Telstra 2009 Annual Report Download - page 40

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Telstra Corporation Limited and controlled entities
Full year results and operations review - June 2009
Depreciation and amortisation
Higher depreciation on communications assets in CSLNW was
the main driver behind the increase in the depreciation and
amortisation expense of 4.8%.
Depreciation on communications assets increased by $73
million as accelerated depreciation on CSLNW’s existing 3GSM
and 2GSM networks continued until June 2009. Total
accelerated depreciation at CSLNW was $172 million this fiscal
year whilst foreign currency movements in CSLNW also
resulted in a $40 million increase in depreciation. There was an
offsetting reduction in depreciation expense of $92 million due
to a change in the service life of other communications assets
within the group.
Other plant and equipment depreciation increased by $34
million, mainly due to the addition of information technology
equipment related to the transformation activities.
Additions to the building structure of various exchanges in
NSW made up the majority of the additions to land and
buildings where depreciation increased by $30 million in fiscal
2009. There were also major property fitouts undertaken due
to the roll out of T[life]™ stores.
Asset additions as a result of our IT transformation were the
main reason for the 8.8% increase in amortisation. Major
acquisitions were for customer relationship management,
billing and network operations management applications.
These increases were partially offset by amortisation
reductions due to an extension to the service life of some
software asset classes.
Net finance costs
The reduction in net interest on borrowings of $35 million
(borrowing costs and finance leases less finance income) in
fiscal 2009 arises from:
• a reduction in the average yield on debt over the year
from 7.3% in fiscal 2008 to 7.1% in fiscal 2009; and
• reductions in short term market base interest rates
during the year which resulted in lower costs on the
floating rate debt component of our debt portfolio.
This was partly offset by an increase in interest costs arising
from:
• an increase in the average volume of debt over the
period;
• higher yields driven by an increase in our borrowing
margins which have impacted our refinancing yields; and
• substantial replacement of short term borrowings with
long term debt.
The significant deterioration in global economic conditions
during fiscal 2009 resulted in de-leveraging by financial
institutions and consequent increases in borrowing margins.
This has resulted in higher absolute yields on new term debt
raisings during the year.
The reduction in the gain on fair value hedges - effective of
$110 million represents the fair value movements of the
Year ended 30 June
2009 2008 Change Change
$m $m $m %
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,624 3,486 138 4.0%
Amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 766 704 62 8.8%
Total depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,390 4,190 200 4.8%
Year ended 30 June
2009 2008 Change Change
$m $m $m %
Borrowing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,199 1,238 (39) (3.2%)
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 (1) (10.0%)
Unwinding of discount on liabilities recognised at present value . . . . . . . . . . . . . . . . 23 24 (1) (4.2%)
Gain on fair value hedges - effective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61) (171) 110 64.3%
Gain on cash flow hedges - ineffective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (4) 3 75.0%
(Gain)/loss on transactions not in a designated hedge relationship . . . . . . . . . . . . . . (77) 27 (104) (385.2%)
(Gain)/loss on transactions de-designated from fair value hedge relationships . . . . . . . (145) 13 (158) (1215.4%)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21 (1) (4.8%)
Finance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967 1,158 (191) (16.5%)
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67) (72) 5 6.9%
Net finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 1,086 (186) (17.1%)