Telstra 2003 Annual Report Download

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Annual Review 2003
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Table of contents

  • Page 1
    ne + ne + ne + ne + Annual Review 2003

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  • Page 3
    ...million mobile phone services - 114% growth in broadband subscribers - 2.6 million Sensisâ„¢ online users a month - 17% share in the Hong Kong mobile market Everyone, everywhere, needs to communicate every day and increasingly they do so with our assistance. Telstra continues to offer newer services...

  • Page 4
    ...Chairman and CEO P.10 One company. One team. Many customers. P.12 P.14 P.16 P.18 P.20 P.22 P.24 fixed line mobile broadband internet advertising & directories international innovations corporate social responsibility P.26 P.28 P.30 P.44 P.59 senior management board of directors directors' report...

  • Page 5
    ... per share Total dividends for the year increased 22.7% to 27 cents per share, including a special dividend of 3 cents per share paid at the half year. * 1999 included a special dividend of 16 cents per share. 2003 includes a special dividend of 3 cents per share. www.telstra.com.au/investor P.3

  • Page 6
    ...Chief Executive Officer and Managing Director Robert Mansfield Chairman Dear fellow shareholders, As the industry approaches its 150 year anniversary in March 2004, Telstra has evolved to be a solid, safe and progressive telecommunications company, unmatched in its capacity to provide a wide range...

  • Page 7
    ... leading positions in fixed line services, mobiles, data and internet gives us diversity in our income stream. Not only does this help to ensure we maintain consistency of earnings, it enables us to generate solid and reliable cash flow in our traditional businesses such as our fixed line network...

  • Page 8
    ... on last year. Capital management Telstra's strong free cash flow generation has provided the Company's directors with the opportunity to return capital, which is surplus to our operational requirements, to shareholders in the form of an off-market share buyback. The buyback, to be in the range $800...

  • Page 9
    ... of one million broadband customers during 2005 and earn one billion dollars in broadband revenue by 2006. Directories and advertising During the year, we changed the business name of our information, advertising and Yellow Pages® and White Pages® business from Pacific Access to Sensis™. This is...

  • Page 10
    ... Our international business includes mobile carrier CSL, Hong Kong's leading provider of mobile voice and data services; TelstraClear, the number two full service operator in the New Zealand telecommunications market; and REACH, Asia's largest international carrier of combined voice and data. CSL is...

  • Page 11
    ...to be moderately higher than the financial year just past driven by our continued focus on cost management and productivity improvements. We thank you for your ongoing support. Robert Mansfield Chairman Ziggy Switkowski Chief Executive Officer and Managing Director www.telstra.com.au/investor P.9

  • Page 12
    ... is the number of shares multiplied by the share price Market Capitalisation (approx.) at 30 June 2003 Telco Company ($bn) Vodafone Group s ale more than $35 billion of assets more than $20 billion of sales revenue more than $4 billion of free cash flow $3 billion in dividends declared more...

  • Page 13
    ... of a single bill and the advantages of bundled solutions. Through bundling, customers can save on their home, mobile, internet and subscription TV services. Telstra now has over 1.2 million customers in bundled solutions. -Total packaged customers across consumer and small business segments has...

  • Page 14
    ... revenue stream. This year, Telstra introduced a number of new products aimed at enhancing the fixed network's capability and providing customers with innovative ways to manage calls. We continually look for new ways to utilise the existing network. A good example of this is ADSL (broadband internet...

  • Page 15
    ... local calls, enabling affordable internet access, expanding CDMA mobile coverage and upgrading radio networks. The Estens Inquiry findings complement the activities Telstra Country Wide has already initiated. Performance We continually strive to give our customers high levels of service and network...

  • Page 16
    ... applications, such as entertainment, transaction, information and location services. As well as voice, today's mobiles can be used to transmit text messages, access the internet, download emails, buy a soft-drink from a vending machine and pay for parking. They can be a phone, an organiser, a radio...

  • Page 17
    ... GRAMS SERVICES: VOICE CALL SMS MMS DIGITAL ORGANISER INTEGRATED PERSO NAL ACCESS THE INTERNE PC T DOWNLOAD EMAIL PC STYLE GAMING VIDEO MUSIC TELSTRA MOBILE LO OP TELSTRA MOBILE LO ® OP IS RUN ON 1XRT T ON OUR CDMA NETW ORK AND FEATURE S DOWNLOADABLE GA MES AND RINGTON ES, EMAIL ACCESS AND PICTURE...

  • Page 18
    ... GBPS DOWNLOAD SPEED SERVICES: • DIAL-UP • ENTERTAINMENT • HOME SHOPPING • EMAIL • BROADBAND • INFORMATION • PAY BILLS • ISDN broadband internet Products include: • Cable broadband 2.5 million premises • ADSL broadband 7.5 million premises • Satellite broadband Australia wide...

  • Page 19
    ... to dial-up internet offerings. BigPond Broadband provides four web channels: - bigpond.com/entertainment: this site provides movie reviews, television programs and entertainment news. - bigpond.com/games: one of Australia's most visited online game sites,'GameArena', offers the latest in games and...

  • Page 20
    ... buyers through the internet, voice and wireless services. In fact, Sensis accounted for over 25% of the Australian online advertising market in 2002. Product innovation 2002/2003 was a year of innovation across Sensis, with a focus on developing smart solutions that drive both customer benefits and...

  • Page 21
    ... the Australian main media advertising market • recently been ranked as the 9th largest directories business in the world by revenue Growth opportunities New media, such as the internet, voice and wireless offer exciting opportunities for both Sensis and our customers. Sensis is already enjoying...

  • Page 22
    ... in New Zealand. Hong Kong CSL Telstra's 100%-owned mobile carrier CSL is Hong Kong's premium provider of mobile voice and data services. CSL has approximately one million customers. It is the most profitable mobile carrier in Hong Kong, with a high share of premium and business customers. Focusing...

  • Page 23
    ... TelstraClear CSL REACH • âˆ' Number two, full service provider in New Zealand • âˆ' more than 350,000 customers • approx. 12% New Zealand market share* • âˆ' approx. 1,200 employees •s âˆ' tate-of-the-art IP network * revenue market share •M âˆ' ost profitable mobiles business in...

  • Page 24
    ... offerings. Looking to the future, we see a range of new applications, based on mobile data, interactive TV and voice technology. Here are just a few of the products we are taking from concept to reality. WLAN (Wireless Local Area Network) Telstra 'Wireless Hotspots' deliver high-speed internet...

  • Page 25
    ... Another developing application is Mobile EFTPOS. Credit cards can be used with a mobile phone that is fitted with a special EFTPOS keypad and card-swipe attachment. It offers a payment option when there is no phone line, such as in a taxi or at the markets. Internet Protocol (IP) Solutions Telstra...

  • Page 26
    ... DIRECTORY RECYCLING PROGRAM RECOVERED APPROXIMATELY 4% OF OLD PHONE BOOKS IN 2002/2003 THE REVISED BOOKMUNCHER® PROGRAM RESULTED IN A RECORD 66.4% RECYCLING OF OLD PHONE BOOKS IN 2003/2004 TELSTRA WILL PRODUCE ITS FIRST CORPORATE SOCIAL RESPONSIBILITY REPORT THE REPORT COVERS : • THE COMMUNITY...

  • Page 27
    ... for excellent and cost-competitive service to customers. Here for industry Telstra is a leader in the Australian telecommunications industry. We support programs that foster growth and development in areas such as broadband internet and mobile communications, as well as other new technologies. We...

  • Page 28
    ... officers Our senior management team is committed to driving profitable growth for our shareholders. We continually seek to deliver innovative products and promote outstanding customer service. Telstra Consumer and Marketing is responsible for serving metropolitan consumer and small business...

  • Page 29
    ... to the position of Group Managing Director Telstra Business and Government in December 2002 and is now responsible for the company's corporate, government, large and small business customers. Before joining Telstra, Mr Thodey was Chief Executive Officer of IBM Australia/New Zealand and previously...

  • Page 30
    ...Total: $274,707 Dr Switkowski has been Chief Executive Officer of Optus Communications Limited and Chairman and Managing Director of Kodak (Australasia) Pty Limited. He is a Director of REACH Ltd, FOXTEL and the Business Council of Australia. Age 55. Number of board meetings held: 9 Number of board...

  • Page 31
    ... International Corporation (SAIC); Vice Chairman, US Joint Chiefs of Staff; Deputy Chief, US Naval Operations; Commander, US Sixth Fleet. Mr Owens has had a strong history in corporate management of broadband telecommunications, information technology and internet applications. Age 63. Number...

  • Page 32
    .... During the year, we continued to develop our full service telecommunications model and focus on cost control. We have seen growth in many areas of the business including mobiles, internet and IP products, advertising and directories and intercarrier services. Sales revenue increased by $299...

  • Page 33
    ... the likely developments in Telstra's operations; or • the expected results of those operations in the future. Details about directors and executives There have been no changes to the directors of Telstra Corporation Limited during the financial year and up to the date of this report. Information...

  • Page 34
    ...report • names of directors and details of their qualifications, experience and special responsibilities are given on pages 28 to 29; • number of board and committee meetings and attendance by directors at these meetings is provided on page 35; • details of directors' shareholdings in Telstra...

  • Page 35
    ... report have been rounded to the nearest million dollars, except where otherwise indicated. This report is made in accordance with a resolution of the directors. Robert C Mansfield Chairman 28 August 2003 Ziggy Switkowski Chief Executive Officer and Managing Director www.telstra.com.au/investor...

  • Page 36
    ... John W Stocker (2) Age 52 70 55 63 64 52 50 47 56 53 63 58 Position Chairman Deputy Chairman Chief Executive Officer, Managing Director Director Director Director Director Director Director Director Director Director (1) Other than the chief executive officer, one third of directors are subject...

  • Page 37
    ...director related entities, are excluded from indirect interests. (2) Includes: • 400 shares acquired with an interest free loan and 200 free shares under the terms of the Telstra Employee Share Ownership Plan 1999 (TESOP99); • 2,000 shares acquired with an interest free loan plus 500 free shares...

  • Page 38
    ...in travelling to or from meetings of the board or committees or when otherwise engaged on the business of the company in accordance with board policy. Telstra also provides directors with telecommunications and other services and equipment to assist directors in performing their duties. From time to...

  • Page 39
    ... market price. The shares are held in trust for a period of 5 years unless the participating director ceases earlier with the Telstra Group. In accordance with the ASX Principles of Good Corporate Governance, directors are restricted from entering into arrangements which effectively operate to limit...

  • Page 40
    ... managers' rewards with generation of shareholder value; • supporting business plans and corporate strategies; and • rewarding superior performance. The chief executive officer, and senior executives who report to the chief executive officer, participate in a semi-annual performance review...

  • Page 41
    ..., the senior executive pays the original exercise price to the Telstra Growthshare Trust and the loan is repaid. As a result there is no direct cash expense incurred by Telstra in relation to the options. Telstra employee share ownership plans All employees, including our senior managers who were...

  • Page 42
    ... Bruce Akhurst Group Managing Director, Telstra Wholesale, Broadband & Media David Thodey Group Managing Director, Telstra Business & Government $ 1,354,500 Short term incentive (2) $ 750,000 Cash value of other benefits (3) $ 8,551 Total cash payment $ 2,113,051 Total cash & Deferred deferred...

  • Page 43
    ... & (5) Long Term Incentive Plans Name & position Zygmunt Switkowski Director and Chief Executive Officer Ted Pretty Group Managing Director, Telstra Consumer & Marketing David Moffatt Group Managing Director, Finance & Administration David Thodey Group Managing Director Telstra Business & Government...

  • Page 44
    directors' report Details of current equity holdings of all managers under Telstra Growthshare Total options/ performance rights/ deferred shares allocated(1) & (5) Eligible participating managers Exercise price $ Expiry date Allocation date Market price at allocation date $ Options 1,533,722 3,...

  • Page 45
    ... to Telstra shares if a performance hurdle is satisfied in the performance period and, in the case of options, a payment of the exercise price is made. The performance hurdle for options and performance rights allocated in fiscal 2002 is that the Telstra 30 day average total shareholder return 'TSR...

  • Page 46
    ... profits due to a change in an accounting standard Valuation adjustments available to Telstra Entity shareholders and recognised directly in equity Total changes in equity other than those resulting from transactions with Telstra Entity shareholders as owners 4 Telstra Group Year ended 30 June 2003...

  • Page 47
    ...in the number of mobiles in the Australian market. Internet and IP solution revenue experienced significant growth due to increased numbers of broadband and IP customers in a highly competitive market. Sensis directory services also showed improvement due to new print features and online initiatives...

  • Page 48
    ... financial report continued statement of financial position as at 30 June 2003 2003 $m Current assets Cash assets Receivables Inventories Other assets Total current assets Non current assets Receivables Inventories Investments - accounted for using the equity method Investments - other Property...

  • Page 49
    ... dividends for the year and repayment of bank loans was as a result of the group maintaining a strong free cash flow position. We have gained cash through the sale of properties, continued strong company operating activities and through careful capital and cash management, resulting in a sustainable...

  • Page 50
    ... sale of listed securities and other investments - sale of business Net cash used in investing activities Cash flows from financing activities Proceeds from: - borrowings - Telstra bonds Repayment of: - borrowings - Telstra bonds - finance leases principal amount Employee share loans (net) Dividends...

  • Page 51
    ... previous periods, apart from the following changes during fiscal 2003: Provision for dividends In previous financial years, our accounting policy was to provide for dividends in the statement of financial position when that dividend was declared after reporting date but before the completion of the...

  • Page 52
    ... two new groups were formed, namely Telstra Consumer and Marketing and Telstra Business and Government. A separate group was established which comprises Telstra's broadband and online activities, as well as Telstra's directories business, Sensis Pty Ltd, and Telstra's media activities. This business...

  • Page 53
    ... - provides legal services and has responsibility for regulatory positioning and negotiation; • Corporate Relations - responsible for managing our relationships and positioning with key groups such as our customers, the media, governments, industry, community groups and staff; • Human Resources...

  • Page 54
    ... customers is the sale of the seven office properties for $570 million. Refer note 4 for further information. (d) Sales revenue for the other segment relates primarily to revenue earned by our subsidiary Sensis Pty Ltd. Telstra Technology and the Asset Accounting Group are the main contributors...

  • Page 55
    ... the new business segments and segment accounting policies had existed in prior years. In accordance with applicable accounting standards, both AGAAP and USGAAP, the restatement of those lines that could be restated under the new structure for 2002 is presented below. Telstra Group Telstra Consumer...

  • Page 56
    ... new business segments and segment accounting policies existed in prior year. Below are the comparatives for the 2002 year under the structure that existed as at 30 June 2002. Telstra Retail (a) $m Year ended 30 June 2002 Sales revenue from external customers Other revenue from external customers...

  • Page 57
    ... dividend in fiscal 2003 was not declared, determined or publicly recommended as at 30 June 2003, no provision has been raised prior to that date in the statement of financial position. The final dividend is now reported as an event after balance date (refer note 5). www.telstra.com.au/investor...

  • Page 58
    ...the global market for international data and internet capacity resulting in high levels of excess capacity, intense price competition and lower than expected revenues. This has resulted in a reduction of our investments accounted for using the equity method in our statement of financial position and...

  • Page 59
    ... interest in Commander Communications Limited for $24 million. The financial effect of the above events after balance date have not been recognised in our statements of financial performance, financial position or cash flows for the year ending 30 June 2003. www.telstra.com.au/investor P.57

  • Page 60
    independent audit report to the members of Telstra Corporation Limited Scope The concise financial report and directors' responsibility The concise financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, and accompanying notes to ...

  • Page 61
    ....au/telstra or by calling 1300 88 66 77. Sometimes a shareholder may have changed their payment details and not advised the Telstra Share Registry by record date. If the dividend is paid and Telstra is advised by your financial institution that your nominated account has been closed, we will write...

  • Page 62
    ... worldwide voice telephone network SIM Subscriber Identity Module - a smartcard that is inserted into GSM handsets to activate the phone SIO Services in Operation - phone services in use SMS Short Messaging Service - refers to the ability to receive and deliver text messages to mobile devices such...

  • Page 63
    five year financial summary contact details Telstra Corporation Limited Incorporated in the Australian Capital Territory Telstra is listed on Stock Exchanges in Australia, New Zealand (Wellington), and USA (New York) Sales revenue Total revenue (including interest) EBITDA(1) Profit before income ...

  • Page 64
    The power of one. ® © Telstra Corporation Limited (ABN 33 051 775 556) 2003. ™ Trade mark of Telstra Corporation Limited. ® Registered trade mark of Telstra Corporation Limited.