Telstra 2004 Annual Report Download

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FOXTEL® digital
BigPond™
broadband
entertainment
BlackBerry®
fixed line
innovation everywhere
Annual Review 2004

Table of contents

  • Page 1
    innovation everywhere Annual Review 2004 BlackBerry® fixed line FOXTEL® digital BigPond™ broadband entertainment

  • Page 2
    ...20 P.22 business review 12 PAGE P.26 P.28 P.42 P.60 investor information board of directors directors' report concise financial report investor information 26 fixed line mobile data & internet advertising & media international product & service innovations P.24 corporate social responsibility

  • Page 3
    ... cents per share 8.3% 26 '00 '01 '02 '03 '04 '00 '01 '02 '03 '04 '00 '01 '02 '03* '04 Sales revenue has increased to $20,737 million. Mobile services, Internet and IP Solutions and advertising and directories all strongly contributed to the growth. Net profit after minorities increased...

  • Page 4
    ..., improvements in business performance and better returns to shareholders. That's why our drive for continuous improvement in service and products is our number one commercial priority as we move forward. Ziggy Switkowski Chief Executive Officer and Managing Director Donald G McGauchie Chairman

  • Page 5
    ... Telstra - Australia's connection to the future Our mission To develop, design and deliver great communications solutions to all our customers Our strategic goal Grow the company profitably and provide attractive returns to shareholders Our values We will achieve this by employing terrific people...

  • Page 6
    ... management 2% Inbound calling products 2% Intercarrier services 5% $20,737 million 16% Basic access 7% Local calls 1% PSTN value added services 5% National long distance calls 8% Fixed to mobile 1% International direct 5% Specialised data 5% ISDN (Access & calls) 7% Advertising & directories...

  • Page 7
    ... - which will combine to support an active capital management program and attractive returns to our shareholders. DONALD G McGAUCHIE - AO Chairman ZIGGY SWITKOWSKI Chief Executive Officer and Managing Director 2 Excluding investment in 3G mobile telephony. WHERE DID TELSTRA'S CASH FOR 2003/4 GO...

  • Page 8
    ... Bill Scales joined Telstra in November 2000 as Managing Director Human Resources and Chief of Staff. He was appointed Group Managing Director, Corporate and Human Relations on 1 August 2002 responsible for the management of Human Resources, Corporate and Political Relations, Employee Communications...

  • Page 9
    ...Group Managing Director Telstra Business and Government in December 2002 and is now responsible for the company's industry, government and business customers. Before joining Telstra, David was Chief Executive Officer of IBM Australia/New Zealand and previously held several senior executive marketing...

  • Page 10
    ... • Value added services • Price innovation • Reduce costs/Improve margin Grow new wave products and services Develop the customer base and product offerings of: • Broadband • Wireless • Advertising Infrastructure • Building, operating and maintaining Telstra's infrastructure...

  • Page 11
    ... products and services. International Domestic long distance long distance Mobile minutes minutes services Sensis print advertising Internet expenditure services - (main media) narrowband Internet services - broadband Basic access services Data revenue Subscription TV services Local calls Telstra...

  • Page 12
    ... us to access our e-mails and the Internet. BROADBAND Delivering fantastic customer options while driving revenue growth MOBILITY A range of solutions is available to suit every customer PAGE 16 SENSIS® An advertising and directories business delivering great shareholder value PAGE 14 PAGE 18...

  • Page 13
    ... its traditional fixed telephone line services through value added services FOXTEL® DIGITAL Revolutionising the way Australians think about TV PAGE 12 BLACKBERRY® Demonstrating the convergence of voice and data service delivery over one small hand held device BIGPOND™ BROADBAND ENTERTAINMENT...

  • Page 14
    ...: - Basic access - Local calls - National long distance calling - International calling - Fixed to mobile calling - Inbound calling - Telstra Home Messages 101® - 1#® Feature Assistant - Talking Text™ - Calling number display Our Performance Telstra's Public Switched Telephone Network (PSTN...

  • Page 15
    ... OF CALL WAITING AND CALL FORWARD FEATURES AND TURN THEM ON AND OFF AND STORE FREQUENT FORWARDED NUMBERS UNDER THE CATEGORIES OF HOME, WORK, MOBILE OR OTHER. Telstra's performance for new service connections, measured against the Australian Communications Authority (ACA) Customer Service Guarantee...

  • Page 16
    ... using mobile SMS technology to provide automated billing information service updates. Our Networks Telstra offers customers access to both the Code Division Multiple Access (CDMA) and Global System for Mobile Communications (GSM) mobile networks. Telstra's CDMA network covers over 98% of Australia...

  • Page 17
    ...to work closely with us as our business needs evolve and as we continually move to raise our service levels.' TNT EXPRESS DIRECTOR OF INFORMATION SYSTEMS, GARY SMITH, AFTER TELSTRA PROVIDED A WIRELESS SOLUTION FOR CONSIGNMENT TRACKING PERFORMANCE INDICATORS (millions) GSM services in operation CDMA...

  • Page 18
    ...by introducing entry-level broadband plans at, or near, dial-up prices (after installation). Over the next year broadband uptake is expected to accelerate as more Australians recognise its benefits and convenience. Telstra is developing an extremely important and profitable new business that will be...

  • Page 19
    ... 96% of Australia's population. To provide greater customer convenience, the BigPond website has been redesigned to provide customer information, online ordering and service management. Content and Applications A high speed Internet connection provides access to Internet content and applications...

  • Page 20
    ...YELLOW PAGES PRINT DIRECTORY IS AUSTRALIA'S LEADING BUYING GUIDE. WHITE PAGES PRINT DIRECTORY MAINTAINS ITS POSITION AS A PREMIER INFORMATION CENTRE. advertising & media BRANDS INCLUDE: - Yellow Pages® - White Pages® - CitySearch® - Whereis® - Trading Post® - Invizage - sensis.com.au - Sensis...

  • Page 21
    ... Fox Film Corporation. DID YOU KNOW SENSIS®: HAS 420,000 CUSTOMERS HAS APPROXIMATELY 10million LISTINGS AND DISPLAY ADS WAS THE FIRST YELLOW PAGES COMPANY TO INTRODUCE A CUSTOMER CHARTER PERFORMANCE INDICATORS Unique visitors Yellow Pages® OnLine White Pages® OnLine CitySearch® site FOXTEL...

  • Page 22
    ... Zealand. TelstraClear is pioneering the use of Internet Protocol on a domestic and trans-Tasman, basis ensuring its business customers receive competitive prices for voice and data solutions. Residential customers on its Wellington and Christchurch network access the country's fastest, best value...

  • Page 23
    ... ABILITY TO SELL RESIDENTIAL SERVICES TO 99% OF THE NEW ZEALAND POPULATION TELSTRACLEAR ACHIEVED 100% CUSTOMER GROWTH IN IP NETWORKS INTERNATIONAL INTERNET VOLUMES HAVE INCREASED 110% INTERNATIONAL PRIVATE LINE BANDWIDTH VOLUMES HAVE INCREASED 85% www.telstra.com.au/communications/shareholder 21

  • Page 24
    ... provides high speed Internet and corporate network access across both Telstra CDMA 1x and Telstra Wireless Hotspot® technologies through the Telstra Wireless PC Pack launched in October 2003. IP Solutions Telstra offers a range of IP Solutions to suit the needs of its customers. Telstra Connect IP...

  • Page 25
    ... Subscriber Line (DSL) is a broadband data service that offers data rates at demanding business grade service levels. Business DSL provides customers with a cost effective way of data networking many locations. This is of particular appeal to our retail and banking customers. Telstra's Business DSL...

  • Page 26
    ... Telstra Small Business Awards • onTrac @ Peter Mac • Telstra Child Flight At Telstra we have a values-based approach to how we do business, leading us beyond legal compliance to make a positive contribution to the industries and communities in which we participate. Being a successful company...

  • Page 27
    ... Australian suppliers. Telstra also pays dividends to shareholders, reinvests profits into our network and develops new opportunities for our business that often result in a benefit to the overall economy. Industry Telstra plays a lead role with the Australian Mobile Telecommunications Association...

  • Page 28
    ... Chief Executive Officer (CEO) and Managing Director CEO and Managing Director since March 1999 John E Fletcher FCPA Director since November 2000 Chairman, Rural Finance Corporation of Victoria; Deputy Chairman, Ridley Corporation Ltd; Director, Reserve Bank of Australia, National Foods Limited...

  • Page 29
    ... Chartered Accountant; formerly Managing Partner KPMG NSW (1992-1998); Chairman, Maritime Industry Finance Company Ltd and Cumnock Coal Limited; Deputy Chairman, Tourism Australia; Director, Amalgamated Holdings Ltd Group, Ramsay Health Care Ltd and Carlton Investments Ltd. Age 65 Number of board...

  • Page 30
    ... $168 million mainly as a result of the sale of seven office properties in fiscal 2003. Investment expenditure amounted to $668 million in fiscal 2004, which included the acquisition of Trading Post (Australia) Holdings Pty Ltd and its controlled entities (Trading Post group). Review of operations...

  • Page 31
    ..., business services and software solutions. Telstra paid 40c per share via a Scheme of Arrangement, resulting in the payment of cash consideration of $333 million; • On 12 August 2004, the directors of Telstra Corporation Limited disclosed the intention to pay a fully franked special dividend of...

  • Page 32
    ... • details of directors' shareholdings in Telstra are shown on page 41; and • details of directors' emoluments are given on pages 33 to 34. Senior executive emoluments This information is provided on pages 34 to 40 and forms part of this report. Performance rights, restricted shares, options and...

  • Page 33
    ... the Board in discharging this responsibility and in the oversight of the Company's compliance programs. This oversight is facilitated by Donald G McGauchie Chairman 12 August 2004 Ziggy Switkowski Chief Executive Officer and Managing Director www.telstra.com.au/communications/shareholder 31

  • Page 34
    ...: Name Donald G McGauchie John T Ralph Zygmunt E Switkowski (2) Samuel H Chisholm Anthony J Clark John E Fletcher Belinda J Hutchinson Catherine B Livingstone Charles Macek John W Stocker Age 54 71 56 64 65 53 51 48 57 59 Position Chairman Deputy Chairman Chief Executive Officer, Managing Director...

  • Page 35
    ... US based director, received management consultancy fees of $31,529 (paid in US dollars). These payments are not included when calculating the total aggregate remuneration pool. These fees are for contribution of services in addition to Board duties. www.telstra.com.au/communications/shareholder 33

  • Page 36
    ... retirement benefit as fees have been declined by the director Remuneration policy for the CEO & senior executives The Nominations & Remuneration Committee (formerly the Appointments & Compensation Committee) is accountable for reviewing and recommending to the Board the remuneration arrangements...

  • Page 37
    ... concept of share ownership by the CEO and senior executives in Telstra. The Board has also approved a change to the Telstra Long Term Incentive (LTI) Plan for fiscal 2005. The LTI plan currently uses Telstra's Total Shareholder Return (TSR) compared to a comparator group of companies comprising the...

  • Page 38
    ... remuneration plan supported Telstra's operational and strategic plans through linking an element of the CEO's and senior executives' remuneration with sustained improvements in shareholder value. A deferred share was a right to acquire a share in Telstra subject to satisfying certain employment...

  • Page 39
    ..., the senior executive pays the original exercise price to the Telstra Growthshare Trustee and the loan is repaid. As a result, there is no direct cash expense incurred by us, nor dilution of shareholder interests. Telstra employee share ownership plans All employees, including our CEO and senior...

  • Page 40
    ... use of products and services related to Telstra employment. (4) Includes payments made to executives for continued service with Telstra as part of their employment contract. (5) The value of deferred remuneration relates to the number of Telstra shares issued under the Deferred Remuneration Plan...

  • Page 41
    ...LTI plan. (3) Where a vesting scale is used the table reflects the maximum achievable allocation. Long Term Incentive allocations during fiscal 2004 In addition to the remuneration detailed in the table in the section headed "CEO and senior executive remuneration", the CEO and the senior executives...

  • Page 42
    directors' report continued CEO and senior executives number of equity based instruments outstanding Telstra Growthshare (1) (2) Long Term Incentive Plans Name Zygmunt E Switkowski Bruce Akhurst Douglas Campbell David Moffatt Ted Pretty Michael Rocca Bill Scales John Stanhope David Thodey ...

  • Page 43
    ...shares held by 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...

  • Page 44
    ...revenue Borrowing costs Net borrowing costs Profit before income tax expense Income tax expense Net profit Outside equity interests in net loss Net profit available to Telstra Entity shareholders Other valuation adjustments to equity Net exchange differences on translation of financial statements of...

  • Page 45
    ... revenue increased due to the introduction of pricing packages with higher access charges and lower call rates, but was offset by lower local call, international direct and national long distance revenues. Mobile services and fixed to mobile call revenue increased, largely due to the strength of...

  • Page 46
    ... financial report continued statement of financial position as at 30 June 2004 2004 $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 47
    ... - sale of business Net cash used in investing activities Cash flows from financing activities Proceeds from: - borrowings Repayment of: - borrowings - Telstra bonds - finance leases principal amount Employee share loans (net) Loan to joint venture entity Dividends paid Share buy-back Net cash used...

  • Page 48
    ... free cash flow position, which enabled the company to pay strong dividends, fund the acquisition of the Trading Post Group and complete an off market share buy-back. We have gained cash through continued strong company operating activities and through careful capital and cash management. We have...

  • Page 49
    ... of a mobile network contract or sold as part of a prepaid phone package; • broadband Internet installation kits, where a modem is provided, and satellite Internet packages; and • advertising in the Yellow Pages printed and online directories. Further clarification of terminology used in our...

  • Page 50
    ... the timetable outlined above. The IFRS project team is monitored by a governance committee comprising senior members of management, and reports regularly to the Audit Committee of the Telstra Board on the progress towards adoption. Planning and technical evaluation has largely been completed, and...

  • Page 51
    ... the "tax effect income statement" approach currently used by Australian companies. Under the new method we will recognise deferred tax balances in the statement of financial position when there is a difference between the carrying value of an asset or liability and its tax base. It is expected that...

  • Page 52
    .../139, our accounting policy will change to recognise our financial instruments in the statement of financial position and to record all derivatives and most financial assets at fair market value. AASB 139 recognises fair value hedge accounting, cash flow hedge accounting and hedges of investments in...

  • Page 53
    ...responsible for: • the overall planning, design and construction management of Telstra's communication networks; • the delivery of information technology solutions to support our products, services and customer support function; • product development and management; • the office of the Chief...

  • Page 54
    ...Segment information (continued) • Regulatory, Corporate and Human Relations - responsible for managing our relationships and positioning with key groups such as our customers, the media, governments, community groups and staff. It manages personnel, health and safety, environment, remuneration and...

  • Page 55
    ... Global Services Australia Limited (IBMGSA), amounting to $154 million. Refer note 3 of the financial report in the "Annual Report 2004" for further information. c) Sales revenue for the other segment relates primarily to revenue earned by our subsidiary Sensis Pty Ltd. The Asset Accounting Group is...

  • Page 56
    ... in the share of equity accounted net losses/(profits) is the write down of our investment in REACH, amounting to $965 million. Refer note 3 of the financial report in the "Annual Report 2004". c) Included in other revenue from external customers is the sale of seven office properties for $570...

  • Page 57
    ... and Contingent Assets" for the year ended 30 June 2003 and subsequent reporting periods, a provision for dividend can no longer be raised at balance date when the dividend is declared after that date. As a result, during fiscal 2003 we changed our accounting policy to reflect this position and...

  • Page 58
    ...with IBM Global Services Australia Limited (i) - provision for the non recoverability of funding to REACH Ltd (ii) - book value on sale of properties (iii) Item included in share of net losses of associates and joint venture entities: - write down of the carrying value of our investment in REACH Ltd...

  • Page 59
    ... depressed conditions in 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 resulted in a reduction of our investments accounted for using the equity method in our statement of...

  • Page 60
    ... the arrangement by the Boards of both companies. Under the Heads of Agreement, the H3GA radio access network is proposed to become the core asset of the joint venture. In return for 50% ownership of the asset, it is proposed that we will pay H3GA $450 million under a fixed payment schedule in four...

  • Page 61
    ... audit report to the members of Telstra Corporation Limited Scope The financial report and directors' responsibility The concise financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, statement of changes in shareholders' equity...

  • Page 62
    ...our website at www.telstra.com.au/communications/shareholder/services.cfm From this site you can access your holding information, you can make changes to your holding record or you can download forms to complete and return to the Telstra Share Registry, to ensure that your details are up to date. To...

  • Page 63
    ... Review or copies of the detailed Annual Report, please call 1300 88 66 77 Website This review and the Annual Report may also be found via Telstra's Investor Relations home page at: http://www.telstra.com.au/communications /shareholder Depositary for American Depositary Receipts The Bank of New York...

  • Page 64
    broadband Sensis® wireless