Telstra 2001 Annual Report Download

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Annual Review 2001

Table of contents

  • Page 1
    Annual Review 2001

  • Page 2
    ... & Content International Wholesale Infrastructure Services Regional & Rural Australia Community Board of Directors Directors' Report Emoluments Concise Financial Report Investor Information Telstra's on-line Environment Report Telstra's on-line Annual Review Five year Financial Summary because...

  • Page 3
    4 key strategic areas P.1

  • Page 4
    ... deliver growth. Telstra. One Company, One Team, Strategic Area No. 1 Domestic Retail pages 14-17 The core of Telstra's business is to provide a full suite of services including: • voice • mobiles • data to consumers, small and medium enterprises (SMEs) and to corporations and governments in...

  • Page 5
    ... Access Internet subscribers Revenue Foxtel 1 2 1 Strategic Area No. 3 International pages 20-21 Developing and providing the infrastructure for mobile/wireless and data telecommunications with a focus on the Asian markets. There are strong growth opportunities for our new Asian businesses...

  • Page 6
    ....5 cents. Financial Performance (Profit and Loss) Sales revenue (before unusuals) Total revenue Total expenses Profit before income tax expense Income tax expense Net profit after minorities Earnings per share Dividends per share Return on average assets Number of full-time employees 2001 $m 19,458...

  • Page 7
    ... and CEO Our message this year - Telstra is a strong company with a clear vision. We've laid the strategic groundwork over the last few years, have strong cash flows and a solid balance sheet, which means we have conservative debt levels. We are well positioned for growth. Return on average...

  • Page 8
    ... dividend for the year to 19 cents per share. Once again, mobiles, internet and data and wholesale services were the key performers in the result. Telstra continues to be the most scrutinised, analysed and reported on company in the land. During the year, there had been an expectation in the market...

  • Page 9
    ...managed services offering to corporates The changing face of Telstra Successfully transforming underlying revenues* How mobiles are changing $ billion 18.9 +5.2% pa 15.4 6.5 10.8 +14% pa Non-traditional (eg mobiles, managed services, data and internet) Estimated Australian mobiles market services...

  • Page 10
    ...promote broadband internet access • continue ADSL (Asymmetric Digital Subscriber Line) rollout for fast internet access through consumers home line • Pacific Access (Yellow Pages® and White Pages™) will enhance its on-line offerings to business customers Wholesale • world leading wholesale...

  • Page 11
    ... internet access using a mobile phone), we now market more than 80 applications, such as e-mail and flight information. Short Messaging Services (SMS), with around 70 million messages a month, are now a significant component of our mobile businesses. General Packet Radio Service (GPRS), launched...

  • Page 12
    ... us with flexibility to roll out more high speed data services as demand dictates. With the introduction of Mobile Number Portability (MNP) in September 2001, customers will be able to change mobile phone companies without having to change their number. Telstra has prepared well for MNP, and we...

  • Page 13
    ... a product focus to a customer focus, including bundling, or packaging, of products and services and offering total end-to-end solutions. Telstra's involvement with the Sydney 2000 Olympics and Paralympics was outstandingly successful, showcasing a world-class network; state-of-the-art technology...

  • Page 14
    ... he planned and managed GE Capital's entry into Australia and New Zealand. Before joining GE, Mr Moffatt was the Chief Financial Officer of Palmer Tube Mills. He has also held leadership positions with Citibank and Bain & Company. Telstra's aim: to provide customers with all their communications...

  • Page 15
    ... advisory board of the Macquarie Graduate School of Management and a member of the Australian Institute of Company Directors. Mr Pilbeam manages external affairs and corporate communications, including government and media relations, employee communications, customer relations, cross-company public...

  • Page 16
    DOMESTIC RETAIL INTERNATIONAL APPLICATIONS WHOLESALE Voice Data Bundled Services Customer Service To be each customer's single source provider and integrator of choice for communications solutions and applications in Australia. domestic retail 11.2 billion LOCAL CALLS P.14

  • Page 17
    ...is on-line billing. More than 110,000 customers have taken 10% OF CUSTOMERS WITH packaged services up on-line billing, which also offers a wide range of useful functions to help them manage their telecommunications spend and view their account details. The Telstra Customer Service Charter, launched...

  • Page 18
    ... Short Message Service Wireless Data GPRS CDMA GSM Wireless data is an exciting new growth opportunity. domestic retail 60 40 20 0 JAN 2000 JAN 2001 Networks There is, quite literally, no bigger cellular mobile network in Australia than the Telstra MobileNet® CDMA (Code Division Multiple Access...

  • Page 19
    ... information per second (kbps). A GPRS phone can handle 20 kbps and with network upgrades will increase to 40 kbps later this year. GPRS heralds the introduction of packet data services on our cellular networks and is a key plank in our wireless data future. The growth in numbers of customers using...

  • Page 20
    ... WHOLESALE Internet Broadband Pay TV Directories With strong growth in an exciting new area - we see a healthy growth curve ahead. Broadband Nearly all Australian homes and businesses now have coverage by our BigPond™ broadband services. We have achieved this through: • Cable Telstra...

  • Page 21
    ... ADSL products. In addition, Telstra Wholesale's Unconditioned Local Loop (ULL) product allows other companies to provide their own ADSL products. We are aiming to attract more than one million broadband customers by 2005. Pacific Access (PA), our subsidiary known for Yellow Pages® and White Pages...

  • Page 22
    ... WHOLESALE Reach CSL Connectivity Cables Mobiles Regional Wireless Company and Reach, providing a solid platform for growth in Asia. international Regional Wireless Company (RWC - 60% owned by Telstra) is the parent company of our Asian mobiles business - CSL. CSL has consolidated its position...

  • Page 23
    ...and data world. Telstra telecommunications network. holds 39.9% of the equity of Australia Japan Cable Limited. CSL • Premium spectrum position • World's first digital network to provide full coverage in an underground railway system • Extensive roaming coverage • 1 million mobile customers...

  • Page 24
    ...INTERNATIONAL APPLICATIONS WHOLESALE Telstra Wholesale Olympics Customer Services We encourage other carriers to buy network capacity from Telstra, as opposed to building their own. Telstra Wholesale has had an excellent year in fiscal 2001, achieving revenue growth of 35%. This business division...

  • Page 25
    ...of its Telstra Millennium Network during the Sydney Olympic and Paralympic Games. More than 4,800 kilometres of optical fibre, 30,000 phone and fax lines and 280 video links were installed on time and within budget, delivering service without fault. Customer services During the year, we implemented...

  • Page 26
    ... improve Telstra's services and business performance in regional and rural Australia. Area offices We have appointed Area General Managers in 28 local offices and six sub-offices to strengthen service, sales and marketing of our products and relations with customers and communities. Local agents In...

  • Page 27
    ...,000 customers with access to HomeLine™ features such as MessageBank® Home. Mobiles We promoted Telstra MobileNet® CDMA as the mobile service of choice for regional Australia and secured Federal Government funding for increased coverage. CDMA offers the largest cellular mobile phone coverage in...

  • Page 28
    ..., social and cultural well-being in areas such as the arts, technology, sport and the environment; or supporting a local charity through Telstra Friends, Telstra reaches into 338 THOUSAND PRIZE POOL Telstra Small Business Awards $ 255 THOUSAND PRIZE POOL Telstra Business Women's Awards P.26

  • Page 29
    ...staff and their families, has grown into Australia's largest corporate volunteer program, with more than 9,000 registered members from the Telstra workforce. Over the year, key activities for Telstra Friends included Sydney 2000 Olympic and Paralympic Games, Olympic Landcare 2000, Telstra 2000 Swim...

  • Page 30
    ... Chief Executive and Managing Director, Nine Network Australia Ltd (1973-1990). Chairman, Stanwell Corporation Ltd; Director, David Jones Ltd, GPT Management Ltd, RP Data Ltd, Queensland Treasury Corporation, City of Brisbane Arts and Environment Ltd and Foundation for Development Cooperation Ltd...

  • Page 31
    ... Rural Press Ltd, Australian Business Foundation and the Sydney Institute; Member, Department of Accounting and Finance Advisory Board and Division of Economic and Financial Studies Advisory Board, Macquarie University; former Managing Director, Cochlear Ltd. Senior Partner, C&E McGauchie - Terrick...

  • Page 32
    ...as US Securities Exchange Commission Staff Accounting Bulletin 101 (or SAB 101).) The main effect for Telstra of the application of SAB 101 has been that all revenue is deferred until either delivery has taken place or the service has been provided. This has resulted in a reduction in profit of $219...

  • Page 33
    ... basis, our sales revenue increased in fiscal 2001 by 3.2% to $18.9 billion, with strong underlying growth in data and internet, mobiles services, basic access and intercarrier revenues. Total underlying revenue (excluding interest) increased by 2.9%. Through the successful implementation of our...

  • Page 34
    ... of Reach Ltd, a 50:50 joint venture entity operating as a provider of voice, data and internet connectivity services in the Asia-Pacific region. Reach was formed through the combination of the sale of our international wholesale businesses and certain wholesale assets together with certain PCCW...

  • Page 35
    ... past directors); • executive officers (other than directors) and certain employees generally; and • employees (including executive officers other than directors) involved in the formulation, entering into or carrying out, of a Telstra Sale Scheme (as defined in the Telstra Corporation Act 1991...

  • Page 36
    Directors' report continued Directors' meetings Each director attended the following meetings and board committees during the year while a member of the board: Board Audit a R C Mansfield J T Ralph Z E Switkowski (1) N R Adler S H Chisholm (2) A J Clark J E Fletcher(2) M G Irving C B Livingstone ...

  • Page 37
    ...loan and 200 free shares under the terms of the Telstra Employee Share Ownership Plan 1999; • 2,000 shares acquired with an interest free loan plus 500 free shares under the terms of the Telstra Employee Share Ownership Plan 1997 and 200 loyalty shares obtained under the 'one for ten loyalty offer...

  • Page 38
    ... board members and senior executives Remuneration strategy and relationship to company performance Telstra's senior manager remuneration strategy is designed to provide competitive total reward levels conditional upon the achievement of business improvement and personal performance accountabilities...

  • Page 39
    .... Offers under Telstra Growthshare are made to managers at the discretion of the board. For fiscal 2001 and beyond, between 21% and 34% of total senior manager potential reward was delivered through Telstra Growthshare. Cumulatively, over a five year period, the total number of shares and options...

  • Page 40
    ... in the form of Telstra shares. The shares were purchased on market and allocated at market value and held in trust for either a three or five year period (unless the manager leaves the Telstra Group earlier). Senior executive emoluments (current employees) Name and position Fixed(1) $ Zygmunt...

  • Page 41
    ... 1999 8 Sept 2000 16 Mar 2001 Market price at allocation date(4) $8.02 $6.28 $6.55 $8.02 $6.28 $6.55 Options Restricted shares 573,500 961,900 43,817 (1) (2) (3) (4) (5) (6) (7) This total employment cost is the sum of salary, benefits, all superannuation contributions and fringe benefits...

  • Page 42
    ... this decline by writing down our investment in RWC by $999 million. Other items As well as the 'unusual items' outlined for the current year, a number of other events have impacted on the reported result: • we sold our global wholesale business to the 50% owned joint venture Reach Ltd effective...

  • Page 43
    ... mortgage over half of PCCW's 50% shareholding in Reach (ie 25% of Reach's total shares). Further discussion and analysis Commentary on our operating results is also contained in the message from the Chairman and the Chief Executive Officer (refer pages 5-11). UNDERLYING SALES REVENUE UNDERLYING...

  • Page 44
    ... Share of associated and joint venture entities' reserves Asset revaluation decrements taken through the reserve Valuation adjustments available to Telstra Entity shareholders and recognised directly in equity Total changes in equity other than those resulting from transactions with Telstra...

  • Page 45
    ...Investments - accounted for using the equity method Investments - other Property, plant and equipment Future income tax benefit Intangible assets Other assets Total non-current assets Total assets Current liabilities Payables Borrowings Income tax payable Provisions Revenue received in advance Total...

  • Page 46
    ...sale of joint venture entities and operations Net cash used in investing activities Cash flows from financing activities Proceeds from: - borrowings - Telstra bonds Repayment of: - Telecom/Telstra bonds - borrowings - finance leases principal amount Payments for convertible note Employee share loans...

  • Page 47
    ... until future years. The major revenue and associated expense items impacted are: • basic access installation and connection fees for in place and new services; • up-front mobile phone connection fees; • commission revenue for our printed directories; and • on-line directories and voice...

  • Page 48
    ... directories and voice services was recognised when agreements for the service were made with the customer. Revenue for these services is now deferred over the life of service agreements, which is on average one year. As a result of the change in revenue recognition accounting policy, our net profit...

  • Page 49
    ... addressed as for customers in metropolitan areas. Telstra OnAir is responsible for: • our mobile and wireless networks and associated systems within Australia; and • all mobile retail sales and after sales support, customer service, product development and pricing. Telstra International manages...

  • Page 50
    ... Group Telstra Retail (a) Telstra OnAir (b) Telstra International (c) Infrastructure Services & Wholesale $m 2,437 174 5,895 8,506 1,528 21,823 Other (d) Eliminations Total of all segments $m 18,679 1,287 - 19,966 6,005 37,473 $m Year ended 30 June 2001 Sales revenue from external customers...

  • Page 51
    ...are not charged to the reportable segments. Telstra Group Year ended 30 June 2001 2000 $m $m 3. Dividends Ordinary shares Interim dividend paid (i) Final ordinary dividend provided for or paid (i) Dividends per share (cents) Interim dividend Final ordinary dividend Total 1,029 1,416 2,445 ¢ 8.0 11...

  • Page 52
    ... - revenue recognition accounting policy change (i) - expenses in performing obligations under JORN contract (v) Other expenses - unusual - book value and deferred profit on the sale of our global wholesale business and controlled entities to Reach Ltd (ii) - book value of sale of our investment in...

  • Page 53
    ... we retain an ownership interest in Reach. The amount deferred is brought to account in the statement of financial performance (through the share of net losses of associates and joint venture entities) on a straight-line basis over a period of 20 years. RWC Unusual expense items 999 (a) Write-off of...

  • Page 54
    ... 2001, Telstra CB.com Limited sold the remaining balance of 26.6 million shares at $6 per share resulting in revenue of $160 million. The profit on the sale of this investment was $245 million before tax, as shown in the table below: Revenue from sale of Computershare 546 Book value of investment in...

  • Page 55
    ... been formed on the above basis. Audit Opinion In my opinion, the concise financial report of Telstra Corporation Limited and its controlled entities complies with Accounting Standard AASB 1039:"Concise Financial Reports." Ian McPhee Acting Auditor-General 29 August 2001 Melbourne, Australia P.53

  • Page 56
    ... plant and equipment, value so we clearly understand how accounts receivables, stock). our actions may create or destroy value. These drivers are being incorporated into • We use EVA to measure our corporate our management incentive plans at an performance and to evaluate investment...

  • Page 57
    ...relating to your shareholding, including share transfers, dividends or changing your mailing address should be directed to the Telstra Share Registrar on FREECALL 1800 06 06 08*. You can also visit their website at www.registrars.aprl.com.au where you can also obtain share registry forms to transfer...

  • Page 58
    ...these sites. • Participation in the national mobile phone battery recycling scheme. • The Book Muncher® directory recycling initiative, managed by Pacific Access (Telstra's directories business), is achieving a recycling rate of 50% of directories distributed. 3 Developing and promoting product...

  • Page 59
    ... personal computer (PC) and internet usage: 74% 55% 75% 62% use their home PC for shareholder related activities own PCs less than 2 years old use Internet Explorer to browse the web have a Pentium 1, 2, or 3 57% use Windows 98 Telstra's Investor Relations home page www.telstra.com.au/investor...

  • Page 60
    ... A$m Sales revenue - usual Total revenue EBITDA(1) Profit before tax Net profit after minorities Dividend Total assets Gross debt Net debt Shareholders' equity Operating cashflow Cash used in investing Cash used in financing Net movement Capital expenditure and investments Financial ratios Return on...

  • Page 61
    ... 231 Elizabeth Street Sydney New South Wales 2000 Australia Investor Relations Unit Level 36, 242 Exhibition Street Melbourne Victoria 3000 Australia Wayne Treeby General Manager Ph: +61(3) 9634 8632 The Telstra Share Registrar ASX Perpetual Registrars Limited PO Box 14300 MELBOURNE CITY MC Victoria...

  • Page 62
    Everyone, everywhere, needs to communicate, everyday. © Telstra Corporation Limited (ABN 33 051 775 556) 2001. ™Trade mark of Telstra Corporation Limited. ®Registered trade mark of Telstra Corporation Limited.