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28 September 2007
The Manager
Company Announcements Office
Australian Stock Exchange
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
Office of the Company Secretary
Level 41
242 Exhibition Street
MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400
Facsimile 03 9632 3215
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra Corporation Limited 2007 Annual Report
In accordance with the listing rules, I attach an announcement for release to the market.
Yours sincerely
Claire Elliott
Acting Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556

Table of contents

  • Page 1
    ...Company Secretary Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA Telephone 03 9634 6400 Facsimile 03 9632 3215 ELECTRONIC LODGEMENT Dear Sir or Madam Telstra Corporation Limited 2007 Annual Report In accordance with the listing rules, I attach an announcement for release to the market...

  • Page 2
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  • Page 3
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  • Page 4
    ... ra Corporat ion Limit ed and cont rolled ent it ies Contents 1. Full y ear result s and operat ions review - June 2007 ...3 2. Corporat e Governance and Board Pract ices ...51 3. Shareholder Informat ion ...65 4. Direct ors Report ...69 5. Remunerat ion Report ...87 6. Financial Report ...113 1

  • Page 5
    ... ent it ies ® Regist ered t rade mark of Telst ra Corporat ion Limit ed ™Trade mark of Telst ra Corporat ion Limit ed †Regist ered t rade mark of Tw ent iet h Cent ury Fox Film Corporat ion ‡ Regist ered t rade mark of Research in Mot ion Lt d * Regist ered t rade mark of AUSTAR Ent...

  • Page 6
    ... Calling Product s ...- Pay phones ...- Cust omer premises equipment ...- Int ercarrier access services ...- Ot her fixed t elephony ...Mobiles ...Int ernet ...IP & dat a access ...Business services and applicat ions ...Advert ising and direct ories ...Offshore cont rolled ent it ies ...Pay TV...

  • Page 7
    ... it ies Full year results and operations review - June 2007 Summary financial information Results of operations Results of operations 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Sales revenue...Ot her revenue ...Tot al revenue ...Ot her income ...Total income (excl. finance...

  • Page 8
    ... ies Full year results and operations review - June 2007 Balance sheet Balance sheet As at 30-Jun-07 $m Current assets Cash and cash equivalent s ...Trade and ot her receivables ...Inventories ...Derivat ive financial asset s...Ot her asset s...Tot al current asset s ...Non current assets Trade and...

  • Page 9
    ...in investing activities ...Operating cash flows less investing cash flows ...Movement s in borrow ings/finance leases ...St aff repay ment s of share loans ...Purchase of shares for employ ee share plans . Finance cost s paid ...Dividends paid ...Net cash used in financing activities... Net increase...

  • Page 10
    ... o t he management account abilit y framew ork or our int ernal report ing sy st ems as follow s: • Sales revenue associat ed w it h mobile handset s for t he Consumer, Business and Ent erprise and Government segment s are allocat ed t o t he Consumer segment . Ongoing prepaid and post paid mobile...

  • Page 11
    ... millions) Mobile voice t elephone minut es ...Number of short messaging service (SMS) sent ...Internet statistical data Online subscribers (in t housands) Broadband subscribers - ret ail ...Broadband subscribers - w holesale ...Tot al broadband subscribers ...Narrow band subscribers ...Total online...

  • Page 12
    ... 2007 $m Fixed telephony Basic access...Local calls ...PSTN value added services...Nat ional long dist ance calls...Fixed to mobile...Int ernat ional direct ...Fixed int erconnect ion ...Tot al PSTN product s...ISDN product s ...Inbound calling product s ...Pay phones ...Customer premises equipment...

  • Page 13
    ...ional IP net w ork) and ADSL 2+ high speed broadband product offering. In t he second half of fiscal 2006, w e also int roduced our first subscript ion based price offers int o t he consumer PSTN market t o help address t he decline of our PSTN revenues and t o make pricing simple for our cust omers...

  • Page 14
    ...PSTN products PSTN products 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Basic access revenue: - Ret ail ...- Domest ic w holesale ...Tot al basic access revenue ...Local call revenue ...PSTN value added services revenue . Nat ional long dist ance call revenue . Fixed to mobile...

  • Page 15
    ... subscript ion pricing plans for our PSTN cust omers, w hich offer great er choice and value from t he home phone, including unt imed nat ional long dist ance calls and low or no charge local calls. Overall, t hese plans have impact ed posit ively on our PSTN revenue performance for t he current...

  • Page 16
    ...of some subscript ion based pricing plans w hich offer free local calls as part of t he package, such as HomeLine® Ult imat e and HomeLine® Toget her. PSTN value added services PSTN value added services revenue consist s of a range of resident ial and business call complet ion and complex product...

  • Page 17
    ...er revenue per minut e result ing from higher discount s associat ed w it h ongoing compet it ive pressure, including incorporat ing fixed t o mobile calls in rew ard offerings and subscript ion plans. This increase in t he level of discount ing is represent at ive of our increased campaign act ivit...

  • Page 18
    ... t he broadband market , grow t h in t he number of DSL enabled exchanges and migrat ion t o advanced dat a product s such as IP solut ions in t he business market s. ISDN products 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Access revenue ...Dat a calls ...Voice calls ...Tot...

  • Page 19
    ... service (B part y ). The A part y revenues are affect ed by subst it ut ion t o ot her voice product s such as mobiles and t he int ernet . B part y revenues are affect ed by increased cust omer compet it ion impact ing prices. Inbound calling products 2007 $m Year ended 30 June 2006 Change 2007...

  • Page 20
    ... w it h call and product subst it ut ion from pay phones t o pre-paid mobiles. Phone-card revenue also reduced by $2 million result ing from increased compet it or pre-paid calling cards w it h int ernat ional call rat es at 1 t o 2 cent s per minut e t o some locat ions. We have removed a number of...

  • Page 21
    ... services, such as Prepaid Home, Phoneaw ay ®, and Say G'day ®. The decline in card services revenue reflect s an overall decline in t he number of services due t o subst it ut ion t o cheaper and more convenient calling product s such as mobiles. Virt ual privat e net w ork enables mult i locat...

  • Page 22
    ... Our operat ing revenue from mobiles consist s of revenue from access fees and call charges, as w ell as ot her services comprising int ernat ional roaming, mobile MessageBank®, Short message service (SMS) and ot her mobile dat a. Mobile dat a includes mobile w ireless broadband product s from plat...

  • Page 23
    ... 2006 Change 2007/2006 $m $m (% change) 2,684 (2) (0.1%) 266 61 22.9% Access fees and call charges (i) ...Int ernat ional roaming ...Mobile messagebank®...Mobile dat a - Short message service (SMS) (ii) ...- Non SMS dat a (i)(iii) ...Tot al mobile dat a (i)...Tot al mobile services revenue - ret...

  • Page 24
    ... w hich have cont ribut ed t o our ARPU uplift . Mobile revenues have also been impact ed by t he grow t h in capped price plans and height ened campaign act ivit y part icularly around Next Gâ„¢services. Subscriber grow t h w as driven by an increase in post paid SIOs of 11.8%or 583 t housand SIOs...

  • Page 25
    ... a key driver of t his increase. Wholesale mobile service revenue increased by 41.7% t o $51 million due t o grow t h in t he Wholesale GSM resale product and GSM post paid due t o new cont ract s acquired. Mobiles int erconnect ion revenue has declined 4.8%t o $593 million. The main product driving...

  • Page 26
    ... t he increased need t o access broadband services on a mobile basis. While int ernet market s have been experiencing grow t h, price compet it ion remains. We expect t hat t hese t rends w ill cont inue. Internet 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Narrow band ...Ret...

  • Page 27
    ... of a new nat ional high speed broadband net w ork. The net w ork delivers significant ly increased speeds from exchanges offering ADSL 2+ services. The int roduct ion of a number of key price and value campaigns has also st imulat ed broadband t ake up including high-speed cable plans, value offers...

  • Page 28
    ... Limit ed and cont rolled ent it ies Full year results and operations review - June 2007 IP & data access IP & data access 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Int ernet direct ...Specialised dat a: - Frame relay ...- ATM ...- Digit al dat a services ...- Leased lines...

  • Page 29
    ... product s t hat support t ransact ion services; and our eBusiness and global dat a cent re. Year ended 30 June 2006 Change 2007/2006 $m $m (% change) • • Business services and applications 2007 $m Managed net work services ...IT services ...Business applicat ions...Ot her ...Total business...

  • Page 30
    ... business due t o t he int roduct ion of new init iat ives w it hin print direct ories such as coloured list ings. We cont inue t o see solid grow t h w it hin our online direct ories due t o increased cust omer numbers and new init iat ives such as Home@Yellow . The locat ion & navigat ion port...

  • Page 31
    ... Limit ed and cont rolled ent it ies Full year results and operations review - June 2007 Offshore controlled entities - revenue 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) CSL New World ...Telst raClear ...Ot her offshore cont rolled ent it ies ...Total offshore controlled...

  • Page 32
    ... Limit ed and cont rolled ent it ies Full year results and operations review - June 2007 Pay TV bundling Pay TV bundling 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Pay TV bundling revenue ... 344 320 24 7.5% FOXTEL Pay TV bundling subscribers (t housands) ...Aust ar Pay...

  • Page 33
    ... service calls. †Revenue decreased by 4.8% t o $80 million mainly due t o a decline in cable field w orks as FOXTEL are undert aking t heir ow n inst allat ion act ivit y . This decrease w as part ially offset by an increase in t he revenue share cont ribut ion due t o higher subscriber numbers...

  • Page 34
    ... a result of reduced mobile t erminat ing access rat es and low er net cost s flow ing t hrough from REACH, result ing in low er offshore out pay ment s. • • • • • Labour Labour expense includes salary , w ages and relat ed on-cost s, including superannuat ion cost s, share based pay...

  • Page 35
    ...impact of t hese invest ment changes, t ot al w orkforce numbers have declined 1,887 from 30 June 2006. Our labour expense decreased by 8.0% t o $4,017 million mainly due t o increased levels of redundancy result ing in low er st aff levels and t herefore a reduct ion in salary cost s; a reduct ion...

  • Page 36
    ...recont ract ing cost is $187 for fiscal 2007, up from $137 in fiscal 2006, mainly due to significant subsidy rat e increases part ially relat ing to 3GSM 2100 and a change in t he mix of handset s sold w it h a higher post paid to prepaid percent age as we invest in our subscriber base to drive grow...

  • Page 37
    ... ra Corporat ion Limit ed and cont rolled ent it ies Full year results and operations review - June 2007 • Increase of $321 million in ot her cost of goods sold amount ing t o $188 million due t o higher volumes of handset sales and higher average cost per handset mainly as a result of t he Next...

  • Page 38
    ...as more market ing act ivit y t o st imulat e grow t h of w ireless and ot her BigPond® relat ed product s. Anot her driver for t he increase is expendit ure used t o drive print and online Whit e Pages® and Yellow TM usage and t o promot e Trading Post in a highly compet it ive environment . This...

  • Page 39
    ... 2007. This is mainly at t ribut able t o t he follow ing fact ors: • impairment charges relat ing t o t he Trading Post mast heads of $110 million, w hich arose as a result of st rong compet it ion in t he t radit ional print and online classified market s and t he risks associat ed w it h new...

  • Page 40
    ...) and t he acquisit ion SouFun Holdings Limit ed (August 2006) cont ribut ing a t ot al of $74 million. Net finance costs Net finance costs 2007 $m Year ended 30 June 2006 Change 2007/2006 $m $m (% change) Borrow ing cost s ...Finance leases ...Loss/(gain) in fair value hedge inst rument s ...Unw...

  • Page 41
    ... summary We are a leading provider of advert ising and search services t hrough our advert ising, direct ories and local search business Sensis and it s cont rolled ent it ies. Sensis provides innovat ive advert ising and search solut ions t hrough print , online, voice, w ireless and sat ellit...

  • Page 42
    ... inued st rong advert iser support in bot h our met ro and non met ro direct ories due t o new product init iat ives such as coloured list ings. Classifieds revenue declined by 12.0% t o $125 million, largely as a result of compet it ive fact ors in t he print market , w hich are causing declines in...

  • Page 43
    ...t he highly compet it ive online classified market and t he risks associat ed w it h new init iat ives; an increase in promot ion & advert ising spend by $18 million in t he print direct ories, classifieds and voice port folios. The addit ional spend w as required t o drive print usage, revenue grow...

  • Page 44
    ...it s current form since December 2001. Telst raClear is a voice and dat a company , providing innovat ive market leading product s, services and cust omer focus t o t he business, government , w holesale and resident ial sect ors. The New Zealand market is slow ly undert aking regulat ory change and...

  • Page 45
    ...er fixed t o mobile t erminat ion rat es, improved dat a circuit pricing and reduced pricing in global int ernet access. In addit ion, low er revenues and call volumes have cont ribut ed t o low er out pay ment cost s; and a release of an onerous propert y lease provision. • The NZ$ exchange rat...

  • Page 46
    ... (116.7%) Net cash used in investing activities ...Operating cash flows less investing cash flows ... Movement s in borrow ings/finance leases ...St aff pay ment s of share loans ...Dividends paid ...Finance cost s paid ...Purchase of shares for employ ee share plans . Net cash used in financing...

  • Page 47
    .... The key drivers of our increased revenue w ere our mobiles and broadband product s, as w ell as increased revenue from our acquisit ion act ivit ies. Our higher expense pay ment s w ere mainly due t o higher cost of mobile sales as w e cont inue t o invest in our subscriber base t o drive fut ure...

  • Page 48
    ... a new generat ion of Digit al Subscriber Line (DSL) equipment , increased ut ilisat ion of available net w ork capacit y , and ot her alt ernat ive t echnology solut ions. The reduced cost s w ere also driven by t he complet ion of an upgrade program t o increase ADSL capacit y in t he exchange net...

  • Page 49
    ... he business combined w it h higher capit al cash demands for t he t ransformat ion invest ment , part ly offset by an increase in liquidit y . A significant port ion of our net financing cash out flow s relat e t o pay ment of dividends. Dividends paid in fiscal 2006 w ere higher t han t he current...

  • Page 50
    ...lines. ADSL 2+: Our upgraded nat ional high speed broadband net w ork offering improved fixed line ADSL speeds. ARPU: Average Revenue Per User CDMA: Code Division Mult iple Access - a mobile st andard t hat provides voice, dat a, fax and short messaging services. Churn: The net number of subscribers...

  • Page 51
    ... resellers on t he Telst ra access net w ork. SARC: Subscriber acquisit ion and recont ract cost s. SIO: Services in operat ion SMS: Short Messaging Service - t he t ext based message service on mobile phones. Telst ra Next IPTM : Telst ra's t rade mark name for t he int egrat ed nat ional IP...

  • Page 52
    ... balance sheet . Adjustments to 30 June 2006 $m Income Statement Decrease in revenue (excluding finance income) Decrease in goods and services purchased ...Decrease in EBITDA Decrease in depreciat ion and amort isat ion ...EBIT...Increase in finance income ...Increase in finance cost s ...Income...

  • Page 53
    Telst ra Corporat ion Limit ed and cont rolled ent it ies (This page has been left blank intent ionally ) 50

  • Page 54
    ... services t hat are safe, deliver long-t erm shareholder value and provide benefit s for our cust omers, employ ees, t he environment , our communit ies and t he nat ion. To achieve t his w e are w orking t o int egrat e social and environment al risk assessment s int o our business processes; list...

  • Page 55
    ...risk management sy st ems; review ing and approving our st at ut ory account s and overseeing our financial posit ion; approving decisions concerning our capit al, including capit al rest ruct ures and share buy backs, and det ermining our dividend policy ; and ensuring w e comply w it h t he report...

  • Page 56
    ... ion Limit ed and cont rolled ent it ies Corporate Governance and Board Practices The t enure of t he CEO as a direct or is linked t o his execut ive office. Under our const it ut ion, no ot her direct or may hold office for more t han t hree y ears or bey ond t he t hird annual general meet ing...

  • Page 57
    ... w it h senior management as required and may consult w it h ot her Telst ra employ ees and advisers and seek addit ional informat ion. Det ails of t he number of meet ings held by t he Board during fiscal 2007 and at t endance by Board members are set out in t he Direct ors' report . Performance...

  • Page 58
    ... environment as it sees fit ; compliance w it h legal and regulat ory requirement s and company policies; t he ext ernal audit including t he ext ernal audit ors' qualificat ions, scope, independence and performance and t he non-audit services disclosures t o be made in our annual report including...

  • Page 59
    ...det ermined annually in advance by t he Board, and planned t o correspond w it h our financial report ing cy cle. Addit ional meet ings are also held if required. Ot her members of t he Board are ent it led t o at t end Audit Commit t ee meet ings and t he Audit Commit t ee may ask management , t he...

  • Page 60
    ...Ernst & Young audit part ner rot at ed aft er t he signing of t he audit opinion for t he 2007 financial y ear. Our ext ernal audit ors at t end our annual general meet ing and are available t o answ er shareholder quest ions about t he conduct of our audit and t he preparat ion and cont ent of t he...

  • Page 61
    ... rat ive pow ers delegat ed t o it by t he Board under our share opt ion plans and, in cert ain circumst ances, makes offers t o employ ees under t hose plans. During t he 2007 financial y ear, t he Remunerat ion Commit t ee comprehensively addressed it s responsibilit ies under it s chart er w hich...

  • Page 62
    ... it h det ails of t he remunerat ion paid t o Board members and senior execut ives w ho w ere t he key management personnel of t he Company during fiscal 2007, can be found in our Remunerat ion Report w hich forms part of t he Direct ors' Report . The Remunerat ion Commit t ee seeks and receives ext...

  • Page 63
    ...We have a number of int ernal operat ing policies and principles w hich promot e et hical and responsible decision making and t imely and balanced disclosure. Telstra Values, Telstra Business Principles and company policies We provide guidance t o our direct ors, senior management and employ ees on...

  • Page 64
    ...ra Values of Account abilit y , Int egrit y and Leadership, support s our Code of Conduct and complement s exist ing management st ruct ures and funct ions. Share Trading We have in place a share t rading policy t hat prohibit s direct ors, t he CEO, senior management and cert ain ot her employ ees...

  • Page 65
    ... - Invest or Relat ions or t heir delegat es; senior management (including Group Managing Direct ors ot her t han t he CFO and t heir direct report s, all financial cont rollers and cert ain legal and regulat ory counsel) must immediat ely inform t he Commit t ee of any pot ent ially price-sensit...

  • Page 66
    ... designed t o increase t he level of public dialogue about t he fut ure of t elecommunicat ions in Aust ralia; w rit ing direct ly t o our shareholders t w ice a y ear about our half-y ear and annual financial result s in addit ion t o providing t hem w it h a copy of t he annual review ; placing...

  • Page 67
    ...Corporat ion Limit ed and cont rolled ent it ies Corporate Governance and Board Practices We are also seeking t o encourage our shareholders t o receive t heir communicat ions from us elect ronically t hrough our part icipat ion in t he eTree program, of w hich w e are a foundat ion member. Through...

  • Page 68
    ... are traded We are list ed, and our shares are quot ed on t he Aust ralian St ock Exchange (ASX) and on t he New Zealand St ock Exchange (NZX). A number of our shares are unquot ed. These unquot ed shares are held by t he Fut ure Fund Board of Guardians (Future Fund) and Telst ra Sale Company Limit...

  • Page 69
    ... 6 September 2007 The follow ing t able set s out t he Top 20 holders of our shares (w hen mult iple holdings are grouped t oget her): Shareholders Number of shares % of issued shares 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 17 18 19 20 Total TELSTRA SALE COMPANY LIMITED1 FUTURE FUND BOARD OF GUARDIANS...

  • Page 70
    ... PTY LIMITED ANZ NOMINEES LIMITED COGENT NOMINEES PTY LIMITED UBS NOMINEES PTY LTD UBS WEALTH MANAGEMENT AUSTRALIA QUEENSLAND INVESTMENT CORPORATION AMP LIFE LIMITED NETWORK INVESTMENT HOLDINGS PTY LTD AUSTRALIAN FOUNDATION INVESTMENT AUSTRALIAN REWARD INVESTMENT ALLIANCE...

  • Page 71
    Telst ra Corporat ion Limit ed and cont rolled ent it ies (This page has been left blank intent ionally ) 68

  • Page 72
    ...; invest ing in new services and applicat ions t o different iat e us from our compet it ors; and t arget ed invest ing in areas w here w e can creat e value for our shareholders. We are delivering our st rat egy t hrough t he implement at ion of a one fact ory approach and market based management...

  • Page 73
    ...changing. We have seen t he number of mobile handset s in t he Aust ralian market cont inue t o grow , as w ell as t he use of mobile services. Most households cont inue t o maint ain a basic access line, how ever PSTN product s are increasingly being subst it ut ed by w ireless or broadband product...

  • Page 74
    ... for high speed int ernet access accelerat es. We have recent ly seen large increases in broadband subscribers and a st eady fall in prices as providers compet e for market share. We expect t he broadband sect or t o cont inue it s expansion t hrough t he provision of new innovat ive product s and...

  • Page 75
    ... print direct ories, an increase in cust omer numbers and t he purchase of SouFun Holdings Limit ed (SouFun) in fiscal 2007. CSL New World revenue increased 20.2% due to fiscal 2007 including a full y ear of revenue from New World, w hereas fiscal 2006 included revenue from t he merged group since...

  • Page 76
    ...Fitch Long term A Short term A1 Outlook negat ive A2 A+ P1 F1 negat ive negat ive We report ed a st rong free cash flow posit ion and w e cont inue t o source cash t hrough ongoing operat ing act ivit ies and t hrough careful capit al and cash management . Our cash flow before financing act ivit...

  • Page 77
    ... ion and our t ax posit ion. No decision w it h respect t o t he pay ment or funding of fut ure ordinary dividends has been made. The Board w ill make t hese decisions in t he normal cy cle having regard t o, among ot her fact ors, t he Company 's earnings and cash flow requirement s, as w ell as...

  • Page 78
    ... and senior execut ives is provided as follow s and forms part of t his report names of direct ors and det ails of t heir qualificat ions, experience, special responsibilit ies and direct orships of ot her list ed companies are given on pages 79 t o 83; number of Board and Commit t ee meet ings and...

  • Page 79
    ... Corporat ion Limit ed and cont rolled ent it ies Directors' Report • direct ors, secret aries and execut ive officers of a relat ed body corporat e of t he Telst ra Ent it y (ot her t han a w holly ow ned subsidiary ) w hile t he direct or, secret ary or execut ive officer w as also an employ ee...

  • Page 80
    ... sy st em design and implement at ion services; appraisal or valuat ion services, fairness opinions, or cont ribut ion in kind report s; act uarial services; int ernal audit services; management funct ion or human resources; t emporary st aff assignment s; broker or dealer, invest ment adviser, or...

  • Page 81
    ... ing financial report have been rounded t o t he nearest million dollars, except w here ot herw ise indicat ed. This report is made in accordance w it h a resolut ion of t he direct ors. Donald G McGauchie Chairman 9 August 2007 Solomon D Trujillo Chief Execut ive Officer 9 August 2007 78

  • Page 82
    ...ion Limit ed and cont rolled ent it ies Directors' Report Directors' profiles As at 9 August 2007, our direct ors w ere as follow s: Name Age Position Chairman CEO and Execut ive Direct or Direct or Direct or Direct or Direct or Direct or Direct or Direct or Year of initial appointment Year last...

  • Page 83
    ...ions sect or w here he managed fixed line, w ireless, broadband and direct ory businesses and served as a leader in t he shift t o market -based management . He most recent ly served as CEO of Orange SA, one of Europe's leading w ireless companies. Mr Trujillo w as chairman and CEO of US West unt il...

  • Page 84
    ... of other listed companies - current: Direct or, Macquarie Bank Limit ed (2003- ) and Worley Parsons Lt d (2007- ). Directorships of listed companies - past three years: Nil Other: Current : Direct or, Macquarie Graduat e School of Management Pt y Lt d (2007- ); Member, Business/Indust ry...

  • Page 85
    ... companies - past three years: Nil Other: Current : Chairman, Sust ainable Invest ment Research Inst it ut e Pt y Lt d (2002- ), Financial Report ing Council (FRC) (2003- ); Direct or, Racing Informat ion Services Aust ralia Pt y Lt d (2007- ), Orchard Funds Pt y Lt d (2007-); Member, New Zealand...

  • Page 86
    ... inued as CEO of AT&T Wireless unt il ret iring in November 2004 follow ing t he company 's sale t o Cingular Wireless. Directorships of other listed companies - current: Direct or, Helmerich & Pay ne Corporat ion (1989- ). Directorships of listed companies - past three years: Direct or, Georgia...

  • Page 87
    .... Appoint ed t o Technology Commit t ee on 9 August 2006. Director and senior executive shareholdings in Telstra As at 9 August 2007: Directors Number of shares held Direct interest Indirect interest (1) Total (2) Donald G McGauchie...Solomon D Trujillo ...Geoffrey Cousins ...Belinda J Hutchinson...

  • Page 88
    Telst ra Corporat ion Limit ed and cont rolled ent it ies Directors' Report Senior executives Number of shares held Direct interest Indirect interest (1) Total (2) Bruce Akhurst . Kate McKenzie . David Moffat t . Deena Shiff ...John St anhope. David Thodey . Gregory Winn . (1) (2) ... ... ... ......

  • Page 89
    ... ed and cont rolled ent it ies Directors' Report Auditor's Independence Declaration to the Directors of Telstra Corporation Limited In relat ion t o our audit of t he financial report of Telst ra Corporat ion Limit ed for t he financial y ear ended 30 June 2007, t o t he best of my know ledge and...

  • Page 90
    ... ion Group Managing Director, Telst ra Business & Government Chief Operat ions Officer (COO) DISCUSSION IN REPORT Remunerat ion st rategy Designed to at t ract and ret ain key t alent in an increasingly globalised market , w hilst at t he same t ime aligning t he int erest s of senior execut ives...

  • Page 91
    ...t heir member account s w it h t he Telst ra Superannuat ion Scheme. Remunerat ion st ruct ure Ret irement benefit s Page 110 * For t he purposes of t his Report t he Board has det ermined t hat , in addit ion t o t he Non-execut ive direct ors list ed above, t he key management personnel (being...

  • Page 92
    ... is made up of: • base salary including salary sacrifice benefit s and applicable fringe benefit s t ax; and • superannuat ion. The STI for fiscal 2007 is an annual " at risk" component of remunerat ion for t he senior execut ives and is delivered in cash and Incent ive Shares, except for t he...

  • Page 93
    ... ive Share Ow nership Policy t o ensure t hat t he market performance of t he company w ill have a direct economic impact on t he individual execut ive. The minimum holding for t he senior execut ives w ho const it ut e t he Key Management Personnel (KMP's), excluding t he Chief Execut ive Officer...

  • Page 94
    ... earnings object ive. Revenue Grow t h 20% STI* (Cash and Incent ive Shares) To st rengt hen exist ing revenue st reams w hile driving t he development of new revenue and overall grow t h Net work Transformat ion Milestones Broadband market share Individual account abilit ies 25% A mixt...

  • Page 95
    ... t he senior execut ive meet s t he minimum shareholding level specified under t he Execut ive Share Ow nership Policy ; or t he senior execut ive ceases employ ment w it h Telst ra; or a dat e t he Board det ermines (in response t o an act ual or likely change in cont rol). 6. Long term incentive...

  • Page 96
    Telst ra Corporat ion Limit ed and cont rolled ent it ies Remuneration Report How Options are allocated In order t o reinforce t he import ance of t he t ransformat ion st rat egy and our need t o deliver ext raordinary result s and shareholder value t he fiscal 2007 LTI plan is an enhanced " one ...

  • Page 97
    ... ion and build new plat form. EBIT over Average Invest ment (Average of Net Debt plus Shareholder Funds). To st rengt hen exist ing revenue st reams w hile driving t he development of new revenue and overall grow t h. To reduce complexit y and cost and provide an enhanced customer experience by rat...

  • Page 98
    ... t o any dividend, bonus issue, ret urn of capit al or ot her dist ribut ion in respect of t hose shares. Restrictions on hedging The senior execut ives are rest rict ed from ent ering int o arrangement s w hich effect ively operat e t o limit t he economic risk of t heir securit y holdings in inst...

  • Page 99
    ...t ot al act ual value of his STI in t he form of Telst ra deferred shares. The number of STI deferred shares is based on t he volume w eight ed average price of Telst ra shares for t he 5 t rading day s prior t o allocat ion of t he deferred shares. The CEO is not eligible for t he cash dividends on...

  • Page 100
    ... CEO's fiscal 2007 allocat ion are The allocat ion is subject t o a 2 y ear performance period; The Opt ions have an exercise price of $3.67 being t he volume w eight ed average price of Telst ra shares t raded in t he five t rading day s prior t o grant dat e; Opt ions may vest , subject t o meet...

  • Page 101
    ... of Telst ra shares for t he 30 calendar day s follow ing t he announcement of Telst ra's fiscal 2008 annual result s. C. LINKING SENIOR EXECUTIVE REMUNERATION AND COMPANY PERFORMANCE 1. Defining " company performance" Telstra ultimately assesses its company performance by reference to increases in...

  • Page 102
    ... reams w hile driving t he development of new revenue and overall grow t h. EBITDA maint ains t he focus on cost management . To provide a st rong alignment bet w een execut ive rew ard, company success and shareholder wealt h creat ion. Remunerat ion Mix The remunerat ion mix for fiscal 2007 has...

  • Page 103
    ... Year ended 30 June 2007 $m Year ended 30 June 2006 $m (1) Year ended 30 June 2005 $m Year ended 30 June 2004 $m (2) Year ended 30 June 2003 $m (2) Earnings Sales revenue EBITDA Net profit available to Telst ra Shareholder w ealt h Share Price ($) Total dividends paid/ declared per share...

  • Page 104
    ... ra Corporat ion Limit ed and cont rolled ent it ies Remuneration Report LTI results and payments As at 30 June 2007 t he vest ing st at us of LTI equit y is as follow s: Figure 11: LTI Status Status of plan Instruments granted Result Next steps The Sept 2001 plan failed to meet t he Performance...

  • Page 105
    ...restricted shares & options granted under Telstra' s LTI plans. This includes amounts accrued for current and prior year LTI grants Other long term benefits Equity settled share-based payments Salary and Fees: Includes salary, salary sacrificed benefits (other than superannuation), leave provisions...

  • Page 106
    ...based payments Other long term benefits Short Term Incentives: Includes the cash component of annual bonuses payable in relation to fiscal 2007 Other equity: Options, restricted shares & options granted under Telstra' s LTI plans. This includes amounts accrued for current and prior year LTI grants...

  • Page 107
    ... Short t erm Accrued long Incent ive Shares (6) service leave Past Employ ees Zy gmunt Sw it kow ski Ceased 1 July 2005 5,451 SUB-TOTAL 5,451 Remuneration Report TOTAL 8,955,922 9,061,255 Telst ra Corporat ion Limit ed and cont rolled ent it ies Includes salary, salary sacrifice benefit...

  • Page 108
    ... ial allocat ion of opt ions lapsed on 6 December 2006. Alt hough an account ing value is recorded above, t he execut ives received no value from t his plan. Tot al Remunerat ion is t he sum of short t erm benefit s, post employ ment benefit s and share based pay ment s det ailed in Figure 12. 105

  • Page 109
    Telst ra Corporat ion Limit ed and cont rolled ent it ies Remuneration Report The account ing value and act ual number of t he CEO and senior execut ives' opt ions, rest rict ed shares and opt ions t hat w ere grant ed, exercised and lapsed in fiscal 2007 are set out in Figure 16 and Figure 17. The...

  • Page 110
    ...Corporat ion Limit ed and cont rolled ent it ies Remuneration Report Figure 17: Number of Options - granted, vested, exercised and lapsed Inst rument Balance at 1 July 2006 Granted during period (1) Vested during period Exercised during period Expired during Balance at 30 period (2) June 2007...

  • Page 111
    ... if he remains employed by Telst ra unt il 8 August 2008. E. NON-EXECUTIVE DIRECTORS 1. Remuneration policy and strategy In order to maintain their independence and impartiality, non-executive directors are remunerated with fees which are not linked to company performance. The total fee pool is...

  • Page 112
    ... 20% of their fees into Telstra shares to align their interests with those of our shareholders. All Board and commit t ee fees, including superannuat ion, paid t o non-execut ive direct ors in fiscal 2007 remain w it hin t he current fee pool. Board fees w ere increased in fiscal 2007 t o t ake int...

  • Page 113
    ...right s, bonuses and right s issues) unt il t hey are t ransferred at expirat ion of t he rest rict ion period. If a non-execut ive direct or chooses t o increase t heir part icipat ion in t he Direct share plan, t hey t ake a great er percent age of TRP in Telst ra shares, and t heir cash component...

  • Page 114
    ...-execut ive direct ors in fiscal 2007 and 2006. Figure 20: Non-executive directors - 2007 details of remuneration Short term employ ee benefits Post-employment benefits Cash settled share-based payments Retirement benefits (3) Equity settled share-based payments Direct share Total Name Salary...

  • Page 115
    ... Non-executive directors - 2006 details of remuneration Short term employee benefits Postemploy me nt benefits Superannu ation Termination benefits Termination benefits (3) Cash settled share-based payments Retirement benefits Equity settled share-based payments Direct share Total Name Salary...

  • Page 116
    ... ent it ies Telstra Corporation Limited and controlled entities Aust ralian Business Number (ABN): 33 051 775 556 Financial Report as at 30 June 2007 Financial Statements Income St at ement ...Balance Sheet ...St at ement of Recognised Income and Expense . Cash Flow St at ement ... Page Number...

  • Page 117
    ... Limit ed and cont rolled ent it ies Income Statement for t he y ear ended 30 June 2007 Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note Income Revenue (excluding finance income) ...6 Ot her income ...6 Expenses Labour ...7 Goods and services...

  • Page 118
    ... s - account ed for using t he equit y met hod Invest ment s - ot her ...Propert y , plant and equipment ...Int angible asset s...Deferred t ax asset s ...Derivat ive financial asset s...Defined benefit asset s ...Tot al non current asset s ...Total assets...Current liabilities Trade and ot her pay...

  • Page 119
    ... 30 June 2007 Telstra Group Year ended 30 June 2007 2006 $m $m Foreign currency translation reserve Equit y account ing our int erest in joint ly cont rolled and associat ed ent it ies ...Translat ion of financial st at ement s of non-Aust ralian cont rolled ent it ies ...Cash flow hedging reserve...

  • Page 120
    ... (16,049) 10,138 (1,618) 8,520 Telstra Entity Year ended 30 June 2007 2006 $m $m 22,707 (12,925) 9,782 (1,584) 8,198 Note Cash flows from operating activities Receipt s from cust omers (inclusive of goods and services t ax (GST)) . Pay ment s to suppliers and to employ ees (inclusive of GST) ...Net...

  • Page 121
    ...he y ear ended 30 June 2007 w as aut horised for issue in accordance w it h a resolut ion of t he Telst ra Board of Direct ors on 9 August 2007. The principal account ing policies used in preparing t he financial report of t he Telst ra Group and t he Telst ra Ent it y are list ed in not e 2 t o our...

  • Page 122
    ...policies 2.1 Changes in account ing policies The follow ing account ing policy changes occurred during t he y ear ended 30 June 2007. (i) Lease arrangements Opening Balance Sheet Assets The follow ing impact s w ere recorded on t he t ransit ion t o UIG 4 and are applicable t o bot h Telst ra Group...

  • Page 123
    ... our lease commit ment s. We have also rest at ed t he cash flow st at ement for fiscal 2006 based on our int erpret at ion of UIG 4. For t he Telst ra Group and Telst ra Ent it y , net cash provided by operat ing act ivit ies has decreased by $9 million, net cash used in invest ing act ivit...

  • Page 124
    ... product ion of direct ories t he 'first in first out ' basis is used for assigning cost . Net realisable value of it ems expect ed t o be sold is t he est imat ed selling price in t he ordinary course of business, less est imat ed cost s of complet ion and t he est imat ed cost s incurred in market...

  • Page 125
    ... as 'available-for-sale' financial asset s and as such are measured at fair value at each report ing dat e. Fair values are calculat ed on t he following basis: • • for list ed securit ies t raded in an organised financial market , w e use t he current quot ed market bid price at balance dat...

  • Page 126
    ... net w ork w ork t oget her t o generat e net cash flow s. No one it em of t elecommunicat ions equipment is of any value w it hout t he ot her asset s t o which it is connect ed in order t o achieve t he delivery of product s and services. As a result , w e have det ermined t hat t he ubiquit ous...

  • Page 127
    ... and t he present value of fut ure minimum lease pay ment s is capit alised as equipment under finance lease at t he beginning of t he lease t erm. Capit alised lease asset s are depreciat ed on a st raight line basis over t he short er of t he lease t erm or t he expect ed useful life of t he asset...

  • Page 128
    ... pat ent s, t rademarks, licences, brandnames and cust omer bases. (d) Deferred expendit ure Deferred expendit ure mainly includes cost s incurred for basic access inst allat ion and connect ion fees for in place and new services, and direct increment al cost s of est ablishing a cust omer cont ract...

  • Page 129
    ... carry ing amount is t he present value of t hose cash flow s. (a) Employ ee benefit s We accrue liabilit ies for employ ee benefit s t o w ages and salaries, annual leave and ot her current employ ee benefit s at t heir nominal amount s. These are calculat ed based on remunerat ion rat es expect ed...

  • Page 130
    ... apply management judgment in est imat ing t he follow ing key assumpt ions used in t he calculat ion of our long service leave provision at report ing dat e w eight ed average project ed increases in salaries; w eight ed average discount rat e; and leave t aking rat e. 2.16 Share capit al Issued...

  • Page 131
    ... (act ual labour hours / planned labour hours) x planned revenue for labour int ensive project s; and short durat ion project s are t hose t hat are expect ed t o be complet ed wit hin a mont h and revenues and cost s are recognised on complet ion. All of our Yellow Pages® and Whit e Pages® direct...

  • Page 132
    ...hin t he group. We record our revenue, expenses and asset s net of any applicable goods and services t ax (GST), except w here t he amount of GST incurred is not recoverable from t he Aust ralian Taxat ion Office (ATO). In t hese circumst ances t he GST is recognised as part of t he cost of acquisit...

  • Page 133
    ...as a result of employ ee services provided. (b) Defined benefit plans We current ly sponsor a number of post -employ ment benefit plans. As t hese plans have element s of bot h defined cont ribut ion and defined benefit , t hese hy brid plans are t reat ed as defined benefit plans. At report ing dat...

  • Page 134
    ...values or cash flows of hedged it ems. Purchases and sales of derivat ive financial inst rument s are recognised on t rade dat e being t he dat e on w hich w e commit t o purchase or sell an asset . (i) Fair value hedges We use fair value hedges t o mit igat e t he risk of changes in t he fair value...

  • Page 135
    ... fut ure cash flows using an appropriat e market based y ield curve, w hich is independent ly derived and represent at ive of Telst ra's cost of borrow ing. The net fair values of our list ed invest ment s are det ermined by reference t o prices quot ed on t he relevant st ock exchanges w here t he...

  • Page 136
    ...2007. IFRIC 14 aims t o clarify how t o det ermine in normal circumst ances t he limit on t he asset t hat an employ er's balance sheet may cont ain in respect of it s defined benefit pension plan. IFRIC 14 is applicable for annual report ing periods beginning on or aft er 1 January 2008. Management...

  • Page 137
    ... under Telst ra Grow t hshare Trust (Grow t hshare); incent ive shares grant ed under t he Grow t hshare short t erm incent ive scheme; and share opt ions issued under Telst ra Employ ee Share Ow nership Plan I (TESOP97). In fiscal 2007 and fiscal 2006, t he follow ing equit y inst rument s are...

  • Page 138
    ... it ies Notes to the Financial Statements (continued) 4. Dividends Telstra Entity Year ended 30 June 2007 2006 $m $m Note Dividends paid Previous y ear final dividend paid ...Previous y ear special dividend paid w it h t he final Int erim dividend paid ...Special dividend paid wit h t he int erim...

  • Page 139
    ... ies Notes to the Financial Statements (continued) 4. Dividends (continued) Telstra Entity Year ended 30 June 2007 2006 $m $m The combined amount of exempting and franking credits available to us for the next fiscal year are: Combined exempt ing and franking account balance (a) ...Franking credit...

  • Page 140
    ... s port al t hrough t he invest ment in SouFun. Telstra International (TInt.) consist s of t he follow ing offshore business operat ions: • CSL New World is a 76.4% ow ned subsidiary in Hong Kong responsible for providing full mobile services including handset sales, voice and dat a product...

  • Page 141
    ... rol of our consumer ret ail Int ernet product s, cont act cent res, and online and mobile cont ent services. Telstra Media is responsible for: • • t he management of our invest ment in t he FOXTEL part nerships; and t he development and management of t he hy brid fibre coaxial (HFC) cable...

  • Page 142
    ...Aust ralian and non-Aust ralian businesses, at market value. For segment report ing purposes, t ransfer pricing is not used w it hin t he Company . As such t he int er-segment revenue line purely relat es t o int ercompany revenue. The Asset Account ing Group does not allocat e depreciat ion expense...

  • Page 143
    ... $m 23,709 23,709 5,725 (7) 61 5,779 Revenue from ext ernal customers . Add int er-segment revenue ...Total segment revenue ...Segment result ...Share of equit y account ed net (losses)/profit s ...Less net gain on sale of invest ment s Earnings before interest and income tax expense (EBIT) Segment...

  • Page 144
    ... Sensis $m TInt. $m TO $m Other Elimina(a) tions $m $m Total $m Revenue from ext ernal customers . Add int er-segment revenue ...Total segment revenue ...Segment result ...Share of equit y account ed net (losses)/profit s ...Less net gain on sale of invest ment s Earnings before interest and income...

  • Page 145
    ... and cont rolled ent it ies Notes to the Financial Statements (continued) 5. Segment information (continued) Telstra Group Year ended 30 June 2007 2006 $m $m Information about our geographic operations (i) Segment revenue from external customers Aust ralian cust omers ...Int ernat ional cust omers...

  • Page 146
    ...ed and cont rolled ent it ies Notes to the Financial Statements (continued) 6. Income Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note Sales revenue Rendering of services ...Sale of goods ...Rent of net work facilit ies ...Const ruct ion cont...

  • Page 147
    ...are t he follow ing: Employ ee redundancy (b) ...Share based pay ment s ...21 Defined benefit plan expense...28 Goods and services purchased Included in our goods and services purchased are t he follow ing: Cost of goods sold ...Rent al expense on managed services ...Other expenses Impairment losses...

  • Page 148
    ... (continued) Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note (a) Profit before income tax expense has been calculated after charging/(crediting) the following items: (continued) Depreciation of property, plant and equipment (b) - general...

  • Page 149
    ... ems is relevant in explaining our financial performance. Our profit for t he y ear has been calculat ed aft er charging specific expense it ems as det ailed below : Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note Redundancy and restructuring...

  • Page 150
    ... are eliminat ed on consolidat ion for Telst ra Group report ing purposes. Each fiscal y ear, w e review t he value of our invest ment in cont rolled ent it ies. As a result , w e have incurred an impairment loss by assessing t he carry ing value of our cont rolled ent it y w it h it s recoverable...

  • Page 151
    ... t ee via bi-annual report s t o t he Audit Commit t ee. In addit ion, w here engagement s involve services from t he defined list of services, t hese are report ed t o t he Audit Commit t ee at t he following meet ing. (iii) Audit relat ed fees charged by EY are for services t hat are reasonably...

  • Page 152
    ... ed and cont rolled ent it ies Notes to the Financial Statements (continued) 9. Income taxes Telstra Group As at 30 June 2007 2006 $m $m Major components of income tax expense Current t ax expense...Deferred t ax result ing from t he originat ion and reversal of t emporary differences ...Under...

  • Page 153
    ...taxes (continued) Telstra Group As at 30 June 2007 2006 $m $m Deferred tax asset/(deferred tax liability) Deferred tax items recognised in income statement Propert y , plant and equipment ...Int angible asset s...Provision for employ ee ent it lement s ...Revenue received in advance ...Provision for...

  • Page 154
    ...it ies Notes to the Financial Statements (continued) 9. Income taxes (continued) Telstra Group As at 30 June 2007 2006 $m $m Deferred tax assets not recognised in the balance sheet (a): Income t ax losses ...Capit al t ax losses ...Deduct ible t emporary differences ...Telstra Entity As at 30 June...

  • Page 155
    ... ent it ies Notes to the Financial Statements (continued) 10. Cash and cash equivalents Telstra Group As at 30 June 2007 2006 $m $m Current Cash at bank and on hand ...Bank deposit s, bills of exchange and commercial paper (a) ...Telstra Entity As at 30 June 2007 2006 $m $m 241 582 823 238 451...

  • Page 156
    ... ed and cont rolled ent it ies Notes to the Financial Statements (continued) 11. Trade and other receivables Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Current Trade receivables (a) ...Allowance for doubt ful debt s (a) ... 2,917 (161) 2,756 46...

  • Page 157
    ... repay t he cost of t heir mobile handset and approved accessories mont hly over 12, 18 or 24 mont hs. The loan is provided int erest free t o our mobile post paid cust omers. Similarly , t he Whit e Pages®direct ory ent ries can be repaid over 12 mont hs. Trade receivables have been aged according...

  • Page 158
    ...value of minimum lease pay ment s Telstra Entity As at 30 June 2007 2006 $m $m ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 55 99 154 (18) 136 40 51 91 (12) 79 55 99 154 (18) 136 40 51 91 (12) 79 Included in the financial statements...

  • Page 159
    ... it ies Notes to the Financial Statements (continued) . 12. Inventories Telstra Group As at 30 June 2007 2006 $m $m Current Finished goods recorded at cost ...Finished goods recorded at net realisable value ...Tot al finished goods ...Telstra Entity As at 30 June 2007 2006 $m $m 155 133 288 31...

  • Page 160
    ... to the Financial Statements (continued) 13. Investments Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Investments - accounted for using the equity method Invest ment s in joint ly cont rolled ent it ies ...Allowance for impairment in value ...Carry...

  • Page 161
    ...ent it ies Notes to the Financial Statements (continued) 14. Property, plant and equipment Telstra Group As at 30 June 2007 2006 $m $m Land and site improvements At cost ...Buildings (including leasehold improvements) At cost ...Accumulat ed depreciat ion/impairment ...Telstra Entity As at 30 June...

  • Page 162
    ... it ies Notes to the Financial Statements (continued) 14. Property, plant and equipment (continued) Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note Land and site improvements Opening cost ...- disposals...Closing cost ...Buildings (including...

  • Page 163
    ...Notes to the Financial Statements (continued) 14. Property, plant and equipment (continued) Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note Communication assets (including leasehold improvements) (a) Opening cost ...- addit ions...- disposals...

  • Page 164
    ... Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended 30 June 2007 2006 $m $m Note Other plant, equipment and motor vehicles Opening cost ...- addit ions...- disposals...- acquisit ions t hrough business combinat ions - foreign currency exchange differences ...- ot her ...Closing cost...

  • Page 165
    ... ed and cont rolled ent it ies Notes to the Financial Statements (continued) 15. Intangible assets Telstra Group As at 30 June 2007 2006 $m $m Goodwill ...Internally generated intangible assets Soft ware asset s developed for int ernal use (a) ...Accumulat ed amort isat ion ...Acquired intangible...

  • Page 166
    ... (continued) Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Goodwill Opening cost ...- acquisit ions t hrough business combinat ions - disposals...- impairment losses ...- foreign currency exchange differences ...- ot her ...Closing cost ...Internally...

  • Page 167
    ... assets (continued) Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Acquired intangible assets Patents and trademarks Opening cost ...- addit ions...- disposals...- foreign currency exchange differences - ot her ...Closing cost ...Opening accumulated...

  • Page 168
    ...) Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Customer bases Opening cost ...- addit ions...- disposals...- acquisit ions t hrough business combinat ions - foreign currency exchange differences ...- ot her ...Closing cost ...Opening accumulated...

  • Page 169
    ... ed and cont rolled ent it ies Notes to the Financial Statements (continued) 15. Intangible assets (continued) Telstra Group As at 30 June 2007 2006 $m $m Deferred expenditure (c) Opening cost ...- addit ions...- amount s w rit t en off . - ot her ...Closing cost ...Telstra Entity As at 30 June...

  • Page 170
    ... cont rolled ent it ies Notes to the Financial Statements (continued) 16. Derivative financial assets Telstra Group As at 30 June 2007 2006 $m $m Current Cross currency swap hedge receivable ...Forward cont ract asset ...Telstra Entity As at 30 June 2007 2006 $m $m 38 3 41 20 1 21 38 3 41 20...

  • Page 171
    ...and cont rolled ent it ies Notes to the Financial Statements (continued) 17. Trade and other payables Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Current Trade creditors (a) ...Accrued expenses ...Accrued capit al expendit ure ...Accrued int erest...

  • Page 172
    ... ed and cont rolled ent it ies Notes to the Financial Statements (continued) 18. Borrowings Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note Current Short term debt Bank loans ...Promissory not es (a) ...Loans from w holly ow ned cont rolled ent it ies...

  • Page 173
    ... As at 30 June 2007 2006 Aust ralian dollar loans ...US dollar loans...Euro eurobond loan ...Sw iss franc eurobond loan...Japanese y en loans ...Singapore dollar loans ...New Zealand dollar loans ...Brit ish pound st erling loans ...Tot al offshore loans including current port ion (d) Financing...

  • Page 174
    ... of amount s for annual leave and long service leave accrued by employ ees. Non current employ ee benefit s for long service leave are measured at t heir present value. The follow ing assumpt ions w ere adopt ed in measuring t his amount : Telstra Group As at 30 June 2007 2006 Telstra Entity As at...

  • Page 175
    ... employ ee benefit s Telstra Group Year ended 30 June 2007 2006 $m $m Workers' compensation Opening balance ...- addit ional provisions ...- amount used ...- unwinding of discount on liabilit ies recognised at present - effect of any change in t he discount rat e ...Closing balance ...Restructuring...

  • Page 176
    ...rolled ent it ies do not self insure, but pay annual premiums t o t hird part y insurance companies for t heir w orkers' compensat ion. Rest ...lease cost s; and cost s of replacing cust omer equipment in order t o meet our current service obligat ions. The execut ion of t hese det ailed formal plans...

  • Page 177
    ...ies Notes to the Financial Statements (continued) 20. Derivative financial liabilities Telstra Group As at 30 June 2007 2006 $m $m Current Cross currency swap hedge pay able...Forward cont ract liabilit y ...Int erest rat e swap pay able ...Telstra Entity As at 30 June 2007 2006 $m $m 165 9 3 177...

  • Page 178
    ... to the Financial Statements (continued) 21. Share capital Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m 5,793 (113) (84) 15 5,611 Cont ribut ed equit y ...Share loan to employ ees...Shares held by employ ee share plan t rust s ...Net services received...

  • Page 179
    ... Opening balance...- addit ional shares purchased ...- shares issued t o employ ees under employ ee share plans. Closing balance ...Net services received under employee share plans Opening balance...- share based pay ment expense ...- shares issued t o employ ees under employ ee share plans. Closing...

  • Page 180
    ... financial st at ement s int o Aust ralian dollars. This reserve is also used t o record our percent age share of exchange differences arising from equit y account ing our non-Aust ralian invest ment s in joint ly cont rolled ent it ies and associat ed ent it ies. Cash flow hedging reserve The cash...

  • Page 181
    ... of ow nership of Telst ra CSL Limit ed ...24 Closing balance ...Cash flow hedging reserve Opening balance...- adjust ment t o opening balance on adopt ion of new account ing st andard (i) ...Adjust ed opening balance ...- net hedging (losses)/gains recognised direct ly in equit y ...- net hedging...

  • Page 182
    ... he act uarial gain on defined benefit plans ...- dividends paid ...- t ransfers from consolidat ion fair value reserve ...- dilut ion gain recognised on CSL New World Mobilit y Group merger (ii) ...Closing balance ...(i) Adjust ment on adopt ion of AASB 132 " Financial Inst rument s: Disclosure and...

  • Page 183
    ...Finance cost s ...Dividend revenue ...Share based pay ment s ...Defined benefit plan expense...Net gain on disposal of propert y , plant and equipment ...Net gain on disposal of int angibles ...Net gain on disposal of cont rolled ent it ies...Net gain on disposal of ot her invest ment s...Share of...

  • Page 184
    ...to the Financial Statements (continued) 24. Notes to the cash flow statement (continued) (c) Significant financing and investing activities that involve components of non cash Acquisition of assets by means of finance leases Telstra Group Year ended 30 June 2007 2006 $m $m Telstra Entity Year ended...

  • Page 185
    ... primarily based on t he final w orking capit al posit ion of t he New World Mobilit y Group at t he complet ion dat e. The net impact of t he merger on t he Telst ra Group result s, including t he adjust ment t o t he subscript ion amount in fiscal 2007, are det ailed below . Telstra Group $m 2006...

  • Page 186
    ...ing fact ors cont ribut ed t o t he recognit ion of goodw ill forecast revenues and profit abilit y of t he acquired ent it ies; cost sy nergies expect ed by combining our current operat ions w it h t he acquired ent it ies; and st rat egic benefit s t o t he operat ions of t he Telst ra Group. We...

  • Page 187
    ... of t he Trading Post business also included t he Trading Post mast heads and propert y , plant and equipment direct ly at t ribut able t o t he CGU. During t he y ear, as t he financial and operat ional funct ions of t he Trading Post business w ere int egrat ed int o t he Sensis Group, t he goodw...

  • Page 188
    ...of increasing compet it ion in t he t radit ional print classifieds market , challenges in t he highly compet it ive on-line classified market and t he risks associat ed w it h new init iat ives. As a result of t he impairment , t he carry ing value of t he Trading Post mast heads at 30 June 2007 is...

  • Page 189
    ... to the Financial Statements (continued) 26. Expenditure commitments Telstra Group As at 30 June 2007 2006 $m $m (a) Capital expenditure commitments Tot al capit al expendit ure commit ment s cont ract ed for at recorded in t he financial st at ement s: Property, plant and equipment commitments Wit...

  • Page 190
    ... (continued) Telstra Group As at 30 June 2007 2006 $m $m Telstra Entity As at 30 June 2007 2006 $m $m Note (c) Finance lease commitments Wit hin 1 y ear ...Wit hin 1 to 5 y ears...Aft er 5 y ears ...Tot al minimum lease pay ment s ...Fut ure finance charges on finance leases ...Present value of net...

  • Page 191
    ... ed and cont rolled ent it ies Notes to the Financial Statements (continued) 26. Expenditure commitments (continued) Telstra Group As at 30 June 2007 2006 $m $m (d) Other commitments Ot her expendit ure commit ment s, ot her t han commit ment s dealt w it h in (a), (b) and (c) above, w hich have...

  • Page 192
    ... Telst ra's compet it ors' equipment in Telst ra's exchanges allow ing t hem t o provide voice and broadband services t o ret ail cust omers. Once connect ed, no Telst ra services can be provided over t he ULLS. The ACCC has indicat ed t hat Telst ra should charge different prices in different areas...

  • Page 193
    ... he High Court for hearing, expect ed in November 2007. Indemnities, performance guarantees and financial support During fiscal 1998, w e resolved t o provide IBM Global Services Aust ralia Limit ed (IBMGSA) w it h guarant ees issued on a several basis up t o $210 million as a shareholder of IBMGSA...

  • Page 194
    ... ing t o PCCW's US$25 million share of t he w orking capit al facilit y . ASIC deed of cross guarantee A list of t he companies t hat are part of our deed of cross guarant ee appear in not e 29. Each of t hese companies (except Telst ra Finance Limit ed) guarant ees t he pay ment in full of t he...

  • Page 195
    ... ra Super are closed t o new members. The defined benefit divisions provide benefit s based on y ears of service and final average salary . Post employ ment benefit s do not include pay ment s for medical cost s. Cont ribut ion levels made t o t he defined benefit divisions are designed t o ensure...

  • Page 196
    ... Notes to the Financial Statements (continued) 28. Post employment benefits (continued) (a) Net defined benefit plan asset - historical summary Our net defined benefit plan asset recognised in t he balance sheet for t he current and previous periods is det ermined as follow s: Telstra Group As at...

  • Page 197
    ...ed and cont rolled ent it ies Notes to the Financial Statements (continued) 28. Post employment benefits (continued) (b) Amounts recognised in the income statement and in equity Telstra Group Year ended 30 June 2007 2006 $m $m The components of defined benefit plan expense recognised in the income...

  • Page 198
    ... the Financial Statements (continued) 28. Post employment benefits (continued) (c) Categories of plan assets The w eight ed average asset allocat ion by major asset cat egory as a percent age of t he fair value of t ot al plan asset s as at 30 June are as follow s: Telstra Super As at 30 June 2007...

  • Page 199
    ... to the Financial Statements (continued) 28. Post employment benefits (continued) (d) Reconciliation of change in fair value of plan assets Telstra Group As at 30 June 2007 2006 $m $m Fair value of defined benefit plan assets at beginning of year Expect ed ret urn on plan asset s ...Employ er cont...

  • Page 200
    ...Notes to the Financial Statements (continued) 28. Post employment benefits (continued) (f) Principal actuarial assumptions We used t he follow ing major assumpt ions t o det ermine our defined benefit plan expense for t he y ear ended 30 June: Telstra Super Year ended 30 June 2007 2006 % % HK CSL...

  • Page 201
    ... Financial Statements (continued) 28. Post employment benefits (continued) (g) Employer contributions Telstra Super In accordance w it h our funding deed w it h t he t rust ee of Telst ra Super, w e are required t o make fut ure employ er pay ment s t o Telst ra Super in relat ion t o t he defined...

  • Page 202
    ...it ies Notes to the Financial Statements (continued) 28. Post employment benefits (continued) (h) Net financial position of plan The financial posit ion of t he defined benefit divisions of Telst ra Super (including defined benefit members' t ot al volunt ary account balances) and t he HK CSL Ret...

  • Page 203
    ... Pt y Lt d ...Telst ra Media Pt y Limit ed ...Telst ra Mult imedia Pt y Limit ed (a) ...Telst ra Int ernat ional Limit ed (a) ...Telst ra New Wave Pt y Lt d ...Telst ra Pay TV Pt y Lt d (a)...Hy pertokens Pt y Lt d ...Hy permax Holdings Pt y Lt d ...Chief Ent ert ainment Pt y Lt d ...Dat a & Text...

  • Page 204
    ... Telecommunicat ions Technical Consult ing Services Company Limit ed (c) ...• Telst ra Holdings (Bermuda) No. 2 Limit ed ...• CSL New World Mobilit y Limit ed ...• Best class Holdings Lt d ...• Hong Kong CSL Limit ed ...• Int egrat ed Business Sy st ems Limit ed ...• One2Free PersonalCom...

  • Page 205
    ... ...• Cordoba Holdings Lt d ...• London Host ing Cent re Lt d ...• Telst ra Inc ...• Telst ra India (Privat e) Limit ed (c) ...• Telst ra Limit ed ...• Telst ra New Zealand Holdings Limit ed ...• Telst raClear Limit ed ...• Telst raSat urn Holdings Limit ed...• Sy t ec Resources Lt...

  • Page 206
    ... y Lt d (a) (h)...• Plat efood Limit ed (h) ...• Just List ed Pt y Limit ed (a) ...• Research Resources Pt y Lt d ...• Queensland Trading Post Pt y Lt d (b) ...• Trading Post Market ing (Qld) Pt y Lt d (b) . . • Trading Post on t he Net Pt y Lt d (b)...• Cit y Search Aust ralia Pt y Lt...

  • Page 207
    ...) Pt y Lt d; Trading Post Aust ralia Pt y Limit ed; Universal Publishers Pt y Limit ed; Invizage Pt y Lt d *; Sensis Holdings Pt y Lt d *; Telst ra Pay TV Pt y Limit ed *; and Telst ra Business Sy st ems Pt y Limit ed *. The consolidat ed income st at ement and balance sheet of t he closed group is...

  • Page 208
    ... s - account ed for using t he equit y met hod Invest ment s - ot her ...Propert y , plant and equipment ...Int angible asset s...Deferred t ax asset s ...Derivat ive financial asset s...Defined benefit asset s ...Tot al non current asset s ...Total assets...Current liabilities Trade and ot her pay...

  • Page 209
    ... the financial year available to the closed group Act uarial gain on defined benefit plans (net of t ax effect ) ...Effect on ret ained earnings from removal of ent it ies from t he closed group ...Effect on ret ained earnings from addit ion of new ent it ies t o t he closed group...Total available...

  • Page 210
    ...t herefore w e have consolidat ed t he financial result s, posit ion and cash flows of t hese ent it ies int o our group financial report . • We ow n 50% of t he issued capit al of Telecom Aust ralia (Saudi) Company Limit ed. We can exercise cont rol over t he Board of Direct ors of t his ent it...

  • Page 211
    ... Financial Statements (continued) 29. Investments in controlled entities (continued) (f) New incorporations and business combinations • On 25 August 2006, we est ablished a new ent it y named Telst ra Int ernat ional Holdings Limit ed. This ent it y is t he holding company for t he SouFun group...

  • Page 212
    ... ed in New Zealand) (f ) (i) Pay t elevision Pay t elevision Customer service Management services Pay t elevision Int ernat ional connect ivit y services Toll free number port abilit y in New Zealand Financial advice and Money Solut ions Pt y Lt d (b) educat ion services Business process Enhanced...

  • Page 213
    ... Telstra Group Year ended 30 June 2007 2006 $m $m Net (loss)/profit from jointly controlled and associated entities has been contributed by the following entities: Jointly controlled entities (b) Sale of investments • On 31 August 2006, our cont rolled ent it y KAZ Group Pt y Limit ed sold...

  • Page 214
    ...entities Telstra Group Year ended/As at 30 June 2007 2006 $m $m 2 1 3 (1) (1) 1 Associated entities Telstra Group Year ended/As at 30 June 2007 2006 $m $m 21 1 22 (7) (7) (7) 15 Note Carrying amount of investments at beginning of year ...Addit ional invest ment s made during t he y ear ... Share of...

  • Page 215
    ...): Jointly controlled entities Telstra Group Year ended/As at 30 June 2007 2006 $m $m Associated entities Telstra Group Year ended/As at 30 June 2007 2006 $m $m 85 289 374 42 505 547 (173) 99 130 (31) (1) (30) Current asset s ...Non current asset s...Tot al asset s ...Current liabilit ies ...Non...

  • Page 216
    ... t he invest ment is recorded at zero due t o losses made by t hese ent it ies and/or reduct ions in t he equit y account ed carry ing amount , is show n below : Telstra Group Year ended 30 June Period Cumulative Period Cumulat ive 2007 2007 2006 2006 $m $m $m $m Jointly controlled entities FOXTEL...

  • Page 217
    ...ed and cont rolled ent it ies Notes to the Financial Statements (continued) 31. Employee share plans The Company has a number of employ ee share plans t hat are available for direct ors, execut ives and employ ees. These include: • • t hose conduct ed t hrough t he Telst ra Grow t hshare Trust...

  • Page 218
    ... on t he rat ionalisat ion of t he number of business support sy st ems (BSS) and operat ional support sy st ems (OSS) used by companies in t he Telst ra Group; and ret urn on invest ment (ROI) performance right s - are based on an increase in t he earnings before int erest and t ax for Telst ra...

  • Page 219
    ... (i) Nature of share plans (continued) TSR opt ions For TSR opt ions allocat ed in fiscal 2007, t he applicable performance hurdle is based on t he market value of Telst ra shares and t he value of any ot her benefit s paid or made available t o Telst ra shareholders, including dividends. There are...

  • Page 220
    ...allocat ions of TSR performance right s, t he applicable performance hurdle is based on t he market value of Telst ra shares and t he value of accumulat ed dividends paid t o Telst ra shareholders. TSR performance right s vest if Telst ra's t ot al shareholder ret urn exceeds cert ain t arget s over...

  • Page 221
    ... it ies Notes to the Financial Statements (continued) 31. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (ii) Performance hurdles (continued) ROI performance right s For t he allocat ion of ROI performance right s, if t he ret urn on invest ment is: • equal t o t he...

  • Page 222
    ... on invest ment 24.5% ret urn on invest ment (a) The applicable performance hurdle is based on t he market value of Telst ra shares and t he value of any ot her benefit s paid or made available t o Telst ra shareholders, including accumulat ed dividends paid. This has been set by t he Board. 219

  • Page 223
    ... Notes to the Financial Statements (continued) 31. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (iii) Summary of movements and other information Number of equity instruments Outstanding at 30 June 2006 Grow t hshare 2002 - Sept 2001 allocat ion Granted 7,677,589 5,758...

  • Page 224
    ...Financial Statements (continued) 31. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (iii) Summary of movements and other information (continued) Number...ion of deferred shares respect ively . These share prices were based on t he closing market price on t hose dat es. 221

  • Page 225
    ...ed deferred shares aft er a specified service period. (*) The exercise price w as communicat ed t o Telst ra shareholders at t he Annual General Meet ing held on 14 November 2006 and is based on t he five day volume w eight ed average share price aft er t he release of our 2006 annual result s on 10...

  • Page 226
    ... calculat ed using an opt ion pricing model t hat t akes int o account various fact ors, including t he exercise price and expect ed life of t he inst rument , t he current price of t he underly ing share and it s expect ed volat ilit y , expect ed dividends, t he risk-free rat e for t he expect ed...

  • Page 227
    ... e of allocat ion of t he shares; t he part icipat ing direct or is no longer a direct or of, or is no longer employ ed by , a company in t he Telst ra Group; or t he Board of Telst ra det ermines t hat an 'event ' has occurred. Share price ...Risk free rat e ...Dividend y ield ...Expect ed st ock...

  • Page 228
    ...330) (723,917) 256,372 175,130 419,462 231,319 393,244 177,596 1,653,123 (i) The number of direct shares or ownshares grant ed is based on t he w eight ed average price of a Telst ra share in t he w eek ending on t he day before grant dat e, in conjunct ion w it h t he remunerat ion foregone. (ii...

  • Page 229
    ... ees short t erm incent ive pay ment s and t he 27 Oct ober 2006 grant relat es t o shares acquired t hrough salary sacrifice by employ ees. The w eight ed average fair value of fully paid shares grant ed t o direct ors and execut ives under t he direct share and ownshare plans as at 30 June 2007...

  • Page 230
    ... ...Equity instruments outstanding and exercisable as at 30 June 2007 ... (i) The fair value of t hese shares is based on t he market value of Telst ra shares at balance dat e and exercise dat e. The employ ee share loan balance as at 30 June 2007 is $113 million (2006: $130 million). The w eight ed...

  • Page 231
    ...; and cert ain execut ives in t he Chief Execut ive Officer's (CEO's) senior leadership t eam, referred t o as a 'senior execut ive' in t his report . Directors During fiscal 2007 and fiscal 2006, t he Direct ors' of t he Telst ra Ent it y w ere: Name Current Directors Position Donald G McGauchie...

  • Page 232
    ...our KMP w as: Telstra Group As at 30 June 2007 $ Telstra Entity As at 30 June 2007 $ 21,956,239 2,635,944 282,500 484,757 12,002,388 37,361,828 2006 $ 2006 $ Short t erm employ ee benefit s Post employ ment benefit s . . Ot her long t erm benefit s...Terminat ion benefit s ...Share based pay ment...

  • Page 233
    ...ent it ies Notes to the Financial Statements (continued) 32. Key management personnel compensation (continued) KMP interests in shares of Telstra Entity During fiscal 2007, our KMP and t heir relat ed ent it ies held share capit al of t he Telst ra Ent it y direct ly , indirect ly or beneficially...

  • Page 234
    ... ent it ies Notes to the Financial Statements (continued) 32. Key management personnel compensation (continued) KMP interests in shares of Telstra Entity (continued) During fiscal 2006, our KMP and t heir relat ed ent it ies held share capit al of t he Telst ra Ent it y direct ly , indirect ly or...

  • Page 235
    ... it ies Notes to the Financial Statements (continued) 32. Key management personnel compensation (continued) KMP interests in equity instruments of Telstra Entity The follow ing det ails t he balances and changes in inst rument s issued for our KMP during fiscal 2007. Vested and exercisable at 30...

  • Page 236
    ... ent it ies Notes to the Financial Statements (continued) 32. Key management personnel compensation (continued) KMP interests in equity instruments of Telstra Entity (continued) The follow ing det ails t he balances and changes in inst rument s issued for our KMP during fiscal 2006. Instrument...

  • Page 237
    ... ed incent ive shares are exercised. Equity instruments held by the former chief executive officer Dr Sw it kow ski ceased employ ment w it h t he Company effect ive 1 July 2005. The number of equit y inst rument s held by Dr Sw it kow ski at t he dat e of leaving office w ere: Holding as at 1 July...

  • Page 238
    ... at ement and balance sheet are as follow s: Telstra Group Year ended/As at 30 June 2007 2006 $m $m Telstra Entity Year ended/As at 30 June 2007 2006 $m $m Note Income from controlled entities: Sale of goods and services (a) ...Finance income (a) ...Dividend revenue (b) ...6 Expenses to controlled...

  • Page 239
    ...ies, being an int ernal group bank account used t o set t le t ransact ions w it h it s cont rolled ent it ies or bet w een t w o cont rolled ent it ies. Cash deposit balances in t he current account ow ed t o our cont rolled ent it ies are recorded as loans. All loan balances w it h our cont rolled...

  • Page 240
    ... ent it y Reach Lt d (Reach) in line w it h market prices. These w ere for bot h t he purchase of, and ent it lement t o, capacit y and connect ivit y services; and sales t o Reach w ere made for int ernat ional inbound call t erminat ion services, const ruct ion and consult ancy by t he Telst ra...

  • Page 241
    ... ion Limit ed. As at 30 June 2007, Telst ra Super holds bonds w it h a cost of $6 million (2006: $9 million) and a market value of $6 million (2006: $9 million). All purchases and sales of Telst ra shares and bonds by Telst ra Super are det ermined by t he t rust ee and/or it s invest ment managers...

  • Page 242
    ... face values of our financial asset s and financial liabilit ies. Our gearing rat ios and net int erest on borrow ings are also provided. Sect ion (b) addresses in more det ail t he key financial risk fact ors t hat arise from our act ivit ies, including our policies for managing t hese risks. Sect...

  • Page 243
    ...erest rat e swap pay able * ...Forward cont ract liabilit y * ...Financial liabilit ies - non current Ot her credit ors ...Deferred considerat ion for capit al expendit ure ...Telst ra bonds and domest ic loans * ...Offshore loans * ...Finance leases * ...Cross currency hedge pay able * ...Int erest...

  • Page 244
    ... to the Financial Statements (continued) 34. Financial and capital risk management (continued) (a) Financial assets, financial liabilities and gearing (continued) Table B Telstra Entity As at 30 June 2007 As at 30 June 2006 Carrying Face Carrying Face Fair value amount value amount Fair value value...

  • Page 245
    ... port folio is carried at fair value w it h t he remaining part at amort ised cost . Refer t o not e 2.14 for furt her informat ion. Market risk is t he risk t hat t he fair value or fut ure cash flow s of our financial inst rument s w ill fluct uat e because of changes in market prices. Component...

  • Page 246
    ... Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Market risk (continued) (i) Int erest rat e risk (cont inued) Our debt is sourced from a number of financial market s covering domest ic and offshore, short t erm and long...

  • Page 247
    ... cont rolled ent it ies Notes to the Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Market risk (continued) (i) Int erest rat e risk (cont inued) The exposure t o int erest rat e changes and t he cont ract ual repricing...

  • Page 248
    ...the Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Market risk (continued) Accordingly , apart from some finance leases, bank deposit s and foreign borrow ings / cross currency sw aps used t o hedge our net foreign invest...

  • Page 249
    ... rolled ent it ies Notes to the Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Market risk (continued) (i) Int erest rat e risk (cont inued) Table H As at 30 June 2007 Interest rate range Average (a) % Australian dollar...

  • Page 250
    ... t wo fact ors part ially offset each ot her as t he ineffect ive component result s in a gain and t he increase in finance cost s result s in an increase in expense. Telstra Group Finance costs Year ended 30 June 2007 2006 $m $m Net profit As at 30 June 2007 2006 $m $m Equity (Cash flow hedging...

  • Page 251
    ...ies Notes to the Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Market risk (continued) (ii) Foreign currency risk Foreign currency risk refers t o t he risk t hat t he value of a financial commit ment , recognised asset...

  • Page 252
    ... the Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Market risk (continued) Sensit ivit y analy sis (cont inued) For t he Telst ra Group, our foreign currency t ranslat ion risk associat ed w it h our foreign invest ment...

  • Page 253
    ... market s; and have a liquidit y port folio st ruct ure t hat requires surplus funds t o be invest ed w it hin various bands of liquid inst rument s ranging from ult ra liquid, highly liquid and liquid inst rument s. Table M Telstra Entity Credit risk concentrations (VAR based) As at 30 June 2007...

  • Page 254
    ...Telst ra bonds and domest ic loans ...Bank loans ...Offshore loans ...Finance leases ...Promissory not es ...Deferred considerat ion for capit al expendit ure Non derivat ive financial asset s Bank deposit s w it h mat urit y great er t han 90 day s ...Bills of exchange and commercial paper . . (38...

  • Page 255
    ... the Financial Statements (continued) 34. Financial and capital risk management (continued) (b) Risks and mitigation (continued) Liquidity risk (continued) Table O Telstra Entity As at 30 June 2007 As at 30 June 2006 Contractual maturity (nominal cash flows) Contractual maturity (nominal cash flows...

  • Page 256
    ...as a result of exchange rat e movement s. We also ent ered int o forward foreign currency cont ract s as cash flow hedges t o hedge forecast t ransact ions denominat ed in foreign currency w hich hedge foreign currency risk arising from spot rat e changes. The hedged it ems comprised highly probable...

  • Page 257
    ...or t o propert y , plant and equipment during t he y ear. Refer t o Table Q, Table R and Table S for t he value of our derivat ives designat ed as cash flow hedges. Table P Nominal cash outflows Telstra Group Telstra Entity As at 30 June As at 30 June 2007 2006 2007 2006 $m $m $m $m Highly probable...

  • Page 258
    ... at 30 June 2007 2006 2007 2006 $m $m $m $m Cross currency swaps Current Cross currency swaps - designat ed cash flow hedges of offshore loans (i) ...Cross currency swaps - designat ed fair value hedges of offshore loans ...Cross currency swaps - designat ed hedge of net foreign invest ment ...Non...

  • Page 259
    ...R Telstra Group Assets Liabilities As at 30 June As at 30 June 2007 2006 2007 2006 $m $m $m $m Telstra Entity Assets Liabilities As at 30 June As at 30 June 2007 2006 2007 2006 $m $m $m $m Interest rate swaps Current Int erest rat e swaps - designat ed cash flow hedges of offshore loans (i) ...Int...

  • Page 260
    ...Notes to the Financial Statements (continued) 34. Financial and capital risk management (continued) (c) Derivative financial instruments and hedging activities (continued) Derivat ive hedging inst rument s (cont inued) The fair value of our net Aust ralian dollar amount s receivable/ pay able, set...

  • Page 261
    ... e of our affairs; ot her t han: Dividend declarat ion On 9 August 2007, t he direct ors of Telst ra Corporat ion Limit ed declared a fully franked final dividend of 14 cent s per ordinary share. The record dat e for t he final dividend w ill be 24 August 2007 w it h pay ment being made on 21 Sept...

  • Page 262
    ...s, not es and addit ional disclosures included in t he Direct ors' Report designat ed as audit ed, of t he Telst ra Ent it y and t he Telst ra Group set out on pages 114 t o 258 of Telst ra Corporat ion Limit ed and t he Telst ra Group: (i) comply w it h t he Account ing St andards and Corporat ions...

  • Page 263
    ...Int ernat ional Account ing St andards Board. The direct ors are also responsible for t he remunerat ion disclosures cont ained in t he Direct ors' Report . Audit or's Responsibilit y Our responsibilit y is t o express an opinion on t he financial report based on our audit . We conduct ed our audit...

  • Page 264
    Telst ra Corporat ion Limit ed and cont rolled ent it ies (This page has been left blank intent ionally ) 261

  • Page 265
    Telst ra Corporat ion Limit ed and cont rolled ent it ies (This page has been left blank intent ionally ) 262

  • Page 266
    Telst ra Corporat ion Limit ed and cont rolled ent it ies (This page has been left blank intent ionally ) 263

  • Page 267
    Telst ra Corporat ion Limit ed and cont rolled ent it ies (This page has been left blank intent ionally ) 264

  • Page 268
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  • Page 269
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