Telstra 2011 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ANNUAL REPORT 2011 IT'S HOW WE CONNECT

  • Page 3
    2M NEW MOBILE CUSTOMERS IN AUSTRALIA & HONG KONG 659,000 BUNDLES SOLD 28c DIVIDEND PER SHARE COMMUNICATING WITH OUR SHAREHOLDERS Our online Investor Centre www.telstra.com/investor is an important tool for our shareholders where you can access all the latest news, information and shareholder ...

  • Page 4
    ... your dividend statements, Notice of the Annual General Meeting and Shareholder Updates (including summary financial information) by email notification. This is also important if we want to communicate with you at short notice in relation to current issues. Please refer to the Managing my Telstra...

  • Page 5
    FINANCIAL RESULTS FIVE YEAR FINANCIAL SUMMARY 2011 $m Sales revenue EBITDA(1) EBIT(2) Profit for the year after non-controlling interests Dividends declared per share (cents per share) Total assets Gross debt Net debt Total Equity Accrued capital expenditure Free cashflow 24,983 10,151 5,692 3,250 ...

  • Page 6
    ... shareholders, the strategy is bearing fruit. We have seen the company return to revenue growth, and expect the momentum across the business to translate to profit growth in 2012. CATHERINE LIVINGSTONE CHAIRMAN DAVID THODEY CHIEF EXECUTIVE OFFICER 2011 HIGHLIGHTS For the fiscal year 2011, sales...

  • Page 7
    ... medium business decision makers each month on their views of Telstra. Catherine B Livingstone AO Chairman David Thodey Chief Executive Officer * Guidance assumes wholesale product price stability and excludes any further impairments to investments and proceeds on the sale of businesses. Pictured...

  • Page 8
    ... TO FREE LOCAL AND STD CALLS AND PROVIDED FREE HANDSETS WITH SIM CARDS FOR USE BY EVACUEES, FREE PHONE CARDS, SATELLITE KITS TO EMERGENCY SERVICES ORGANISATIONS AND SOME ISOLATED COMMUNITIES AND 200 PRE-PAID MOBILE HANDSETS, 2000 $30 RECHARGE CARDS AND 1600 $10 PHONEAWAY CARDS. WWW.TELSTRA.COM...

  • Page 9
    ...) and Group Managing Director, Finance & Administration in October 2003. In July 2011 Mr Stanhope's title changed to Chief Financial Officer and Group Managing Director Finance. JOHN M STEWART BA, FCIB, ACII Mr Stewart joined Telstra as a non-executive Director in April 2008. He is a member of the...

  • Page 10
    ...create a new Telstra: improve customer satisfaction, retain and grow our customer base, simplify the business and invest in new growth businesses. All of these strategic priorities are important, but we asked the Group Managing Directors of some of our major business units in Fiscal 2011 about their...

  • Page 11
    viii WWW.TELSTRA.COM

  • Page 12
    ... boards. As I was involved in installing interim Next G® phone services, I was also impressed at how understanding our customers were. I believe this was due to the widespread presence of the Telstra flood response team and also the fact that outstanding faults were locally managed and customers...

  • Page 13
    ... at some of Telstra's network exchange sites, and provide at-risk youth positive alternatives to anti-social activities. The T-MAP initiative is not only focused on reducing vandalism on Telstra property. Just as importantly it's about strengthening existing community based relationships through...

  • Page 14
    WWW.TELSTRA.COM xi

  • Page 15
    ...connected the performers to their family, homes and the world with Next G and high-speed internet services into the Opera House and High Definition video streaming to the YouTube) global network. Almost 33 million people viewed the spectacular final concert via YouTube, on mobile devices and Telstra...

  • Page 16
    Telstra Corporation Limited and controlled entities Contents 1. Full year results and operations review June 2011...2. Corporate Governance and Board Practices ...3. Shareholder Information...4. Directors' Report ...5. Remuneration Report ...6. Financial Report... 3 37 53 55 69 84 1

  • Page 17
    ...Limited and controlled entities ® Registered trade mark of Telstra Corporation Limited ™ Trade mark of Telstra Corporation Limited ) Trade mark of Google Inc, a Delaware Corporation FOXTEL marks are used under licence by FOXTEL Management Pty Ltd. All amounts are expressed in Australian dollars...

  • Page 18
    ......Statement of financial position ...Statement of cash flows ...Segment information and product profitability ...Statistical data summary ...Revenue ...Fixed products:...- PSTN ...- Fixed internet ...- ISDN and other fixed revenue . Mobiles ...IP and data access ...Network applications and services...

  • Page 19
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Summary financial information Results of operations Year ended 30 June 2011 2010 Change $m $m $m Sales revenue ...Other revenue (i) . . Total revenue ...Other income (ii) . . Total income (excl...

  • Page 20
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Statement of financial position As at 30 Jun 11 30 Jun 10 Change $m $m $m Current assets Cash and cash equivalents ...Trade and other receivables ...Inventories...Derivative financial assets......

  • Page 21
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Statement of cash flows 2011 $m Cashflows from operating activities Receipts from customers (inclusive of goods and services tax Payments to suppliers and to employees (inclusive of GST) . Net ...

  • Page 22
    ......Year ended 30 June 2010 Change $m $m Change % 3,060 1,208 3,780 3,341 1,211 3,558 (281) (3) 222 (8.4) (0.2) 6.2 Telstra Business PSTN products ...Fixed internet ...Mobile services revenue...Telstra Enterprise and Government Mobile services revenue...IP and data access ...Network applications...

  • Page 23
    ... SIO growth accelerated by 9.1%. Mobile broadband revenue grew by 16.8%. Fixed products revenue, which includes PSTN and ISDN revenue, decreased by 4.0%. This rate of decline has slowed driven by increased internet direct and premium calling product revenue growth. IP and data access revenue grew...

  • Page 24
    ... decline in revenue, driven by improvements in credit management activity and reduced marketing spend in the second half. Product profitability - EBITDA margins Jun 2011 Half-year ended Dec 2010 Jun 2010 Dec 2009 Mobile ...Fixed internet . . PSTN ...IP and data access Sensis ...Telstra Group...

  • Page 25
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Statistical data summary Billable traffic data (i) 2011 m Fixed telephony Number of local calls ...National long distance minutes Fixed to mobile minutes. . International direct minutes Mobiles ...

  • Page 26
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Revenue 2011 $m Fixed products PSTN products ...Fixed internet ...ISDN products ...Other fixed revenue (i) ...Total fixed products ...Mobiles Mobile services - retail ...Mobile services - ...

  • Page 27
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 The mix of sales revenue by product continues to change. The decline in PSTN revenue of 7.9% or $462 million to $5,370 million was due to a decline in usage levels across all categories. This ...

  • Page 28
    ... ...Total basic access lines in service ...Average revenue per user per month ($'s) ...Number of local calls (millions) (i) ...National long distance minutes (millions) (i) Fixed to mobile minutes (millions) (i) ...International direct minutes (millions) (i) ...5,370 Year ended 30 June 2010 Change...

  • Page 29
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 PSTN revenue - year-on-year change % Jun 2011 Total PSTN ...Retail ...Wholesale ...Wholesale as a percentage of total PSTN revenue ...(7.4) (6.7) (12.4) Dec 2010 (8.4) (9.3) (1.7) Jun 2010 (9.0)...

  • Page 30
    ... years • Low cancellation rate at 17.3%, improved from 22.8% last year as we continue our strategy to better manage customer churn Fixed internet 2011 $m - Fixed broadband - retail ...- Fixed broadband - hardware . Total retail fixed broadband . . Wholesale broadband ...Spectrum sharing services...

  • Page 31
    ... controlled entities Full year results and operations review - June 2011 Total fixed internet revenue decreased by 2.5% to $2,091 million during the year with declines in fixed wholesale broadband and spectrum sharing services (LSS) offsetting growth in retail fixed broadband revenue. 200 Half...

  • Page 32
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Mobiles • SIO growth of 1.66 million for the year as a result of our strategy to retain and grow customers • Total mobile revenue growth of 10.7% and services growth of 7.4% • Postpaid ...

  • Page 33
    ... Corporation Limited and controlled entities Full year results and operations review - June 2011 broadband revenue of $974 million grew by 18.9% or $155 million as our customers continue to enjoy the benefits of wireless internet access and our Next G® network. Although prepaid handheld customers...

  • Page 34
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 IP and data access • IP access revenue grew by 16.2% to $970 million while legacy specialised data product revenue declined by 27.4% to $350 million • IP MAN SIOs increased by 19.0% and IP ...

  • Page 35
    ... works 2011 $m Network applications and services revenue ...1,144 Year ended 30 June 2010 Change $m $m 1,033 111 Change % 10.7 Network Applications and Services (NAS) is one of our strategic growth drivers. This portfolio builds on the value our IP access products provide to enterprise, government...

  • Page 36
    ... the sale of part of our UK voice business together with unfavourable churn in data and voice products. Pay TV bundling 2011 $m Pay TV bundling revenue ...Total pay TV bundling SIOs (thousands) ...Note: statistical data represents management's best estimates. 584 508 Year ended 30 June 2010 Change...

  • Page 37
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Other revenue 2011 $m Distributions received ...Rental income ...Total other revenue ...70 40 110 Year ended 30 June 2010 Change $m $m 60 44 104 10 (4) 6 Change % 16.7 (9.1) 5.8 Other revenue ...

  • Page 38
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Expenses Labour • Total labour expenses increased by 5.9% with increases driven by redundancy activity, higher costs to support our growing customer base as well as the impact of natural ...

  • Page 39
    ...with improved customer offerings resulting in higher connections and higher subsidy expense supporting sales revenue growth. Domestically, subsidised volumes decreased due to a change in the product/plan offering mix favouring postpaid mobile repayment option (MRO) offers. Network payments increased...

  • Page 40
    ... by increases in media spend for our T-Box®, T-Hub® and bundling promotions, which has supported strong growth in these products. Internationally, CSL New World expenditure declined after a successful branding and sales campaign during the previous financial year. Service contracts and agreements...

  • Page 41
    ... and Australia-Japan Cable as at 30 June 2011 were $559 million and $148 million respectively. The restructure of Reach and acquisition of assets as announced on 26 January 2011 resulted in an accounting gain for Telstra. The gain will have no direct impact on our share of carried forward losses...

  • Page 42
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Net finance costs 2011 $m Borrowing costs ...Finance leases ...Finance Income ...Net Borrowing Costs ...Unwinding of discount on liabilities recognised at present value ...Loss on fair value ...

  • Page 43
    ...Corporation Limited and controlled entities Full year results and operations review - June 2011 Income tax expense and franking account • Our effective tax rate this fiscal year is 28.7% which is lower than the Australian corporate tax rate of 30% 2011 $m Income tax expense ...Effective tax rate...

  • Page 44
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 Major subsidiaries - financial summaries Below is a financial summary of our three largest subsidiaries: Sensis, CSL New World and TelstraClear. This information is complementary to the product ...

  • Page 45
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 CSL New World financial summary Year ended 30 June 2011 2010 Change A$m A$m % Sales revenue ...Total income ...Operating expenses (excl. depreciation & amortisation)...EBITDA ...Depreciation and...

  • Page 46
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 TelstraClear financial summary Year ended 30 June 2011 2010 Change A$m A$m % Sales revenue ...Total income ...Operating expenses (excl. depreciation & amortisation)...EBITDA contribution ......

  • Page 47
    ...the market on competitive terms • Net assets have decreased reflecting our investment during the year in executing our strategy around customer acquisition and business simplification Statement of financial position As at 30 Jun 11 30 Jun 10 Change $m $m $m Current assets Cash and cash equivalents...

  • Page 48
    ...effect of exchange rate movements and reflects a change in policy settings which requires us to hold more liquidity to prefund major payments. Also of note is $169 million for the net cash portion of SouFun assets sold which was included in current assets held for sale in June 2010, partly offset by...

  • Page 49
    ... to support mobiles coverage and broadband growth; • new revenue / growth spend to support new growth businesses has been maintained and includes spend on platform development for emerging products such as digital business initiatives and media applications and experience; • the international...

  • Page 50
    ... sales revenue in the second half of the year. This was partly offset by an increase in debtors influenced by the high take up of our repayment option plans for mobile, T-Hub® and T-Box® as well as higher customer numbers as a result of our strategy to invest and grow our customer base. Cash...

  • Page 51
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2011 product development projects, increased mobiles site expenditure and IP platform upgrades. Interest received was higher year on year by $56 million due to the increase in cash holdings ...

  • Page 52
    Telstra Corporation Limited and controlled entities Corporate Governance Statement Corporate Governance & Board Practices 2011 Your Board is committed to excellence in corporate governance and enhancing our shareholders' interests. Good corporate governance is the hallmark of successful companies -...

  • Page 53
    ... financial position as well as internal and external audit activities; • Governance of Telstra's corporate citizenship strategy and performance is provided by the Company's Executive Leadership team, comprised of the Chief Executive Officer (CEO) and Group Managing Directors. Reports on progress...

  • Page 54
    ... to excellence in corporate governance in Australia; monitoring and influencing Telstra's culture, reputation and ethical standards; driving Board succession planning; and overseeing shareholder reporting and communications. A recommendation to re-elect a Director at the end of their term is not...

  • Page 55
    ... financial, strategic, operational and risk management position, the Company's governance framework and key developments in the Company and the industry and environment in which it operates. Telstra also has in place a continuing education program for Directors which is included in the annual Board...

  • Page 56
    Telstra Corporation Limited and controlled entities Corporate Governance Statement Board Meetings Your Board meets regularly to discuss, among other things, strategic matters, business performance oversight, senior executive appointments, performance and remuneration, financial matters, risk ...

  • Page 57
    ...statements; the integrity of Telstra's financial systems and processes; and the appropriateness of Telstra's accounting policies and practices and consistency with current and emerging accounting standards; • provides a forum for communication between your Board, management and both the internal...

  • Page 58
    ..., including materiality levels, for the current year in the light of Telstra's circumstances and changes in regulatory and other requirements; and approving the provision of recurring audit (and any non-audit) services as part of the annual approval of the audit plan. Nomination Committee Role and...

  • Page 59
    Telstra Corporation Limited and controlled entities Corporate Governance Statement remuneration strategies, practices and disclosures; employee share and option plans; management succession, capability and talent development; diversity (at all levels of the Company below Board level); and ...

  • Page 60
    ...was founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. • • Telstra Values, the Telstra Group Code of Conduct & Business Principles and other Company policies Together...

  • Page 61
    ... shares, and buying and selling (or otherwise dealing in) Telstra shares on a short-term trading basis. Further, Directors, the CEO, senior management and relevant employees are prohibited from entering into arrangements which effectively operate to limit the economic risk of their security holdings...

  • Page 62
    ... is disclosable, an announcement is prepared and immediately sent via the Company Secretary's office electronically to all relevant stock exchanges. • Telstra's Investor Relations Communication Policy governs communications and the provision of information to shareholders, brokers and analysts...

  • Page 63
    ..., information security, operational separation, financial reporting, records management, whistleblowing, policy governance, and continuous disclosure. This program-based approach at a corporate level is supported by a network of senior personnel appointed to the role of Business Unit Compliance...

  • Page 64
    Telstra Corporation Limited and controlled entities Corporate Governance Statement • • engagement of identified groups* equal to or greater than national benchmarks; and female representation for 30 June 2012 at 32% (Telstra) and 25% (Executive Management). Gender diversity At Telstra, it is ...

  • Page 65
    Telstra Corporation Limited and controlled entities Corporate Governance Statement Women in management roles at Telstra* As at 30 June 2011 Role Executive Management Middle Management Operational TOTAL By Number 56 2,064 8,256 10,385 By Percentage 22.7% 27.3% 32.6% 31.3% As at 30 June 2010 By ...

  • Page 66
    ... Business Principles, and other Company Policies". See also the Telstra Group Code of Conduct & Business Principles which are available on our website. • Recommendation 3.2: Companies should establish a policy concerning trading in company securities by directors, senior executives and employees...

  • Page 67
    ... is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Recommendation 8.1: The board should establish a remuneration committee. Recommendation 8.2: Companies should clearly...

  • Page 68
    Telstra Corporation Limited and controlled entities Shareholder Information Listing Information Markets in which our shares are traded We are listed, and all our issued shares are quoted on the Australian Securities Exchange (ASX) and the New Zealand Stock Exchange (NZX). Markets on which our debt ...

  • Page 69
    ... Investment Alliance Telstra Growthshare Pty Ltd Tasman Asset Management Ltd UBS Nominees Pty Ltd Argo Investments Limited Questor Financial Services Limited Total Voting Rights Shareholders (whether residents or non-residents of Australia) may vote at a meeting of shareholders in person, directly...

  • Page 70
    ... of the Board, the directors present their report on the consolidated entity (Telstra Group) consisting of Telstra Corporation Limited and the entities it controlled at the end of, or during the year ended, 30 June 2011. Financial comparisons used in this report are of results for the year ended 30...

  • Page 71
    ... in operation for the first time. Line Spectrum Sharing (LSS) services declined for the first time, decreasing by 1.4% reflecting the shift to ULL by competitors. Domestic Mobile revenue growth accelerated during the year to 10.7% as we began to see the benefits of growing our domestic customer base...

  • Page 72
    ... customer relations, network operations and work flow management applications and our billing systems. Cash flow and financial condition We reported a strong free cashflow position with free cashflow of $5,477 million generated in the year, a decrease of $748 million or 12.0% from fiscal 2010...

  • Page 73
    Telstra Corporation Limited and controlled entities Directors' Report This cash position, combined with our borrowing program, will continue to support our ongoing operating and investing activities within our target financial parameters. Our net debt at 30 June 2011 was $13,595 million, down $331 ...

  • Page 74
    ... other companies and government agencies to provide a new range of digital services for business and consumers, including health and education sectors. • Details of directors and executives Changes to the directors of Telstra Corporation Limited during the financial year and up to the date of...

  • Page 75
    ...; packaging of products; procurement of services; site contamination and pollution; and waste management. • Telstra is subject to the Energy Efficiency Opportunities Act 2006 (Cwlth). Telstra registered on 31 March 2007 and has submitted annual public and bi-annual government reports to the...

  • Page 76
    Telstra Corporation Limited and controlled entities Directors' Report Telstra notes the Australian Government's announcement on 10 July 2011 that it intends to legislate to introduce a carbon pricing system from 1 July 2012. The system will require companies with operations that emit greenhouse gas...

  • Page 77
    ... the company's corporate, government and large business customers in Australia, TelstraClear in New Zealand and Telstra's International sales division. Before joining Telstra, Mr Thodey was Chief Executive Officer of IBM Australia/New Zealand and previously held several senior executive positions in...

  • Page 78
    ... to Chief Financial Officer and Group Managing Director Finance. On 29 June 2011 Mr Stanhope announced his retirement from the Company as CFO and Director effective 31 December 2011. Experience: Since joining Telstra in 1967, Mr Stanhope has held a number of operational roles and a range of senior...

  • Page 79
    ... of other listed companies - current: Chief Executive Officer and Executive Director, Asciano Ltd (2011 - ). Directorships of listed companies - past three years: Director, Brambles Limited (2009 - 2011), MAp Airports Limited (2010 - 2011), Deutsche Post World Net, Board of Management, Germany (2005...

  • Page 80
    ... become the company's online business head of worldwide Sales and International Operations. Previously, he was Chief Executive Officer of ninemsn. Mr Vamos also worked for Apple Computer in the 1990s after spending 14 years in senior management roles at IBM Australia. He is the founding President of...

  • Page 81
    ... the annual general meeting and annual financial results announcements. She played a key role in the T2 and T3 floats, Telstra's first off-market share buy-back, and the introduction of a dividend reinvestment plan. Before joining Telstra, Ms Mulhern was a senior associate in a leading national law...

  • Page 82
    Telstra Corporation Limited and controlled entities Directors' Report Directors' meetings Each director attended the following Board and committee meetings during the year as a member of the Board or relevant committee: Board Audit a C B Livingstone(5)(6) D I Thodey (5) Committees (1) ...

  • Page 83
    ... Limited In relation to our audit of the financial report of Telstra Corporation Limited for the financial year ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable...

  • Page 84
    ... Corporation Limited and controlled entities Remuneration Report Dear Shareholder, Telstra is pleased to present its Remuneration Report (the Report) for fiscal 2011. Telstra and its Remuneration Committee (the Committee) work to create compensation programs that link employees' pay with company...

  • Page 85
    ...Chief Operations Officer - Telstra Operations GMD - Telstra Business CFO and GMD - Finance and Administration The Senior Executives in the above table include the five highest paid Company and Group executives for the fiscal 2011 year. Tables 7.1 (Senior Executives) and 7.2 (Non-executive Directors...

  • Page 86
    Telstra Corporation Limited and controlled entities Remuneration Report outcomes of the business strategy and increasing shareholder value. Financial measures for fiscal 2011 were set in accordance with Telstra's financial plan and strategy. The objective of the Customer Satisfaction measure is to ...

  • Page 87
    Telstra Corporation Limited and controlled entities Remuneration Report measures of Relative Total Shareholder Return (RTSR) and Free Cashflow Return on Investment (FCF ROI) must be satisfied in order for participants to realise any reward. The design of the fiscal 2011 LTI plan is aimed at ...

  • Page 88
    ... ordinary Telstra share (including the value of any cash dividends and other shareholder benefits paid during the period) relative to the other companies in the RTSR comparator group over the plan period. The restricted shares related to RTSR will only vest where the growth in Telstra's shareholder...

  • Page 89
    ...for Senior Executives. 5.1 Financial Performance Details of the Group's performance, share price, and dividends over the past five years are summarised in the table below: Performance Measure Earnings Sales revenue EBITDA Net profit available to Telstra Shareholder value Share price ($) (1)(2) Total...

  • Page 90
    ... Wide, GMD Chief Operations Officer, GMD Telstra Business and GMD Telstra Enterprise and Government) Component Fixed Remuneration Short Term Incentive Long Term Incentive Total Fiscal 2011 35.7% 35.7% 28.6% 100.0% Fiscal 2010 35.7% 28.6% 35.7% 100.0% Total Shareholder Return Return On Investment...

  • Page 91
    ... and shareholder. The agreement is limited in terms of time commitment (200 hours at $450 per hour) and scope (services in relation to aspects of the Company's media strategy only). Board Fees Board (fiscal 2011) Committee Fees Audit Committee Remuneration Committee Nomination Committee Technology...

  • Page 92
    ...and Data 7.1 Senior Executives remuneration (main table) Postemployment Benefits Superannuation (5) Total Termination Other Long Term Benefits Benefits Equity Settled Sharebased Payments Short Term Employee Benefits Name Year Salary and Fees (1) NonShort Term Incentives monetary Benefits (cash...

  • Page 93
    ... 2011 during which time he was Chief Operations Officer, however his remuneration disclosed in the above table is up to 29 June 2011 as he falls within the five highest paid Company and Group executives for fiscal 2011. Mr Rocca's Termination Payment is based on his contract of employment dated...

  • Page 94
    Telstra Corporation Limited and controlled entities Remuneration Report 7.2 Non-executive Director Remuneration Short Term Employee Benefits Postemployment Benefits Superannuation ($) 15,199 14,461 15,199 14,461 15,199 13,732 2,582 37,856 15,199 14,461 26,118 18,684 13,450 102,946 113,655 Equity ...

  • Page 95
    ... to the Senior Executive's continued employment. Refer to Note 27 of the financial statements for further details. For fiscal 2010, there were no restricted incentive shares provided under the fiscal 2010 STI plan. The grant date for both the cash and the equity component of the fiscal 2011 STI will...

  • Page 96
    Telstra Corporation Limited and controlled entities Remuneration Report 7.4 Summary of LTI Plans as at 30 June 2011 As at 30 June 2011 the vesting status of all LTI equity plans is as follows: Plan Type of Instrument Granted Performance Period Result (1) Future Financial Years in which Grants Vest ...

  • Page 97
    ... Total Remuneration is the sum of short term employee benefits, post employment benefits, termination benefits, other long term benefits and equity settled share based payments as detailed in table 7.1 of this Report. 7.6 Number of equity instruments granted, vested and exercised during fiscal 2011...

  • Page 98
    ... model, as explained in Note 27 to the financial statements. Each equity instrument was exercised for one fully paid Telstra share by paying the prescribed exercise price of $1 in total for all of the performance rights exercised on a particular day. The values reflect the market value at the date...

  • Page 99
    ... contingent assets ...Post employment benefits ...Investments in controlled entities ...Investments in jointly controlled and associated entities ...Employee share plans ...Key management personnel compensation ...Related party disclosures ...Parent entity information ...Events after reporting date...

  • Page 100
    ...Income tax expense ...9 Profit for the year ...Attributable to: Equity holders of Telstra Entity ...Non-controlling interests ... 3,231 19 3,250 3,883 57 3,940 Earnings per share (cents per share) Basic ...Diluted ...The notes following the financial statements form part of the financial report...

  • Page 101
    ... of financial statements of non-Australian controlled entities ...Actuarial gain/(loss) on defined benefit plans ...24 Total other comprehensive income ...Total comprehensive income for the year ...Total comprehensive income attributable to equity holders of Telstra Entity ...Total comprehensive...

  • Page 102
    Telstra Corporation Limited and controlled entities Statement of Financial Position as at 30 June 2011 Telstra Group As at 30 June 2011 2010 $m $m Note Current assets Cash and cash equivalents ...Trade and other receivables...Inventories ...Derivative financial assets ...Current tax receivables......

  • Page 103
    ... Corporation Limited and controlled entities Statement of Cash Flows for the year ended 30 June 2011 Telstra Group Year ended 30 June 2011 2010 $m $m Note Cash flows from operating activities Receipts from customers (inclusive of goods and services tax (GST)) Payments to suppliers and to employees...

  • Page 104
    ... of the non-Australian controlled entities' financial statements into Australian dollars. This reserve is also used to record our percentage share of exchange differences arising from equity accounting our non-Australian investments in jointly controlled and associated entities. (ii) The cash flow...

  • Page 105
    ... Telstra Board of Directors on 11 August 2011. The principal accounting policies used in preparing the financial report of the Telstra Group are set out in note 2 to our financial statements. 1.1 Basis of preparation of the financial report This financial report is a general purpose financial report...

  • Page 106
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements 2.1 Changes in accounting policies The following accounting policy changes occurred during the year ended 30 June ...

  • Page 107
    ... dollars. The financial statements of these entities are translated to Australian dollars (our presentation currency) using the following method: • assets and liabilities are translated into Australian dollars using market exchange rates at reporting date; • equity at the date of investment...

  • Page 108
    ... partnerships, are accounted for using the equity method of accounting in the Telstra Group financial statements. Under the equity method of accounting, we adjust the initial recorded amount of the investment for our share of: • profits or losses after tax for the year since the date of investment...

  • Page 109
    ...-for-sale' financial assets and are measured at fair value at each reporting date. Fair values are calculated on the following basis: • for listed securities traded in an organised financial market, we use the current quoted market bid price at reporting date; and • for investments in unlisted...

  • Page 110
    ... ...Communication assets Network land and buildings...Network support infrastructure ...Access fixed ...Access mobile ...Content/IP products - core ...Core network - data ...Core network - switch ...Core network - transport ...Specialised premise equipment ...International connect ...Managed service...

  • Page 111
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) (a) Telstra as a lessee Where we acquire non current assets via a finance lease, the lower of the fair...

  • Page 112
    ... useful life for both that current year and future years. The net effect of the reassessment for fiscal 2011 was a decrease in our amortisation expense of $105 million (2010: $49 million decrease) for the Telstra Group. In relation to acquired intangible assets, we apply management judgement...

  • Page 113
    ...; and • discount rate. Refer to note 16 for further details on the key management judgements used in the calculation of our long service leave provision. Borrowings are included as non current liabilities except for those with maturities less than 12 months from the reporting date, which are...

  • Page 114
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) 2.16 Share capital Issued and paid up capital is recognised at the fair value of the consideration ...

  • Page 115
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) (f) Royalties Royalty revenue is recognised on an accrual basis in accordance with the substance of ...

  • Page 116
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) Management judgement is required to determine the amount of deferred tax assets that can be recognised...

  • Page 117
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) (b) Defined benefit plans We currently sponsor a number of post-employment benefit plans. As these ...

  • Page 118
    ... at the current reporting date and the actual outcome in the next annual reporting period. Refer to note 24 for details on the key estimates used in the calculation of our defined benefit liabilities and assets. 2.21 Employee Share Plans We own 100% of the equity of Telstra ESOP Trustee Pty Ltd, the...

  • Page 119
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) risk by using forward foreign currency contracts, cross currency swaps and/or borrowings in the ...

  • Page 120
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) (b) Financial Instruments - Classification, Measurement and Derecognition AASB 9: "Financial ...

  • Page 121
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of significant accounting policies, estimates, assumptions and judgements (continued) (h) Employee Benefits IAS 19: "Employee Benefits" was issued by the IASB in June 2011 to replace the ...

  • Page 122
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 3. Earnings per share Telstra Group Year ended 30 June 2011 2010 cents cents Basic earnings per share ...Diluted earnings per share ...26.1 26.1 $m 31.4 31.3 $m 3,883 Earnings used in the calculation...

  • Page 123
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 4. Dividends Telstra Entity Year ended 30 June 2011 2010 $m $m Dividends paid Previous year final dividend paid ...Interim dividend paid ...Total dividends paid ...Dividends paid per ordinary share ...

  • Page 124
    ... controlled entities Notes to the Financial Statements (continued) 5. Segment information Operating segments We report our segment information on the same basis as our internal management reporting structure, which drives how our company is organised and managed. During the year ended 30 June 2011...

  • Page 125
    ...of corporate planning, accounting and administration, credit management, billing, treasury, risk management and assurance, investor relations and procurement. It also provides financial support to all business units and financial management of the majority of Telstra Entity's fixed assets (including...

  • Page 126
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 5. Segment information (continued) The following tables detail the underlying results of our business segments, based on the reporting structure as at 30 June 2011: Telstra Group Year ended 30 June ...

  • Page 127
    ...impairment in value of investments ...- Telstra Group EBIT (reported) ...- Net finance costs ...- Telstra Group profit before income tax expense (reported) . . (a) We sold our 48.2% holding in Keycorp Limited on 8 December 2010 for a total consideration of $23 million, resulting in a gain on sale of...

  • Page 128
    ... non current assets excludes derivative assets, defined benefit assets and deferred tax assets. Note Information about our products and services PSTN products ...Fixed internet ...ISDN products ...Other fixed revenue ...Mobiles ...IP and data access ...Network applications and services. Offshore...

  • Page 129
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 6. Income Telstra Group Year ended 30 June 2011 2010 $m $m Note Sales revenue Rendering of services ...Sale of goods ...Rent of network facilities and access Construction contracts ...Advertising and...

  • Page 130
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 7. Expenses Telstra Group Year ended 30 June 2011 2010 $m $m Note Labour Included in our labour expenses are the following: Employee redundancy ...Share based payments ...27 Defined benefit plan ...

  • Page 131
    ...$172 million relating to impairment of goodwill ($121 million) and other intangible assets ($51 million) in Telstra Group financial statements. Refer to note 14 and note 21 for further details regarding impairment. (b) We use our cross currency and interest rate swaps as fair value hedges to convert...

  • Page 132
    ... the financial reports, audit related and tax. These services include various reviews and non assurance services across the Group, including a number of projects as part of our strategy around customer acquisition and business simplification which occurred in fiscal 2011. These projects have...

  • Page 133
    ... equity during the year ... Telstra Group As at 30 June 2011 2010 $m $m (Deferred tax liability)/deferred tax asset Deferred tax items recognised in the income statement (*) Property, plant and equipment ...Intangible assets...Borrowings and derivative financial instruments ...Provision for employee...

  • Page 134
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 9. Income taxes (continued) Telstra Group As at 30 June 2011 2010 $m $m Deferred tax assets not recognised Income tax losses ...Capital tax losses ...Deductible temporary differences ...(d) ... 55 172...

  • Page 135
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 10. Trade and other receivables Telstra Group As at 30 June 2011 2010 $m $m Note Current Trade receivables (a) ...Allowance for doubtful debts (a) ... 3,341 (230) 3,111 35 52 864 1 74 991 4,137 233 5...

  • Page 136
    ...). Telstra Group As at 30 June 2011 2010 $m $m Amounts receivable under finance leases Within 1 year ...Within 1 to 5 years ...After 5 years ...Total minimum lease payments ...Less unearned finance income ...Present value of minimum lease payments Included in the financial statements as: Current...

  • Page 137
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 11. Inventories Telstra Group As at 30 June 2011 2010 $m $m Current Finished goods recorded at cost...Finished goods recorded at net realisable value ...Total finished goods ...Raw materials and ...

  • Page 138
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 12. Non current assets held for sale At 30 June 2011 we were committed to dispose of our 64.4% shareholding in Adstream (Aust) Pty Ltd (Adstream). The disposal was subsequently completed on 21 July ...

  • Page 139
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 13. Property, plant and equipment Telstra Group As at 30 June 2011 2010 $m $m Land and site improvements At cost ...Buildings (including leasehold improvements) At cost ...Accumulated depreciation and...

  • Page 140
    ...Corporation Limited and controlled entities Notes to the Financial Statements (continued) 13. Property, plant and equipment (continued) Telstra Group CommOther Total unication plant, property, Land and Commassets equipmentEquipment plant site unication under and under and improve- Buildings assets...

  • Page 141
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets Telstra Group As at 30 June 2011 2010 $m $m Goodwill ...Internally generated intangible assets Software assets developed for internal use (a) ...Accumulated amortisation and ...

  • Page 142
    ... . - disposals through sale of businesses...- impairment losses (e) ...- amortisation expense...- net foreign currency exchange differences . - transfers to non current assets held for sale Written down value at 30 June 2011 . . ... Telstra Corporation Limited and controlled entities 127

  • Page 143
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets (continued) (a) As at June 2011, we had software assets under development amounting to $593 million (2010: $392 million). As these assets were not installed and ready for use, ...

  • Page 144
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 15. Trade and other payables Telstra Group As at 30 June 2011 2010 $m $m Current Trade creditors (a) ...Accrued expenses ...Accrued capital expenditure . . Accrued interest ...Deferred consideration ...

  • Page 145
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 16. Provisions Telstra Group As at 30 June 2011 2010 $m $m Current Employee benefits (a) ...Workers' compensation (b) ...Other (b) ...Non current Employee benefits (a) ...Workers' compensation (b) ......

  • Page 146
    ... Limited and controlled entities Notes to the Financial Statements (continued) 16. Provisions (continued) (b) Movement in provisions, other than employee benefits Telstra Group Year ended 30 June 2011 2010 $m $m Workers' compensation (i) Opening balance ...- additional provisions ...- amount used...

  • Page 147
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 17. Capital management and financial instruments This note provides information on our capital structure and our underlying economic positions as represented by the carrying values, fair values and ...

  • Page 148
    ... investments, and some cash balances/finance leases held in foreign currencies by our foreign controlled entities. The carrying amounts of offshore loans are denominated in the following currencies. TABLE B Telstra Group As at 30 June 2011 2010 $m $m Australian dollar ...Euro ...United States dollar...

  • Page 149
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 17. Capital management and financial instruments (continued) (b) Financial instruments The carrying amounts, fair values and face values of each category of our financial instruments are shown in ...

  • Page 150
    ...investments, and some cash balances/finance leases held in foreign currencies by our foreign controlled entities. These foreign currency amounts are reported in Australian dollars based on the applicable exchange rate as at 30 June. Total net debt in Table D agrees to the face value of our financial...

  • Page 151
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 17. Capital management and financial instruments (continued) (d) Movements in Net Debt The decrease in the carrying amount (including net cash movements) of our net debt during the year of $331 ...

  • Page 152
    ...yield on average net debt. The average yield on average net debt during the current year was 7.22% (2010: 6.42%) for the Telstra Group. Reflected in the increase in yield is an increase in short term market base interest rates in the current year compared to the prior year, resulting in higher costs...

  • Page 153
    ... . Non current Fair value hedge ...Cash flow hedge (i) . . Hedge of net investment foreign operation ...Held for trading (ii) ...in ...59 59 13 10 10 33 92 (261) (336) (597) (51) (946) (587) (1,584) (2,181) Telstra Group As at 30 June 2011 Interest rate Forward contracts swaps Asset Liability Asset...

  • Page 154
    ... methods used to estimate the fair value. Derivative liabilities Cross currency swaps . Interest rate swaps . . Forward contracts ...Table I Telstra Group As at 30 June 2011 Level 1 Level 2 Level 3 $m $m $m Available for sale Investments - other Quoted securities . . Derivative assets Cross currency...

  • Page 155
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 17. Capital management and financial instruments (continued) (g) Fair Value Hierarchy (continued) Cross currency and interest rate swaps The net fair values of our cross currency and interest rate ...

  • Page 156
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Financial risk management We undertake transactions using a range of financial instruments including cash assets; receivables; payables; deposits; bills of exchange and promissory notes; listed ...

  • Page 157
    .../notional value) effective interest rate, as at reporting date. (#) These financial instruments are used to hedge our net foreign investments. (^) Rates on cash and cash equivalents represent average rates earned on net positive cash balances after taking into account bank set-off arrangements...

  • Page 158
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Financial risk management (continued) (a) Risk and mitigation (continued) (ii) Sensitivity analysis - interest rate risk The sensitivity analysis included in this section is based on the interest ...

  • Page 159
    ...and related hedges, profit and equity after tax would have been affected as follows: TABLE B +10% Telstra Group -10% Net profit or loss Equity (cash flow Net profit or loss Equity (cash flow (*) hedging reserve) (*) hedging reserve) Year ended 30 June Gain/(loss) 2011 2010 $m $m As at 30 June Gain...

  • Page 160
    .... We manage this translation foreign exchange risk with forward foreign currency contracts, cross currency swaps and/or borrowings denominated in the currency of the entity concerned. We currently hedge our net investments in TelstraClear Limited and Hong Kong CSL Limited in New Zealand dollars and...

  • Page 161
    ...exchange rates based on our balances as at reporting date. At 30 June, had the Australian dollar against all applicable currencies moved as illustrated in Table C, with all other variables held constant and taking into account identified underlying exposures and related hedges, net profit and equity...

  • Page 162
    ... the applicable potential credit limit factors. This level changed from 99 per cent in the prior year to 90 per cent in the current year in accordance with revised policy settings during fiscal 2011. The VaR based methodology employed has the following limitations: • the use of historical data as...

  • Page 163
    ... current market pricing for interest rates over the period to maturity. Also affecting liquidity are cash and cash equivalents, available for sale financial assets and other non-interest bearing financial assets. Liquidity risk associated with these financial instruments is represented by the face...

  • Page 164
    18. Financial risk management (continued) (a) Risks and mitigation (continued) Liquidity risk (continued) Telstra Group As at 30 June 2011 Contractual maturity (nominal cash flows) Less than 1 year 1 to 2 years Total $m (265) (62) (384) (204) (11,716) (1,268) 471 88 869 9,578 685 1,288 (3,587) (3,...

  • Page 165
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Financial risk management (continued) (a) Risks and mitigation (continued) Liquidity risk (continued) Financing arrangements Table F Telstra Group As at 30 June 2011 2010 $m $m We have access ...

  • Page 166
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Financial risk management (continued) (b) Hedging strategies (continued) Fair value hedges We hold cross currency principal and interest rate swaps to mitigate our exposure to changes in the fair ...

  • Page 167
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Financial risk management (continued) (b) Hedging strategies (continued) Cash flow hedges (continued) Table G Telstra Group Nominal cash outflows As at 30 June 2011 2010 $m $m Highly probable ...

  • Page 168
    18. Financial risk management (continued) (c) Hedge relationships (continued) Telstra Group - 30 June 2011 Table H Face value Pre hedge underlying exposure Native currency $m (Pay)/ receive float Pay fixed Native currency $m $m $m $m Final leg - Australian dollar $m $m Australian dollar $m $m ...

  • Page 169
    ... positions Notional/Face Value Telstra Corporation Limited and controlled entities $m Notes to the Financial Statements (continued) In hedge relationships Offshore borrowings - fixed Swiss francs ...Euro ...British pound ...Hong Kong dollar ...Japanese yen ...United States dollar ...Offshore...

  • Page 170
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Financial risk management (continued) (c) Hedge Relationships (continued) Table J describes each of our hedge relationships, where forward foreign currency exchange contracts are used as the ...

  • Page 171
    ... position as described in note 17 Table D. Table K Hedged amount (i) New Zealand dollars 2011 2010 $m $m Net foreign investments TelstraClear Ltd (New Zealand dollars). Non-derivative hedging instruments Face value Offshore loans and promissory notes (ii) New Zealand dollars Australian dollars...

  • Page 172
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Share capital Telstra Group As at 30 June 2011 2010 $m $m Contributed equity ...Share loan to employees ...Shares held by employee share plans ...Net services received under employee share plans ...

  • Page 173
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 20. Notes to the statement of cash flows Telstra Group Year ended 30 June 2011 2010 $m $m Note (a) Reconciliation of profit to net cash provided by operating activities Profit for the year ...Add/(...

  • Page 174
    ...market for a total consideration of $5 million. On 28 February 2011, our wholly controlled entity, Telstra Holdings Pty Ltd acquired 100% of the issued capital of Reach Asia Limited, Reach Global Holdings Limited and Reach Network Services Korea Limited. On the same day, our wholly controlled entity...

  • Page 175
    ... 2009. (d) Disposals Fiscal 2011 disposals SouFun On 17 September 2010, our controlled entity Telstra International Holdings Limited sold its 50.6% shareholding in SouFun Holdings Ltd (SouFun) for a net consideration of $288 million (net of cash balances of the disposed entity). The effect of the...

  • Page 176
    .... On 30 April 2009, our controlled entity Telstra Service Solutions Holdings sold its 100% shareholding in KAZ Group Pty Limited and KAZ Technology Services Pty Limited for a total consideration of $205 million (net of cash balances of the disposed entities), with $8 million of this consideration...

  • Page 177
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 21. Impairment Cash generating units For the purposes of undertaking our impairment testing, we identify cash generating units (CGUs). Our CGUs are determined according to the smallest group of assets...

  • Page 178
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 21. Impairment (continued) Cash generating units (continued) (g) On 24 May 2011, the New Zealand Government announced it had reached agreements to progress the rollout of a new ultra-fast broadband (...

  • Page 179
    ... useful life intangible assets has been allocated: Terminal value growth rate (i) As at 30 June 2011 2010 % % 2.0 3.0 3.0 3.0 3.0 3.0 3.0 5.0 5.0 5.0 3.0 2.0 3.0 3.0 3.0 3.0 3.0 3.0 5.0 5.0 5.0 - Discount rate (h) As at 30 June 2011 2010 % % CSL New World Group TelstraClear Group . . Telstra...

  • Page 180
    ... Telstra Group As at 30 June 2011 2010 $m $m (a) Capital expenditure commitments Total capital expenditure commitments contracted for at balance date but not recorded in the financial statements: Property, plant and equipment commitments * ...Intangible assets commitments ...(b) Operating lease...

  • Page 181
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 22. Expenditure commitments (continued) Telstra Group As at 30 June 2011 2010 $m $m Note (c) Finance lease commitments Within 1 year ...Within 1 to 5 years...After 5 years ...Total minimum lease ...

  • Page 182
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 23. Contingent liabilities and contingent assets We have no significant contingent assets as at 30 June 2011. The details and maximum amounts (where reasonable estimates can be made) are set out below...

  • Page 183
    ...on the employees' remuneration and length of service. Measurement dates For Telstra Super actual membership data as at 30 April was used to precisely value the defined obligations as at that date. Details of assets, benefit payments and other cash flows as at 31 May were also provided in relation to...

  • Page 184
    ...)/asset - historical summary Our net defined benefit plan (liability)/asset recognised in the statement of financial position for the current and previous periods is determined as follows: Telstra Group As at 30 June 2010 2009 $m $m 2,546 2,934 2,503 2,847 2011 $m Fair value of defined benefit plan...

  • Page 185
    ... the Financial Statements (continued) 24. Post employment benefits (continued) (c) Reconciliation of changes in the present value of the wholly funded defined benefit obligation. Telstra Group As at 30 June 2011 2010 $m $m Present value of defined benefit obligation at beginning of year ...Current...

  • Page 186
    ... defined benefit plan expense for the year ended 30 June: Telstra Super Year ended 30 June 2011 2010 % % Discount rate ...Expected rate of return on plan assets (i) ...Expected rate of increase in future salaries ...We used the following major assumptions to determine our defined benefit obligations...

  • Page 187
    ... the total amount that Telstra Super would be required to pay if all defined benefit members were to voluntarily leave the fund on the valuation date. The VBI assesses the short term financial position of the plan. On the other hand the liability recognised in the statement of financial position is...

  • Page 188
    ... of equity held by immediate parent As at 30 June 2011 % 2010 % Name of entity 2010 $m Australia • Integrated Vision Pty Ltd (f) ...• iVision (QLD) Pty Ltd (f) ...• iVision Investments Pty Ltd (f) ...• iVision (Unify) Pty Ltd (f) ...• Unify Pty Ltd (f) ...Telstra Communications Limited...

  • Page 189
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 25. Investments in controlled entities (continued) Telstra Entity's recorded amount of investment (#) As at 30 June 2011 2010 $m - Name of entity Country of incorporation % of equity held by ...

  • Page 190
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 25. Investments in controlled entities (continued) Country of incorporation Telstra Entity's recorded amount of investment (#) As at 30 June 2011 2010 $m % of equity held by immediate parent As at 30 ...

  • Page 191
    ... following entities form part of the deed of cross guarantee Telstra Corporation Limited; Telstra Multimedia Pty Limited; Telstra International (Aus) Limited; Telstra Pay TV Pty Ltd; Telstra Business Systems Pty Ltd; iVision Pty Ltd; Telstra Communications Limited; Telstra Holdings Pty Ltd; Network...

  • Page 192
    ... Class Order as follows. This excludes Telstra Finance Limited. All significant transactions between members of the closed group have been eliminated. Closed group statement of financial position Closed group As at 30 June 2011 2010 $m $m Current assets Cash and cash equivalents ...Trade and other...

  • Page 193
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 25. Investments in controlled entities (continued) (a) ASIC deed of cross guarantee financial information (continued) Closed group income statement and retained profits reconciliation Closed group ...

  • Page 194
    ... the financial results, position and cash flows of these entities into our Telstra Group financial report. • We have no direct equity interest in the following entities within the Octave Investments Holdings Limited Group: • Beijing Jun Yuan Zhi Ye Information Technology Company Limited...

  • Page 195
    ... capital of Telecom Australia (Saudi) Company Limited. We can exercise control over the Board of Directors of this entity in perpetuity, and therefore we have consolidated the financial results, position and cash flows of this entity into our Telstra Group financial report. This entity is currently...

  • Page 196
    ... 30.0 15 15 amount of investment (*) As at 30 June 2011 2010 $m $m Pay television Pay television Customer service Management services Pay television International connectivity services Toll free number portability in New Zealand Management services 3G network services Regional roaming provider 50...

  • Page 197
    ... are used for equity accounting purposes. Our ownership interest in jointly controlled and associated entities with different reporting dates is the same at that reporting date as at 30 June unless otherwise noted. (f) Share of net profits Telstra Group Year ended 30 June 2011 2010 $m $m Net profit...

  • Page 198
    ...: Jointly controlled entities Telstra Group Year ended/As at 30 June 2011 2010 $m $m Carrying amount of investments at beginning of year ...Share of net profits for the year...Share of foreign currency translation reserve and movements due to exchange rate translations ...Dividends received ...Sale...

  • Page 199
    ... and associated entities where equity accounting has been suspended): Jointly controlled entities Telstra Group Year ended/As at 30 June 2011 2010 $m $m Current assets ...Non current assets ...Total assets ...Current liabilities...Non current liabilities. Total liabilities ...Net liabilities ...378...

  • Page 200
    ...or reductions in the equity accounted carrying amount, is shown below: Telstra Group Year ended 30 June Cumulative Period 2011 2010 $m $m Period 2011 $m Jointly controlled entities FOXTEL (*) ...Reach Ltd ...Associated entities Australia-Japan Cable Holdings Limited ... Cumulative 2010 $m (20) (37...

  • Page 201
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans The Company has a number of employee share plans that are available for Directors, executives and employees. These include those conducted through the: • Telstra Growthshare...

  • Page 202
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (b) Long term incentive (LTI) plans The purpose of LTI plans is to align key executives' rewards with shareholders' interests...

  • Page 203
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (b) Long term incentive (LTI) plans (continued) Options (i) Outstanding equity based instruments (continued) In relation to ...

  • Page 204
    ... set out below: Relative Total Shareholder Return (RTSR) restricted shares (fiscal 2011 and fiscal 2010) For fiscal 2011 and fiscal 2010 RTSR restricted shares, the single performance period is the three year period ending on 30 June 2013 and 30 June 2012 respectively. If Telstra achieves a result...

  • Page 205
    ...value of Telstra shares and the value of any other benefits paid or made available to Telstra shareholders, including dividends. This performance hurdle is set by the Board. 1st Growthshare 2008 1 July 2007 to 1 July 2007 to 1 July 2007 to (TSR) ...30 June 2009 30 June 2010 30 June 2011 The result...

  • Page 206
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (b) Long term incentive (LTI) plans (continued) (iii) Performance hurdles (continued) Return on Investment (ROI) options (...

  • Page 207
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (b) Long term incentive (LTI) plans (continued) (iv) Summary of movements and other information Number of equity instruments...

  • Page 208
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (b) Long term incentive (LTI) plans (continued) (iv) Summary of movements and other information (continued) Number of equity...

  • Page 209
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (b) Long term incentive (LTI) plans (continued) (iv) Summary of movements and other information (continued) Options (*) Weighted average fair value (**) $0.63 $0....

  • Page 210
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (b) Long term incentive (LTI) plans (continued) (v) Fair value of equity instruments granted The fair value of LTI ...

  • Page 211
    ... and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (c) Telstra Directshare and Ownshare (i) Nature of Telstra Directshare and Ownshare Telstra Directshare As a result of the changes to tax laws governing...

  • Page 212
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) Telstra Growthshare Trust (continued) (c) Telstra Directshare and Ownshare (continued) (iii) Summary of movements The table below provides information about our ...

  • Page 213
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) TESOP99 and TESOP97 As part of the Commonwealth's sale of its shareholding in fiscal 2000 and fiscal 1998, we offered eligible employees the opportunity to buy ...

  • Page 214
    ...2011 ...15,000 (*) The fair value of these shares is based on the market value of Telstra shares at reporting date and exercise date. (#) The amount exercised relates to the shares released from trust as a result of the interest free loan to employees being fully repaid during the year. The employee...

  • Page 215
    ... Products and Marketing Chief Operations Officer, Telstra Operations (KMP effective from 28 February 2011) Group Managing Director, Telstra Business Position Chairman, Non-Executive Director Executive Director and Chief Executive Officer Executive Director, Chief Financial Officer and Group Managing...

  • Page 216
    ...to the Financial Statements (continued) 28. Key management personnel compensation (continued) KMP aggregate compensation During fiscal 2011 and fiscal 2010, the aggregate compensation provided to our KMP was: Telstra Group As at 30 June 2011 2010 (*) $ $ Short term employee benefits Post employment...

  • Page 217
    ... entities. Unless related to our employee share plans, shares acquired or disposed by our KMP during fiscal 2011 were on an arm's length basis at market price. (a) For those non-executive Directors and senior executives who qualified as KMP during the year, represents shares held as at the date...

  • Page 218
    ... Telstra Entity (continued) During fiscal 2010 our KMP and their related entities held share capital of the Telstra Entity directly, indirectly or beneficially as follows: Total shares held at 30 June 2009 Directshare (a) allocation Number Non-Executive Directors Catherine B Livingstone ...Geoffrey...

  • Page 219
    ... Financial Statements (continued) 28. Key management personnel compensation (continued) KMP interests in rights, options and restricted shares of Telstra Entity The following details the balances and changes in instruments issued for our KMP during fiscal 2011: Instrument type (*) Senior Executive...

  • Page 220
    ...KMP interests in rights, options and restricted shares of Telstra Entity (continued) Vested and Total held Vested as exercisable at 30 June at 30 June at 30 June 2011 (c) 2011 (c) 2011 (c) Number Number Number Instrument type (*) Senior Executive Incentive shares rights (d) Kate McKenzie ...TESOP97...

  • Page 221
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 28. Key management personnel compensation (continued) KMP interests in rights, options and restricted shares of Telstra Entity (continued) The following details the balances and changes in instruments...

  • Page 222
    ... Limited and controlled entities Notes to the Financial Statements (continued) 28. Key management personnel compensation (continued) KMP interests in rights, options and restricted shares of Telstra Entity (continued) Instrument type (*) Senior Executive Incentive shares rights (d) Kate McKenzie...

  • Page 223
    ... are set out in note 25. Our transactions with our controlled entities recorded in the income statement and statement of financial position are as follows: Telstra Entity Year ended/As at 30 June 2011 2010 $m $m Income from controlled entities: Sale of goods and services (a) ...Dividend revenue...

  • Page 224
    ... set out in note 26. Our transactions with our jointly controlled and associated entities recorded in the income statement and statement of financial position are as follows: Telstra Group Year ended/As at 30 June 2011 2010 $m $m Income from jointly controlled and associated entities: Sale of goods...

  • Page 225
    ... the market announcement that Telstra and Vodafone Hutchison Australia will conclude their joint venture agreement for the 3GIS network in 2012. Refer to note 26 for further details. Transactions involving other related entities Post-employment benefits As at 30 June 2011, the Telstra Superannuation...

  • Page 226
    ... Limited and controlled entities Notes to the Financial Statements (continued) 30. Parent entity information Telstra Entity As at 30 June 2011 2010 $m $m Statement of Financial Position Total current assets ...Total non current assets (a) ...Total assets ...Total current liabilities ...Total non...

  • Page 227
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 30. Parent entity information (continued) Contingent liabilities and guarantees (continued) National Broadband Network On 23 June 2011, Telstra entered into Definitive Agreements (DAs) with NBN Co ...

  • Page 228
    ... unit, Applications and Ventures Group, was also created to invest and partner with other companies and government agencies to provide a new range of digital services for business and consumers, including health and education sectors. New organisational structure On 6 July 2011, Telstra announced...

  • Page 229
    ... the Telstra Group set out on pages 84 to 213: (i) comply with the Accounting Standards applicable in Australia, International Financial Reporting Standards and Interpretations, and Corporations Regulations; (ii) give a true and fair view of the financial position as at 30 June 2011 and performance...

  • Page 230
    ... report of Telstra Corporation Limited is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the consolidated entity's financial position as at 30 June 2011 and of its performance for the year ended on that date; and ii complying with Australian Accounting...

  • Page 231
    Telstra Corporation Limited and controlled entities (This page has been left blank intentionally) 216

  • Page 232
    CONTACT DETAILS REGISTERED OFFICE Level 41, 242 Exhibition Street Melbourne Victoria 3000 Australia Carmel Mulhern Company Secretary email: [email protected] INDICATIVE FINANCIAL CALENDAR* Final dividend paid Annual General Meeting Half Year Results announcement Ex-dividend share ...