Slide 1: ASX lodgement letter - Analyst Briefing
28/08/2003 The Manager Company Announcements Office Australian Stock Exchange 10th Floor, 20 Bond Street SYDNEY NSW 20006 ELECTRONIC LODGEMENT Dear Sir or Madam Re: Anatyst Briefing Office of the Company Secretary Level 44 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA Telephone 03 8634 6400 Fac
Slide 2: Improved Underlying Financials in Second Half
_ Dr Ziggy Switkowski.. : Chief Executive Officer improved Underlying Financials in Second Half Underlying Results ($ millions except EPS & DPS) 2H03 = Growth (%) FY2003 Growth (%)' Sales Revenue 9,752 14 49,947 05 Expenses 4,854 i (3.7) 10,004 (1.8) EBITDA 5,049 6.4 10,205 28 Depreciation & Amortis
Slide 3: 2002/03 Financial Outcomes
$miltions 2002/03 Financial Outcomes 26% 12,000 91% 30 10,600 3,000 20 £ a 6,000 8.4% 3 F & SM 15, 34.6% 10 2,000 Y 2002 ©2003 2802-2003 2062 2003 2002 © 2003 EBITt EBITDA! FCF? Dividends jeasures (3) Undedying (2) Netof large one off asset sales side 3 Managing Performance Telstra Performance Slide
Slide 4: Status - Economy and Regulation
% Growth Status - Economy GDP & Communications Services Consumer Spending on Communications 2% 3.0% 15% Communtcatian Services 2.5% GST elated spike 10% 5% 2.0% % 1.5% Share of disposable income 95.96 918 90-00 “St Mar.1994 Mar.1994 Mar.1997 = Mar.2000 «= Mar.2003 Source: ian Buroau at & ected to gr
Slide 5: Status - Competition and Customers
Status - Competition Market Share Telstra Market Shares! Miffions: 46 90% ‘8 Mobile S10 - Inistry 80% 2 Qo et te 70% Access Lines - Telstra 8 60% é sewonenanivine , ” een S08 - Telstra 50% tenis 4 eal 40% 2 8 30% 199920002001 20022003 199920002004 2002-2003 (3) Market share by revenue for Data, Inte
Slide 6: Status - Customers (Cont.) and Organisation
Status - Custorners (Cont.) ARPU / Fixed Access Line Value Added Fixed Line Features 00 + 41#- Telstra Feature Assistant 760 * Telstra Home Messages 101 700 * Call Forward 650 * Calling Number Display nt $743 $763 + Calling Waiting 00 $674 + *10# Call Retum 450 + 3 Way Chat 400 rE : a 2001 2002 2003
Slide 7: Status - Investors
Status « Investors Capital Management i Special : Ordinary Dividends - Yield 5.7%, + 100% franked + Capital Return - $800m to $tbn buyback - completed by Dec 2003 + Domestic capex - Approx. $2.9bn in ‘03/04 + Acquisitions - EPS + vein 2" yr Balance Sheet Net debt to equity ratio 44.6% . it rati 2 19
Slide 8: Outlook
Outlook . a revenue grout al e0Ps, around 4% * felsta domestic revenue growth positive but less than industry Quarterty service trends wil resume their continuous improvement : Sosts budgeted to grow less than growth in revenues ’ Underlying EBIT and EBITDA margin to be higher on back of productivit
Slide 9: Core Financial Priority is Free Cash Flow
wee Chief Finanelal- Officer David Moffatt = Core Financial Priority is Free Cash Flow improved EBITDA/EBIT Margin Process improvement using Six Sigma Tight capex management Customer satisfaction Operational excellence EPS accretive by year two, ROIC Operational contrat incremental in size Accretive
Slide 10: Financial Highlights
Financial Highlights iB Ih INN . Broadband slo. up 113% * Sensis - up 7% Buyback Program * Undertying before depreciation, amortisation Slide 3 Strong Cash Flow & CAPEX Management Reported Results ~ Impacted by Reach non cash write-down ($ millions except EPS & DPS) FY2002-- FY 2003 | % A® Sales Rev
Slide 11: Underlying Results
Underlying Results Overview 1HO3 2H03 FY03 $bn %' Son! Sb Sales revenue 10.2 7 1 |199 05 Operating expenses 52 (4) 10.0 (2) EBITDA 5.2 6 110.2) 3 Depreciation & Amortisation 1.7 3 33° («4 EBIT 35 8 | 69 2 NPAT (After minorities) 22 2 | 44) 6 1. %change on pop Slices a Underlying Domestic Operations
Slide 12: Full Year Underlying Sales +0.5%
Full Year Underlying Sales +0.5% Strong growth in Internet and PSTN growth Movement ASM Growth in Revenue from ASM Actual Growth BE ©” internet & 1P solutions 802 32.6 | PSTN 7,916 24 | Total mobiles 3,608 4.0 | Sensis — Directories 1,217 72 2c ISDN 951 (8.3) ma HK CSL 908 (18.9) 1 Controlled entiti
Slide 13: Depreciation & Amortisation
Depreciation & Amortisation* $3,305m Amortisation 419% Amorligalior Software amortisation +10% so Goodwill amortisation 434% Other $16im A Other Depreciation 2% Motor vehicles Other plant & equipment Mobiles Depreciation 47% $2,045m. Network Fixed network Hi% Higher Capex in prior years 2002 2603 “D
Slide 14: Delivered Strong Free Cash Flow
. Delivered Strong Free Cash Flow Tight Capex mgt, cost control assisted by asset sales have grown free cash flow ... ... FCF per share strong $4,565m , Large Asset sales! $3,685m $3,995 iI FY 2002 FY 2003 2000 2001 2002 2003 Free Cash Flow FCF per share 1. Computershare iti FY2002: Properties sale
Slide 15: Dividends and Capital Returns
& Special «In conjunction with needs to: Mi Ordinary ~ Driving returns from existing businesses - Accretive incremental acquisitions ... enabled continued strong growth in Dividends e Ongoing program to Capital has been returned to shareholders soe : : through Ordinary and Special dividends ... maxi
Slide 16: Capital Management - Off Market Share Buy back
Capital Management - Off Market Share Buy back Structure * Offer to buy back approx $800m to $1,000 million « All shareholders eligible to participate via tender + Further details to be announced once regulatory approvals obtained Benefits + Will enhance earings per share and increase Return on Equi
Slide 17: Operational Performance
Operational Performance 4th Quarter Underlying sales -0.4% Movement ASM growth in om ASM Actual Growth% EE 5 Mobiles 928 54 ee internet & IP 221 22.8 a PSTN 1,956 13 |B Sensis - Directories 273 58 || 10 Intercarrier 293 3.6 “i Solutions Mgt 135 (9.4) 7 ISDN 228 (6.9) 1 i Controlled entities 84 {39.1
Slide 18: What's Driving Controlled Entity Revenue in Q4?
What’s Driving Controlled Entity Revenue in Q4? CSL Vietnam — Transend/Argent Mobitel = -$26m in Hong ‘ong, but still profitable Slide 19 ISDN + Overlay network closed in Nov 2002 + Re launch ISDN to SME & Consumer $245m $228m + BigPond™ ISDN launch 30 July 2003 8% 4,268 4,245 ‘ faa, 213 1,190 Data
Slide 19: Data
Data $263m $266m La Other Leased Line Frame/ATM Q402 Revenue Q403 to grow strongly in quarter four Slide 24 Strong Growth in Internet & IP Solutions Narrowband Subscribers ARPU Gay $221m woes z Other $1m $254 Ie id $180m “a IP Solutions +36% Ofer Sim — Internet Direct 8% \y Fy2008 Fy2003 Onl w% Broa
Slide 20: Delivered by Operating Expense Reduction in 2H03
.. Delivered by Operating Expense’ Reduction in 2H03 $5,050m = $52m $195m Pes) vapour 860 gst seem $185m = St4m—4.797m Netmork ae) Other Prats Mobiles COGS Other Service Expenses DvCs Contracts & Agreements $2,500 +. excluding share of Equity Acoounited Losses and Depreciation 1 Arorivaon Slide 23 L
Slide 21: Directly Variable Costs
Directly Variable Costs t + Domestic network payments * Reach take or pay — 2H only + Reach pricing ~~ * Handset Subsidies * NDC costs on “eas ye + Reclassification FY 2002 FY 2003 ubsidy expense drives reduction : Slide 26 Other Expenses * Service Contract & Agreements ef * One Off Adjustments ee *
Slide 22: Service Contracts & Agreements / TelstraClear
Service Contracts & Agreements $858m One ~offs $78m $674m other + Platforms/Maintenance « New Services Platform e (CDMA 1x, DSL) Maintenance « ExistingPiatforms * Sales/Mrkting * Outsourcing SalesiMkting IT Services 2H02 Agreements going forward Slide 27 Telstraciea TelstraClear - Leading Challenger
Slide 23: Hong Kong's Leading Mobile Business - CSL
Hong Kong’s Leading Mobile Business - CSL Highlights + CSL delivered a solid performance despite an adverse operating environment (SARS and price war} + Lower cost base through productivity and process improvement. + Premium mobile business in Hong Kong, maintaining prand superionty. + Reinforced it
Slide 24: Dividend Growth - up 9% to 24cps + 3cps special
‘ Dividend Growth - up 9% to 24cps + 3cps special + Buyback Program Broadband SIO - up 115% Sensis - up 7% * Undertying before dey n arrentisation Slide 34 * ‘Appendi¢es-
Slide 25: PSTN rebalanced products grow +2.1%
PSTN rebalanced products grow +2.1% ~ ARPU* up 2.8% to $763 per annum Basic access revenues grow ... access fines stable Local cail revenues and volumes down 4044m Access Lines 10,268m aan Te 10.32 9,794 y “GD 8%) $4,643m0| $1.567m FY 02 FY 03 FYd2 FYO3 STD volumes stable... yield reduced F2M minute
Slide 26: Data and Handsets Drive Mobiles Revenue
Data and Handsets Drive Mobiles Revenue Revenue movement by category SMS* volumes continue to grow 54%) 320m 40im $155m $3,608m $26 stsim YAS ey Access yy fees & call charges $3,006m Total mobile Totaf mobile 4Q2002 702003 20.2003 3Q03 4003 cevenue revenue FY2002 FY2003 ssitively in 4% Quarter * Mob
Slide 27: Strong Growth in Internet & IP Solutions
Strong Growth in Internet & IP Solutions Narrowband Subscribers ARPU $802 $268 — Other $15m IP Solutions 443% Other $12m— Intemet Direct 48% v PyD002 Fy2003 418% . Online Broadband Subscribers {000s} Narrowband 361 169 Online 4IT4 Broadband ms Fy2002 FY 2008 - — Revenues sya YE Slide 37 ISDN + Overl
Slide 28: Other Expenses + 7%
. Other Expenses + 7% $149m $3,830m One Offs — Te $5m $3,573m Other = = — == -$30m -$22m -$35m $30m Service Rental Bad FXcosts Marketing Contracts Expense Debts & Agreements $2,500m Slide 39 . Labour Expense Movements Labour costs down 1% Telstra FTE’ $2,87im $2,839m sored : = 44,977 stom $34m_ S12m
Slide 29: Directly Variable Costs down 13.1%
... Directly Variable Costs down 13.1% $3,741m =I =— $2im — -$t1m COGS Usage $129m Comms Subsidy few sas =s fs 252m ems g38m “S48m Fea $374m $85 ~~ Domestic N Other Reach Int’ Other Network $4tm Fx Pits $2,500m d Subsidy expense drives reduction Slide 44 Financial Overview - international Contributi
Slide 30: International Connectivity - REACH
Sy international Connectivity - REACH REACH Asia’s largest International Carrier of Combined Voice and Data Key Financials US$m; in USGAAP As capacity for sending trans Atlantic traffic = grew (in gigabits per second) the cost of 8 Foz. FYV03 transmission tumbled ... Revenue 4207. 4,074 ERITDA at? 2