Telstra Group Limited · ASX:TLS
Telstra — Investor Day (April 2012)
24 slides from Telstra's investor day presentation, Apr 19, 2012
Slide 1: The NBN Opportunity
THE NBN OPPORTUNITY DAVID THODEY CHIEF EXECUTIVE OFFICER TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 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 result
Slide 2: The NBN fits within our existing strategy
THE NBN FITS WITHIN OUR EXISTING STRATEGY 1. IMPROVE CUSTOMER SATISFACTION 2. RETAIN AND GROW CUSTOMER NUMBERS 3. SIMPLIFY THE BUSINESS TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 4. BUILD NEW GROWTH BUSINESSES 3 THE NBN ACCELERATES EXISTING TRENDS Move to an all Product data world bundling Demand for
Slide 3: Telstra is focused on being NBN ready
TELSTRA IS FOCUSED ON BEING NBN READY CUSTOMER TRANSITION NEW PRODUCTS AND PRICING SALES AND MARKETING ENGINEERING EXPERTISE TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 5 STRONG SHAREHOLDER PROTECTIONS LONG TERM CONTRACTUAL COMMITMENTS TERMINATION PAYMENT OF UP TO $500M GOVERNMENT PACKAGE & GOVERNMENT
Slide 4: Summary
SUMMARY NBN FITS WITHIN OUR EXISTING STRATEGY NBN ACCELERATES EXISTING TRENDS NBN CREATES NEW OPPORTUNITIES WE ARE READY TO COMPETE IN THIS MARKET TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 7 CAPITAL MANAGEMENT STRATEGY ANDREW PENN CHIEF FINANCIAL OFFICER TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 inv
Slide 5: Agenda / Capital management strategic framework
AGENDA 1. CAPITAL MANAGEMENT STRATEGY 2. CURRENT CAPITAL POSITION TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 9 CAPITAL MANAGEMENT STRATEGIC FRAMEWORK Fiscal Discipline 1. 2. 3. Maximising Maintaining Retain financial OBJECTIVES returns for financial strength flexibility shareholders 1. Maintain balan
Slide 6: Capital management objectives and principles
CAPITAL MANAGEMENT OBJECTIVES MAXIMISING RETURNS FOR SHAREHOLDERS MAINTAINING FINANCIAL STRENGTH RETAINING FINANCIAL FLEXIBILITY TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 11 CAPITAL MANAGEMENT PRINCIPLES Maintain balance sheet settings consistent with a single-A credit rating Ensure dividends remain
Slide 7: Telstra's dividend history and strong financial settings
STRONG FINANCIAL SETTINGS Financial Comfort Actual HY12 Parameters Zones Debt Servicing 1.5 – 1.9x 1.48x Gearing 50% to 70% 54.9% Interest Cover >7x 9.3x TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 13 TELSTRA’S DIVIDEND HISTORY (CPS) 0.12 0.16 0.06 0.03 $17 billion returned in last 5 0.26 0.28 0.28 0.
Slide 8: Investment guidelines and defining excess cash
INVESTMENT GUIDELINES 14% CAPEX/SALES RE-INVEST IN ORGANIC CORE Subject to rate of implementation of NBN INVEST EPS accretive in year 2 EXPANSION INORGANIC ROI above WACC by year 3 TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 PORTFOLIO MANAGEMENT More accretive than buy- back of comparable size 15 DEFI
Slide 9: Financial impact of the NBN agreements
FINANCIAL IMPACT OF THE NBN AGREEMENTS Illustrative FCF trend of Telstra fixed line business and NBN agreements* Approximate post-tax NPV of agreements ~$ 1.0bn ~$ 11.0bn Other payments ~$ 0.3bn ~$ 0.7bn under Commonwealth ~$ 5.0bn Agreements Free Cashflow Incremental cashflow for TUSMA services Inf
Slide 10: NBN deal - P&L and cashflow treatment
APPENDIX TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 NBN DEAL - P&L AND CASHFLOW TREATMENT DISCONNECTION & SALE OF COMMONWEALTH AGREEMENTS & OTHER INFRASTRUCTURE ACCESS LEAD-IN CONDUITS GOVT POLICY COMMITMENTS • ~$2bn NPV post tax at June 2010 including: Re-training ($100 million nominal value) • Rece
Slide 11: Agreements with NBN Co
THE NBN AGREEMENTS TONY WARREN GROUP MANAGING DIRECTOR CORPORATE AFFAIRS AGREEMENTS WITH NBN CO IMPLEMENTATION & INTERPRETATION SUBSCRIBER DEED AGREEMENT INFRASTRUCTURE SERVICES INFRASTRUCTURE Deals with the AGREEMENT SERVICES ACCESS DEED Sets out the disconnection of AGREEMENT Conditions Precedent
Slide 12: Agreements with the Commonwealth
AGREEMENTS WITH THE COMMONWEALTH TUSMA RETRAINING INFORMATION FUND DEED CAMPAIGN AND Sets out the terms MIGRATION DEED Sets out the COMMONWEALTH on which Telstra will arrangements Sets out the key residual GUARANTEE perform, and be under which the commitments and paid for payments to be met A guaran
Slide 13: A good deal for shareholders: regulatory stability and flexibility
A GOOD DEAL FOR SHAREHOLDERS A MORE STABLE REGULATORY ENVIRONMENT TUSMA Structural Separation REGULATORY STABILITY HFC/FOXTEL divestiture Spectrum Bar avoided avoided 25 A GOOD DEAL FOR SHAREHOLDERS GREATER STRATEGIC FLEXIBILITY Strong customer Economic scale and relationships geographic reach STRAT
Slide 14: Strong shareholder protections
A GOOD DEAL FOR SHAREHOLDERS STRONG SHAREHOLDER PROTECTIONS Long term contractual Rollout termination payment commitments SHAREHOLDER PROTECTIONS Government package Natural hedge 27 FOUNDATION FOR FUTURE ENGAGEMENT CONSTRUCTIVE APPROACH TO POLICY DEVELOPMENT PROVEN ABILITY TO NEGOTIATE WORK WITH THE
Slide 15: The retail opportunity: changing the conversation
THE RETAIL OPPORTUNITY GORDON BALLANTYNE CHIEF CUSTOMER OFFICER TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4 CHANGING THE CONVERSATION TELSTRA IN A BROADBAND IP ENVIRONMENT • Rollout is gaining scale with 450k households across 60+ local markets ready by July 2013* • Awareness of the NBN is growing. Co
Slide 16: Our ambition to deliver the best NBN experience
OUR AMBITION TO DELIVER THE BEST NBN EXPERIENCE Critical to being successful in the NBN customer migration: SIMPLIFYING OUR PRODUCTS TO IMPROVE USER EXPERIENCE AND TO DRIVE COST REDUCTION PRODUCT MIGRATION STRATEGIES ALIGNED WITH CUSTOMER NEEDS STREAMLINING END-TO-END PROCESSES CARS 2 © Disney/Pixar
Slide 17: Unlocking amazing for customers
UNLOCKING AMAZING FOR CUSTOMERS SIMPLE AND COMPELLING OFFERS • Value in our T-Bundles • Telstra Connected Home and Telstra Digital Business • Professional installation and in home/business set up CLEAR AND SIMPLE CUSTOMER COMMUNICATION • Helping customers prepare for the NBN • Allowing customers to
Slide 18: Unlocking amazing in Kiama
UNLOCKING AMAZING IN KIAMA 35 THE NBN RETAIL OPPORTUNITY DELIVER AN EASY TRANSITION SIMPLE AND COMPELLING OFFERS EDUCATE AND COMMUNICATE LOCAL SALES, SERVICE AND SUPPORT DELIVER OUTSTANDING CUSTOMER EXPERIENCE 36 investor.relations@team.telstra.com
Slide 19: The Wholesale Opportunity
37 THE WHOLESALE OPPORTUNITY STUART LEE GROUP MANAGING DIRECTOR TELSTRA WHOLESALE investor.relations@team.telstra.com
Slide 20: Today's focus: NBN is a game changer
TODAY’S FOCUS 1. NBN IS A GAME CHANGER 2. IMPLICATIONS FOR TELSTRA WHOLESALE 3. TELSTRA WHOLESALE’S STRATEGY 4. THE TELSTRA WHOLESALE APPROACH Telstra Wholesale 19 April 2012 The Wholesale Opportunity Page 39 1. NBN IS A GAME CHANGER PRICE EQUIVALENCE & TRANSPARENCY • New Rate Card for Regulated Ser
Slide 21: What does this mean in practical terms?
1. NBN IS A GAME CHANGER WHAT DOES THIS MEAN IN PRACTICAL TERMS? OPTION 1 OPTION 2 OPTION 3 ACCESS NBN CO VIA A WHOLESALER PICK AND CHOOSE BY REGION ACCESS NBN CO DIRECT • Focus on marketing, sales and • Unevenly dispersed end • NBN accreditation service customer base across different regions • Capa
Slide 22: Telstra Wholesale's strategy
2. IMPLICATIONS FOR TELSTRA WHOLESALE TRADITIONAL COPPER ACCESS REVENUES ARE IN DECLINE BUT NEW REVENUE OPPORTUNITIES ARE EMERGING NBN AS A FOUNDATION BACKHAUL CUSTOMER PRODUCTS BUNDLED CONTENT & 3G SOLUTIONS OTHER VAS Telstra Wholesale 19 April 2012 The Wholesale Opportunity Page 43 3. TELSTRA WHOL
Slide 23: The Telstra Wholesale approach and summary
4. THE TELSTRA WHOLESALE APPROACH • “OVERALL SATISFACTION” MEASURE FOR TW STAFF LISTENING TO OUR • YOY IMPROVEMENT SINCE 2009 CUSTOMERS • FY11/12 EXTENDED CUSTOMER FEEDBACK LOOPS • THIRD YEAR TRAINING IN CUSTOMER SERVICE COMMITMENT TO • FY11/12 FOUR SERVICE EXCELLENCE AWARDS SERVICE EXCELLENCE • FY1
Slide 24: Questions?
Questions? STUART LEE GROUP MANAGING DIRECTOR TELSTRA WHOLESALE Telstra Wholesale The Wholesale Opportunity Page 47 investor.relations@team.telstra.com