptions that analysts have got wrong
and contrasted them with the facts and performance and so on. Those perceptions have lead to a view
from some that dividends might be cut in future years. I know you are not going to give me dividend
guidance for future years, but given you are talking about pivot point and growth in earnings from
cash flow, is it fair to say the risk of dividend being cut has been reduced or removed?
MR TRUJILLO: I think mathematically the answer is yes, and management philosophy and board
philosophy, the answer is yes, because we have a view that says we are going to generate
significant free cash with this transformation plan going forward. This is what we have said
continuously we said it on our T3 road shows, and that is why the board made the decision it did
last August regarding the dividend that we have just declared.
We have confidence in our plan and we think it is good for shareholders.
Q: Richard Eary from UBS. Just one question: In the actual presentation today, you gave out a cost
take-out graph or slide, on slide 15, that looks as though the big step change in materials of cost
take-out is in 2009/10 year rather 2008. Looking at the guidance you have given for 2010, you have
not really given us an idea in terms of where the step change comes from, whether it is a straight
line graph from the current margins to 46 or 48 in 2010 or whether it is a more U-shaped back ended
graph. I am wondering whether the graph is representative of a more back ended recovery rather than
front line or straight line.
MR STANHOPE: I am sure you would love numbers in the bubbles, Richard. I was trying to give you the
indication that cost is coming out of the business progressively. In the first year or so, 13
months in, it has largely been around productivity improvements in the operations group and
organisational redesign.
As we get further along, I am really saying to you, decommissioning of the systems is going to
happen right at the end because as you do an IT transformation, it would be a dumb thing to do to
switch off the old until you have got the new humming. So that is just practical common sense. And
platform exits take a while as well and they will be done progressively.
So I just wanted to make sure you all understood that it is not going to happen in a big bang
2007/08, it will be progressive over the time. To answer your question, most of it will come late.
Q: So thats correct in terms that it will be more backended?
MR STANHOPE: Yes.
MR TRUJILLO: Let me just add a little bit to that. In the meantime, we are driving productivity.
Obviously this is a big company with a lot of people, a lot of volumes and a lot of processes that
we are improving so far. So you saw on the operations side for the last year or year-plus about the
full-time equivalent headcount taken out. That was all basically productivity driven.
There is more that is going to be done. I talked about the GPS devices now put on vehicles. We are
going to be able to drive more productivity, improve the safety for our people and do a lot of
things with that. If we look at what David Moffatt is right now driving inside the consumer
channels, we are getting productivity improvements literally by day because of the implementation
of market-based management, where our strike rates so when you think about per employee
productivity, it is going up literally daily because our strike rates are improving because of the
knowledge we have about customers. We do not have time today to get into all of that detail but
productivity improvements will continue.
He is going to get further benefits from the urn-up of what I described earlier, I call it the wrap
around system, it is kind of an intermediary system we put in place where our front line people,
instead of having to get into 12, 13 or 14 different systems they now have a single interface and
single log-on and be able to acquire information from customers just once, instead of multiple
times.
All of those things will drive productivity between now and the time at the back end when we start
removing all the systems, when we start doing our switching office conversions, when we start doing
all the other things that are kind of the culmination of the transformation. All of that is on
plan but we are not going to be stopping on improving more productivity and more cost take-out
between now and then.
Q: In terms of looking at what other people have done around the world on the ability to take out
costs, a portion of the cost has been used to drive the top line to take advantage of step changes
in competition. Looking at the revenue growth now in terms of competition levels, and it looks as
though you are in a sweet spot, would it be better for you to take those cost savings on board to
drive top line in the next 18 months or would you prefer to put them back into the margin?
MR TRUJILLO: Right now we are putting some of it back into the top line. You saw our labour costs
year on year are lower and you see that our COGS, our acquisitions costs are up. They are trending
downward but they are up in terms of over a year or two years ago. So we are investing for growth
and that is a good thing.
I have no qualms, especially when in our case we are investing for growth at higher ARPU. We are
growing ARPU in our broadband fixed line business, we are growing ARPU in our mobile business and
we are growing ARPU on our online digital platforms businesses and we are investing in some of the
pricing plans that we have around our PSTN kind of old legacy business, where the decline rate has
slowed and our actual wins versus losses is now positive. So we are investing in that because that
does return better for the shareholders over the long term.
Q: Tim Smeallie, Citigroup. Four questions I wanted to cover. Coming back to the CDMA issue,
looking at the first half performance, it looks like there were 45,000 CDMA subscribers migrated on
to the Next G network, clearly a stellar performance, but David has had the cheque book out to
drive that growth. I am keen to understand, of the 135,000 that have been connected in the first
six weeks of this year on to Next G, how many are CDMA or where are CDMA subscribers sitting at the
moment.
Secondly, can we get a trading update on the business channel, in terms of how David Thodeys
division is going and Deenas SMB division?
Thirdly, you are increasing your dominance across just about every sector of the industry PSTN,
mobile and broadband. Does that concern you from a regulatory perspective? Do you believe that
there are any levers there that the ACCC could come out and impose on you?
Finally, you touched on in the last couple of strategy sessions your aspirations for 30 per cent of
revenue growth to come from new products. In terms of that first half result, could you give us a
feel of what percentage of that revenue do you deem as being new product?
MR TRUJILLO: Tim, you have asked a lot here. Let me start with the last one. What I have said in
the presentation about 30 per cent, it was about new products, new platforms. Obviously, Next G is
one of those new platforms for growth, and some of the things that Justin is building in his
business and Bruce and others are building in their business. I do not have a calculation off the
top of my head but are we at 7 per cent or 12 per cent? I dont know. But it is clearly fast
moving, given the high double digit growth rate we have with our Bigpond platform now and also our
Next G platform and then what we are doing in the Sensis business. So it is high double digits. Are
we on a path to get to that 30 per cent from new products, new platforms? I think so.
Relative to what you termed as dominance, I would not call it dominance in terms of on all fronts.
We are building value add. There is nothing here that we are doing that has anything to do with
what I would call regulatory legacy focus. Are we better on Bigpond because we have more content,
more services more capabilities? Absolutely. Are we better in the Next G world versus 2G or 3G
players? Absolutely. But that is about investment in new stuff, not legacy.
Finally, as we look at the Sensis business and its expansion, it is highly competitive for
advertising dollars. Are we building competitive advantage and are we the market leaders here in
Australia? The answer is yes.
But I take no steps back, no apologies, no hesitation, because it has nothing to do with the copper
loop, and the copper loop is the only thing the regulators should be focused on.
As you said, big players, SingTel, a big market cap company, Vodafone, a big market cap company,
Hutchinson, big market cap owners if they want to risk market capital in Australia, let them. I
applaud them when they do that because if they want to take profits out of Australia they ought to
invest.
We are investing, and we are investing to get competitive advantage. And if those companies cant
keep up, they shouldnt whinge, they shouldnt complain, they should invest. Thats the way the
markets work.
In terms of business, how we are doing on business, we are accelerating. Deena Shiff, in terms of
our Telstra Business business, we are ramping up our growth rate in terms of on all metrics, in
terms of business. Again, when we talk about full year results we will have more
coverage, and when we have our next years investor day we will get into some of the details there.
On enterprise, during the last fiscal period we announced that we basically for the first time had
crossed over to positive growth in the enterprise base. It is our intent to continue that growth as
we deal in a very competitive marketplace, and there are facility based players in most of the
metro locations.
In the case of CDMA, I think I have answered this question twice: the run rates on CDMA are very
good, I will not disclose the numbers because I do not have them off the top of my head, but a
fairly significant portion of our growth now is in CDMA and is continuing. Now that we have a full
line-up of products and the capability around car kits and some of the other things that are
necessary for customers that live out in the regions or the bush to feel comfortable moving over, I
think we will see a lot more movement when we report results at the end of this fiscal year.
Q: On that point, in terms of the January 2008 close-out of the CDMA network, will you look at a
trade-off between shutting that down definitively in January 2008 or if you have not migrated
enough subscribers will you leave the network open for longer?
MR TRUJILLO: We will migrate the subscriber. I seriously am not overly concerned. Obviously I am
concerned about everything we do every day. But we have a plan, we think this makes sense for
customers and we will do things in a customer friendly way as we move over the next year.
Q: You touched on the competitive environment in metro for the business divisions. In terms of
margin performance are you seeing pricing pressure continue to erode margins?
MR TRUJILLO: Tim, we are seeing pricing pressure everywhere. The question is: Does it erode margins
or not? It depends on where we take out costs, how cost effectively we can manage. As you saw in
terms of our period to period overall results, we are improving our underlying margins.
Not seeing any more people standing in line in Sydney, and none here in Melbourne, I will declare
the meeting closed. Thank you very much.
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28 February 2007
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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 3Y Change in Directors interest Notice
In
accordance with the listing rules, I attach an announcement for release to the market.
The change to the Directors indirect holdings in Telstra Growthshare Pty Ltd as trustee for the
Telstra DirectShare Plan represent an allocation of Telstra Shares to Directors on 23 February
2007 under the DirectShare Plan.
Yours sincerely
Douglas Gration
Company Secretary
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Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556 |
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 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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GEOFFREY COUSINS |
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Date of last notice
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17 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
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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|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY |
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|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
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Date of change |
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23 FEBRUARY 2007 |
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No. of securities held prior to change |
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DIRECT NIL |
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INDIRECT NIL |
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Class |
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ORDINARY |
|
|
|
Number acquired |
|
1,747 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
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Value/Consideration |
|
$7,827 |
Note: If consideration is non-cash,
provide details and estimated valuation |
|
|
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No. of securities held after change |
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DIRECT NIL |
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INDIRECT 1,747 (FPO) |
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Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend reinvestment
plan, participation in buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 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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BELINDA HUTCHlNSON |
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Date of last notice
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24 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
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Date of change |
|
23 FEBRUARY 2007 |
|
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|
No. of securities held prior to change |
|
DIRECT 38,912 (FPO) |
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INDIRECT 40,426 (FPO) & 155,000 (IR) |
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Class |
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ORDINARY |
|
|
|
Number acquired |
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4,095 (FPO) |
|
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Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$18,346 |
Note: If consideration is non-cash,
provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change |
|
DIRECT 38,912 (FPO) |
|
|
INDIRECT 44,521 (FPO) & 155,000 (IR) |
|
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|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES UNDER |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend
reinvestment plan, participation in
buy-back |
|
THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 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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CATHERINE LIVINGSTONE |
|
|
|
Date of last notice
|
|
24 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY. |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
|
|
Date of change |
|
23 FEBRUARY 2007 |
|
|
|
No. of securities held prior to change |
|
DIRECT 11,637 (FPO) &10,000 (IR) |
|
|
INDIRECT 27,800 (FPO) & 10,000 (IR) |
|
|
|
Class |
|
ORDINARY |
|
|
|
Number acquired |
|
4,256 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$19,067 |
Note: If consideration is non-cash,
provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change |
|
DIRECT 11,637 (FPO) &10,000 (IR) |
|
|
INDIRECT 32,056 (FPO) & 10,000 (IR) |
|
|
|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend
reinvestment plan, participation in
buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
CHARLES MACEK |
|
|
|
Date of last notice
|
|
24 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
|
|
Date of change |
|
23 FEBRUARY 2007 |
|
|
|
No. of securities held prior to change |
|
DIRECT NIL |
|
|
INDIRECT 53,704 (FPO) & 50,000 (IR) |
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|
Class |
|
ORDINARY |
|
|
|
Number acquired |
|
4,578 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$20,509 |
Note: If consideration is non-cash,
provide details and estimated
valuation |
|
|
|
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|
No. of securities held after change |
|
DIRECT NIL |
|
|
INDIRECT 58,282 (FPO) & 50,000 (IR) |
|
|
|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend
reinvestment plan, participation in
buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
DONALD MCGAUCHlE |
|
|
|
Date of last notice
|
|
24 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY. |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
|
|
Date of change |
|
23 FEBRUARY 2007 |
|
|
|
No. of securities held prior to change |
|
DIRECT 1,866 (FPO) & 27,800 (IR) |
|
|
INDIRECT 68,278 (FPO) & 3,000 (IR) |
|
|
|
Class |
|
ORDINARY |
|
|
|
Number acquired |
|
11,388 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$51,018 |
Note: If consideration is non-cash,
provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change |
|
DIRECT 1,866 (FPO) & 27,800 (IR) |
|
|
INDIRECT 79,666 (FPO) & 3,000 (IR) |
|
|
|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend
reinvestment plan, participation in
buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent
for the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
JOHN STOCKER |
|
|
|
Date of last notice
|
|
24 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
|
|
Date of change |
|
23 FEBRUARY 2007 |
|
|
|
No. of securities held prior to change |
|
DIRECT 2,953 (FPO) |
|
|
INDIRECT 99,985 (FPO) & 24,150 (IR) |
|
|
|
Class |
|
ORDINARY |
|
|
|
Number acquired |
|
5,061 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$22,673 |
Note: If consideration is non-cash,
provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change |
|
DIRECT 2,953 (FPO) |
|
|
INDIRECT 105,046 (FPO) & 24,150 (IR) |
|
|
|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend
reinvestment plan, participation in
buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent
for the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
PETER WILLCOX |
|
|
|
Date of last notice
|
|
24 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN |
|
|
|
Date of change |
|
23 FEBRUARY 2007 |
|
|
|
No. of securities held prior to change |
|
DIRECT NIL |
|
|
INDIRECT 31,897 (FPO) & 12,500 (IR) |
|
|
|
Class |
|
ORDINARY |
|
|
|
Number acquired |
|
3,626 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$16,244 |
Note: If consideration is non-cash,
provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change |
|
DIRECT NIL |
|
|
INDIRECT 35,523 (FPO) & 12,500 (IR) |
|
|
|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend
reinvestment plan, participation in
buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of 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.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
JOHN ZEGLIS |
|
|
|
Date of last notice
|
|
10 NOVEMBER 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest |
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest |
|
ALLOCATION OF SHARES TO TELSTRA |
(including registered holder) |
|
GROWTHSHARE PTY LIMITED ATF |
Note: Provide details of the
circumstances giving rise to the
relevant interest. |
|
TELSTRA DIRECTSHARE PLAN. |
|
|
|
Date of change |
|
23 FEBRUARY 2007 |
|
|
|
No. of securities held prior to change |
|
DIRECT 16,500 (FPO) |
|
|
INDIRECT 1,897 (FPO) |
|
|
|
Class |
|
ORDINARY |
|
|
|
Number acquired |
|
3,458 (FPO) |
|
|
|
Number disposed |
|
NIL |
|
|
|
Value/Consideration |
|
$15,492 |
Note: If consideration is non-cash,
provide details and estimated valuation |
|
|
|
|
|
No. of securities held after change |
|
DIRECT 16,500 (FPO) |
|
|
INDIRECT 5,355 (FPO) |
|
|
|
Nature of change |
|
ALLOCATION OF TELSTRA SHARES |
Example: on-market trade, off-market
trade, exercise of options, issue of
securities under dividend reinvestment
plan, participation in buy-back |
|
UNDER THE DIRECTSHARE PLAN. |
Part 2 Change of directors interests in contracts
NIL
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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|
|
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/s/ Douglas Gration
Name: Douglas Gration
|
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|
|
Title: Company Secretary |
|
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|
Date: 28 February 2007 |
|
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