Telstra 2015 Annual Report Download - page 26

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NAS revenue continued to grow at double-
digit rates, increasing by 23.2 per cent to
$2,418 million, exceeding market growth
in all key NAS portfolios. This increase
was driven by existing and new contracts,
and acquisitions. Included in NAS revenue
is International NAS which increased by
41.4 per cent to $99 million. The Pacnet
acquisition, completed in April 2015,
contributed $14 million to International
NAS. Managed network services revenue
increased by 21.8 per cent driven by
increased professional service and
security activity and includes revenue
from the acquisitions of O2 last nancial
year and Bridge Point in October 2014.
Revenue growth of 8.1 per cent in unied
communications was driven by increased
IP telephony customer connections.
Industry Solutions revenue growth of
41.6 per cent was led by NBN commercial
works and contributions from TSM (formerly
SNP Security). Overall, NAS protability
continued to improve driven by portfolio
growth, scalable standardised offerings
and a global, lower cost delivery model.
Media
Media product portfolio revenue
increased by 3.4 per cent to $931 million.
This portfolio includes Foxtel from Telstra
(previously Premium Pay TV), IPTV, (which
includes T-Box® sales, Foxtel on T-Box,
BigPond® Movies and Presto), Mobility
and other content (which includes
exclusive AFL and NRL rights and music
subscriptions) and cable revenue.
Foxtel from Telstra revenue increased
by 9.4 per cent to $662 million. This was
driven by growth in subscribers as a
result of the reintroduction of “Foxtel
from Telstra” bundles in May 2014 and
Foxtel price reductions in November 2014.
A shift in focus to Foxtel from Telstra
has reduced T-Box sales revenue by
$33 million. Excluding T-Box sales, IPTV
revenue increased by 19.6 per cent
due to Foxtel on T-Box and Presto sales
growth. Mobility and other content
revenue declined by 2.5 per cent to
$79 million. The continued decline in
legacy mobile download services has
been partly offset by the increased
take up of NRL and AFL subscribers.
Cable revenue declined by 1.7 per cent
to $118 million. This represents income
from the supply of HFC cable services
to Foxtel.
Network Applications and Services (NAS)
NAS revenue ($b)
FY13
FY14
FY15
1.5
2.0
2.4
While there was an increase in cable subscribers, there was an offsetting reduction
in ARPU in line with new Foxtel pricing introduced in November 2014.
Other
Global connectivity revenue grew by 27.7 per cent to $780 million driven by the
continued increase in wholesale carrier data. The Pacnet acquisition also contributed
$90 million to global connectivity. Other sales revenue increased by 39.4 per cent
to $1,238 million. Other sales revenue includes revenue from our China digital media
portfolio which increased by 81.3 per cent to $504 million. This was largely driven by
Autohome with revenue increasing by 98.0 per cent as a result of increased advertising
services and dealer subscriber growth.
FY15 FY14 Change
$m $m %
Labour 4,921 4,732 4.0
Goods and services purchased 6,847 6,465 5.9
Other expenses 4,113 3,988 3.1
Total operating expenses 15,881 15,185 4.6
Operating expenses
Expense performance
Labour
Total labour expenses increased by 4.0 per cent or $189 million to $4,921 million. Our total
full time staff and equivalents (FTE) increased to 36,165. This increase in FTE was mainly
driven by organic growth and M&A activity across our NAS portfolio (in particular the
Pacnet acquisition), Telstra Business, and our nascent Software and Health businesses.
Additionally, business growth and the conversion of contractors to permanent staff in our
China business also contributed to the increase. Offsetting these increases were reductions
in FTE driven by our restructuring programs across various parts of the business.
Salary and associated costs increased by 8.4 per cent or $287 million to $3,686 million.
This increase was mainly driven by the increase in FTE, as well as salary and wage
increases which also incorporated the change in the statutory superannuation
contribution. These increases were partially offset by a favourable year on year bond
rate impact of $58 million, driven by a favourable outcome of $71 million from the
transition to a high quality corporate bond rate for the calculation of employee long
service leave provisions, in accordance with AASB 119. This change resulted from the
G100 concluding in May 2015 that a deep corporate bond market exists in Australia.
Labour substitution costs increased by 3.7 per cent or $29 million to $816 million.
This increase was mainly driven by the establishment of global operations to support
the expansion of our NAS business, higher eld fault volumes due to adverse weather
events, and increased costs in support of NBN activations.
Redundancy expenses decreased by 55.0 per cent or $138 million to $113 million,
driven mainly by restructuring work returning to normal levels within our core
business, the impact of the Sensis divestment on the prior year, and redundancy
expense savings from the redeployment of staff to growing areas of the business.
Goods and services purchased
Goods and services purchased increased by 5.9 per cent or $382 million to $6,847
million. Cost of goods sold (COGS) (which includes mobile handsets, tablets, dongles,
broadband modems) increased by 6.0 per cent or $173 million to $3,079 million.
This was driven mainly by the strong demand for our iPhone^ 6 offerings. This increase
was signicantly offset by a $397 million decrease in COGS driven by our divestment
of CSL in the prior year.
Network payments decreased by 0.3 per cent or $6 million to $1,725 million. This decrease
was mainly attributable to our divestment of CSL and reduced payments to overseas
carriers due to lower negotiated roaming rates. Offsetting these decreases were higher
onshore carrier network outpayments in support of increased mobile subscribers and
increased NBN network payments as we migrate customers to the NBN.
Other goods and services purchased increased by 11.8 per cent or $215 million to
$2,043 million. This was mainly driven by increased service fees for Foxtel, cloud
services, IPTV and digital content, and mobile insurance in support of increased
subscribers. This increase was partially offset by our divestment of CSL.
Full Year Results and Operations Review_