Telstra 2007 Annual Report Download - page 193

Telstra Corporation Limited and controlled entities
190
Notes to the Financial Statements (continued)
Telstra Entity (continued)
Unconditioned Local Loop Service (ULLS) and Line Sharing Service
(LSS) (continued)
When the ACCC make their final determinations on these remaining
access disput es, they may find t hat it is reasonable for Telstra to
reimburse the access seekers for the difference in the access price
charged from the date in which the various access seekers lodged their
access dispute or from a point prior to that time when negot iations
between Telstra and the access seeker commenced.
On 24 January 2007, Telstra commenced proceedings in the High
Court against the Commonwealth, the ACCC and eleven access seekers
who had, prior to 24 January 2007, notified access disputes in respect
of ULLS and/or LSS. Telstra is seeking declarations from the High Court
that Part XIC of the Trade Practices Act is invalid as it applies to ULLS
and LSS, together with administrative relief directed at each of the
specific access disputes. The matter was accepted at the last
directions hearing on 4 July 2007 and will be referred to the full court
of the High Court for hearing, expected in November 2007.
Indemnities, performance guarantees and financial support
We have provided the following indemnities, performance guarantees
and financial support through the Telstra Entity as follows:
• Indemnities to financial instit utions to support bank guarantees to
the value of $364 million (2006: $347 million) in respect of the
performance of contracts.
• Indemnities to financial institutions in respect of the obligations of
our controlled entit ies. The maximum amount of our contingent
liabilities for this purpose was $245 million (2006: $311 million).
• Financial support for certain controlled entit ies to the amount
necessary to enable those entities to meet their obligations as and
when they fall due. The financial support is subject to conditions
including individual monetary limits totalling $103 million (2006:
$150 million) and a requirement that the entity remains our
controlled entity.
• Guarantees of the performance of jointly controlled entities under
contractual agreements to a maximum amount of $21 million
(2006: $69 million).
• Guarantees over the performance of third parties under
defeasance arrangements, whereby lease payments are made on
our behalf by the third parties over the remaining terms of the
finance leases. The lease payments over the remaining expected
term of the leases amount to $671 million (US$569 million) (2006:
$843 million (US$626 million)). We hold an early buyout option
that we could exercise in fiscal 2011 and fiscal 2013, otherwise the
relevant lease period ends during fiscal 2015 and fiscal 2016. Refer
to note 26 for further details on the above finance leases.
• During fiscal 1998, we resolved to provide IBM Global Services
Australia Limited (IBMGSA) with guarantees issued on a several
basis up to $210 million as a shareholder of IBMGSA. We issued a
guarantee of $68 million on behalf of IBMGSA during fiscal 2000.
During fiscal 2004, we sold our shareholding in this entity. The $68
million guarantee is provided to support service contracts entered
into by IBMGSA and third parties, and was made wit h IBMGSA
bankers, or directly to IBMGSA customers. As at 30 June 2007, this
guarant ee has still been provided and $142 million (2006: $142
million) of the $210 million guarantee facility remains unused.
Upon sale of our shareholding in IBMGSA and under the deed of
indemnity between shareholders, our liabilit y under these
performance guarant ees has been indemnified for all guarantees
that were in place at the time of sale. Therefore, the overall net
exposure to any loss associat ed with a claim has effectively been
offset.
Other
FOXTEL† minimum subscriber guarantees and other obligations
The Telstra Entity and its partners, News Corporation Limit ed and
Publishing and Broadcasting Limited, and Telstra Media Pty Ltd and
its partner, Sky Cable Pty Ltd, have entered int o agreements relating
to pay television programming wit h various parties and other
miscellaneous contracts. Our share of commitments under these
agreements relate mainly to minimum subscriber guarantees (MSG)
(refer to note 30 for details of MSG commit ments).
As we are subject to joint and several liability in relation to certain
agreements entered into by the FOXTEL partnership, we would be
contingently liable if our partners in this relationship failed to meet
any of their obligations. As a result, our contingent liabilit ies arising
from FOXTEL’s MSG and other agreements are $1,712 million (2006:
$1,531 million).
3GIS Partnership
During fiscal 2005, Telstra OnAir Holdings Pty Ltd and its partner,
Hutchison 3G Australia Pty Ltd entered into agreements relating to
the occupat ion of premises to provide 3GSM radio access network
services.
As we are subject to joint and several liability in relation to
agreements entered into by the 3GIS partnership, we would be
contingently liable if our partners in this relationship failed to meet
any of their obligations. As a result, our contingent liabilit ies arising
from the above agreements are $154 million (2006: $154 million).
27. Contingent liabilities and contingent assets (continued)