Telstra 2008 Annual Report Download - page 199

Telstra Corporation Limited and controlled entities
196
Notes to the Financial Statements (continued)
Telstra Entity (continued)
Indemnities, performance guarantees and financial support
(continued)
• Guarantees of the performance of jointly controlled entities under
contractual agreements to a maximum amount of $14 million
(2007: $21 million).
• Guarantees over the performance of third parties under
defeasance arrangements, whereby lease payments are made on
our behalf by the third parties over the remaining terms of the
finance leases. The lease payments over the remaining expected
term of the leases amount to $490 million (US$472 million)
(2007: $671 million (US$569 million)). We hold an early buyout
option that we could exercise in fiscal 2011 and fiscal 2013,
otherwise the relevant lease period ends during fiscal 2015 and
fiscal 2016. Refer to note 22 for further details on the above finance
leases.
• During fiscal 1998, we resolved to provide IBM Global Services
Australia Limited (IBMGSA) with guarantees issued on a several
basis up to $210 million as a shareholder of IBMGSA. We issued a
guarantee of $68 million on behalf of IBMGSA during fiscal 2000.
During fiscal 2004, we sold our shareholding in this entity. The $68
million guarantee is provided to support service contracts entered
into by IBMGSA and third parties, and was made with IBMGSA
bankers, or directly to IBMGSA customers. As at 30 June 2008, this
guarantee has still been provided and $142 million (2007: $142
million) of the $210 million guarantee facility remains unused.
Upon sale of our shareholding in IBMGSA and under the deed of
indemnity between shareholders, our liability under these
performance guarantees has been indemnified for all guarantees
that were in place at the time of sale. Therefore, the overall net
exposure to any loss associated with a claim has effectively been
offset.
Other
FOXTEL minimum subscriber guarantees and other obligations
The Telstra Entity and its partners, News Corporation Limited and
Publishing and Broadcasting Limited, and Telstra Media Pty Ltd and
its partner, Sky Cable Pty Ltd, have entered into agreements relating
to pay television programming with various parties and other
miscellaneous contracts. Our share of commitments under these
agreements relate mainly to minimum subscriber guarantees (MSG)
(refer to note 26 for details of MSG commitments).
As we are subject to joint and several liability in relation to certain
agreements entered into by the FOXTEL partnership, we would be
contingently liable if our partners in this relationship failed to meet
any of their obligations. As a result, our contingent liabilities arising
from FOXTEL’s MSG and other agreements are $1,828 million (2007:
$1,712 million).
3GIS Partnership
During fiscal 2005, Telstra OnAir Holdings Pty Ltd and its partner,
Hutchison 3G Australia Pty Ltd entered into agreements relating to
the occupation of premises to provide 3GSM radio access network
services.
As we are subject to joint and several liability in relation to
agreements entered into by the 3GIS partnership, we would be
contingently liable if our partners in this relationship failed to meet
any of their obligations. As a result, our contingent liabilities arising
from the above agreements are $130 million (2007: $154 million).
Sequel Limited
On 27 June 2008, our controlled entity Telstra Holdings Pty Limited
acquired 55% of the issued capital of Sequel Limited who acquired
100% of the issued capital of certain entities (refer to note 20 for details
of this acquisition).
An additional amount of up to $50 million may become payable as
consideration if certain pre-determined revenue and EBITDA targets
are achieved by the subsidiaries. Of this, we have estimated an
amount of $15 million to become payable and have brought this to
account. Any additional amounts becoming payable will be brought
to account as a component of goodwill.
ASIC deed of cross guarantee
A list of the companies that are part of our deed of cross guarantee
appear in note 25. Each of these companies (except Telstra Finance
Limited) guarantees the payment in full of the debts of the other
named companies in the event of their winding up. Refer to note 25 for
further information.
23. Contingent liabilities and contingent assets (continued)