5 March 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 |
Telstra Corporation Limited Citigroup Australia & New Zealand 4th AnnualInvestment Conference London March 2007 Sol Trujillo Chief Executive Officer |
Disclaimer 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 Tel stra, 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 techno logical changes taking place in the telecommunications industry; and the continuing growth in the da ta, 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 ba sed 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. |
1H07 Financial results (reported) $ billions (except margins & DPS)3.6% 1H061H07% Sales Revenue11.411.6S2.0Sales Operating Expenses6.36.9S9.9Revenue* EBITDA5.34.9T7.0*normalised for Melbourne Yellow book EBITDA Margin (%)46.342.3T4.0 EBIT3.52.9T15.7 1.7% NPAT 12.11.7T20.1 Cash Operating Capex2.02.5S22.8 EBITDA Free Cash Flow2.00.9T55.9Margin** Ordinary DPS (cents) 214.014.0-**1H07 v 2H06 (normalised for Melbourne Yellow book andtransformation costs) (1) Before minority interests (2) 1H06 excludes 6 cent per share special dividend Beat Earnings Guidance ...Earnings pivot point reached whilst continuing to invest3 |
Sales Revenue Drivers: $11.6b2%+$225m Drivers of Actual 1H07 1H07 Movement($m)Revenue Growth1H07($m)Growth % 296Total mobiles2,79811.8 150 Mobile services2,4416.5 146 Mobile handsets35769.2 166Retail broadband49750.2 70Wholesale broadband27933.5 41IP access 19327.0 (47)Specialised data404(10.4) (117) +57*Sensis885(11.7) (216)PSTN products3,615(5.6) * Normalised for deferral of Melbourne Yellow book +7% Mix change continues...growing in key markets4 |
Winning where it matters 1.2m 3G SIOs added more than 700,000 1H07 MobilesMarket leader at end of January 4 months ahead of target 3G ARPU uplift of $20 maintained Next G driving content and applications non SMS data ARPU +74% Outgrowing competitors to increase market share by 1% to 45% BroadbandBeating nearest competitor 3:1 Over 200,000 retail wireless broadband subscribers Total line loss of 0.8% since June best in class PSTNResidential lines held at June levels best in 5 years Positive residential churn and market share gain 1 st time since comp Online usage up 21% SensisShare of new media revenue increasing from 10% to 15% SouFun triple digit percentage growth FOXTEL subscribers up 10% FoxtelFOXTEL subscriber revenue growth of 15% 100% digital TV provider cable analogue service switched off 1 Feb Sustained growth in key platforms5 |
Telstras Competitive Advantage Penetration of base: Next GTM v 3G 2100 3G 2100 9FOXTEL by Mobile: 7% 9 FOXTEL by Mobile: 0.8% 4 new channels recently 9Mobile Music: 24% 9 Mobile Music: 5% launched driving an 9Video Streams: 53%9 Video Streams: 11%increase in streaming minutes and customer take up Next GTM v 3G 2100 Usage (Oct Dec) Most popular channels are 210011.3XFox 8, Comedy Channel and Next GTMDisney Channel 7.4XIncrease in channel content: Simple Life & Jerry Springer (FOX8); MAD TV 3.3X(Comedy Channel) 2.1X 1.0X1.0X1.0X1.0X MusicGamesVideo Video Calls Streams Changing the game in customer behaviour...leading the market6 |
Transformation driving efficiency and cost take-out WirelessWireline IT Next GTM peak network download IP/MPLS Core and Multi Service Edge On track speeds increased to 14.4Mbps- turn up nearing completion 1st release at the end of calendar Additional 400 base stations being Migrations of Internet backbone IP 2007 rolled out in FY07traffic (Telstra Internet Direct) to 2nd release in late calendar 2008 Deeper coverage, Core completed early Feb 07Delivered important capabilities More capacityMigrations of Routed Data Network Integrated desktop >1800 more Next G base stations (RDN) underway Telstra Service Delivery Platform compared to CDMAEthernet Aggregation and Transport Telstra Retail Integrated Moving to one consolidated networkdeployments on track to carry traffic Campaign Systems (TRICS) 200km range extension completed at by end of June 07 Enterprise Program Management selected sitesIP DSLAM ports on track to meet full Network Planning Trial of home based wireless year deployment target of 8 87k broadband serviceports Organisation redesign Significant expense Operational improvement reduction on IT transformation reaching Network fixes Transformation MilestonesPlatform rationalisation FY06 FY07 FY08 FY09 FY10 Increase in momentum as key milestones achieved7 |
Transformation driving service improvements and productivity Enterprise & Getting thereon time... Getting it rightfirst time...GovernmentADSL HeldordersBigPond cycletimes Service Levels Over 90% Best results on Over 80% reduction Over 96% of the timesince Sep 2005Down 19% of the time record Vehicles with GPSInvesting inour peopleIncentive BasedCompensation Productivity Over 6,900 vehiclesOver 6,400 More than 80% - Higher productivity participantsfront of house and vehicle visibility Improved front-of Improved staff house and field performance and more efficientschedulingworkforce skills One factory increasing service levels, quality, efficiency and delivering 8 benefits...headcount down 4,596 since June 2005 |
Addressing Key Market Misperceptions Perception Facts PSTNSlowed PSTN revenue decline to 5.6% Churn trend improving with positive PSTN churn from FY06 is only the beginning of a long period where competitors since October 06 fixed line will decline at high single digit rates Subscription pricing positi ve impact (4.2% of base) Telstras change in strategy to focus more on its Maintain strong focus on PS TN while also aggressively 850MHz mobile network over its fixed line network pushing Next G TM is a concernIntegration continues to benefit PSTN NEXT GTM NETWORKNetwork operating very well, all material technical Next GTM could deliver significant benefits over time. issues resolved However, this is dependent on resolution of launch-Now added 415,000 Next G TM subscribers since launch related technical issues such as handset availabilitywith current handset range Telstra will have a lower range of more expensive 13 Next G TM handsets and 13 data devices to be handsets than its competitors given the limited available by March 07. On average Next G TM handsets deployment of 3G at 850MHz globallycheaper than 2100 handsets Other carriers are expected to launch HSDPA Next G TM peak net work speed increased to 14.4Mbps -shortly, offering similar speeds to Telstra next best is still only 3.6M bps on less th an 1% of the potentially eliminating any competitive advantagecoverage area PROPERTY RATIONALISATION Approximately 200 exchange buildings may fit criteria Potential to close and sell between 3,000-5,000 for potential sale to be cons idered on a case by case exchanges as they wont be needed under the new basis . Any benefits mate rialising 2010 and beyond network architecture Disconnect between perceptions and strategy9 |
FY2007 Guidance Guidance on Reported Numbers RevenueGrowth of +2.5% to +3.0% Depreciation &D & A similar to FY06 incl accelerated AmortisationD & A of $300m to $350m EBITGrowth in range of +3% to +5% EBIT (2H07)Growth in range of +37% to +40% Cash operating Range $5.4bn to $5.7bn due to transformation capex DividendIntention to pay 14c final dividend Top line momentum continues...revenue and earnings guidance increased 10 |
Long Term Management Objectives unchanged* Guidance on Reported Numbers (base year FY05) Revenue 2.0% to 2.5% pa to FY10 Growth New product In excess of 30% sales revenue FY10 revenue Cost growth2.0% to 3.0%pa to FY10 EBITDA ($)2.0% to 2.5%pa growth to FY10 EBITDA 46% to 48%pa by FY10 margin WorkforceDown 12,000 by FY10 Capex10% to 12% of revenue by FY10 Free cash flow$6b to $7b by FY10 * Based on no FTTN and ULL Band 2 price of $17.70 p/m with 100% flow on to 11 retail prices and no further adverse regulatory outcomes |
Regulation Key Issues StatusRecent developments Telstra appealed ACCCs rejection of Telstras $30 ULLaverage undertaking to the ACT decision expected early 2007 ACCC issued revised interim determinations in Dec 06 Telstra has lodged a containing Band 2 price of constitutional $17.70 p/m challenge in High Court to protect shareholder interest Interim determination issued in two LSS arbitrations at the rate LSSof $3.20/month. Final ACCC pricing determination expected in first half of 2007 High Court challenge lodged12 |
Summary 13 months into a 5 year transformation plan On or ahead of plan on all fronts Winning where it matters Broadband, 3G, Online, Integration Creating new opportunities Evolution to MediaComms Improving operational performance Churn, 3G/Broadband Market share, Productivity Momentum continues across all business units13 |
7 March 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 |
| media release; | ||
| the Supplement dated 6 March 2007 to the Debt Issuance Program Prospectus dated 12 October 2006, which was lodged by Telstra and approved for listing on the London Stock Exchange by the United Kingdom Listing Authority on 6 March 2007 (London time); and | ||
| Fixed Income Investor Briefing presentation pack. |
Media Release | ||
7 March 2007 | 039/2007 |
Page 2
| the Australian Telecommunications Commission, trading as Telecom Australia, in July 1975; | ||
| the Australian Telecommunications Corporation, trading as Telecom Australia, in January 1989; | ||
| the Australian and Overseas Telecommunications Corporation Limited in February 1992; | ||
| Telstra Corporation Limited in April 1993, trading internationally as Telstra; and | ||
| trading domestically as Telstra in 1995. |
Year of initial | Year last | |||||||||||
Name | Age | Position | appointment | re-elected (1) | ||||||||
Donald G McGauchie |
57 | Chairman | 1998 | 2005 | ||||||||
Solomon D Trujillo(2) |
55 | Chief Executive Officer | 2005 | 2005 | ||||||||
Geoffrey Cousins |
64 | Director | 2006 | | ||||||||
Belinda J Hutchinson |
53 | Director | 2001 | 2004 | ||||||||
Catherine B Livingstone |
51 | Director | 2000 | 2005 | ||||||||
Charles Macek |
59 | Director | 2001 | 2006 | ||||||||
John W Stocker |
61 | Director | 1996 | 2006 | ||||||||
Peter J Willcox |
61 | Director | 2006 | | ||||||||
John D Zeglis |
59 | Director | 2006 | |
(1) | Other than the CEO, one third of directors are subject to re-election by rotation each year. | |
(2) | Sol Trujillo was appointed CEO on 1 July 2005. |
Page 3
Number of shares or instalment receipts held | ||||||||||||
Direct | Indirect | |||||||||||
interest | interest(1) | Total | ||||||||||
Donald G McGauchie |
29,666 | 82,666 | 112,332 | |||||||||
Sol Trujillo |
250,000 | | 250,000 | |||||||||
Geoffrey Cousins |
| 1,747 | 1,747 | |||||||||
Belinda J Hutchinson |
38,912 | 199,521 | 238,433 | |||||||||
Catherine B Livingstone |
21,637 | 42,056 | 63,693 | |||||||||
Charles Macek |
| 108,282 | 108,282 | |||||||||
John W Stocker |
2,953 | 129,196 | 132,149 | |||||||||
Peter J Willcox |
| 48,023 | 48,023 | |||||||||
John D Zeglis |
16,500 | 5,355 | 21,855 |
(1) | Shares in which the director does not have a relevant interest, including shares held by director related entities, are excluded from indirect interests. |
Number of shares held | ||||||||||||
Direct | Indirect | |||||||||||
interest | interest | Total | ||||||||||
Bruce Akhurst |
4,880 | 17,000 | 21,880 | |||||||||
Kate McKenzie |
| | | |||||||||
David Moffatt |
364,722 | 364,722 | ||||||||||
Deena Shiff |
5,680 | 5,680 | ||||||||||
John Stanhope |
121,674 | 121,674 | ||||||||||
David Thodey |
173,604 | 800 | 174,404 | |||||||||
Greg Winn |
| | |
Page 4
Page 5
Page 6
Page 7
Mallesons Stephen Jaques
|
Mallesons Stephen Jaques | |
Level 50 | 6th Floor | |
Bourke Place | Alder Castle | |
600 Bourke Street | 10 Noble Street | |
Melbourne Victoria 3000 | London EC2V 7JX | |
Australia | United Kingdom |
to the Arranger | to the Issuer | to the Issuer as to Canadian | ||
as to English law | as to New Zealand law | law | ||
Clifford Chance LLP | Bell Gully | Stikeman Elliott LLP | ||
10 Upper Bank Street | Vero Centre | Dauntsey House | ||
London E14 5JJ | 48 Shortland Street | 4B Fredericks Place | ||
United Kingdom | Auckland | London EC2R 8AB | ||
New Zealand | United Kingdom |
Page 8
Telstra Corporation Limited Fixed Income Investor Briefing March 2007 |
Disclaimer 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 Tel stra, 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 g eneral 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 techno logical changes taking place in the telecommunications industry; and the continuing growth in the d ata, 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 bas ed 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 availabl e information unless otherwise indicated. |
Contents Telstra- the company4 Financial- overview12 Financials- latest 6 months21 Regulation24 Debt27 Summary33 |
Telstra who are we? Australias leading telecommunications and information services company 13th largest telco globally (Forbes 2006) Full service, fully integrated operating model Telstra has in Australia around: Access 9m lines Mobiles 9m customers Online 4.3m internet customers PayTV 1.2m customers in Foxtel (50% owned by Telstra) International presence in New Zealand, Hong Kong and regional networks and leading real estate website in mainland China Continuous, rigorous, public, political and regulatory scrutiny Telstra- a well established, world class telco |
Ownership Structure Pre- 24 November 2006 Public & Institutions Govt of Australia 48% 52%Australian International Retail 23% Inst.17% Inst.8% Now Govt of Australia Public & Institutions Future Fund 17% arms length from government 83% 2 year Future Fund lock-up (from November 2006)Market capitalisation $A53b (Share price = $A4.25 approx.) Foreign ownership limit=< 35% total (=<5% individual)Shareholders = 1.6m Size, ownership constraints and regulatory issues are challenges to change of control |
Diverse revenue streams ( YE June 06) Solutions Intercarrier Mgmt Offshore Services4%8% Data & Internet1%Other* 16%6% Inbound Calling ProductsBasic 2%Access 15% Local Calls Mobiles4% 22%Long Fixed to DistancePSTN Sensis (Advert. / MobileValue Directories)4% 7%Added 8%Services Fixed Internat. 1% Interconn.Direct 1%1% *Other includes payphones & customer premise equipment Strength and diversity with trend from voice to data products6 |
We are undergoing transformation Focusing on customersUsing market based management (offerings tailored to customer needs and lifestyles) Producing customer Create world of 1 touch, 1 click, 1 screen, 1 button, friendly products1 step solutions- simple, easy and valued Building next generationConstructing state-of-the-art IP networks wireline network Deploying national wireless Launched Next G netwo rk, Australias only broadband networknational wireless broadband 3G network Simplifying systemsReducing number and complexities of our systems Transforming cultureInvesting in employees to better serve customers and create value for shareholders A 5 year transformation process is underway which commenced November 057 |
Vision is true differentiation Best delivery Superior content Deepest customer networksand servicesunderstanding Superior NEXT G 3G networkFoxtel, Sensis, BigPond, Richest needs-based customer Trading Post, Soufunsegmentation Robust IP / MPLS core Unique ability to access, Largest customer base Broadest fixed line build, acquire and monetise reach and QoS Broadest channels Differentiated multi-Highest brand awareness platform capability Emerging competitive culture Market based management Integrated company delivering a 1 click, 1 touch, 1 screen, 1 button user experience8 |
Telstras Transformation is on track and gaining momentum On Track WirelessDeployment of national 3G98% population coverage9 (850 Mhz) networkBetter in-building coverage network data speeds 1.1Mbps at launch, increased to 14Mbps in 2007 Reduced network complexity WirelineDeployment of IP/MPLS Core, Far greater capacity and speed9 Multiservice Edge and IP-DSLAMsReduced operating costs MarketReduced time to market9 BasedSuperior understanding of customer Focused and effective Mgmtgo-to-market Transformation delivers cost effective Reduced cost of ownership9 IT Systems processes .... to deliver superior operating leverage moving forward9 |
Evolving to new style telco Old PSTN TelcoNew Digital Telco Physical elementsSoftware defined Products delivered Services delivered manuallyelectronically Limited leverageLow marginal cost Carriage based products Valueadd products and and servicesservices Effectively managing transition10 |
SEC deregistration SEC proposed new rules (December 2006) allowing foreign companies to deregister and delist provided: average US trading volume 5% of home exchange turnover (equity) -U.S resident holders 300 (debt) Telstra satisfies above rules and will deregister at earliest opportunit y once rules final ised (final rules expected by end-March 2007) Following deregistration will no longer file Form 20F (USGAAP) annual reports with SEC or comply with NYSE listing rules Reporting obligations will continue to be determined by Australian Corporations Act and Australian Stock Exchange (ASX) continuous disclosure listing rules Annual Debt Prospectus update lodged with UKLA Robust reporting and disclosures processes maintained11 |
Financials- overview |
5 year financial summary 5 years ended 30 June A$b20022003200420052006 Total revenue20.621.021.222.523.1 EBITDA9.59.210.210.59.6 EBIT6.25.76.66.95.5 Net Profit (after-tax)3.73.44.14.33.2 Shareholders equity14.115.415.413.712.8 Operating cashflow7.98.08.29.08.6 Return an average equity (%)26.823.226.830.624.2 Free cashflow (after capex)3.84.64.25.24.6 Operating capex3.12.43.43.54.3 Gross debt13.712.311.913.313.7 Net debt12.311.011.211.813.1 Steady results in period of industry turbulence and revision |
Sales Drivers- FY 2006 MovementDrivers of Growth Actual $m% $mRevenue Growth 284Mobiles4,9726.1 267Retail Broadband73058 200Wholesale Broadband46177 126Sensis (Adv & Directories)1,7117.9 98Internet Direct & IP Solutions42829 58Solutions Management9896.2 (82)Specialised Data884(8.5) (83)ISDN807(9.3) (540)PSTN Voice7,478(6.7) Delivering on key revenue targets |
Retail Broadband- FY 2006 RevenuesRevenue growth of 58% Retail broadband market share increased to 44% Retail broadband SIOs increased by 72% Wireless broadband SIOs grew 424% $730mCompetition driving ARPU down across the market +58% $463m Customers FY05FY0644% 43% 42% 41% Retail Broadband ARPU per month ($)41% Retail market share 80 1,476k 1,188k 60856k 623k 40427k 20FY04 1H05 FY051H06FY06 Retail broadband subscribers Includes retail broadband, Mobile 0including wireless broadbandbroadband and Internet Direct (Retail 1H04 2H04 1H05 2H05 1H06 2H06ADSL) customers Market leading churn at low 1.3% per month15 |
Mobiles- FY 2006 Mobiles RevenueMobiles ARPU per month ($) %FY ARPUs $4,688m+6.1$4,972m 60Postpaid Mobile Handsets $381m+23 %$467m Blended 40 $4,307mMobile Services1$4,505m20 Prepaid +4.6 % Data 0 FY05 FY061H04 2H04 1H05 2H05 1H06 2H06 Mobile data revenue growth of 26% Postpaid base % SMS messages exceeded 3 billion, up 32% Non SMS data revenue up 121% 20052006% 3G subscribers grew 497% in 2H Telstra57%58%+13G average spend 37% more than 2G Capped plans 7.4% of postpaid mobile base Optus47%44%-3 SACs (blended) increased 14% to $137 Vodafone29%27%-2 Strong 3G take up16 |
Sensis- FY 2006 Revenue12.7m Australians use a Sensis service more .% 9$1,826mthan 10 times each per month (1) $1,708m+6 $209mAccounts for almost 14% of the Australian $177mEmerging Business $143mmain media advertising market (2) $154mClassifieds Online usage up 27% to 7.4 million $269mWhite Pages®$302m -Print & Onlineunique browsers (3) Over 60 million Whereis® maps downloaded each month $1,108mYellow Pages®$1,172mHigh customer satisfac tion with sales reps. -Print & Online Underlying EBIT $932m FY05 FY06$845m Strong online revenue growth 10.2% Yellow Pages online 54% to $124m Reported EBIT growth of 7.7% to $910m Directory margins improving, especially online Delivered on full year guidance FY05 FY06 (1) Roy Morgan Single Source Australia, April 2005 March 2006, base Australians 14+ (2) Sensis data and CEASA Main Media Report, 2005 (3) Nielsen / NetRatings Site Census, June quarter 2006 v 2005 Strong 2H revenue growth of 9% |
PSTN- FY 2006 8,100PSTN Revenue & SIO $8,018m ($44m)-6.7% ($261m) 7,900 10.2m ($100m) 7,700($33m) 10.1m ($75m) ($4m) ($23m)$4,132m 7,500$7,478m$3,886m $3,818m10.0m $3,660m 7,300 1H052H051H06 2H06 7,100 Basic LocalFixed toRevenue SIO FY05 Access CallsSTD IDMobileVAS Terminating FY06 Revenue decline slowed in 2H to 5.8% v 1H 7.6%PSTN Revenue Growth Broadband migration causing loss of 2nd line2% 0% 1H04 2H04 1H05 2H05 1H06 2H06 Capped plans pushing fixed to mobile substitution(2%) (4%) Competition forcing yields down(6%) (8%) Churn metrics improved in 2H Subscription pricing launched in April Innovative pricing helping to slow PSTN decline |
Long Term Management Objectives * (issued February 2007) Guidance on Reported Numbers Revenue 2.0% to 2.5% pa to FY10 Growth New product In excess of 30% sales revenue FY10 revenue Cost growth2.0% to 3.0%pa to FY10 EBITDA ($)2.0% to 2.5%pa growth to FY10 EBITDA 46% to 48%pa by FY10 margin WorkforceDown 12,000 by FY10 Capex10% to 12% of revenue by FY10 Free cash flow$6b to $7b by FY10 * Based on no FTTN and ULL Band 2 price of $17.70 p/m with 100% flow on to 19 retail prices and no further adverse regulatory outcomes |
Employee superannuation Defined benefit scheme in-place for some employees (Telstra has investment risk) Defined benefit scheme closed since July 1999 and obligations declining Accumulation scheme covers majority of employees and all new employees (employee has investment risk) Superannuation fund managed independently by Telstra Super Pty Ltd (not controlled by Telstra) Superannuation obligations are over-funded and Telstra has contrib ution holiday (asset/liability ratio = 115 % as at June 2006) No requirement to fund scheme until asset/liability ratio = 103 % Superannuation fund soundly managed with healthy surplus20 |
Financials- latest 6 months (to 31 December 2006) Released 15 February 2007 |
International New World HK$FY05FY06% SNZ$FY05FY06% SAU$1H07 Income6766932.5Income 22m Income 4,3084,83112.1 EBITDA1,2721,3909.3EBITDA1221241.6EBITDA9m EBIT725686(5.4)EBIT(19)(20)(5.3)%EBIT6m Shareholding76%Shareholding100%55% Shareholding CSL and New World merger completed on Net income up 2.5% March 2006Triple digit top line growth of 107% and Calling revenues declined due to strong 3 months NW results includedbottom line growth of retail competition 131% Merger synergies starting to be realisedStrong growth in business sector Integration on trackEvaluating strategic options given regulatory environment Leading mobile operator in Hong Kong CSL & New World merger completed- Soufun acquired August 2006 |
1H07 Financial Results (Reported) $b (except margins & DPS) 1H061H07%Guidance Sales Revenue11.411.6S2.0S2.5-3.0% (FY07) Operating Expenses6.36.9S9.9-EBITDA5.34.9T7.0-EBITDA Margin (%)46.342.3T4.0- EBIT3.52.9T15.7S 3.0-5.0% (FY07) T NPAT 12.11.7T20.1-17 to -20% (HY07) -Cash Operating Capex2.02.5S22.8S$5.4b to $5.7b (FY07) Free Cash Flow2.00.9T55.9-Ordinary DPS (cents) 214.014.0-aim to pay 14c final (1) Before minority interests (2) 1H06 excludes 6 cent per share special dividend Beat earnings guidance- earnings pivot point reached whilst continuing to invest23 |
Regulation |
Industry/Regulatory framework Ombudsman ConsumerCompetition TIO policypolicy Service qualityPrice CapsConduct regime USOAccess deficitAccess regime Other (eg free Investment Direct Access)impact ACMAACCC Technical regulationACIF ACCC = The Australian Competition and Consumer CommissionACIF = Australian Communications Industry Forum ACMA = Australian Communications and Media AuthorityTIO = Telecommunications Industry Ombudsman Australia- well established regulatory environment25 |
Regulation- Key Issues StatusRecent developments Telstra appealed ACCCs Unbundled rejection of Telstras $30 Local Loop average undertaking- decision (ULL)expected early 2007 ACCC issued revised interim determinations in Dec 06 Telstra has lodged a containing Band 2 price of constitutional $17.70 p/m challenge in High Court to protect shareholder interest Interim determination issued in Line Sharing two LSS arbitrations at the rate Service of $3.20/month (LSS) Final ACCC pricing determination expected in first half of 2007 High Court challenge lodged26 |
Debt |
Long term debt maturity profile (February 2007) A$b Long Term Debt Average Maturity (years) 3 Current4.3 Target3 Q6 2.5 2 1.5 1 0.5 0 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21Years Borrowing to lengthen maturity profile 28 |
06/07 funding overview Funding Requirements:A$ b Maturing long term debt0.4 Net internal cash flow2.1 Total2.5 Funding Sources Long term borrowings (proposed)1.6 Private Placements (completed)0.6 Increased short term borrowings0.3 Total2.5 Note: Approximate only. Are adjusted continually over year to reflect cash flows, capital investments, sales, etc. which are dynamic Return to debt markets following T3 in November 200629 |
Key debt parameters (30 June) A$bJune 20022003200420052006Target Zone (set mid-2005) Gross Debt13.712.211.813.313.8-Net Debt (1)12.310.911.111.813.1-Interest Cover (2)10.710.214.111.910.3 > 7 times Net Debt Ratio (%) (3)46.541.642.145.950.455-75% Debt Coverage Ratio (4)1.31.21.11.11.41.7-2.1% (1) After deducting cash & liquid financial investments from Gross Debt (2) Net interest cover based on EBITDA & includes capitalised interest (3) Net Debt/(Net Debt + SHF) (4) EBITDA/Net Debt Reflect financial strength and flexibility30 |
Telstra credit ratings Agency LongShortOutlook Standard & Poors AA1Negative MoodysA2P1Negative FitchA+F1Negative Negative outlook largely reflects regulatory and transformation risk31 |
Telco credit ratings (February 2007) Moodys Telstra AT&TVodafone SBCVerizon Comm. BellSouthBell KT Corp CorpCanada TCNZFTTELEF average TeliaSprint NTTSingTelDTBTKPNNextelQWestC&W Sonera Aa1Aa2Aa3A1A2A3 Baa1 Baa2 Baa3Ba1Ba3 Negative Outlook S&P Telstra Bell CanadaInvestmentNon investment Positive VerizonTeliagradegrade Sonera AT&T FT SBC DTBT Comm BellSouthTELEF Vodafone Corp KPNSprintQWestC&W NTTSingTelTCNZKT CorpNextel AA+ AAAA- A+AA-BBB+ BBB BBB-BB+BBBB- A mid range Telco credit32 |
Summary |
Investment highlights Full service and fully integrated telco- strong position & wide rang e of products & services Diversity- from an Australian investment Regulatory regime- well established competitive environment Strongest Australian-based franchise- No. 1 position in all domestic segments Proven record in highly competitive environment Strong cash flows Transformation Plan- progressing well and on-track Opportunity for quality investment offering diversity34 |
Telstra Treasury Website www.telstra.com.au/abouttelstra/investor/treasury/index.cfm |
9 March 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 |
Telstra Corporation Limited JB Were 3rd Annual Australasian Conference New York March 2007 Sol Trujillo Chief Executive Officer |
Disclaimer 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 Tel stra, 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 techno logical changes taking place in the telecommunications industry; and the continuing growth in the da ta, 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 ba sed 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. |
1H07 Financial results (reported) $ billions (except margins & DPS)3.6% 1H061H07% Sales Revenue11.411.6S2.0Sales Operating Expenses6.36.9S9.9Revenue* EBITDA5.34.9T7.0*normalised for Melbourne Yellow book EBITDA Margin (%)46.342.3T4.0 EBIT3.52.9T15.7 1.7% NPAT 12.11.7T20.1 Cash Operating Capex2.02.5S22.8 EBITDA Free Cash Flow2.00.9T55.9Margin** Ordinary DPS (cents) 214.014.0-**1H07 v 2H06 (normalised for Melbourne Yellow book andtransformation costs) (1) Before minority interests (2) 1H06 excludes 6 cent per share special dividend Beat Earnings Guidance ...Earnings pivot point reached whilst continuing to invest3 |
Sales Revenue Drivers: $11.6b2%+$225m Drivers of Actual 1H07 1H07 Movement($m)Revenue Growth1H07($m)Growth % 296Total mobiles2,79811.8 150 Mobile services2,4416.5 146 Mobile handsets35769.2 166Retail broadband49750.2 70Wholesale broadband27933.5 41IP access 19327.0 (47)Specialised data404(10.4) (117) +57*Sensis885(11.7) (216)PSTN products3,615(5.6) * Normalised for deferral of Melbourne Yellow book +7% Mix change continues...growing in key markets4 |
Winning where it matters 1.2m 3G SIOs added more than 700,000 1H07 MobilesMarket leader at end of January 4 months ahead of target 3G ARPU uplift of $20 maintained Next G driving content and applications non SMS data ARPU +74% Outgrowing competitors to increase market share by 1% to 45% BroadbandBeating nearest competitor 3:1 Over 200,000 retail wireless broadband subscribers Total line loss of 0.8% since June best in class PSTNResidential lines held at June levels best in 5 years Positive residential churn and market share gain 1 st time since comp Online usage up 21% SensisShare of new media revenue increasing from 10% to 15% SouFun triple digit percentage growth FOXTEL subscribers up 10% FoxtelFOXTEL subscriber revenue growth of 15% 100% digital TV provider cable analogue service switched off 1 Feb Sustained growth in key platforms5 |
Telstras Competitive Advantage Penetration of base: Next GTM v 3G 2100 3G 2100 9FOXTEL by Mobile: 7% 9 FOXTEL by Mobile: 0.8% 4 new channels recently 9Mobile Music: 24% 9 Mobile Music: 5% launched driving an 9Video Streams: 53%9 Video Streams: 11%increase in streaming minutes and customer take up Next GTM v 3G 2100 Usage (Oct Dec) Most popular channels are 210011.3XFox 8, Comedy Channel and Next GTMDisney Channel 7.4XIncrease in channel content: Simple Life & Jerry Springer (FOX8); MAD TV 3.3X(Comedy Channel) 2.1X 1.0X1.0X1.0X1.0X MusicGamesVideo Video Calls Streams Changing the game in customer behaviour...leading the market6 |
Transformation driving efficiency and cost take-out WirelessWireline IT Next GTM peak network download IP/MPLS Core and Multi Service Edge On track speeds increased to 14.4Mbps- turn up nearing completion 1st release at the end of calendar Additional 400 base stations being Migrations of Internet backbone IP 2007 rolled out in FY07traffic (Telstra Internet Direct) to 2nd release in late calendar 2008 Deeper coverage, Core completed early Feb 07Delivered important capabilities More capacityMigrations of Routed Data Network Integrated desktop >1800 more Next G base stations (RDN) underway Telstra Service Delivery Platform compared to CDMAEthernet Aggregation and Transport Telstra Retail Integrated Moving to one consolidated networkdeployments on track to carry traffic Campaign Systems (TRICS) 200km range extension completed at by end of June 07 Enterprise Program Management selected sitesIP DSLAM ports on track to meet full Network Planning Trial of home based wireless year deployment target of 8 87k broadband serviceports Organisation redesign Significant expense Operational improvement reduction on IT transformation reaching Network fixes Transformation MilestonesPlatform rationalisation FY06 FY07 FY08 FY09 FY10 Increase in momentum as key milestones achieved7 |
Transformation driving service improvements and productivity Enterprise & Getting thereon time... Getting it rightfirst time...GovernmentADSL HeldordersBigPond cycletimes Service Levels Over 90% Best results on Over 80% reduction Over 96% of the timesince Sep 2005Down 19% of the time record Vehicles with GPSInvesting inour peopleIncentive BasedCompensation Productivity Over 6,900 vehiclesOver 6,400 More than 80% - Higher productivity participantsfront of house and vehicle visibility Improved front-of Improved staff house and field performance and more efficientschedulingworkforce skills One factory increasing service levels, quality, efficiency and delivering 8 benefits...headcount down 4,596 since June 2005 |
Addressing Key Market Misperceptions Perception Facts PSTNSlowed PSTN revenue decline to 5.6% Churn trend improving with positive PSTN churn from FY06 is only the beginning of a long period where competitors since October 06 fixed line will decline at high single digit rates Subscription pricing positi ve impact (4.2% of base) Telstras change in strategy to focus more on its Maintain strong focus on PS TN while also aggressively 850MHz mobile network over its fixed line network pushing Next G TM is a concernIntegration continues to benefit PSTN NEXT GTM NETWORKNetwork operating very well, all material technical Next GTM could deliver significant benefits over time. issues resolved However, this is dependent on resolution of launch-Now added 415,000 Next G TM subscribers since launch related technical issues such as handset availabilitywith current handset range Telstra will have a lower range of more expensive 13 Next G TM handsets and 13 data devices to be handsets than its competitors given the limited available by March 07. On average Next G TM handsets deployment of 3G at 850MHz globallycheaper than 2100 handsets Other carriers are expected to launch HSDPA Next G TM peak net work speed increased to 14.4Mbps -shortly, offering similar speeds to Telstra next best is still only 3.6M bps on less th an 1% of the potentially eliminating any competitive advantagecoverage area PROPERTY RATIONALISATION Approximately 200 exchange buildings may fit criteria Potential to close and sell between 3,000-5,000 for potential sale to be cons idered on a case by case exchanges as they wont be needed under the new basis . Any benefits mate rialising 2010 and beyond network architecture Disconnect between perceptions and strategy9 |
FY2007 Guidance Guidance on Reported Numbers RevenueGrowth of +2.5% to +3.0% Depreciation &D & A similar to FY06 incl accelerated AmortisationD & A of $300m to $350m EBITGrowth in range of +3% to +5% EBIT (2H07)Growth in range of +37% to +40% Cash operating Range $5.4bn to $5.7bn due to transformation capex DividendIntention to pay 14c final dividend Top line momentum continues...revenue and earnings guidance increased 10 |
Long Term Management Objectives unchanged* Guidance on Reported Numbers (base year FY05) Revenue 2.0% to 2.5% pa to FY10 Growth New product In excess of 30% sales revenue FY10 revenue Cost growth2.0% to 3.0%pa to FY10 EBITDA ($)2.0% to 2.5%pa growth to FY10 EBITDA 46% to 48%pa by FY10 margin WorkforceDown 12,000 by FY10 Capex10% to 12% of revenue by FY10 Free cash flow$6b to $7b by FY10 * Based on no FTTN and ULL Band 2 price of $17.70 p/m with 100% flow on to 11 retail prices and no further adverse regulatory outcomes |
Regulation Key Issues StatusRecent developments Telstra appealed ACCCs rejection of Telstras $30 ULLaverage undertaking to the ACT decision expected early 2007 ACCC issued revised interim determinations in Dec 06 Telstra has lodged a containing Band 2 price of constitutional $17.70 p/m challenge in High Court to protect shareholder interest Interim determination issued in two LSS arbitrations at the rate LSSof $3.20/month. Final ACCC pricing determination expected in first half of 2007 High Court challenge lodged12 |
Summary 13 months into a 5 year transformation plan On or ahead of plan on all fronts Winning where it matters Broadband, 3G, Online, Integration Creating new opportunities Evolution to MediaComms Improving operational performance Churn, 3G/Broadband Market share, Productivity Momentum continues across all business units13 |
15 March 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 |
Media Release | ||
15 March 2007 | 050/2007 |
27 March 2007
|
Office of the Company Secretary | |
The Manager Company Announcements Office Australian Stock Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 |
Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA Telephone 03 9634 6400 Facsimile 03 9632 3215 |