Slide 1: Full Year 2010 Financial Results – CEO/CFO Analyst briefing presentation
12 August 2010 Office of the Company Secretary For personal use only The Manager Level 41 242 Exhibition Street MELBOURNE VIC 3000 Company Announcements Office AUSTRALIA Australian Securities Exchange 4th Floor, 20 Bridge Street General Enquiries 08 8308 1721 SYDNEY NSW 2000 Facsimile 03 9632 3215 E
Slide 2: 2010 Full Year Results – Disclaimer
For personal use only 2010 FULL YEAR RESULTS 12 August 2010 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 s
Slide 3: $6.2 Billion Free Cashflow
For personal use only 2010 FULL YEAR RESULTS John Stanhope, CFO 12 August 2010 $6.2 BILLION FREE CASHFLOW 4 2
Slide 4: Reported Financial Results
REPORTED FINANCIAL RESULTS $ Billions (inc CSL impairment) FY09 FY10 % Growth Sales Revenue 25.37 24.81 -2.2 For personal use only FREE EBITDA 10.95 10.85 -0.9 CASHFLOW EBIT 6.56 6.50 -0.9 42.6% Attributable NPAT 4.07 3.88 -4.7 Accrued Capex 4.60 3.47 -24.5 Free Cash Flow 4.37 6.23 42.6 Ordinary DPS
Slide 5: Challenging Conditions at CSL New World in Hong Kong
CHALLENGING CONDITIONS AT CSL NEW WORLD IN HONG KONG Sales Revenue (HK$) For personal use only CHALLENGING MARKET CONDITIONS Improving economic conditions $5.7b expected in FY11 $168m impairment $1.0b $5.3b -7% $0.9b STRONG DATA & PREPAID GROWTH IN FY10 Data revenue +8% Prepaid revenue +18% $4.7b $4
Slide 6: Changing Telstra EBITDA Mix
CHANGING TELSTRA EBITDA MIX* For personal use only $27m -$22m ~$110m $11,015m -$168m ~$180m $10,948m ~-$290m $10,847m ~$100m FY09 PSTN Fixed Mobiles IP & Sensis CSL New Other FY10 CSL FY10 Broadband Data World ex CSL Impairment * Based on Telstra management estimates 9 PRODUCT REVENUE AND EBITDA MIX
Slide 7: Improving Performance in Second Half
IMPROVING PERFORMANCE IN SECOND HALF FIXED RETAIL BROADBAND IP ACCESS SENSIS For personal use only SIO Growth („000) Yellow™ and White® Pages Monthly Mobile Visits (m) Customer Value IP Telephony 1.6 Network 43 Comp. 12% 1.3 Services* 5.7pp IP Security 2% 11 0.7pp Managed WAN 41% 1.7pp -23 0.5 -30 I
Slide 8: PSTN – Drivers of Revenue Decline
PSTN – DRIVERS OF REVENUE DECLINE (FY10 v FY09, INDICATIVE) ULL -$100m Line Loss For personal use only -$292m Cancellations -$192m Local calls -$71m PSTN Usage National Long Distance -$504m -$188m -$51m F2M -$49m Interconnect IDD Material portion retained -$25m -$16m by Telstra through revenue subst
Slide 9: Operating Expenses Declined $653 Million
OPERATING EXPENSES DECLINED $653 MILLION Fixed vs Variable Costs* Variable Costs as % Sales ($m) For personal use only 15,000 21.8% 21.6% 10,000 5,000 21.0% 20.9% 0 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Fixed Costs Variable Costs * Excludes CSL Impairment 15 OPERATING EXPENSES UNDER CONTROL IN FY1
Slide 10: D&A, Interest and Tax
D & A, INTEREST AND TAX D&A FINANCE COSTS TAX For personal use only Average Depreciation & borrowing Income tax Amortisation costs 6.4% expense 1.0% -1.0% 70bps Adjusted D&A Net Debt down 11% to Franking account balance of (ex KAZ, FX) -0.3% $13.9 billion -$138m at 30 June Trading Post Masthead Fair
Slide 11: $6 Billion Free Cash Flow Target Exceeded
$6 BILLION FREE CASH FLOW TARGET EXCEEDED For personal use only $1.3b -$0.2b $6.2b $0.2b -$0.2b $0.7b $4.4b $3.9b $2.9b FY07 FY08 FY09 CF from One-off Pension Capex Other non- Other FY10 operations Tax top-up recurring 19 We are at an inflection point... 20 10
Slide 12: Guidance
GUIDANCE* For personal use only Measure FY11 Guidance Sales Revenue Flattish EBITDA High single digit percentage decline Capex 14% of sales Free cashflow $4.5 - $5 billion Measure 2010 Base Sales Revenue $24,813m EBITDA $10,847m *Guidance assumes wholesale product price stability, no additional impa
Slide 13: Product Profitability and Market Share
PRODUCT PROFITABILITY* For personal use only EBITDA MARGIN FY08 FY09 FY10 Mobiles 30% 34% 35% Fixed Broadband 27% 36% 41% PSTN 61% 58% 59% IP & Data 55% 57% 62% Sensis 51% 52% 54% * Based on Telstra management estimates 23 MARKET SHARE* Revenue 2H08 1H09 2H09 1H10 2H10 Mobile 43% 43% 42% 42% 42% Fix
Slide 14: Retail and Consumer
RETAIL Revenue Growth (%) 2H09 1H10 2H10 FY10 For personal use only Sales Revenue 3.2 -0.1 0.7 0.3 Mobile services 8.3 4.8 7.5 6.1 Fixed (ex Internet) -3.5 -5.8 -8.1 -6.9 Fixed Internet 10.1 0.7 -1.4 -0.4 Operating Contribution Growth 3.5 -2.1 -2.0 -2.0 Operating Contribution Margin (%) 68.0 67.0 66
Slide 15: Business and Enterprise & Government
BUSINESS Revenue Growth (%) 2H09 1H10 2H10 FY10 For personal use only Sales Revenue 2.2 -0.4 2.3 0.9 Mobile services 7.7 2.6 11.4 6.9 Fixed (ex Internet) -3.8 -4.2 -5.2 -4.7 Fixed Internet 13.5 7.2 4.2 5.7 Operating Contribution Growth 4.5 -1.3 0.2 -0.6 Operating Contribution Margin (%) 73.6 71.8 72
Slide 16: Interest and Financial Parameters
INTEREST AND FINANCIAL PARAMETERS For personal use only INTEREST FINANCIAL PARAMETERS Actual Actual (adj for Target FY09 FY10 Change ($) Change (%) (inc IFRS) IFRS & other) Borrowing Costs $1,199m $1,059m -$140m -11.7% Debt 1.7 – 2.1x 1.28x 1.35x Servicing Other (incl IFRS adj) -$299m -$96m $203m n/
Slide 17: Fiscal 2010 Operating Performance Improved
For personal use only 2010 FULL YEAR RESULTS David Thodey, CEO 12 August 2010 FISCAL 2010 OPERATING PERFORMANCE IMPROVED INITIATIVES PERFORMANCE New product bundles ~ 300,000 bundles Wireless broadband pricing > 300,000 new customers Accelerated mobile New postpaid mobile plans revenue growth
Slide 18: Customer Service Improved; Significant NBN Milestone
FISCAL 2010 CUSTOMER SERVICE HAS IMPROVED… CUSTOMER CENTRICITY For personal use only New standard in Home movers program responsiveness Weekend technician Telstra service & support appointments calls now free of charge TIO Complaint Customer Satisfaction Reduction Survey Results RESULTS +4.6
Slide 19: Industry Inflection Point; Four Major Initiatives
CHALLENGE INDUSTRY INFLECTION POINT For personal use only Accelerated decline in PSTN revenues Fixed-to-mobile calling substitution CHANGING Mobile internet is developing faster than fixed internet DYNAMICS Data / video usage is exploding Broadband and voice competitiveness is increasing Open-access
Slide 20: Improving Customer Satisfaction; Simplifying the Business
STRATEGY 1. IMPROVING CUSTOMER SATISFACTION For personal use only 24/7 contact centres from 14 September Re-building our online capability Removing process bottlenecks that lead to complaints Adding customer satisfaction measure to management incentives 37 STRATEGY 2. SIMPLIFYING THE BUSINESS Custom
Slide 21: Competing Aggressively – Customer Base and Mobiles
STRATEGY 3. COMPETING AGGRESSIVELY – CUSTOMER BASE Market Share Trends For personal use only FY08 FY09 FY10 FY11 Fixed Broadband Mobile 39 STRATEGY 3. COMPETING AGGRESSIVELY - MOBILES WBB – 3 yr revenue CAGR +109% INTEGRATION OF FIXED + MOBILE Unified Comms $787m Same screen across multiple products
Slide 22: Competing Aggressively – IP and the Cloud; Investing for Growth
STRATEGY 3. COMPETING AGGRESSIVELY – IP AND THE CLOUD For personal use only IP Access - 3 yr revenue CAGR +26% Vertical and Horizontal Apps $835m Virtual Desktop, Platform as a Service Marketing and Advertising, eCommerce, Supply Chain $416m Backup, Storage, Security Unified Messaging, IP Voice, Web
Slide 23: Fiscal 2011 Guidance
FISCAL 2011 GUIDANCE* For personal use only Measure FY11 Guidance Sales Revenue Flattish EBITDA High single digit percentage decline Capex 14% of sales Free cashflow $4.5 - $5 billion *Guidance assumes wholesale product price stability, no additional impairments to investments and excludes any proce