Telstra 2007 Annual Report Download - page 75

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Telstra Corporation Limited and controlled entities
Directors’ Report
Sensis increased revenue compared with the prior year due to the introduction of new initiatives within print
directories, an increase in customer numbers and the purchase of SouFun Holdings Limited (SouFun) in fiscal
2007.
CSL New World revenue increased 20.2% due to fiscal 2007 including a full year of revenue from New World,
whereas fiscal 2006 included revenue from the merged group since March 2006.
The PSTN product revenue decline of $309 million or 4.1% continued as customers move towards mobile and
broadband products. This reduction is at a significantly lower rate than prior periods. The decline in the
second half of the year was only 2.5%.
Total operating expenses (before depreciation and amortisation, finance costs and income tax expense)
increased by $600 million or 4.4% compared with the prior year. This growth was mainly attributable to:
• goods and services purchased - $450 million up 9.6%; and
• other expenses (excluding labour and goods and services purchased) - $497 million up 11.2%.
This was offset by a decrease in labour expense of $347 million, down 8.0%.
Goods and services purchased increased $450 million, up 9.6% due to the following:
• cost of goods sold increased mainly due to higher sales volumes for mobile handsets and a higher
average cost per handset associated with strong 3G take up;
• higher handset subsidies from a rise in the take up of handsets on subsidised plans as well as higher
subsidies offered again associated with our marketing campaign for Next GTM mobile; and
• partially offset by lower network payments as a result of a reduced mobile terminating access rate,
and lower payments for international capacity and termination costs due to lower net costs from
Reach Ltd, our jointly controlled entity.
Other expenses were higher by $497 million, up 11.2% due to the following:
• increased service contracts and other agreements largely due to costs associated with our
transformational activities and payments to Brightstar for management of our channel logistics
operation centre, which did not exist in fiscal 2006;
• higher promotions and advertising costs relating to spending on the launch of the Next GTM net work,
the Telstra Next IPTM network as well as more marketing activity of our wireless and other BigPond®
broadband products;
• the full expenses attributable to the merger of CSL with New World PCS, the consolidation of
expenses from SouFun in the current fiscal year, and the acquisition of Adstream in the second half
of the prior fiscal year;
• increased costs associated with our transformation initiatives, including software development,
training and electricity costs and property maintenance costs associated with running multiple
networks; and
• expenses associated with the impairment of the Trading Post masthead and increased bad and
doubtful debtors expense as a result of write offs and increased aged debts associated with the
increase in mobiles and broadband customers.
Labour costs decreased $347 million, down 8.0% in fiscal 2007 mainly due to the following:
• lower staff levels, and therefore a reduction in salary costs;
• a reduction in redundancy costs due to the utilisation of the redundancy provision that was raised in
fiscal 2006; and
• lower overtime payments partially offset by higher contractor and agency payments.