Telstra Group Limited · ASX:TLS
Telstra — Investor Day (June 2018)
52 slides from Telstra's investor day presentation, Jun 20, 2018
Slide 1: Telstra2022 – briefing materials ASX cover letter
20 June 2018 Office of the Company Secretary Level 41 The Manager 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA Market Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 ELECTRONIC LODGEMENT Dear Sir or Madam Telstra2022 – briefing materials In accor
Slide 2: Telstra2022 and disclaimer
20/06/2018 Telstra2022 Andrew Penn 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 achievernents could be significantly different f
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20/06/2018 • • • • • • • 2
Slide 4: Agenda
20/06/2018 With a new plan Strategic pillars Enabled by our $3b investment program ended net Delivering m business and uperiority >rmance Norm in ° t rship i nent 5bn by FY Agenda 9:30am Andy Penn Introduction & Strategy 10:00am Vicki Brady Pillar 1 Brendon Riley Will Irving Pillar 2 10:30am Technol
Slide 5: Telstra2022 Pillars
20/06/2018 Telstra2022 Pillar 1 Strategic pillars Eliminate pre Drive growth Telstra2022 Pillar 2 Strategic pillars structure bus nent in financial ai
Slide 6: Telstra2022 Pillars
20/06/2018 Telstra2022 Pillar 3 Strategic pillars m our operating de 1 inn Lean an tomer centred design Page Telstra2022 Pillar 4 Strategic S uction pr pillars Page 10
Slide 7: Telstra2022 Enablers: Leading with 5G
20/06/2018 Telstra2022 Enablers New Digital Platforms Enabled by our $3b investment program Australia’s largest, fastest, safest, smartest and most reliable next generation network Page 11 Leading with 5G 5G in conjunction with software defined networking and machine learning will enable huge gains
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Slide 9: 20/06/2018
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Slide 10: Our ambition is to set a new benchmark of trust with our customers
20/06/2018 Our ambition is to set a new benchmark of trust with our customers Radically simpler product propositions No more complex bills or charges for excess data Only pay for the services customers value » . Freedom to move between plans at any time Incentives to have more services with Telstra
Slide 11: By June 2019 customers will experience a radically simplified, fully-digital relationship
By 30 June 2019 customers will experience a radically simplified, fully-digital relationship with Telstra More than 1800 plans @) Less than 20 core plans High customer effort through multiple touch points Intuitive digital experience Multiple legacy systems driving complex processes One CRM supporti
Slide 12: Customers will progressively experience a new relationship with Telstra
20/06/2018 Customers will progressively experience a new relationship with Telstra over the next 12 months July 2018 October 2018 January 2019 March 2019 June 2019 All the data you ve | @ sa | | @ a é é yy Peace of Mind data on a wide Entry level companion plans for Easy purchase of incremental Effo
Slide 13: We continue to execute our Enterprise strategy to drive growth and differentiation
20/06/2018 We continue to execute our Enterprise strategy to drive growth and differentiation platforms & applications Networks Data & IP Mobile Managed cd Cloud Professional & Software internet Next-gen UC Enterprise Networks Communications Managed Services Defined of Things Mobility Networks + Lea
Slide 14: We have launched high impact products designed to differentiate our core
20/06/2018 We have launched high impact products designed to differentiate our core and create new revenue streams Next-gen UC @) Enterprise Mobility @) Security @) Software Defined Networks @) * Telstra Calling for Office 365 * Liberate Mobile Managed Services. Internet of Things * Open MSS (Manage
Slide 15: Modular, per seat offer for smaller businesses
20/06/2018 We will soon launch a modular, per seat offer for smaller businesses with a transformed Telstra experience Connected Workplace: 805 Se er per gos Pp Toney, Fra : Cc °o =e 09° AS and users Delivering a dramatically simplified, next generation service experience for businesses @) Digitally
Slide 16: Why establish Telstra InfraCo?
20/06/2018 Pillar 2 Will Irving Why establish Telstra InfraCo? To maximise the value of our world-class fixed network assets: We are establishing a stand-alone business unit to: * Drive capital efficiency, including monetising assets * Drive improved performance and productivity through focus + Impr
Slide 17: Telstra InfraCo
20/06/2018 • • • • • • Telstra InfraCo 16
Slide 18: Telstra InfraCo indicative financial metrics
20/06/2018 Telstra InfraCo indicative financial metrics FY17 pro forma total assets! ~$11 billion m= Ducts, pipes and fibre m Copper mExchanges m Data centres FY18 pro forma FY18 pro forma revenue?? EBITDA?45 ~$5.5 billion ~$3 billion Telstra Wholesale Customers Telstra internal access m@ Long term
Slide 19: Simplify our structure and ways of working
20/06/2018 Pillar 3 Alex Badenoch Simplify our structure and ways of working to empower our people and serve our customers Simplify and flatten our structure and i . . z + * Create a leaner organisation supporting our productivity commitments transform our operating model Scale up our shared service
Slide 20: Shared service centre supporting all Business Units and InfraCo
20/06/2018 Shared service centre supporting all Business Units and InfraCo Continuous improvement culture and mandate to drive simplified, lean processes Established July 1 Transparency on infrastructure assets, incl. copper, fibre, data centres and exchanges End-to-end integration from infrastructu
Slide 21: Telstra transitions
20/06/2018 Telstra transitions $50m investment to support people through significant change To support the Transition Program we intend to make available initial funding up to$50m Supporting employees leaving Telstra Supporting employees moving to new roles * Enhanced outplacement services for our p
Slide 22: Increasing our productivity target by $1 billion
20/06/2018 Telstra2022 Pillar 4 Strategi 7 rn C t reduction p pillars Jr portfoli * Maint cial flexibility Pages We are increasing our productivity target by $1 billion to ~$2.5 billion by end of FY22 Our productivity target — FY16-22 ~$1.0b ~$2.5b * FY18 to FY22 profile of productivity will be at l
Slide 23: Net productivity target and total cost outlook
20/06/2018 Our ~$2.5 billion net productivity target includes re- investment offset by >$4 billion gross productivity Gross vs net cost productivity — FY16-22 +>$1.5b ->$4.0b ~$2.5b net cost ~$4.5b productivity target! \ FY16 Core fixed Inflation & Gross FY22 Core fixed costs - underlying re-investm
Slide 24: Simplify the way we operate to reduce cost of doing business
20/06/2018 Simplify the way we operate and interact with customers to reduce the overall cost of doing business Productivity area’ Fewer, simpler products + Simplification of products across C&SB and Enterprise to improve customer experience and reduce costs + Reduce legacy product costs including d
Slide 25: Simplify portfolio and monetise up to $2 billion of assets
20/06/2018 We will simplify our portfolio and seek to monetise up to $2 billion of assets by end of FY20! Monetise up to $2 billion of assets by end of FY20': * Further strengthen the Balance Sheet lability of appropriate terms. Enablers Robyn Denholm 24
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Slide 27: Tangible customer experience enhancements
20/06/2018 With tangible customer experience enhancements Gaining momentum on Superior mobile Strengthened network Maintaining network leadership digital customer experiences experiences reliability e e e e nhanced outage detection, ~” 7.5m ee NETFLIX 4mactiveuserswith 4m ? other 1.5m unique visitor
Slide 28: We will lead the market in 5G
20/06/2018 We will lead the market in 5G We are investing to... We have delivered... Coming soon... Transform our network a | ; Australia’s first economics . 5G Innovation | EM Delivers up to 10X capacity at lower Centre | cost per bit to handle exponential traffic growth FY19 Network ready for 5G i
Slide 29: Financials
20/06/2018 Financials Warwick Bray 28
Slide 30: Financial implications of strategy
20/06/2018 Financial implications of strategy Le Strategic end of FY21 of some program 1 Monetisation of assets subject to market conditions and availability of appropriate terms PageS7 Pillar 2: Telstra InfraCo pro forma statements and timeline FY17 pro forma FY18 pro forma FY18 pro forma Estimated
Slide 31: Guidance as updated post May 2018 trading update
20/06/2018 As updated 1 Dec 2017 and post 14 May 2018 trading update 30
Slide 32: FY19 guidance
20/06/2018 Based on current accounting standards Total income $26.6b to $28.5b EBITDA excluding restructuring costs $8.7b to $9.4b Net one-off nbn DA receipts less nbn net C2C $1.8b to $1.9b Restructuring costs ~$0.6b Capex $3.9b to $4.4 Free cashflow Update in August 1 This guidance assumes wholesa
Slide 33: Capital management framework
20/06/2018 Capital management framework Fiscal discipline Objectives We remain committed to retain balance sheet settings consistent with an A band credit rating Pay fully-franked ordinary dividend of 70-90% of underlying earnings’ Target capex/sales ratio of ~14% excluding spectrum from FY2045 1 2.
Slide 34: Telstra2022 strategic pillars
20/06/2018 Strategic pillars Enabled by our $3b investment program Australia’s largest, fastest, safest, Delivering 33
Slide 35: Glossary
20/06/2018 Glossary ARPU AVC B2B C&SB c2c CATM1 cvc cogs CRM Average revenue per user Access virtual circuit Business to business Consumer and Small Business Cost to connect Category M1 Connectivity virtual circuit Cost of goods sold Customer relationship management DAs | DevOps "EE EBITDA EPS FTE “
Slide 36: Speech notes: Telstra strategy update
SPEECH NOTES TELSTRA STRATEGY UPDATE 20 JUNE 2018 ANDREW PENN – CEO Slide– Introduction Good morning and welcome to our investor briefing. Slide – Story Old to New For 100 years, Telstra has been at the forefront of connecting Australia and Australians to each other and to the world. There have been
Slide 37: Speech notes: market dynamics and nbn
While many of the dynamics that are playing out in the market today were predictable, it is their intensity and depth of impact that is accelerating our need for change. The origins of many of these challenges point back to the nbn. We are no longer the wholesale fixed line provider in Australia and
Slide 38: Speech notes: six key goals
Our strategy has 6 key goals with tangible and clear milestones to which we will hold ourselves to account and that will provide transparency on our progress. These cover customer experience, simplifying our business, network superiority, our people, cost improvements and strengthening our balance s
Slide 39: Speech notes: customer simplification
plans telecommunication companies provide today. Customers want them to be simple, easy and digital with certainty on what they are going to be charged. As an industry we have failed to deliver on this. It is not an easy challenge because today’s telecommunications technology is complex. But this is
Slide 40: Speech notes: infrastructure business unit
Two years ago we commenced a project to monetise the payments we were receiving from the nbn for access to our infrastructure. Fundamentally what stood behind this initiative was a belief that our telecommunications infrastructure assets were the most valuable in the country. With the increasingly i
Slide 41: Speech notes: product focus and job reductions
We also intend to elevate our focus and capabilities in product development and management across the company. Collectively these changes will enable us to flatten the organisational structure and improve the operating model of the company. Through these changes we expect to reduce 2-4 layers of man
Slide 42: Speech notes: costs and 5G
Through this work we also expect our total costs to remain flat or decline meaning that we will absorb the full weight of the CVC/AVC costs that we will incur in the migration to nbn. So these are the 4 pillars of our Telstra2022 strategy. Slide – Telstra2022 Enablers I again want to be clear, they
Slide 43: Speech notes: IoT and key outcomes
As every business, in every industry, in every sector looks to improve the efficiency and effectiveness of their operations through the use of technology - many of these solutions will ultimately be connected via Internet of Things solutions. Whether it’s in mining, agriculture, logistics, healthcar
Slide 44: Speech notes: CFO on Pillar 4
Above all else, customers choose to spend their money with companies who put exceptional customer experience at the heart of everything they do and who are willing to take risks to innovate and lead. Our employees need to be equipped with state of the art technology and trained in new ways of workin
Slide 45: Speech notes: total costs flat or declining
Slide – We expect our total costs to be flat or decline each year with our productivity ultimately offsetting the CVC/AVC nbn costs We expect total costs to be flat or decline each year excluding restructuring costs. Cost productivity is expected to ultimately offset increased CVC/AVC nbn costs. Loo
Slide 46: Speech notes: asset monetisation and ROIC
Slide – We will simplify our portfolio and intend to monetise up to $2 billion of assets by end of FY20 We intend to monetise up to $2 billion of assets by the end of FY20 to further strengthen our Balance Sheet. We will make more specific announcements on monetisation at our regular results announc
Slide 47: Speech notes: financial implications of strategy
Slide – Financial implications of strategy The financial implications of the strategy are shown on this chart. Through Pillar 1 we will lead the market with simplified customer orientated charging. By choosing to lead the market and simplify the charging model for our customers, we expect to acceler
Slide 48: Speech notes: NAS growth and guidance
We are also seeking continued growth in our NAS business and modern IP products to offset the impact of pricing pressure and the decline in legacy data revenue. We are resetting our cost base. We are delivering returns on our capital investments. We are committed to the $500 million benefits from ou
Slide 49: Speech notes: balance sheet strength and dividends
From our updated strategy we expect an accelerated reduction in traditional mobile revenue including excess data, excess voice and other fees across the next three years. Headwinds from the nbn network rollout will continue to impact our fixed line business. We have increased our cost productivity a
Slide 50: Speech notes: Telstra InfraCo
• I’ll then give you a closer look at what it will consist of, followed by a look at its key financial metrics. • Finally, I’ll outline our timeline from a reporting perspective. Slide – Why establish Telstra InfraCo? From 1 July, Telstra InfraCo will be responsible for key fixed network assets as w
Slide 51: Speech notes: integrated network and mobiles
Indeed, while Telstra InfraCo will share ownership of the equipment used to power services carried over InfraCo infrastructure, all network management functions will continue to be undertaken by Telstra Operations. This means that we will continue to run one integrated network from a traffic and man
Slide 52: Speech notes: InfraCo EBITDA and timeline
Based on this revenue, there would have been EBITDA of around $3 billion in FY18. This splits into roughly two-thirds that is recurring, long-term revenue (including recurring nbn receipts, which are inflation linked and grow over the next 30+ years), and then one-third that is tied to legacy assets