Telstra 2005 Annual Report Download

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Annual Review 2005
innovation – making thinking work
i-mode®
fixed line
security and
automation
digital entertainment

Table of contents

  • Page 1
    innovation - making thinking work Annual Review 2005 digital entertainment security and automation fixed line i-mode®

  • Page 2
    ... and marketing P.10 business and government P.12 technology, innovation and products P.14 country wide P.15 infrastructure services P.16 wholesale P.17 BigPond® P.18 Sensis P.20 FOXTEL P.21 international P.22 corporate social responsibility investor information board of directors directors' report...

  • Page 3
    ... dividends. The first 6 cent special dividend was paid with the 14 cent interim dividend in April 2005. The second 6 cent special dividend will be paid with the final ordinary dividend of 14 cents per share in October 2005. * % change on ordinary dividends www.telstra.com.au/abouttelstra/investor...

  • Page 4
    ... Telstra will be centred on customers. Your Board began the process of more actively engaging with all our key stakeholders to ensure that our customers across Australia have access to the best telecommunication services available. We affirmed our commitment to providing services to rural and remote...

  • Page 5
    ... dividends, special dividends and a share buy-back. Operationally, again the standout business performers were broadband, mobiles and Sensis, our advertising and directories business. On the downside, pressure on traditional fixed line voice revenues is intensifying. Usage of new communication...

  • Page 6
    ... as Chief Executive Officer on 1 July, we have made good progress on a wide-ranging strategic review of Telstra. We are devising a new business strategy that is coherent, commercially sound and customer focused - a strategy for innovation and growth. Every part of the business - systems, processes...

  • Page 7
    ... Company's operations in order to deliver the best possible customer service. In other recent management changes, Bill Stewart was appointed Group Managing Director and Head of Strategic Marketing and Phil Burgess was named Group Managing Director, Public Policy and Communications. Both executives...

  • Page 8
    ... Company's industry,government and business customers.Before joining the Company,David was Chief Executive Officer of IBM Australia/New Zealand and previously held several senior executive marketing and sales positions within IBM. David Moffatt was appointed Group Managing Director,Telstra Consumer...

  • Page 9
    ... held positions in network services,corporate finance, small business services,product management,and sales.In 1994, he became Vice President,Consumer Sales and Customer service. John Stanhope was appointed to the role of Chief Financial Officer and Group Managing Director,Finance & Administration...

  • Page 10
    ..., Telstra licensees, dealer and retailer points of presence, we offer the most comprehensive range of communication products, services and applications in Australia. TC&M is also responsible for the management of our brand, major advertising and commercial sponsorships, fixed and mobile marketing...

  • Page 11
    ... subscribers worldwide. Telstra i-mode® is the internet simply and easily on your mobile and it is exclusive to Telstra in Australia. Telstra i-mode® offers over 200 information and content internet sites to assist customers who are on the move with news, maps, traffic reports, banking and travel...

  • Page 12
    ..., solutions and Information and Communication Technology (ICT) services to more than 56,000 business and government customers in Australia and New Zealand. TB&G is focused on three key segments; government, industry (our largest corporate customers) and business (our medium and small business...

  • Page 13
    ... in Australia to implement Telstra's mobile broadband (1xEV-DO) solution, a wireless service that provides its field workforce with access to company and customer information, including access to Canon's technical support systems while on the road. The system is as secure as logging in at the office...

  • Page 14
    ... Telstra Mobile Broadband® (launch of 1xEV-DO wireless data service) Launched in November 2004, Telstra Mobile Broadband® allows business customers to work while away from the office. Utilising the latest addition to our CDMA network - 1xEV-DO, customers can access the internet or company networks...

  • Page 15
    ...access technology for our residential customers. OUR MOBILE NETWORKS COVER MORE THAN OF THE AUSTRALIAN POPULATION 98% APPROXIMATELY OF THE POPULATION CAN ACCESS THE ISDN NETWORK TELSTRA'S HYBRID FIBRE COAXIAL (HFC) BROADBAND NETWORK PASSES APPROXIMATELY MILLION HOMES 96% 2.7 www.telstra.com.au...

  • Page 16
    ...The Directorate will work closely with remote indigenous communities and key indigenous groups across Australia to co-ordinate and develop a range of indigenous products and services, and training opportunities within the company. The Directorate will also manage Telstra's involvement in a number of...

  • Page 17
    ...time equivalent employees. Network commitment The Global Operations Centre monitors and controls Telstra's network and operates 24 hours a day, all year round. On a normal business day, this world class centre manages more than 70 million voice and data calls and 21 million mobile calls. During 2004...

  • Page 18
    ... Staff transferred from REACH to Telstra Wholesale in the United States and Hong Kong will work with existing Telstra sales resources across Europe, North America, Asia and Australia to leverage existing relationships and support global customers. Operations We are continuing to develop our business...

  • Page 19
    ... than 400,000 broadband customers were added. BigPond® is an extremely important part of Telstra's business and will continue to be a key driver of future growth. BigPond's accessible pricing, innovative plans and value-added content have stimulated record broadband uptake in Australia. We expect...

  • Page 20
    ... high usage means our advertisers can reach more potential customers. The Sensis advertising network can connect buyers and sellers through print, online, wireless and voice channels. Small business Sensis is one of Australia's most ardent supporters of small business. Sensis is committed to helping...

  • Page 21
    ... text advertisements where advertising is sold on SMS space and promotional text which allows advertisers to place a promotional text message on all SMS messages provided via Sensis® 1234 to promote special offerings. Wireless applications Sensis has also launched a portfolio of mobile services...

  • Page 22
    ... pay for their use of FOXTEL's transmission service, including FOXTEL's cable set top boxes. Access users are responsible for the content and marketing of their channels and the management and billing of their own customer bases. PERFORMANCE INDICATORS June 2005 280 1,023 June 2004 235 904 % Change...

  • Page 23
    ... 3G network offering both businesses and consumers high-speed data access and an enhanced experience across a wide range of mobile multimedia services. Complementing CSL's solution for wireless broadband connectivity, the company also launched its domestic Wi-Fi service. REACH REACH, Telstra's 50...

  • Page 24
    ... - Telstra Friends - Telstra Child Flight - Telstra Foundation® At Telstra, we believe that corporate social responsibility is 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 partner and...

  • Page 25
    ... in London. Released during the year, Telstra's big button multi-purpose phone, for customers with a range of disabilities, is an example of how innovative thinking, consultation, user input, local technology and partnerships can work together to release a unique product. Children from the Cherbourg...

  • Page 26
    ... of Company Directors; and Member, New Zealand Accounting Standards Review Board and Investment Committee of Unisuper Ltd. Chairman, Centre for Eye Research Australia Ltd (1996 - 2003); and Director of Famoice Technology Pty Ltd. (2001 - 2004). Belinda Hutchinson joined Telstra as a non-executive...

  • Page 27
    ... formerly Chief Executive and Managing Director of CRA Limited. He has previously served on the boards of several of Australia's largest companies including the Commonwealth Bank of Australia Limited, BHP Billiton Limited and Fosters Group Limited. Directorships of other listed companies - current...

  • Page 28
    ...new advertising offerings. Pay TV bundling increased due to the launch of FOXTEL digital, an increase in the number of services provided and the average spend per subscriber. In addition to the above drivers of revenue growth, we also strengthened our position in the managed services and information...

  • Page 29
    ... cash flow position, which enabled the company to pay increased dividends, fund the acquisition of a number of new entities and complete the off market share buy-back as described. We have sourced cash through ongoing operating activities and through careful capital and cash management. We continued...

  • Page 30
    ... of the Company, regulatory issues, including regulated price caps, and establishing the appropriate business structure to drive future growth. Growth in sales revenues was led by mobiles, Internet and IP Solutions, solutions management, and advertising and directory services. We continue...

  • Page 31
    ... as our new Chief Executive Officer, effective 1 July 2005. The new CEO is undertaking an operational and strategic review to be completed within 3 to 4 months of his appointment. Details about directors and executives Changes to the directors of Telstra Corporation Limited during the financial...

  • Page 32
    ... Entity directors); • employees of Telstra appointed to the boards of other companies as our nominees; 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...

  • Page 33
    ... statements; • financial information system design and implementation services; • appraisal or valuation services, fairness opinions, or contribution in kind reports; • actuarial services; • internal audit services; • management function or human resources; • broker or dealer, investment...

  • Page 34
    ... role as interim Chairman. (5) Two board meetings throughout the year were held for non-executive directors only - Dr Switkowski was therefore not required to attend these meetings. Resigned as Chief Executive Officer and Managing Director on 1 July 2005. (6) Appointed as a member of the Audit...

  • Page 35
    ... of shares held Indirect interest 54,711 27,500 3,100 2,400 - 1,400 8,800 3,960 5,800 Total 62,491 37,200 3,700 2,400 12,000 9,916 14,480 10,940 18,262 Auditor's independence declaration to the Directors of Telstra Corporation Limited In relation to my audit of the financial report of Telstra Group...

  • Page 36
    ... is on governance and the longerterm strategic direction of the Company. As such, part of their remuneration is delivered as shares, through Telstra's Directshare plan. In this report we explain the policy and structure of the remuneration of: • non-executive directors; and • the CEO and senior...

  • Page 37
    ... with our products and services and recent technological developments. To the extent any of these items are considered a personal benefit to a director, the value of the benefit is included in the 'non-monetary benefits' column in figure 1. Details of non-executive directors' remuneration The...

  • Page 38
    ... senior executives Remuneration policy The Remuneration Committee regularly reviews the strategy, structure and policy for CEO and senior executive remuneration. Responsibility for reviewing and recommending to the Board the remuneration strategy and structure for Telstra's CEO and senior executives...

  • Page 39
    ... Group Managing Directors are those responsible for internal functions of the business, namely finance and administration and regulatory, corporate and human relations. Fixed remuneration Fixed remuneration is made up of guaranteed salary (including salary sacrifice benefits and any applicable...

  • Page 40
    ...of the CEO's maximum STI value is based on measures of customer service, employee opinion survey results and individual, measurable key performance indicators in line with business priorities determined by the Board. The remaining 58.3% of the senior executives' maximum achievable STI value is based...

  • Page 41
    ... wealth The total return to an investor over a given period consists of the combination of dividends paid, the movement in the market value of their shares over that period and any return of capital to shareholders, not including buy-backs. During fiscal 2005 the share price has fluctuated between...

  • Page 42
    ... management strategy whereby we will declare ordinary dividends of around 80% of normal profits after tax and return $1.5 billion per annum to shareholders through special dividends and/or share buy-backs each year through to fiscal 2007. Figure 8: Share buy-backs Date Number of ordinary shares...

  • Page 43
    ... annualised value of the CEO and senior executive allocations under the LTI plan. Remuneration received in fiscal 2005 Telstra has chosen to disclose the remuneration of nine members of the senior leadership team on the basis that these nine have the greatest management authority within the Company...

  • Page 44
    ...Officer, Sensis Douglas Campbell - Group Managing Director, Telstra Country Wide David Moffatt - Group Managing Director, Telstra Consumer & Marketing Ted Pretty - Group Managing Director, Telstra Technology, Innovation & Products Michael Rocca - Group Managing Director, Infrastructure Services Bill...

  • Page 45
    ... of performance rights and options vested to the participants. Allocations for fiscal 2002, 2003, 2004 and 2005 are also subject to performance measures and therefore the CEO and senior executives may or may not derive value from the allocations. www.telstra.com.au/abouttelstra/investor 43

  • Page 46
    ... by any participants. CEO and senior executives' outstanding equity-based instruments The accounting value and actual number of the CEO and senior executives' performance rights, restricted shares and options that were granted, exercised and lapsed in fiscal 2005 is detailed in figure 15 and...

  • Page 47
    ... 2005. This represents the number of equity instruments which have not been exercised or lapsed as at 30 June 2005. The number of instruments that vested during fiscal 2005 relate to the September 2001 LTI plan and had not been exercised at 30 June 2005. www.telstra.com.au/abouttelstra/investor 45

  • Page 48
    remuneration report continued Contractual notice periods The senior executives are employed under contracts without a fixed duration and may terminate their employment by agreement or, by providing six months notice. If an executive's employment is terminated by Telstra for reasons other than ...

  • Page 49
    ... result of this search, Mr Solomon D Trujillo was appointed CEO and executive director of Telstra effective 1 July 2005. The terms of his contract, which was disclosed in an ASX announcement on 9 June 2005, are summarised below. Mr Trujillo receives: • A fixed remuneration package including salary...

  • Page 50
    ... of financial statements of nonAustralian controlled entities Reserves recognised on equity accounting our interest in joint venture entities and associated entities Valuation adjustments attributable to Telstra Entity shareholders and recognised directly in equity Total changes in equity other than...

  • Page 51
    ... sales. Internet and IP solutions revenue experienced significant growth, driven by increased numbers of broadband subscribers for both our retail and wholesale offerings. Our advertising and directories revenue increased over the prior year due to the inclusion of a full year of trading activity...

  • Page 52
    concise financial report continued statement of financial position as at 30 June 2005 2005 $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 ...

  • Page 53
    ... operating activities Receipts from trade and other receivables Payments of accounts payable and to employees Interest received Borrowing costs paid Dividends received Income taxes paid GST remitted to the Australian Taxation Office Net cash provided by operating activities Cash flows from investing...

  • Page 54
    ...The group reported a strong free cash flow position, which enabled the Company to increase declared dividends, fund the acquisition of a number of new entities and complete an off market share buy-back. We have sourced our cash through our operating activities and careful capital and cash management...

  • Page 55
    ...). (v) On 15 November 2004, we completed an off-market share buy-back of 185,284,669 ordinary shares as part of our ongoing capital management program. During fiscal 2004, we also completed an off-market share buy-back of 238,241,174 ordinary shares. www.telstra.com.au/abouttelstra/investor 53

  • Page 56
    ... concise financial report The principal accounting policies adopted in preparing the concise financial report of Telstra Corporation Limited and its controlled entities (referred to as the Telstra Group) are included in the financial report which forms part of the detailed 'Annual Report 2005'. This...

  • Page 57
    ... of our retail Internet products, services and content, contact centres, customer relations and associated functions, for broadband and narrowband delivery. Business segments During the current year, we restructured our pre-existing business unit known as the BigPond®, Media and Sensis group. This...

  • Page 58
    ...management of the hybrid fibre coaxial (HFC) broadband cable network. Sensis is responsible for: • the management and growth of the information, advertising and directories business, including printed publications, voice and online products and services. Corporate areas include: • Legal Services...

  • Page 59
    ...AGAAP 2,420 Share of equity accounted net losses/(profits) 3 Net book value of investments sold (25) Sale of investment/dividend revenue 95 Earnings...Telstra Entity fixed assets (including network assets) managed through the centralised Asset Accounting Group. www.telstra.com.au/abouttelstra/investor...

  • Page 60
    ...229 Less sale of investment/dividend revenue Segment revenue from external customers Add inter-segment revenue Total segment revenue Segment result under AGAAP 2,549 Share of equity accounted net losses/(profits) 2 Net book value of investments sold - Sale of investment/dividend revenue - Earnings...

  • Page 61
    ... statement of financial position. Our final dividend (including the special dividend to be paid with the final dividend) has been reported as an event subsequent to balance date and the provision for dividend has been raised at the declaration date. Dividends paid/declared per ordinary share (cents...

  • Page 62
    ... revenue (excluding interest revenue) - proceeds on sale of our investment in IBM Global Services Australia Limited (i) Items included in expense: Other expenses - Net book value of investment and modification of information technology services contract with IBM Global Services Australia Limited...

  • Page 63
    ... financial statements. Appointment of CEO We have appointed Sol Trujillo as our new Chief Executive Officer (CEO), effective 1 July 2005. The new CEO is undertaking an operational and strategic review to be completed within 3 to 4 months of his appointment. www.telstra.com.au/abouttelstra/investor...

  • Page 64
    ... 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 65
    ...are useful to investors because analysts and other members of the investment community largely view them as key and widely recognised measures of operating performance. (2) Dividends declared in 2005 include a 6 cent special dividend paid with the interim dividend and a 6 cent special dividend to be...

  • Page 66
    Telstra facts Telstra's market share - as at 30 June 2005 * Approx. % of local calls and basic access services resold over Telstra's network. Top 20 telcos - as at 30 June 2005 • Telstra's market capitalisation was approximately $63 billion as at 30 June 2005, making Telstra the 12th largest ...

  • Page 67
    ... 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 access your shareholder information via this secure website you will need to log in using your Securityholder Reference Number (SRN...

  • Page 68
    wireless connectivity broadband internet