Telstra 2007 Annual Report Download - page 34

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Telstra Corporation Limited and controlled entities
Full year results and operations review - June 2007
Expenses
During fiscal year 2007, our total expenses (including share of net loss from jointly controlled and associated
entities) increased by 3.5% to $18,181 million. Our expenses have been impacted by the following factors:
• higher goods and services purchased mainly relating to cost of mobile sales as a result of increased
market campaign activity, especially following the launch of the Next GTM network;
• costs associated with transformational initiatives amounting to $706 million in fiscal 2007, representing
a year on year reduction of $413 million, largely due to restructuring and redundancy provisions of $427
million included in prior period results not being incurred in the current fiscal year. A total of $232 million
of these provisions are remaining at the end of fiscal 2007;
• growth in our service contracts and other agreements largely driven by expenditure relating to the
transformation, as well as volume based increases;
• impairment charges relating to the Trading Post mastheads of $110 million arising as a result of the
highly competitive market in which Trading Post operates and risks associated with new initiatives;
• additional operating expenses of $228 million included in fiscal 2007 resulting from our acquisition
activity including the SouFun acquisition, and the inclusion of a full twelve months of expenses relating
to entities we acquired in fiscal 2006. This included expenses relating to Adstream and New World PCS.
Offsetting this increase is a reduction to our expenses of $80 million, attributable to our divestment of
Australian Administrative Services (AAS) in August 2006;
• lower labour expenses as a result of reduced staff numbers and the utilisation of the redundancy
provision raised at the end of fiscal 2006, which has the effect of lowering our redundancy expense
compared with fiscal 2006; and
• lower network payment costs as a result of reduced mobile terminating access rates and lower net costs
flowing through from REACH, resulting in lower offshore outpayments.
Labour
Labour expense includes:
• salary, wages and related on-costs, including superannuation costs, share based payments, workers'
compensation, leave entitlements and payroll tax;
• costs of engaging contractor labour and agency costs; and
• redundancy expenses.
In the table below, our domestic full time employees include domestic full time staff, domestic fixed term
contracted staff and expatriate staff in overseas subsidiary entities. Domestic full time employees do not
include casual and part time employees or employees in our offshore subsidiary entities. Our full time
employees and equivalents include the total of our domestic and offshore full time employees, and casual
and part time employees measured on an equivalent basis. Our total workforce includes domestic and
offshore full time, casual and part time employees as well as contractors and staff employed through
agency arrangements measured on an equivalent basis.
Expenses
Year ended 30 June
2007 2006 Change 2007/2006
$m $m $m (% change)
Labour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,017 4,364 (347) (8.0%)
Goods and services purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,151 4,701 450 9.6%
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,924 4,427 497 11.2%
14,092 13,492 600 4.4%
Share of net loss/(gain) from jointly controlled and associated entities. . . . . . . . . . . . 7(5) 12 (240.0%)
14,099 13,487 612 4.5%
Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,082 4,078 4 0.1%
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,181 17,565 616 3.5%